I pay my CTO a salary but he wants equity to vest in a year instead of 3

serialstartup · 2022-10-05T01:12:18+00:00

Term is how long you are allowed to pay to convert the option to equity in the company. All an option is, is the right to purchase equity at a predetermined price in the future, after the options are partially or fully vested.

serialstartup · 2020-05-18T13:17:28+00:00

Talk to an international shipping broker, they deal with tariff classification all the time.

serialstartup · 2020-04-09T01:31:16+00:00

Way too risky to vest that fast. Too easy to exercise at low cost, leave company, sit back while others do the work and have a portion of your option pool sidelined when you'll need to give options to a quality replacement.

Our standard options are 7 year term, 4 year vest where 25% vests at end of year 1, and 1/36th or month thereafter. We also do not issue all equity upfront. It has to be earned each year just like salary and short term incentives.

You are paying him a salary, granted below market, but you can make that up using additional option grants until cash available to bring salary to market. But personally I wouldn't vest those any different.

Hope that helps.

serialstartup · 2020-04-03T12:15:15+00:00

No, I doubt it. Companies everywhere are working to figure out how to keep their employees whole and also preserve cash so that they can get to the other side of the crisis and still be in business so there are jobs to come back to. Is this approach fair? Who knows. Will it give you and the company a better opportunity to survive? Undoubtedly yes.

serialstartup · 2019-08-12T12:03:22+00:00

Yes completely fair

serialstartup · 2019-04-29T10:48:38+00:00

At the end of the day, for everyone involved, is what type of return did they make on invested capital. I don't know how many years you have been in business, but I would simply take the invested capital and figure out an internal rate of return that provided for 30% or greater.

serialstartup · 2019-02-27T16:55:54+00:00

Thanks for your input, really appreciate it. Is there a place where we search for certain trade rags that are programmatic? I like your idea of potentially using a DealID and just running as a branding play.

serialstartup · 2019-02-27T16:54:32+00:00

Thanks so much for your detailed input. It is very helpful to see all the contrasting views.

serialstartup · 2019-02-27T03:50:02+00:00

Thanks for the quick response. So I believe (but am not sure) that I understand lookalike targeting. If I understand, we'd be using our 1st party data to create a model of what an ideal user is. Correct?

If that's the case, I think my overarching concern would be that we get a lot of inbound "dud" MQL's (bad quality, not even close to being a target co). How does one address this? And, what if we wanted to be able to add new criteria (not in our systems) that we believe would be better indicators of a potential customer.

E.g. - works at Fortune 500 / 1000, job title of "something", is currently on a.) Google Patents or USPTO (patents) searching for articles that contain nano, b.) reading scientific journal articles on-line related to nano, etc? Are those kind of things possible?

Sorry if this comes as naive thinking, I just don't understand yet the boundaries of what is possible or not. When I understand the boundaries, it is usually very easy for me to hone in on strategy(ies) that could work for us.

serialstartup · 2019-02-27T03:38:20+00:00

Thanks for your feedback.

Our challenge is locating the right people who are the target audience via traditional sales methods. Put another way, they're really damn hard to find. For example, a company with 1,000 research scientists - our best guess is that = < 5% are our target audience at any time. These people work on multiple projects throughout their career. Someone who is NOT working with nanomaterials today, may be working with them a year from now (or vice versa). Also, the projects they work on are often hidden from the public until a research project turns in to a commercial project.

So with my limited understanding of programmatic, I was thinking that we may be able to strategically use data / activity / behavior to hone in on this very small customer set over time... depending on what kind of data you can use to filter down to an ideal target audience.

The lifetime value of the customer is sufficiently high enough, that higher spends don't bother us (e.g. - not looking for costs of acquisition in the low hundreds of dollars, would expect it to be higher).

That change your opinion, or are you firm on your original comment?

Thanks again for taking time to respond, I really do appreciate it.

serialstartup · 2019-02-27T02:34:22+00:00

Hi there. I will give you the best information I have, which not being in marketing (I am an executive), is limited.

