Very promising ecommerce startup at a pivotal growth potential with sound potential. They just raised some seed funding and I am considering coming on full-time as their 5th(ish?) employee to head up marketing/PR/brand efforts. The salary is very low but I am comfortable with it if there is some other long term vested incentives available. What equity share or other compensation structure would be appropriate here so it would be in the best interest of both myself and the company ?
The first thing to understand is if they're looking to be a venture funded startup. Not all startups plan to raise money. If they have in the past, then issues equity is very standard and they should bring it up - if they havent, you can ask.
If they aren't looking to raise capital, then having equity won't be that important so you should try to get fair market value for your skills unless you want to work with that company / team, then negotiate.
If they are offering equity, then read through this:
https://www.themuse.com/advice/getting-startup-equity-everything-you-need-to-know
Hope that helps.
If the Company raised 750,000 or more at a valuation of 4,000,000 or greater, than 0.5 to 1%, vesting over 3-4 years would be fair compensation. As Dan suggests, it's important to know what the Company's plans are and how they intent to grow the business, particularly what they think they'll need to raise a Series A. I'm happy to do a call to give you some independent assessment as to whether their plans to get to the next round appear credible.
Speaking very broadly, startups tend to offer equity to engineers at around 2-4x the rate of marketing hires.
So straight away, you're likely to get a pretty bad deal on equity.
Realistically as employee #5 and in a marketing role, you're probably not going to get a deal on equity that will mean anything significant unless the company exits BIG. Like, $100m+ big. And does so without a stupid amount of liquidation. Anything beyond C round and employee options are basically 0 (the founders wont be great either, if it's any consolation)
But anyways. It really boils down to the salary discount you're taking. You need to realise this is basically you investing personal cash into the business - so what is that investment worth?
If you have been offerred a job at $100k and a startup offer you $70k, they're very simply saying "Please take $30k out of your pocket and put it into our bank account as an investor. Oh and you need to do that for a few years, because your equity vests over the next 4 years".
I'm a tech entrepreneur who has an employee equity pool in his company, but I'm very cynical about the standard practice of giving out options and how much motivation they actually provide to early hires. I think ownership as an intrinsic motivator can be done in more effective ways than a tiny fragment of financial ownership. And there are companies out there you will provide you with a great salary (120%-140% market) AND give you a sense of ownership and shared success in the company.
