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Compensation Negotiation

When to have the comp conversation and what to say in those discussions is critical


When to have the conversation

  • If you are talking with an early stage company, you may want to have the conversation earlier to ensure you are on the same page so you aren’t giving them too much “free consulting”. One way to phrase it is "I'm conscious we've had a few conversations so far, I wanted to make you aware of my expectations around comp. While it's not my number 1 driver, this is important for us to discuss and I want to ensure we're on the same page”

  • If a later stage company, focus on being the preferred candidate (and having leverage) before talking comp. Bigger companies have established bands so they won’t be incredibly off-base like early stage companies can be.

  • If the comp conversation hasn’t been had before making a “presentation” this is a good time to suggest it. i.e “I’m really interested but before we take the next step, shall we make sure we are thinking similar on compensation”

  • Ideally, Do NOT tell the recuiter/hiring manager what you are looking to make- rather get them to first tell you what the job pays.

“At some point in the process, when you become the preferred candidate, you should notice the nature of the conversation with the hiring manager/recruiting team switch from transactional to a candid conversation. This is where the hiring manager will be available to speak with you on a frequent basis.” Matthew Parker

Who to have the conversation with


Be strategic about who you talk comp with:

  • Target having the dialog with the hiring manager, they are more empowered to adjust budget but often recruiting teams will want to discuss earlier

  • Beyond cash and equity amounts, if you aren’t talking to the CEO / working on a role that would report to the CEO, you will hit a dead-end as only the CEO has the ability to approve and these non-cash items will require board approval

  • For established or late-stage companies, often it is best to discuss compensation with the recruiter/ HR. Even though they are just messengers, they can serve as a reality check and can minimize harsh feelings that might occur during negotiations.


How to have the discussion


You want to push on compensation aggressively but not risk it blowing up an opportunity you are excited about. Here are some ways to position the conversation:

  • Convey Excitement: "I am excited about the role we are talking about” “I love where we are headed”

  • Convey the value you bring: If they understand why they need you you will have more leverage

  • Convey the Focus on Success: “I want to make sure we are set up for a long-term relationship with aligned incentives”

  • Make Clear Nothing is a Deal-Breaker: “If anything I am asking for is a deal breaker, let’s agree to chat as that is not my goal here”


Cash (Salary and Bonus)


  • Posted Comp is Just a Guide: Companies will post crazy broad ranges in their job listings because they are no legally required to put in salary but don’t want to be constrained.

    • If the range is obviously too low then it is probably too junior but if you find yourself in the mid-point, don’t worry too much about the posted range.

    • The more senior the role, the smaller percent of your compensation is your salary, with a much greater amount being annual or long-term grants which are not contained in the postings. A job with a salary posting of $200k max may end up with Total Compensation in the high six figure if annual and long term (stock) pay are included.

  • Know the comps:

    • When you are discussing compensation with a company, it is a great opportunity to reconnect with a top recruiter you have chatted with in the past. Update them on your search and ask their thoughts on comp. This both gives the recruiter information on your search but also engages them. And… recruiters often know comp ranges for other roles they have placed.

    • Talk to friends in similar roles to benchmark as well

    • Here are some good public benchmarks

  • Focus on the band / level first: Ask for bands to understand how they are placing you, your negotiation range. If the band/level is not right, negotiate / get aligned on that first - make sure you are looking at the scope of this role the same.

  • Push out the comp discussion: Focus on becoming the preferred candidate first. Then you will have more leverage

    • Once you say what you are looking for, the offer will never go higher than that. Ideally do not say what you are looking for. Your goal is to have the company tell you the range for the job.

    • If a recruiter is involved, they will often ask about comp early to ensure they are bringing candidates in range. You can position as “comp won’t be a reason I decline”. Try to focus the comp discussion directly with the company

  • Be clear in what you are seeking: Be extremely clear with what you need, are looking for and ask them to meet it vs. negotiating


Equity


Increasingly it is important to evaluate the health of the cap table. Are there so many preferences in their equity that you can never make money? I tend to (once cash comp is reasonable) focus on negotiating hard on equity for a few reasons:

  • Shows you are passionate about the company

  • You can always get your cash comp up later but it is hard to move up equity comp


How much can you negotiate on equity

  • 30% above the offer is generally reasonable


Questions to ask on equity:

  • How much equity: A good approach is “how much equity is at work”

    • Equity at work is the concept of “how much equity do you have to start that could grow based on performance of company”

    • Recruiters/companies use this concept to benchmark how much equity you get

    • As a rule-of-thumb, target the equity at work to be 4x your annual salary (researching if this is the right benchmark) 👀

    • Valuation 👇 is a critical factor in how much equity at work you have.

