Salary or equity? This website wants to help you understand startup job offers
Job offer letters can be confusing, especially in the startup industry. Instead of just having a base salary and a benefits package, early-stage startups will provide equity packages.
Cash is simple. Equity, on the other hand, can be complex, with horror stories abound of employees who thought they were in line for a big payday suddenly finding themselves with nothing -- or even owing money.
That's why New York-based tech workers Matt Wallaert and Natalia Rodriguez decided to make a website that explains equity by translating it into a sum comparable to salary.
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The new site, SalaryOrEquity.com, prompts visitors to enter in the funding amount and valuation of their company along with how many shares are being offered out of total shares. They then consider additional funding by estimating the amount and valuation of another round. Lastly, the site requests how likely the startup is to sell and how long it takes for shares to be paid out.
In the end, visitors are left with one number. The tool is not perfect. Indeed, a disclaimer at the bottom notes that equity depends on the success of a startup, yet it provides a good base sense of the compensation package.
"When I got my offer letter I was very confused, and spinning equity as salary made so much sense to me. It made this abstract concept click for the first time," said Rodriguez, who worked at a startup before joining the American Museum of Natural History. She also coded the website.
The project started out as a spreadsheet that Wallaert passed along to friends and mentees who were starting in their first startup jobs and came to him asking for advice on salary.
"Comparing your salary, it's just not something people talk about in the industry."
"How much equity should you expect? Why? What are the factors?" Charna Parkey, one of Wallaert's mentees who works as an engineer at Textio, told Mashable. "My immediate reaction was I need help understanding the factors in play. Otherwise I'm making an investment blindly."
Wallaert himself, a first-generation college student from rural Oregon, had gone to a mentor -- Thrive founder Avi Karnani -- when he received his first startup offer.
"When I first came out of startups from academia, I had no idea what equity was," Wallaert told Mashable. "In tech, we often take for granted that everyone in the ecosystem just magically has all this tribal knowledge. We talk about 'friends and family money' like everyone has friends and family that can afford to just dump money into their ventures."
Wallaert is a behavioral scientist and entrepreneur who currently works at Microsoft Ventures. This is far from his first helpful project. In 2010, he cofounded GetRaised.com, a free service that's dedicated to closing the gender wage gap. So far, the site has helped tens of thousands of women earn $2.3 billion in raises.
SalaryOrEquity.com was also built with helping women in mind. Men tend to be more willing to take risk, which translates to their view of compensation packages. While men will go for high bonus, women will lean toward a high base pay.
Thus men tend to go for equity more than women, putting them in line for bigger paydays when their companies are acquired or go public.
Sallie Krawcheck, CEO of Ellevest, a digital investment platform for women, told Mashable that the site "forces you to think about the possible upside of a new business or opportunity (or lack of upside) in this framework."
"To my mind, the more of these sites — and thus the greater clarity around compensation — the better; this is particularly true for women," she said. "After all, how are you supposed to close your personal gender pay gap if you don’t even know you have a personal gender pay gap?"
Kerry Flynn is a business reporter for Mashable covering the tech industry. She previously reported on social media companies, mobile apps and startups for International Business Times. She has also written for The Huffington Post, Forbes and Money magazine. Kerry studied environmental science and economics at Harvard College, where she led The Harvard Crimson's metro news and design teams and played mellophone in the Band. When not listening to startup pitches, she runs half-marathons, plays with puppies and pretends to like craft beer.
