If you are someone who always wanted to live the startup life, what do you do if that reality comes true? How do you negotiate if you have an offer from a startup?
Before taking up the interview, you might have done your research about the company, and know the risks of joining that startup. Start weighing the risk against the compensation. Is it right to negotiate when you get a job offer from a startup?
Sure, you can!
Every offer is negotiable, but it’s also in how badly you want the job offered to you. Sure, you won’t negotiate much if you get an offer from Fortune 500 company. But here in the early-stage startup, you are ready to take up a risk – you are going to forget taking a vacation, you won’t get fancy corner office space, you won’t get appealing salary package etc. So don’t compare your startup offer to corporate job offer.
Instead, wear your startup life shoe and negotiate an offer that is fair and makes sense for you and the startup that you are about to join. Startup job is for the people who are willing to take a risk on salary, career, perks etc. for a long term pay off.
Here is what you should consider before you negotiate on your startup job offer,
1. Know the Numbers
As a job seeker, you might have already researched about the company before you gave the interview. Validate the package offered with your research.
Startup compensation will vary from startup to startup, so do some research on what other startups are offering for similar positions. You will also get reliable data from Angel List if the startup is active in Angel.co.
As part of your research, you should also consider data about the company’s financial statements. If the financial statements doesn’t match the package offered to you, then you may need to figure out if they can pay you on time. CrunchBase provides data on company’s valuation and investments rounds. This will help you to evaluate the potential of the company.
Also, explore your contacts, if you have friends or family who are active in the startup community, gather information about the company with them.
Set a bottom line for your negotiating, mark how low you are willing to go to take up the offer. Start negotiating.
2. Dig Into the Equity
If the offer comes with equity share, then you got something to rely on, if it doesn’t, then it’s definitely worth to ask for the potential of getting equity in the future. Equity is one of the big upside of working in a startup, so don’t miss a chance to grab those.
It is also important to determine what’s the work of your equity and what is the valuation of the company. For example, if you get 10% of equity, the value of that equity is determined based on the value of the business and the shares outstanding. Its value is directly proportionate to the value of the company. The value also varies if the company is in Pre-IPO or Post-IPO.
There are multiple ways to determine the value of the share. You can ask the founder on how did they arrive at the value of the share offered to you. No one gives equity just like that, and if they give, then you have a bigger problem.
Also, understand more details like what stage they are on raising new rounds of funding, how did they made their previous deals, what are their future plans etc. Also, know if your shares will get diluted if the companies raise more investment or if more employees join the company.
3. Negotiate What Matters Most
Everyone wants to win a negotiation, but there is no point in winning the wrong things. After doing thorough research determine what matters most to you and negotiate on those.
Go into the discussion with your focus on getting most of your salary and equity. Sometimes you may not get both, so decide what is most important – for example, if you have financial backlogs then salary is important, if you are looking for long term exit, then equity is important. If you see real potential in the startup, then maybe you can give up on some salary get raise on equity. Whatever you decide, don’t forget to map it with your research data.
Sometimes it might not be worth to spend time on things like your job title, number of leaves, work timings etc. because startup life is more than those silly things.
After everything, negotiate with yourself if you can live up to the commitment of living a startup life. Joining a startup is a serious decision, ensure you are mentally prepared to take up the challenge.
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