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Employee at start-up with Salary and Equity Questions

I have been working at a small start-up for one year.  I was the 5th employee hired. The company had little to no traction when I was hired. I was hired in a sales/marketing role.  I took about a 50% salary hit for what the market demands for an equivelent role/experience. Because of my ignorance regarding start-ups I did not get anything on paper regarding equity or commission.

Since the time I was hired, I have been responsible for landing our 3 biggest accounts, and over 50% of total company revenue.  I anticipate these 3 accounts (same industry) will open to door to at least a dozen more like companies in 2016.  Recently there has been angel funding, and a CEO has come on board to secure more funding and prepare for a potential A round. The company now has 15 employees, and appears to have about another year of runway.

Is it fair to ask for equity? If so, how much?

Is it reasonable to ask for equity in the company for taking a 50% market hit, or is it too late?

  • Absolutely ask for equity. Ask yourself if you’re willing to walk away if they don’t make you a fair offer. Remember that the difference between the market salary and what you got paid is the amount you invested in the company. Calculate your salary cut as a percentage of the valuation of the company at the time you joined.

    For instance if you got paid 50k instead of 100k, then you’ve invested 50k in year 1. If the angel round valued the company at 6M, then it was worth no more than 3M when you joined. So with these assumptions you should get 1.5% equity.

    Your equity stake should increase as long as your salary is below marked value. Otherwise you’re being taken advantage of.

    Reply

  • IMHO it’s too late to get what you deserve. But you definitely should ask equity for retention if you’re valuable to the company. Just that it probably won’t be huge unless of course you’re still the main rainmaker in the company and they cannot afford to lose you.

    Reply

  • The way i see it you were hired as a salesperson and received a salary, eventho below market comparisons. To now demand equity because you did the job you were payed for is what I would call typical money grabbing. Most start-ups arent born to generate cash cows, they are started because they have a new idea, concept or product and the entrepreneur enjoys the challenges that come with that.

    Try looking at it as great experience, dont go crying for cash just because you did your job. Landing 50% of the business in a 5-man company as the main salesperson isnt that astonishing to be honest.

    Reply

  • Just ask for a raise, point out what the current market valuation for a good salesperson is and ask to be payed accordingly. Asking for equity now just makes you look like a bad salesperson who sold himself cheap. A good salesperson should have thought of an earn-in opt at the start.

    Reply

  • I think there’s a key piece of information missing here.

    You mentioned taking a 50% pay cut. WHY? Why did you agree to it? Did you do it just to help your friend? Or did you do it in anticipation of some upside? If there was some unwritten promise of upside, then by all means you should now ask for it to be a formal agreement be it commission, profit sharing or equity.

    If there was no agreement then all you have is your value going forward to the company and that may warrant some equity or it may not, but the past is the past.

    Reply
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