I got an offer from an early-stage tech startup and I'm trying to evaluate the offer in terms of salary and shares.
To start off, I know that salary is immediate and generally guaranteed and shares are quite likely to be worthless. Shares are more of an investment into the future of the company and can potentially give quite a big return, but they're only worth something if the company is successful (which is generally quite unlikely), it ends up being sold or going public or something, and I actually stay with the company until that happens (and there are quite a few terms and conditions and things to look out for with any given offer of shares).
I am more wondering what I could expect from salary increases or further stock options (or more in terms of how my existing package will be viewed, given that the former is quite variable).
Let's consider a hypothetical offer of $100k annually (with no shares). Say each share is worth $1000.
Now they give me an alternative offer of $80k with $20k shares (20 shares vested over 4 years). Based on some research, the 1:1 salary-to-shares trade-off ratio appears to be fairly common in early-stage startups, even if the shares vest over 4 years (but I might be wrong).
The potential issue I see here is that the shares seem more like a signing bonus, while salary is permanent (as long as I work there). On the one hand, they can refrain from giving me large raises to bring my $80k up to a more competitive $100k, because I have received shares. On the other hand, I'm not continuously receiving shares, so as I work there longer, I'd just be continuously losing out more and more from that $20k+ difference (even though the shares will ideally grow faster than what I lose out there).
How do I make sense of this?
I would hope for an answer that indirectly addresses the following things I wonder (although I don't expect direct answers to any of these questions):
- Is there some point at which it's reasonable to say the shares aren't relevant to my current package any more, and my salary should be raised to $100k (or whatever is competitive at the time)?
- If so, when will this point be?
- Or, if the shift from $80k to $100k is expected to be more gradual, how quickly should I expect that to happen?
- Or are the shares given on the assumption that they'll (eventually) increase in value at the same rate, or faster, than the $20k difference, so my base salary will always be considered to be $20k more than what it actually is (because of the shares I got once)?
- Or does accepting an offer with shares set some sort of informal precedence about receiving another offer with at least the same amount of shares after some period of time (even if this is in no way legally binding)? And, I'd presumably/possibly have the option of just taking a large raise instead. If so, how long can I expect to wait before something like this?
- Does the current value of the shares I currently own matter? If the original $20k worth of shares I got are now valued at $40k, would this affect any raises I might get (disregarding the implication that the company is now presumably better off and able to pay more)? Or, from a negotiating perspective, would that basically be left in the past as having the $20k value it had when the offer was signed?
Of course raises and things would heavily depend on what the company can afford, how valuable I am to the company and how well I negotiate, but I'm wondering more in terms of how they'll generally think about my current salary package in the future.