8/we have no interest in hoarding. All employees get 3 offers inverted with salary/stock to choose from. We hope u join us and play to win!
— Devon Wijesinghe (@DevonWijesinghe) October 6, 2014
Startups have the ability to compensate their people in a variety of ways. The two most prevalent forms of compensation are salary and units of ownership (e.g. something related to stock).
The tricky part is that different people are wired differently. Some employees enjoy more upfront salary and do not want to own many units. Others want more potential upside when the units of ownership multiply in value; they do not require a full market wage upfront in return for the larger chunk of units.
When we first began our business, we sought to understand the motivators driving our potential hires so that we could figure out the right mix of salary and units to give out. We would ask questions to get a feel for those parameters.
Now we are more mature and tend to pay better than market wages, when compared to Silicon Valley companies using the cost of living calculator.
I liked Devon’s series of tweets today about his Series A. The tweet I included above is another approach along these lines to give employees maximum choice in crafting their compensation package by offering prospective hires 3 different options to choose from with different salary/stock splits. One thing to think about when offering 3 compensation options is that it implicitly assigns a value to the units which is a valuation of the startup. That is probably not overly worrisome for most startups, but it is something to consider.
What are your thoughts on stock vs salary in a startup offer letter?
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