Startups Anonymous Est. 2013 · Read-only archive
Questions

Any tips for reducing my risk from an equity cliff when joining a startup?

I’m considering becoming the first technical hire at a funded startup. The offer includes significant equity, but it comes with a typical one year cliff. While this cliff may make sense from the founder/investor point of view, I’ve actually been burned once now at another startup because of it.

In that situation, I also joined as the first technical hire and was let go just a few months later with no equity to keep. In meantime, I had put my life completely on hold for this startup and worked my ass off for those few months for almost no pay. I really don’t want to put myself at risk of being in that situation again, so I wonder if anyone has an idea for how to mitigate that risk?

7 answers from the community

AAnonymous· Mar 15, 2014

Don't accept an unreasonable paycheck. Options, cliff or not, are just icing on the cake. Don't expect them to have any value. Usually they don't, as you already found out.

AAnonymous· Mar 15, 2014

Ask for the vesting to start immediately prorated on a monthly basis over the first year, with an initial up front grant for coming on board.

AAnonymous· Mar 15, 2014

Its been said in previous comments but if you're getting underpaid, don't accept a clean cliff. Either they pay you market rate and you get a cliff, or you get paid under the market rate and you get some sort of equity vesting without cliff.

AAnonymous· Mar 16, 2014

Yeah, accepting that deal was obviously a huge mistake in on my part in retrospect. I was fooled by "standard" documents and thought it wasn't negotiable. Will definitely discuss a more appropriate arrangement this time around. Thanks everyone!

AAnonymous· Mar 16, 2014

I would attempt to negotiate for pro-rated vesting first and if that failed, a perk with actual cash-value for you prior to the vesting. E.g., 50% coverage on spousal health care, monthly transit card, paid meals after 7PM, something.

If the company rescinds their job offer when you attempt negotiation, you don't want to work there.

AAnonymous· Mar 16, 2014

How did they get funding without a tech resource in the first place? Just on the biz plan and connections? If so, that's another reason to follow the advice above and insist on gradual vesting and a good paycheck.

Maybe you care telling us how the funding went down...

AAnonymous· Mar 17, 2014

Plan, past startup and industry experience and the connections that comes with.