  • When was the last valuation that you using (date, amount). There are key data points for valuation

    • Last raise: if this was in a different market be careful if they use this

    • 409A: a private company valuation which companies have to do annually.

    • Secondary: If a company is mid-to-late stage, it will may have a secondary market. If you get this it can be a valuable negotiating point.

    • Your stake: Portfolio/startups will often offer a percentage of the company in equity. The greater the Company’s valuation, the smaller the percentage. Make sure you understand the overall value of the company and the value of the percentage offered to you.

  • What is the vesting schedule: What happens if there is an exit/IPO?

  • Preferences: If it is mid-to-late stage, you can get detailed cap-table with preferences on Forge

  • Policy on refreshes: Many companies are bad at refreshes later on equity + giving more equity if you get promoted. Post IPO companies typically will have structured refresh policies while earlier stage won’t.


Things that if you are focusing on a very senior role you can ask for

  • Exercise window on options: From a ‘legal’ standpoint, a company can give you an exercise window 10 years from the day the option vests. Most companies default their option agreement to “if you leave for any reason, you have 90 days to exercise or you lose them”. A company CAN give 5 years. It costs a company NOTHING to extend your exercise window but it could be meaningful to the individual (late stage, private → shares are expensive and potentially illiquid). Typically companies won’t extend much beyond 6 months

  • 83b: have to redo offer letter + other agreement for early exercise


Other items


For these items, these are generally only seen when:

  • You are at a smaller, more risky company

  • You will be reporting directly to the CEO

  • You have leverage (you are being pulled out of an existing role, you are being asked to relocate, you have existing similar package)


Try to have the discussions below BEFORE you get the offer letter. Once you get the offer letter some of this can be hard to get in later


What you can negotiate

  • Signing Bonuses: Generally companies have leeway here (they rather this than more salary). They can pretty much always do these to close the deal.

    • These are almost a no-brainer if you are relocating.

    • It is very reasonable and common practice for Companies to provide signing/bonus to make up for equity/bonuses you are leaving behind.

    • A signing bonus may be a way to deal with internal equity issues if you are looking for greater compensation then peer positions

  • Severance:

  • Length: Target min 3 months to 6 months (series A 3 months). An umbrella approach is 24 months of severance starting from day 1 (i.e. if you leave after 1 year you get 12 months of severance).

  • Start Date: Triggers minute offer letter signed (offers sometimes get pulled before start date)

  • Amount: Equals base pay at time or highest pay you have achieved

  • Triggers: If termed or leave for “good reason” (legal term)

    • comp is lowered

    • job is changed substantially

    • you are forced to relocate

  • Health insurance: Make sure this is included, with co-term with severance

  • Pro-rata: Get agreement to be paid out pro-rata bonus/ equity if terminated

  • Non-compete: Not allowed in some states…. most companies won’t budge.

    • If you are fired they can require you to sign as part of a severance agreement

    • If you don’t sign severance package then non-compete in offer letter is more wishy-washy

  • Relocation: If someone is trying to get you to relocate you have a lot of leverage as it is moving your life/family.


More Personalized Comp Guidance


🔆 If you are in the negotiation stage and on our premium plan, feel free to slack #searchoutloud to get input. 


You only get one chance to negotiate your comp. We recommend Ezra Singer (who helped with the content on this page). He is a former senior HR leader who works with executives negotiating compensation packages > $500k (in cash and equity).

  • Best time engage him is before you start talking to the recruiter/company (recommended) or when you get an offer

  • He is great at guiding you through the negotiation process and role-play

  • See some amazing testimonials here and feel free to reach out directly. Tell him you found him via Whispered


Do you know how to pick the right company and role?





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