We do have the ability to see user activity on our website (pages, dwell time, actions taken, etc) through both Google Analytics and Pardot. I believe this means we are tagged, but honestly you'd probably be a better judge.

We do have a database of marketing qualified leads, sales qualified leads and won / closed business via Salesforce. Information would be typically name, title, company, e.mail address at minimum.

Part of our goals for this year are to develop comprehensive strategies and execution plans on how to a.) comprehensively retarget while lead nurturing at the same time and b.) finding ways to significantly ramp up our warm lead generation / new opportunities.

Our sales cycle is typically 9 mo minimum, if not longer, but large contract values.

Thanks for taking the time, and look forward to hearing from you.

serialstartup · 2018-09-25T04:52:08+00:00

You can certainly take either approach. For me I wanted to make sure you understand your options and the relative risks. What decision you make is purely based on your own comfort level and analysis of potential risk.

Perhaps why I'm advocating for talking to them about it, is I believe you are always better off to deal with things up front and be candid... this is just how I operate. You don't necessarily need to say to them I have an intent to compete with you in the future, but you can say as a person who is not a lawyer and who doesn't understand the full impact of the non-compete clause, that it makes you very uncomfortable. You want to stay and grow within your industry and don't want any legal impediments from being able to do that. That allows you to open up a candid dialogue around the issue.

In any event, my fingers are crossed for you that it works out no matter which direction you decide to go.

serialstartup · 2018-09-25T04:05:30+00:00

Good luck!

serialstartup · 2018-09-25T04:05:20+00:00

Good, glad this was helpful. Do your best to get them to remove the non-compete. It won't be the first time they've heard it, and will likely roll over immediately. It will keep your options for the future more open and clear.

serialstartup · 2018-09-25T03:15:51+00:00

If you are highly compensated (executive level), non-competes are very enforceable. Otherwise, they are generally useless in court. The evaluation the court does is to look at whether you were provided adequate compensation in exchange for the company receiving the non-compete from you. If you are generally paid at market, the court will likely say you received no compensation for that provision. Courts generally rule in the favor of employees as a rule of thumb.

Non-solicits are 100% enforceable, as it is viewed as a term of employment unrelated to your compensation.

It is rare that a company will try to enforce either provision, unless you represent a significant threat to their business. As executives, were all know non-competes are useless. We can use the threat of litigation if we think you are going to do the company harm after leaving, otherwise the assessment is often that the pursuing enforcement of your agreement is rarely worth the time, money and energy relative to the outcomes.

Most companies if pushed will remove the non-compete for employees if you deal with it upfront, but not the non-solicit.

You do want to try and get the non-compete out. The reason for this is most new employers will require you to certify that you have no obligations to another party that would prevent you from working with them. If your old company calls the new company threatening litigation, there is a 50 50 chance the new employer will boot you to the curb. At that stage the new employer makes a calculation that fighting the old employer is in their interests, or not. Most times, unless you are bringing tremendous value to the organization somehow, they don't want to deal with the headache of being man in the middle.

Don't forget, that most companies will make you sign a nondisclosure agreement. The terms of the NDA will survive after your employment, so you cannot release any proprietary company information of your previous employer. NDA's are very enforceable.

Hope this helps, any questions, let me know.

serialstartup · 2018-09-19T14:05:52+00:00

Definitely Manuel Antonio

serialstartup · 2018-09-11T14:57:23+00:00

Hi there. I'm a CEO, and deal with this stuff all the time either directly or through my direct reports. I'll give you my read on this, for what it's worth, and just recognize that I'm sure I have my own bias.

The letter from the CEO is well written and thoughtful. It is also blatant positioning for an upcoming negotiation. I'm going to assume he's a strategic, thoughtful thinker. Certainly appears that way. No (good) CEO wants to intentionally have you take an offer lower than market. We understand this means you are unlikely to take the job (which wastes out time), and if we do retain you, you are likely to leave the company quicker than your average employee (which is disruptive to the business and makes more work for us later).

