LAST REVIEWED Apr 02 2019 12 MIN READ
By Anisha Sekar
So you’ve got an offer from a startup, and the dream of wearing shorts to work, meaningful contributions interspersed with ping-pong games, and a move-fast-and-break-things mentality is within reach. But before you sign on, make sure you’re getting the compensation you deserve – and that means bargaining up from the first offer.
While some negotiating tips are universal, many big-company recommendations don’t fly in the startup world (it’s hard to get a corner office with an open floor plan). Here are six tips for getting a higher compensation package from a startup.
Don’t give a dollar amount too early
During the interview process, you might be asked what kind of salary you’re looking for. This is the perfect time to practice using lots of words to say absolutely nothing – you don’t want to lock yourself into too low of a salary, and you don’t want to shut the door on a potentially great job because you ask for too much out of the gate.
Leave the salary talk until you actually have an offer in hand. Instead, give general responses like “I’m looking for a salary commensurate with my experience and potential contribution to the company” or “As I’m sure you know, the cost of living is high, but I don’t want salary to be the reason we stop this conversation.” If you’re pressed, highlight reasons you’re worth more than you’re currently paid – for example, experience or educational advancements, or how the salary should be changed to reflect this new startup’s growth and funding prospects.
Benchmark your offer: External data + Company stage
You can think of your total compensation as your annual salary plus either the current value of the stock vesting that year (if you’re getting stock grants) or the difference between the current value and the strike price (if you’re getting stock options). This total compensation figure will help you compare the offer against the market rate.
Glassdoor and Payscale are good for providing pure salary ranges for your position, experience, and location, so they’re most helpful for arguing that your total compensation package is below market rate. AngelList has a much smaller dataset, but shows the impact of specific skills like Rails or business strategy on typical compensation packages.
Now that you’ve benchmarked your total compensation against industry norms, you’ll have to factor in the company’s financial situation. Smaller, early-stage startups may offer less compensation overall in exchange for growth prospects (especially if they’re venture-funded, since investors eat away at the total equity pool), so you might have to take a pay cut.
Generally speaking, smaller companies offer more equity and less salary; larger ones (especially ones that just raised lots of funding) should offer more by way of salary. VentureHacks offers a rough guide to how much equity you should expect from an early-stage company, while Paul Graham takes a higher-level view to help you understand compensation overall. Comparing equity packages is tricky at best, so your best option might be to poke around AngelList to see what other companies at a similar stage and financial situation are offering.
As a side note: Larger companies may offer specific perks like more vacation time or a private office, and potential hires can negotiate for individual access to those perks. With startups, most perks apply to all employees equally – think unlimited PTO, an employer-matched 401(k), free food, or quarterly offsites. However, this means you can negotiate on behalf of all your future coworkers by asking for retirement plans, health insurance or commuter benefits (which provide tax advantages over salary increases anyway and can be easier to ask for than a salary bump or bonus).
What are your personal non-negotiables?
Now that you have a benchmark, you know whether your offer is in line with your expected contribution. If your compensation is below market rate (or even if it is, and you want a better package), you should know what aspects of the compensation are most important and the minimum level you’ll accept, as well as what you’re willing to budge on. Ask yourself:
What is the minimum salary that you can live on?
If the job is in a different place, how much will relocation cost? Can you foot the bill yourself or will you need a relocation bonus?
If your compensation is highly weighted towards bonuses (for example, commission-based sales), are you comfortable with a potentially variable monthly income?
Do you prefer stability in the form of a higher salary, or more upside in the form of higher equity?
For the first two questions, if the offer doesn’t meet your minimum standard, you should be upfront with the hiring manager. Say, “Unfortunately, that salary won’t pay for my cost of living. What other compensation packages are available?” or “Breaking my lease, moving my pets, etc. isn’t feasible given my current financial situation. What help do you offer employees who have to relocate?” Never say outright the lowest amount you’ll accept – your employer will then treat your lower bound as the basis of your offer.
Come armed with statistics and other offers
At this point, you’ve compared your offer with market rates and decided whether you want to negotiate for more salary, more equity, or a different compensation structure (e.g. fewer bonuses and a higher base salary). Now, it’s time to actually sit down at the negotiating table. If your package is below market rate, say so – and back it up with data from Glassdoor, AngelList, etc.
The hiring manager might argue that startups usually pay less than established companies, which you can counter with a request for more equity. Even if you’re at or above market rate, sell yourself. For example: “Product managers with extensive coding experience are typically paid more than product managers with a sales and marketing background, so I would expect compensation in line with my background as well as my job title.”
Also, it never hurts to have other offers as leverage. Here, you can play up other offers’ benefits and cost of living as a reason for the company to offer more salary or equity. For example:
Another company is offering a similar compensation package, but provides health insurance, a matched retirement plan, and commuter benefits. How can my compensation be adjusted since I’ll be paying for those expenses out of pocket?
I have an offer from a later-stage company that offers much more by way of salary. I understand that earlier-stage startups can’t match the salary specifically, but I would expect higher equity in exchange for taking a risk.
I received an offer for $80,000 in Raleigh, and after adjusting for cost of living, that’s over $150,000 in San Francisco. How can this package be altered to reflect the high cost of living? (You can use CNN Money’s cost of living calculator to do the math.)
Negotiate on more than just salary
We mentioned that you should consider startup offers holistically, including both equity and salary. Some companies will offer a choice of compensation packages, ranging from high equity and low salary to low equity and high salary. As a jumping-off point, you can ask for the upper bound of both equity and salary.
But if your employer won’t budge on salary or equity, you can get creative. For example:
A guaranteed pay review after 6 or 12 months. Be sure to ask how performance will be measured, whether pay increases are given based on employee performance or company performance, and what specific milestones you have to hit in order to get a raise. Be sure to get the promise of a pay review in writing so you can hold your employer to their promise.
An accelerated vesting schedule. The average tenure of a startup employee is just 11 months, so pushing for earlier vesting means you’ll leave with more equity than the typical four-year schedule would offer.
Pay tied to your or the company’s performance. A salary tied to the company’s revenue or profits is risky, but if you truly believe in the company, you can ask for compensation that aligns your incentives with the business’. You can also ask for bonuses based on your performance (especially if you’re in sales or another easily quantified role).
A better stock package. You can negotiate for stock grants rather than options, or ask to forward-exercise your options for better tax treatment.
Never take the first offer
When it comes to negotiating a startup salary, the biggest mistake you can make is not negotiating at all. You aren’t being too aggressive or forward, and hiring managers are really, really unlikely to withdraw an offer because you asked for more. Women especially tend to take their initial offer, a setback that compounds over time as each new employer bases its salary on the previous employer’s. Come prepared with cold, hard facts and the knowledge that you’re worth more than the initial offer, and don’t forget: they made you an offer, and they want you to accept, so they’re willing to negotiate.
Anisha Sekar has written for U.S. News and Marketwatch, and her work has been cited in Time, Marketplace, CNN and more. A personal finance enthusiast, she led NerdWallet's credit and debit card business, and currently writes about everything from getting out of debt to choosing the best health insurance plan.