Startup Compensation and Equity: A Complete Guide for Founders

# Startup Compensation and Equity: A Complete Guide for Founders

Compensation is one of the most complex aspects of startup hiring. You're competing for talent against companies with deeper pockets, but you have something they don't: meaningful equity upside.

The Components of Startup Compensation

### Base Salary Cash compensation is table stakes. While startups typically pay 10-25% below market, you can't go too low without losing access to great talent.

**Benchmarks by stage:** - Pre-seed: 50-70% of market - Seed: 60-80% of market - Series A: 75-90% of market - Series B+: 85-100% of market

### Equity This is your secret weapon. Equity should represent meaningful upside and align incentives.

**Typical ranges for early employees:** - Employee #1-5: 0.5% - 2% - Employee #6-15: 0.25% - 0.75% - Employee #16-30: 0.1% - 0.4% - Employee #31-50: 0.05% - 0.2%

### Vesting Standard is 4-year vesting with a 1-year cliff. This protects both parties and ensures commitment.

How to Talk About Compensation

Be transparent about: - Your philosophy and constraints - How you benchmarked the offer - The potential value of equity - How compensation evolves as you grow

Avoid: - Being defensive about paying below market - Overselling equity value - Making promises you can't keep

The Bottom Line

Great candidates understand the startup tradeoff. Be honest about where you are, paint a compelling picture of where you're going, and make sure the total package reflects the value they'll create.