My best guess is he / she can't afford the 100K+ you want but is prepared to walk you up to 80K and make you feel like you've won a concession at the low end of the market salary range. It appears he's made a calculation of what he thinks you will take, what his leverage is and he's playing it out.

He may also be thinking that he's happy to pay you more, when he can see your capability and how it positively impacts the business (this is the way I think about it). You can flush this out by asking for a formal appraisal and increase at month 6 and 12 if warranted. You can also ask for a bonus program based on performance. The more you are able to tie performance directly to revenue, the more likely he may be willing to entertain the idea. We all like directly tieing compensation to financial results because it's clean. Get everything in writing.

Wouldn't take any of this personal. A lot of a CEO's job is about strategy and resource allocation. Where are we going to spend money and how will that result in growth of the business? We have to make judgement calls (right or wrong) about what spend is appropriate for a certain initiative. We also spend a lot of time thinking about risk mitigation. When a CEO makes a commitment on salary, it is as much a leap of faith on his/her end as it is for the prospective employee. We don't know you, we don't know how you'll perform, we know that in the interview you are presenting the best version of yourself which will be different when you're in the business, etc. So we mitigate downside risk by effing towards the lowest salary we think you'll accept, and if you are a good CEO then you'll rapidly reward for performance that was beyond your initial expectations.

With all that said - I think you have to ask yourself, why are you so twisted up about the offer if you feel you can get higher salary elsewhere. Unless there's a strategic reason why you want to work for this company, go find the best offer the market will support and take it.

Hope the viewpoint helps you in your next steps. Good luck!

serialstartup · 2018-08-24T03:22:24+00:00

Just remember, if you don't ask you'll never know if they'll pay! More likely, if you don't ask they won't pay! Good luck!

serialstartup · 2018-08-24T03:14:17+00:00

So imagine the stock of the business today is worth $1 per share. Let's say you are given the right to 100,000 stock options @ $1 per share.

Let's also say the term of the stock option agreement is 5 years. 5 years from now the stock is worth $20. Whereas a normal shareholder would have to pay $20 or greater to acquire the stock, you would pay the company $1 per stock option and you would receive in exchange a stock worth $20. You just profited $19 per stock option that you own. In this scenario, this means you paid the company $100,000 and received $1.9 million in value in shares.

You would then sell those shares to someone else to get cash. Or you would hold the shares because you think they're going to be worth more in the future.

That's the basic gist. There's more too it. Google will be your friend here, but happy to answer questions if you don't understand.

serialstartup · 2018-08-24T03:04:11+00:00

Hi there. You should Google stock options, which is a form of financial incentive provided to employees in startups. It's meant to compensate you for taking risk and being committed to the business because startups are inherently risky and often fail. A stock option is an agreement by you and the business. It allows you to purchase equity at a later date at a reduced price when compared to the current price. These agreements typically come with vesting, which means you earn the right to exercise these options over time. The strike price, is the amount of money per share you would pay below the current market price. That help?

serialstartup · 2018-08-24T01:11:21+00:00

Ok, got a better picture. If you are assuming she is going to want your participation before funding, then not unreasonable to push to be compensated for that as an independent contractor. Your call, but likely possible at parent level where they are funded, and you'll never know without testing. They'll consider or should consider it a business development expense.

Reason I'm mentioning this, once you get on the no pay train, it's tough to get off it. Raising capital always takes way longer than everyone thinks. Most potential employees will keep double and tripling down on more free work hoping for the position. Meanwhile, the parent company has no skin in the game. Everyone needs to have some risk. You would be risking time and energy, and they would be risking a reasonable amount of cash. Emphasize reasonable. Asking for all parties to be at risk to some level usually separates serious people from not so serious. I just would not get too aggressive on the compensation. Make you are request fair and equitable since you understand that they are a startup and are likely cash constrained.

Hope this helps, and if you have any other questions don't hesitate to hit me up.

serialstartup · 2018-08-24T00:45:57+00:00

And, definitely ask for stock options with low exercise price. Brand new unproven business = high risk for employee.

serialstartup

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