New Employee Questions & Negotiation
You can negotiate far more than you may think! Prioritize what's most important to you.
Key Questions To Ask Regarding Your Stock Comp Grant
When you get an offer to join a tech company, that almost always includes a stock-based compensation grant as well. The below is a list of key questions we recommend individuals ask the company regarding their grant (and why).
For Private/Pre-IPO Companies
What percent of the company does my stock grant represent relative to the fully diluted share count? Your percentage ownership of the company is what matters (not how many shares), and can also help you evaluate the offer versus companies at a similar business stage.
Can you tell me what the (1) most recent 409a is, and (2) most recent preferred price? Stock compensation is a material part of your overall compensation package. Understanding what the company is currently valued at is critical to understanding your offer.
If the company has a liquidity event (e.g. IPO or gets acquired), what is the minimum price per share necessary so that common stockholders would make a profit? Most startups fail, and in recent times company valuations have declined substantially. When that happens, VC liquidation preferences can make it much more challenging for employees (whose options/RSUs are for common stock) to derive value.
Have you raised capital with greater than a 1.0 liquidation preference? While your odds of the company answering this question may not be great (they don't have to tell you), it can have a huge impact on the value of your stock comp under a certain exit scenarios.
Will my grant allow early exercise via 83(b)? Not every company/grant can be early exercised. Knowing if yours will allow this helps you know if you if you potentially can/should be considering the pros/cons of early exercise immediately (or not).
If I leave the company, how long will I have before my vested options expire (or said another way: do you have an option extension/PTEP program)? An option extension/PTEP can greatly increase the value of your equity compensation (allowing you to avoid the "exercise or expire" dynamic if you leave the company).
Do you have a company policy regarding whether transfers of stock are allowed/approved or not? While it isn't common for a company to answer this question, the answer can have a huge impact on your financial plan (b/c if transfers are authorized, selling your shares may be available to you prior to an IPO).
What type of vesting schedule will my grant have? A 4-year vest with a 1-year cliff is market normal for a new employee, but companies can (and do) vary from this.
Does the company currently have a plan regarding liquidity for employees? (tender, acquisition, IPO, allows transfers, etc. The validity of this questions depends on the stage of the company (i.e. its likely not a focus at all for a Series A company), but for later-stage companies it's something they are increasingly hearing about from their internal stakeholders. So knowing what's potentially coming up is useful information
Note: Details regarding the type of stock comp you'll receive, the strike price (if its an option), vesting schedule, cliff, etc. are all very important as well -> but this information is commonly provided with an offer
For Publicly Traded Companies
What type of vesting schedule will my grant have? A 4-year vest with a 1-year cliff is market normal for a new employee, but companies can (and do) vary from this.
How is the price input for an RSU grant determined? As noted here (FAQ: How Are The Number of Shares in an RSU Determined), while RSUs are granted for a specified number of shares, the amount of shares you receive is typically pegged to a dollar target (e.g. $100k/yr). Understanding what method the company uses to determine the stock price in that calculation can have a large impact on the amount of RSUs your grant has (e.g. closing price day offer letter is signed; closing price the day you start, average closing price over a the trailing 15, 30, or 60 days, etc.)
Negotiation: What's Important to You?
When you get an offer to join a tech company, some individuals (mistakenly) believe this is the end of the interview process (it's not). Rather, it's the start of the critical last step: Negotiation!
Many individuals dislike negotiating compensation, and sometimes you don't have a proverbial "foot to stand on" (e.g. you've been out of the workforce for a while). But in most circumstances, both you and the company have invested considerable time in getting to know one another and you're both interested in moving forward. The company presumably has hiring and business growth goals it wants/needs to meet, and you are a part of that. This is the ideal time (1) to consider what is most important to you, and (2) ask for it!
Negotiating Compensation (Cash and Equity)
For many individuals, the biggest focus for negotiation is compensation. Maybe your offer was "light". Maybe one part (e.g. equity) was generous but the other part (e.g. cash) was underwhelming. Maybe you consider the offer "fair" overall --> but you think they could do better. No matter the reason(s), when it comes to negotiating compensation, it's important to (1) know and prioritize what you want the most, (2) know key data (e.g. market rates/averages), and (3) make the ask/negotiate. Key areas of negotiation focus are:
Cash Compensation. Salary, Guaranteed Bonus or Commissions
Signing bonus. When it comes to cash compensation, companies many times can/will have more flexibility when it comes to a starting bonus vs. your salary. Basically, HR wants/needs to keep compensation within "bands" for a given role/level -- but signing bonuses are infrequently part of the bands and thus they may have more wiggle room.
