Should I take this deal?
I'm an indie hacker and my last project didn't take off.
I'm looking for a regular programming job again.
I have years of experience.
I'm in new York city an expensive market.
I have two offers right now.
One for $150,000 no equity
And another for $90,000
Which is a low ball number for this city but with 7 % equity .
I can't go into all the details.
They have raised their seed round and look like they can raise v.c money.
I'm single no kids.
What should I take ?
You need to ask yourself a few questions -
If the company B (90k) can raise significant funds, would they be giving you a raise or not necessarily?
At the end of the day, choosing company B means you are investing in it yourself (time, rather than money). You need to make your own due diligence and figure out if the company is worth investing in and if things can grow well.
If you end up working there 3-4 years, (assuming no changes in pay) there's a 200k difference between the two jobs. It's like investing 200k directly in company B, which is a significant risk so you'll need to do some thinking.
I'd take both salary and equity out of the equation and ask yourself 2 questions:
If you answered "no" to either of those, I would pass, regardless of salary / equity.
The thing with equity is that most of the time it's absolutely worthless, yet it's used as a way to justify paying below market for talent.
Hard to give you solid advice without knowing the details. EG What is the vesting schedule? If it is the standard 3 years then the difference between job A and job B over those 3 years is 180k.
If you feel your 7% would be worth that in 3 years and you believe in the company then that's your decision. But I personally would go for the first offer. You could invest that 180k in 3 years into something else less risky and see even higher returns.
Which one do you think will be best for you?
After taxes, you're giving up about $40K/year to take the $90K deal instead of the $150K deal. So the question is, do you believe in this company enough to pay $40K/year for 7% equity?
Generally speaking, this is a bad bet. For 95% of startups that have ever existed, you'd be better off taking the money and leaving the equity, which is very likely to be worth $0 in the long run. But you're single with no kids, so if for some reason you really believe this company is going to do amazingly well, then you can probably afford to take the risk.
In your shoes, I'd probably take the higher salary, save $80K over two years, then quit and invest that in myself, paying my living expenses while I try to start another business.
Hey Geoffrey,
Congrats on the offers! Our company, BeamJobs.com, is in this space so I wanted to offer my two cents.
When engineers on our platform have competing offers here is the advice we give. First, have you tried leveraging your offer from Company B to maximize your offer from Company A and vice-versa? People are often hesitant to do this because of fear that the company might revoke their offer. Let me make it clear that that NEVER happens. These companies have already invested time and resources in determining you're a good fit for them. The cost of finding a new qualified engineer is in the thousands of dollars to them. If you're interested in advice on how to word these messages I'd be happy to help.
Now let's assume that you have maximized your offers. How do you value the equity component of the compensation package from Company B? We tend to recommend using an equity valuation calculator like this one (https://docs.google.com/spreadsheets/d/1pl9gO-9Dl-ROIMvapeso8N4lTi7_IKlmrbnE1DoNGkM/edit?usp=sharing). Now, this calculator makes a number of assumptions to arrive at an answer but it's a good baseline place to start. I'm happy to walk through those assumptions and their validity.
Based on the info you provided I plugged in some averages from Pitchbook (see https://files.pitchbook.com/website/files/pdf/PitchBook_1H_2017_VC_Valuations_Report.pdf?source=post_page---------------------------) to get at an initial valuation. The expected value of the equity grant in terms of annual salary is only $2,300. So these offers aren't even in the same ballpark if you're basing even your optimistic assumptions about Company B in what the data bears out regarding seed companies.
The big piece of the puzzle we're missing here are your goals and your risk aversion. Do you want to take a big gamble in the hopes that you can retire in 5-10 years? Do you value the chance that happens significantly more than you do a higher salary? Based on the averages, these offers aren't very close. But your single with no kids, do you want to gamble? When we started our company I knew the odds were stacked against us but I wanted a challenge with a high potential upside. You know it's unlikely that equity will every materialize into wealth for you, but that doesn't mean you can't have a preference for that risk!
90k with 7%
If both have same prospect in the future, I will choose option B, since you have no kids and single. Why I choose option B:
I can get 7% equity,who know you can sell it in the future
$90,000 not that low I think for single person(depends your life style)
You can start side project without worrying about money
If possible, ask about remote work. You can move to cheaper place. Maybe about 3-6 month of work, if you show a good performance, you can ask for remote work