How much equity should I ask as a C-level executive in a new startup ?

Hi,
I've hired and negotiated several top level execs at startups. On both sides, this is one of the trickiest negotiations that will have to be made at any stage of a company's life, since the value of the equity is highly uncertain.

This is tough to answer without knowing your background and without knowing how much the current company might be worth. As a rule of thumb a non-founder CEO joining an early stage startup (that has been running less than a year) would receive 7-10% equity. Other C-level execs would receive 1-5% equity that vests over time (usually 4 years).

I would adjust these numbers up somewhat if you have significant experience in the space or a track record of building and monetizing a brand.

I would adjust these numbers down somewhat if the company is generating significant revenue (>$1M) or can fairly valued (by a third party, such as a VC) at over USD $10M.

I would also adjust the numbers down if the company has received professional investment from a venture capital firm or a strategic partner. Also remember that salary and equity are both exchangeable and negotiable -- you may be able to get more equity for less salary and vice versa.

A couple of anecdotal examples I can give you may help out:

- I helped recruit a very seasoned (20+ years experience) CMO at a 4 year old venture backed firm for $180K base salary and 9% equity vesting over 4 years. This person was previously a CMO at a Fortune 500 company.

- A firm that I was involved in founding hired our Head of Business Development with 25+ years experience for $100K salary plus 2.5% equity.

- A personal friend of mine with 10+ years in the Sales and Marketing space just got hired (last week) as the Head of Sales & Marketing at a Series A venture backed Financial Technology firm for $100K salary and 1.5% equity.

Hope this helps -- I'd be happy to discuss further on a call to discuss your personal situation or answer any questions that you may have.

Vijay

I hear of a chef who is pretty much product manager and spokesperson as well as another person who is brand manager.
Who's the CEO ?

1 - 1.5% equity would only be beneficial for a multi-million/billion dollar company. What is the most you think the chef will be worth? Let's say it is $4M tops. 15% would give you $600,000. I say shoot for no less than 15%. You may have to settle for less, but the chef has to know that without a reasonable percentage, motivation would drop substantially for most startup partners. By the way, think of yourself as a partner, not an employee.

Bootstrap. Read "How To Get Rich" by Felix Dennis. Or better yet just remember the camel's nose in the tent story.

Listen, in any business you have to take some chances and some risks. Make sure you don't need a license and go for it. Remember, timid business people have skinny kids. Paraphrased from Zig Ziglar.

I am not trying to sell you on calling me. Really, I am pretty busy with my businesses and consulting. However, I need more info before I could have a greater impact in helping you.

Ask, Ask, Ask, then Ask again.

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Here is $10,000 worth of information for free and in a nutshell.

Concentrate on the 3 M's. There are actually 7, but 3 will do for now. These are Market, Message, and Media. They come in that order.

Who is your target market (customer, clients, buyers, users, etc.)?
Tailor your laser focused message for this target market.
What is the best media mix to get your message to that market?

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Ask, Ask, Ask. Have thick skin and learn from each "mistake." In a short while, the market will tell you what you need to do and who and what you need to ask. But get started now even if that just means asking a contact on LinkedIn.

While you are thinking, think big and think of something at least 1% better, newer, or different. And being cheaper is not a winning strategy.

Make decisions quickly and change decisions slowly..unless you are actually going off a cliff.

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Treat everybody you talk to and everybody you meet (including yourself) like each is your number one million dollar customer.

Best of luck,
Take massive action and never give up.
Michael

Michael Irvin, MBA, RN