If you like the company and are happy with the salary, sure: take the job. But don't expect that they'll suddenly drop a big equity package in your lap in a few months. You're absolutely right that you will lose most of your leverage by taking the job first.

And let's be honest: it's not like this is brain surgery. If they really wanted you and needed to put together a stock grant to do it, they would.

So treat it like any other job: if the compensation and work interests you, go for it.

If this is a true startup, meaning a company where equity is a big component of compensation, then you should negotiate the amount of equity you'll get (as a percentage of the fully-diluted shares, not as a mere number of shares) when they hire you. Taking a job at a true startup without knowing how much equity you'll get would be like taking a job at an ordinary company without knowing what the salary would be.

On the other hand, if they don't currently have an option plan, they're probably not a true startup.

Plus, they're offering industry competitive salary, which also means they're probably not a true startup.

We offer competitive salaries, and we're definitely a startup. Founders expect poor compensation from startups, at least in the first years. Everything else is a matter of negotiation.

Is "we" Matasano? Maybe I'm missing something, but my immediate reaction based on the website would be to put it into the category of "consulting firm", not "startup".

Our consulting business funds two FTE devs. We haven't taken a dollar of VC, we have two nice offices, we pay competitive salaries, we offer health insurance and a 401k, and we can turn out products whenever we want. I don't know what you'd call our company, but since you've never made payroll, I'm not sure why I'd care, either.

Congratulations, it sounds like you have a very successful business -- I'm sure many people here would love to be as successful as you are.

But it still isn't a startup. :-)

You're right. We didn't give up 6% of the company --- one year in, the equivalent of 4-8 rock star employees, or a CEO --- in exchange for what a single developer bills out in 2-3 weeks. We therefore do not meet Colin Percival's stringent standards. I see now that "startup" is actually a handicap measure, and not a description of a business ethic.

By the way, we launched product today. Obviously, we don't much give a shit about our website at the moment; our "real" website is the blog.

I think this is a case of you being hyper-sensitive rather than cperciva being hyper-critical.

You're probably right.

Where does the money for those salaries come from? Profitability? Funding? If these guys are funded enough to pay salaries and haven't worked out the equity issue, I'd be concerned. If it's profitable enough to pay competitively, will the founders necessarily be seeking a liquidity event?

I don't know about "these guys", but our answer is straightforward: cash flow.

That's awesome, congrats!

BTW, are you (tptacek, not the company) in Chicago or NY?

It's awesome, but really --- if we can do it, I absolutely guarantee you can too!

I'm in Chicago. Half of us are in Chicago, the other half in Manhattan.

We should meet up some time. I'll be starting a new job in the Loop in a couple weeks.

What I think is, Chicago people should be getting lunch together on a regular basis. Getting drinks once a month worked beautifully --- www.sockpuppet.org/chisec, this is ~30-40 people reliably --- let's set something up for the middle of the day.

Our office is upstairs from the best coffee shop in the loop, and I'll happily buy anyone who comments on HN coffee any time. My contact info's in my profile.

You will lose your negotiating leverage. Good faith and five bucks will buy you a sandwich. You really have no idea what they "think is fair." That said, if you want the job, the equity will be a pleasant bonus, and most employee equity grants are easily diluted, anyhow. I think you're left with nothing but trust and their own incentive not to dilute at the end when you're not a cofounder.

You will lose one type of negotiating leverage and gain another.

Once you have been there a while your true value will be obvious (especially when you produce, in a _nice way_, comprehensive documentation at your first performance review).

Please be clear that I am not advocating salary blackmail (pay rise or I quit) tactics. However reasonable and friendly negotiations periodically is not an unreasonable thing to request.

For most of us the company at hiring time is seeing a choice beteen you (an unknown risk) and someone else (also an unknown risk) and while they obviously have a preference it may not be that strong. However after twelve months they will be evaluating you (a known, and hopefully respected, certainty) and someone new (an unkown risk) which is a whole different game.

Abrupt ultimatums may be bad form, but if you take a job and later realize your comp is unfair, you are under absolutely no obligation to accept that situation.

This will probably run contrary to all the other advice you get here, but my take is: it doesn't matter whether they have a stock plan yet. It is not as if a pre-existing stock plan really protects you; after multiple rounds of VC, any deal that was on the table when you started will have been rewritten many times over.

Though an option plan doesn't protect you, once you've been granted a specific number of options (or rather, restricted stock), there is little anyone can do do take them away from you, short of firing you, without diluting the founders equally.

That depends on your class of equity! Your terms might be different to the founders - in the UK you can read the memorandum and articles to understand the current equity structure and dilution rules for a company.

(Changing the mem and arts usually requires a shareholder meeting, and can be contested in court if the interests of minority stock holders are not taken sufficiently into consideration.)

In addition even if you do hold stock of the same class as the founders that won't always prevent you getting screwed over. The board might sign up to a sucky deal through innocence, incompetence or collusion and condemn you as a side effect.

This is kind of along the lines of what the senior people at the company were telling me. That you have to believe in the idea of the company and have faith that they will take care of employees and want you to be 110% committed to making the company a huge success by giving you a generous equity package.

Don't fall for that. If the company wants to see if you are a good fit before hiring you they should hire you as a contractor and pay a good hourly rate. Which from my experience in the Bay Area is at least 75 bucks an hour for 40 hours a week.

This "try before you buy" contractor meme is awful. 1099s are responsible for their own payroll taxes and their own health insurance. If a company suggested that I relocate for the opportunity to consult with them, I'd hang up the phone. It's insulting.

