Cristina Cordova on "How to think about equity compensation"
Stripe employee #28 shares frameworks for thinking through the big decisions
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Cristina Cordova, COO of Linear, recently published a blog post sharing tips to consider when thinking about equity compensation at early startups.
I’d recommend reading the whole article, but I’ve excerpted some key points I wanted to emphasize (with some additional commentary).
Picking the right company to join matters far more than optimizing.
First, it’s worth noting that you should spend far more time deciding whether you think the startup you’re joining will eventually grow to be 10X/20X/100X in revenue or valuation than it is today, rather than optimizing for compensation.
Cristina’s right that choosing the right company to join is the high-order bit. To improve your skill here, connect with people who see a broad range of startups and can connect you to startups that have surprising traction, but are not yet famous. This could be via VCs/angels, your personal network, or communities like ours.
Recognize that offers shouldn’t be compared to each other in USD terms.
If you're coming from a larger company (by employee size, funding round, etc.), you shouldn't expect the smaller startup to beat your cash comp or your overall comp (cash + equity) based on the value of the equity today.
If you want to normalize offers to compare against each other you need to estimate the risk/returns possible with each package you’re offered. I would recommend trying to calculate an “expected value” to help normalize comparisons. I may polish up a calculator I’ve created and share it in an upcoming post.
Choose equity over base cash comp when you’re initially joining.
If you choose to take less cash in exchange for more equity as part of your offer, in a high-growth startup, your cash comp will often be corrected over time by an in-house people ops/compensation team that will bring your cash up as the company grows.
Getting substantial equity later in a high-growth company’s lifecycle is far less common and far less valuable. To make the big bucks in the startup game you’ve gotta be holding the equity while things go from uncertain to surprisingly right.
Compensation discussions should begin with curiosity about methods.
If you believe your offer doesn’t match what other similar companies are paying for a given role, then I would bring your data points up in discussion with your recruiter and hiring manager. I recommend coming from a place where you want to understand how they got to their number—compensation isn’t always easy for startups to handle either and for certain roles, there are relatively few accessible data points.
I’ve previously written in more detail about phrases to equip you when opening a compensation discussions.
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