Equity Compensation. The number of options/RSUs you're granted is most typical. And when doing so, we strongly encourage you to think about this first in terms of percentage of the company your grant equates to (and how that measures up vs. market averages and your skills/experience).
Balance between cash and equity compensation. Many companies have some flexibility when it comes to the split between cash and equity compensation. If you really believe in the company and want to take more equity risk, you may be be able to adjust your offer to be more equity-heavy. And vice-versa if you want/need more cash, or are more skeptical of the company's long-term business prospects.
Job title. While what you do on the job is most important, we all know that your job title can/does matter. This is the time to ask!
Data is Your Friend! The more data and information you have, the better you can strategize for additional compensation and make your case. See our page on Average Stock Grant By Job Role/Seniority for free public data sources!
Non-compensation Negotiation Items
Beyond compensation, there are a number of other items that can be negotiated. Some of the more frequently discussed and considered ones are:
Reimbursement for job relocation
Ability to work from home (part or full-time)
An increase in the amount of vacation you earn/receive per year (paid or unpaid)
An increase in parental leave time (paid or unpaid)
A sabbatical after a specified number of years working for the company
Less Common Negotiation Items and/or Strategies
Cash bonus to purchase equity at the company you're leaving. Leaving a company means you may need to purchase or forgo your vested equity compensation (a decision you otherwise would not have needed to make). Using this as a negotiation tool for a signing bonus (or larger signing bonus) may bear fruit.
Mentor/leadership exposure. If you desire to grow rapidly in your career, some individuals have found value in negotiating a dedicated mentor within the company and/or exposure to senior leadership.
Negotiating an extension of your stock comp upon departure. Known as a post-termination exercise period (PTEP), these extensions functionally give you more time after you depart a company before you have to exercise vested options or forfeit/lose them. Some companies have policies that provide PTEPs to all employees, others it's grant-by-grant or in special situations. But the value of a PTEP can be substantial.
Negotiating approval to sell vested, pre-IPO stock on secondary markets. Selling stock on a secondary market can be a valuable strategic option to consider, should you ever want/need liquidity and the pricing is reasonable. The sale of stock on secondary exchanges requires company (and typically board) approval. Some companies provide this in most cases, some never, and others on a case-by-case basis. Even if you're not sure you would want to do it, negotiating that the company will approve you doing so if you desire increases your strategic choices.
How your initial RSUs are priced (at a publicly traded company). RSU grants are specified in shares, not dollars. However, when RSU grants are issued, most companies target a dollar amount for the grant (e.g. $400,000 vesting over 4 years), and then use the "current market price" to determine how many RSU shares that will be. But rather than use the stock market price on the day you sign, most companies use the average closing price over a trailing number of trading days (e.g. 20-40). If the company's stock price has declined notably in the past month, this can be very penalizing! Negotiation-wise, if a significant decline in a company's price has occurred over the last 1-2 months, you may want to discuss/negotiate the "price" that is used in your RSU grant to determine the number of shares it will have. For more information see: [FAQ]: How Are The Number of Shares in an RSU Grant Determined for a Publicly Traded Company?
Negotiation Items Typically Only Available To Executives
Change in control provisions. This is one of the most commonly requested, and most infrequently provided asks. Typically known as acceleration clauses ("single trigger" or "double trigger"), this requires that unvested stock-based-compensation accelerate/vest to you in certain circumstances such as an acquisition (vs. typically being canceled).
Negotiating severance packages. Beyond negotiating change in control provisions (detailed above), items like a cash payment, health insurance coverage, months of salary, and more can all potentially be negotiated for a senior executive compensation package.
Change the structure of granted stock-based-comp. Want to negotiate for no cliff, an accelerated vesting schedule, or more options in exchange for a longer vesting period? If you're a key executive hire for a company, this is likely on the table.
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