(Obviously, I mean, as a half-measure before extending a full-time offer. If a company suggested that Matasano consult for them, we'd thank them and then make it happen.)

The consultant/contractor would likely be to avoid payroll taxes/withholding/processing fees with TriNet etc - not to avoid giving equity. (And, technically, it's illegal to "pretend" someone is a contractor when they're not - but that's a separate issue :)

Remember, this is all at-will employment - either of you can end the relationship at any time. This is where an equity grant/option with cliff vesting comes in. 4 yrs with a 1yr cliff is fairly standard... In other words, if you get fired or leave before 1 yr, you don't get that equity/option and it reverts to the company.

Sounds like they are not funded (or self funded). Any VC or lead angel would have required an options pool as part of the funding round. Assuming this is not true, granting options from an existing options pool is as simple as a few documents, if they can not do this it seems to me to be a sign of bigger problems.

"it doesn't matter whether they have a stock plan yet. It is not as if a pre-existing stock plan really protects you; after multiple rounds of VC, any deal that was on the table when you started will have been rewritten many times over."

Somewhat true, you are liable to be diluted over subsequent funding rounds, but then so is everyone else. Its no excuse not to grant options immediately. Its not as if the basics of options change with subsequent funding rounds. The only thing that should matter is the strike price at the date they are granted, which means you want to get them ASAP.

I have heard this story many times, typically it takes longer than what's actually promised to issue stock. Find out why it's taking so long, also speak to current employees there to figure out what was promised to them and when stock would be issued?

Even if they issue stock at a later date, I don't think they can start your vesting date from they day you join (check on this). Also the price would change every month and you will probably get it at higher price than right now (in the cents not $).

All that said, if you like the people, the market for which they are building a product, your role in the company go for it with ONE condition: Typically companies have a 1 year cliff, in this case, if the company takes X months to issue stock, you can ask the company to reduce the cliff by 12-X, which is fair. If they take longer than 12 months, count this as experience and move on.

good luck!

I don't know if they can artificially backdate the vesting schedule, but they can certainly make the vesting schedule shorter.

If the salary is industry competative then the only thing you need the stock for is to compensate you for risk of losing your job.

Given that any losses you have are likley to be limited to a few months salary (unless you work in a field with low mobility, or they have a huge non compete) I wouldn't worry too much and then consider any equity to be pure bonus if it does turn up.

It depends on how good you are at what you do: If you are a really great developer and you become an vital part of the infrastructure after a few months, that will significantly increase your leverage. In order for this to work, you have to be able to walk out on the job for real if the negotiations don't go as planned. That just involves keeping feelers out for replacement jobs (always a good idea regardless when joining a startup since there's no guarantee the company will survive for long) and having enough money saved up to be out of work for a few months, and knowing how to apply for unemployment benefits if you need to.

If you suck well there's no guarantee that they will keep you anyways.

Main thing would be -- would you enjoy relocating to the west coast? If you never get any benefits other than the salary, would that be enough? Have you considered whether the place you are moving to might have higher/lower costs of living?

Good advice from ajross and pg. The fact that they don't have an option plan in place suggests that it's definitely very early stages. What level of funding do they have? Especially if you're that early, you should DEFINITELY be seeking equity.

To put it in perspective, we just made our first non-founder employee - a senior developer - and we gave up 4% to get him. It's on the high side, but as a first hire and someone who we didn't want to lose, we were willing to give that up.

That said, the legal costs with creating an option plan (and registering for business in the state if it's a DE corporation) are not insignificant. Especially if they don't have much money yet, and want to spend that mostly on talent, that can be a factor here.

If they haven't done an equity round yet (i.e., valued the company), then the stock is effectively worthless (par value is probably $0.001 per share or something in that range, and normally you would see something like 5M shares authorized and outstanding). So in this scenario, an option with this strike price is effectively the same as an equity grant.

We were lucky - we're doing our initial stock purchase agreements now (we incorporated awhile back but had to redistribute some equity as involvement with co-founders changed) and we were able to include our first hire in that plan. We all have the same vesting schedule - 4 yrs prorated with a 1yr cliff - but our initial dates are a year or so earlier than his. This saved us at least 5k in legal fees.

My advice would be, like ajross and pg suggested, to negotiate what equity will be granted - even if they don't yet have the means to grant. And, if they wanted, they could also sell you shares under the same original purchase agreement (assuming they have a vesting schedule they're happy with, and they had some authorized but unissued shares).

Basically, if you want the job and like the company, take it - but if you don't negotiate the equity now (even if it can't be executed yet) then don't expect it later.

Just remember to get it down in written form, just to protect yourself from all those fake promises companies always make when you join.

"Oh yeah you'll get a 15K raise if we like what we see after 3 months" - then 3 months later somehow you always fall short of their expectations

This may be a special case, but it worked for me so take it for what it's worth: take the job, work hard and take on as much responsibility as you can, until you are indispensable. Then ask for (demand) equity. They will give it to you.

I would, negotiate a deal now, if they don't stick to it at the time they allocate or take too long to allocate than you can always leave and make that clear from the start.

Unless you feel you have a better option...

Actually, leave or sue. If they make a deal and you have evidence of it, they have to stick to it and courts will enforce it.

Your best chance at negotiating any salary related issues is before you start.

Don't think 'If I perform really well - they will compensate me fairly'. (speaking from experience)

I did that once and the company failed after 18 months. But well, the pay was still OK, I learned a lot in that time and the team consisted of people which loved programming and were motivated enough to work in a startup. I still have contact to many of them years later and it was worth it just for that.

So in my case I would say it worked out fine even though I didn't get rich.