Negotiating job offers can be intimidating, especially as a job seeker. Depending on where you are in your life and career, how secure you are financially and physically, and the support networks you have access to, a lot may be on the line. It’s nerve-wracking to face potential misunderstanding or undervaluation by a party with more power or information than you; and, in my experience, this can lead to not asking for what you want in negotiations.
I’ve become a better negotiator over the years by approaching them as conversations with an empathetic goal: to align on interests and find common ground. We recently hosted a virtual event with investor Jeremy Carr to equip our community with tips and resources to negotiate more effectively. As an entrepreneur and seasoned operator at companies like Palantir, Juul, and Clearslide, Jeremy has negotiated hundreds of different offers. Below are a few takeaways from our discussion:
Aligning Interests: An Exercise in Empathy
To align on interests, you must know what your and your counterpart’s interests are. An exercise around “wants,” where you closely examine your wants and needs and empathize with your counterpart’s wants and needs, is helpful here. The key is knowing what each party’s most important wants and needs are. If you can align on those and establish common ground upfront, asking for additional items will be easier than you think. To use a cooking analogy, it’s always easier to discuss toppings to your dish once you’ve agreed on the base and flavor set.
How do you do this?
Things You Want – First, stack rank all the criteria that matter to you for your next job. What are your non-negotiables? Rank those highest. For example, you could make a table like this:
In this case, the non-negotiables are working with a great team in a role where you are learning rapidly. Once stack ranked, ask yourself, to what extent are your wants aligned with:
Company goals: Can you get behind the companies KPIs/goals? Do you like the leadership/execution style? Is the company growing in a way that aligns with your growth goals/wants?
Commitment level: What does an employee’s average work week look like? How much time/effort do they expect you to put in and for how long? Are you game for that? How many of the “things you want” are you willing to sacrifice?
Things They Want – During your interviews, ask your prospective employer to share their non-negotiable wants and needs for the role. How do they value this role? What does success look like and how is it measured? How do you think they view you? Map this information against what you believe you can offer — and want to offer — the company as a future employee. Are there any intersections between what they want and need and what you want and can offer?
Things You Both Want – These intersections build your common ground. Ask a friend, family member or mentor (or RenCo member!) to be a sounding board on whether these intersections are realistic. Iterate on this exercise until you reach what you believe is an authentic common ground. When you begin a negotiation, align on this common ground first. It will make it infinitely easier to ask for additional things because you’re on the same side!
Keep in mind that early stage startups are limited in time, money and people. They may not have an HR function fully built out. Early stage founders/CEOs are maniacally focused on hiring people who can move the needle for their company’s goals while also managing burn. The more succinct, clear, and objective you can be in making the case for how your capabilities and interests create value for them in the way they need, the easier it will be to ask for the additional things you want.
Now, for some quick tactics for understanding and evaluating early stage offers:
Understand the company’s cash runway: This impacts your cash compensation offer.
Ask about salary ranges: Is your cash compensation within a range consistent with other roles at the company?
Research salary benchmarks: Resources like Gitlab, Angelist, and Glassdoor and your network are super helpful here. Don’t forget to present these benchmarks in the context of your aligned goals and interests.
Negotiate for more equity than cash (if you are in a position to do so): This signals to your prospective employer that you believe in and want a vested interest in the company’s success. Also, equity is most valuable at the time of joining and is difficult to increase once you’ve joined. As companies scale and raise more equity financing, their employee stock option pools get diluted and the value of your equity stake gets diluted as well. Cash compensation, on the other hand, is not subject to dilution and is easier to increase as you grow in seniority.
Calculate valuation risk to assess value of stock options: RenCo Member Robby Huang gave us an excellent example:
Say you are offered 100bps of stock at a company worth 10M in fair market value. Your stock options are worth $100K, likely vesting over 4 years. To calculate valuation risk, you could assign a probability, say 50% chance, for liquidity at the $10M valuation and 15% chance for liquidity where the valuation goes to $100M. This means the estimated future value of your $100K is between $50K (10M*1%*50%) and $150K (100M*1%*15%). Keep in mind that valuations can always go to 0. Your percentage probabilities should be based on your view of the company’s growth trajectory in the next 2-5 years.
Ask about 83B within 30 days signing and ensure early exercise (for non-qualified options) is in your plan: Your exercise window post departure has serious implications on your tax obligations and financial outcomes. You need cash to cover the strike price and the tax bill due for the year of exercise (which is calculated on the difference between the strike and the current fair market value). If you don’t have enough cash on hand you often have to choose between walking away from vested options or being locked into staying at the company. Sam Altman has a great blog diving deeper into Employee Equity here.
Negotiations are all about aligning interests, being informed and realistic about your asks once you’ve established a common ground, and working towards outcomes that create value for both sides. We hope this blog post empowers you to negotiate moving forward. If you enjoyed this piece and want to join a community of smart generalists supporting each other’s growth in early stage startup roles, please apply to join the Renaissance Collective here.
Thank you to Jeremy Carr, Jen Yip, Alizeh Iqbal, Jonathan Lai, Nadia Eldeib, Andrew Woo and Robby Huang for their contributions to this piece.