What is fair compensation in a pre-funding startup when you join as an employee?
Imagine that you are about to join a startup (before raising funds) as a part-time employee.
You are paid for work (compensation is like in any existing, well-established company in the industry, but you do not have regular employee benefits – covering 401 plan, no equity, no health care plan, HO equipment fee, etc.)
You hope that after raising funds, you will become a full-time employee and receive benefits.
What compensation and benefits are reasonable to expect when joining a startup part-time before funding, and what should change once the company raises money and you go full-time?
Which benefits make sense before fundraising (flexibility, learning, future upside)?
Which ones should be non-negotiable after funding?
And how can an employee strengthen their negotiating position when evolving from part-time to full-time (maybe with a higher compensation + benefits)?
As an example, I’m attaching a comparison of what a startup (1) typically offers versus an established company. (2)
You can see that startups often offer things like “dynamic team,” “remote work,” or “ownership of the strategy” – which don’t really function as benefits, but rather as expectations or situational responsibilities.
Understandably, established companies tend to have far more to offer in terms of tangible benefits.
Replies
vibecoder.date
Above a certain level of wealth this question loses relevance. Below that I'd calculate the opportunity cost of the time invested vs running a side business or doing work for pay in those hours.
There is also the startup mindset to consider, the "team spirit" factor. It it likely you will be expected to invest more time and effort than originally planned, as such you might want to de risk the move by accounting for at least 30% more hours.
There is also the risk of involvement with the startup affecting main income through either company policy conflict, such as non compete clauses, startup time commitment being grossly underestimated and affecting main activity commitment, or reputational consequences leading to main income activity friction. (I know of companies where the culture heavily punishes any side income activity)
The startup's financials should further inform the decision, especially, runway, burn rate, and estimated time to at least neutral cash flow.
The above calculation's result is only the first half.
Truth is a lot of startup culture selects for privileged backgrounds, whether they intend to or not. Competitive as an adjective for salary is just about meaningless, but they are in a position where some candidates will not even care about the number.
Fair compensation must highly exceed living costs, to account for the higher risk one would take joining, as there is a possibility of the role transitioning to full time.
When the company gets funded it should reward the loyalty and risk taken with a raise and or equity. Otherwise the founding team will be left feeling underappreciated or cheated.
Who we spend our time with when it comes to income generation activities is something most people don't think about. but we should. Every hour working for an employer is an hour not spent in your own business, we pay for the lack of risk. Every hour pursuing our own ventures also has a cost.
Everyone has different risk tolerance and inclination to invest more or less time.
The calculation I would use in this position would be along the lines of:
COL: Cost of living, minimum standard expenses, includes housing, health, food, etc.
MSC: Monthly savings contribution
MRC: Monthly retirement contribution.
PR: personal runway of 1 year
Total monthly compensation = (COL + MSC + MRC) * 1.35 + (PR / 36)
Adjusted by hours if necessary.
The personal runway over 36 means you get an extra month of runway every 3 months you are there.
Equity is worthless in practice until vested and then I would factor it in.
minimalist phone: creating folders
@build_with_aj This makes sense. The thing is. What can be asked for when it comes to full-time?
Let's say that for a specific industry, they give you part-time: $5k without benefits (it feels like invoicing).
In a full-time position, the logic says then $10k monthly with benefits. Or can you ask for more than 10k? If yes, what kind of amount, and how can you negotiate to have more?
(I use different numbers just for explaining the situation).
minimalist phone: creating folders
@bradshannon The thing is that the offer was a part-time role (compensated), but that's all. And raising the funds is maybe in half a year, so it makes sense that full commitment would not be financially certain for founders.
minimalist phone: creating folders
@bradshannon What do you mean by that? They do not believe in their product? Or?
minimalist phone: creating folders
@bradshannon Okay, can you please elaborate? (Because in my whole life, I have never been an employee, not to mention that I never did anything full-time.) I was more freelancer.
In case I want to stick to "Schwartz system" – what is good compensation for the paytech industry?
Full-time employee vs. Full-time freelancer?
minimalist phone: creating folders
@bradshannon Yeah... to be honest, sometimes I am so drained from freelancing and doing everything on my own, that wishing to be under a more secure and stable shelter. :DDD but I love my freedom of choice when and where to work :D
SEMrush
That's an interesting question, thanks for sharing!
I think working for a startup before the public launch or fundraising is like a risky investment. There are no guarantees, and it only makes sense if you:
believe in the product and the problem it’s solving
love and trust the founding team
have financial stability or a backup plan (since the chances it fails are pretty high)
enjoy the work itself and see clear personal upside (learning, ownership, experience you need for your next career move)
And if it does succeed, people who were there before the launch and early fundraising should absolutely be rewarded with a compensation + a leading role in the company (depending on what they agreed with founders).
minimalist phone: creating folders
@alina_petrova3 Sounds reasonable. If points 1 and 2 are met, that’s fine for me. As for point 3, I already have something to work on, so I’m okay for now. Point 4 – we’ll see how it develops.
At this stage, I’m mainly focused on understanding the industry and shaping the right tone of voice.
Overall, it looks fine for now. The only concern is that the funding request may not go through.
The question is – how to negotiate a better position in that case? Should I be that proactive, or them?
SEMrush
minimalist phone: creating folders
@alina_petrova3 Well, and after funding – what are my expectations? Because it would be weird staying at a low salary, after raising funds, they would offer 2x, 2.5x more to new applicants for similar roles in their company. It would be IMO pretty unfair to stay the same price.
SEMrush
@busmark_w_nika I'd agree on 2x + a leading role if they raise funds or a percentage from the profit if they sell the startup. I'd also ask to sign an agreement to make sure I get a compensation when they raise. Staying at the same price if a startup succeed is 100% unfair.
minimalist phone: creating folders
@alina_petrova3 Now I am hesitating, because we signed an agreement for part-time without any additional benefits.
The thing is, that as soon as they are satisfied and want me full-time, probably I will set different terms because:
– Industry is one of the most highly profitable (paytech)
– it is B2B
– I would potentially lose a huge part of my freedom
Visa (in the US) pay their CMOs around 240k/year + equity + benefits.
This company I collaborate with has an aspiration to help such brands as Visa, Stripe and similar.
I would expect that the salary for such a position should range somewhere between 140k/year (minimum).
But maybe I am wrong.