Ask HN: What is the standard first hire equity + salary in a new startup
We are in the process of hiring our first programmer. As a startup trying to keep costs to a minimum, whats the standard equity / salary our first tech hire should get? (ballpark is cool too)
This post might be helpful: http://news.ycombinator.com/item?id=973060
Everything is a negotiated outcome, but good engineers are worth market salary in the absence of equity.
With equity, one rule of thumb I've heard is give 1% for every $10,000 cut the person takes. This implicitly values your company at $1m, but I guess most companies don't hire an employee unless the business is worth at least that.
Another rule of thumb I've heard is $50k for 2%-4%. Somewhat supporting this is Aaron Patzer (Mint.com founder) paid his early engineers $30k-$50k for 1% to 5% equity. See http://techcrunch.com/2009/10/08/startups-101-the-complete-m...
It's all over the map. Some people like equity. Some people (I'm in this camp) think early equity is too risky to compensate for the salary cuts demanded.
Say I take a $10,000 pay cut. Say your company is worth $1,000,000. That means I should get 1% right? No. I should get 1% this year, starting immediately. But wait. My 1% has only a very small chance over ever turning into money. That means I need, say, 5-10 percent to compensate for that. Don't know many startups willing to give someone 5-10% for a $10k salary cut? Neither do I. Maybe I'm too conservative.
Or, if you want the short answer, I'd say between 0.25% and 5% is normal to go along with a 20-30% salary cut. That's what I've seen, at least. YMMV.
It varies wildly.
The old rule about remembering to pay your soldiers goes. Cutting salary has consequences to your ability to attract and retain talent and equity is worth $0 until some hypothetical point in the future.