Working at a startup can have many rewards, but there are financial considerations to make.
Equity
It’s important to fully understand the various equity options and what they mean for you as the company grows – or doesn’t. A recent study found that up to 75 percent of venture-backed startups fail. While a few go public – and then share the wealth — it’s more likely they’ll be bought out by a larger company. What happens to your shares then
Employees and partners operate in “very different spheres.” The pre-IPO stock that employees are granted tends to have no hard valuation or maturation put on it, she says. If the company is sold to another firm, you might see something, or you might not. Buyout deals tend to favor the partners; the employees, not so much.”
Can You Live on the Salary?
Where you are in life will determine your requirements. A person who’s married with children and owns a home will have very different needs from someone in their twenties whose only concern is paying off their college debt.
Everybody needs to be able to live below their means. The higher their lifestyle costs, the more limited they’re going to be in the offers they can accept, especially at a startup, because that salary likely would not be as much as it would be at an established IT company.
They have to recognize what tradeoff they’ll have to make – if they make one at all. But people who work for startups tend to be more interested in getting in on the ground floor of something really exciting rather than the salary.
While startup salaries have been reported to be about 70 percent of what larger companies pay, not all startups are cash-strapped. So do your homework and negotiate for a reasonable blend of salary and equity.
Next Step
Ready to take the next step and work with a fee-only CFP? Reach out to schedule a Discovery Meeting to learn more.