Guidelines for Early Engineering Hire Compensation in New Startups
The compensation package for an early engineering hire in a new startup can vary widely based on several factors. This article will provide a comprehensive guide to help you understand the typical salary and equity ranges, as well as other important considerations.
Base Salary
Salaries for early-stage startups can range from $80,000 to $150,000 per year. The exact range will depend on several factors, including the location, industry, stage of funding, and the engineer's experience level.
Location Influence on Salary
Salaries in tech hubs like Silicon Valley, New York, or Seattle tend to be higher, typically ranging from $120,000 to $150,000. Engineers with more experience, such as those with 5 years of experience, are more likely to receive salaries at the higher end of this spectrum.
Equity Offerings
Equity in a startup can be a significant part of the compensation package, with percentages ranging from 1% to 10% depending on the stage of the startup and the engineer's role.
Equity at Different Stages of the Startup
Seed Stage: An early engineering hire might receive 1% to 3% equity, closer to 1% for more significant contributions or for hiring at an earlier stage. Series A and Beyond: Equity percentages typically range from 0.5% to 2%, reflecting the reduced risk but higher valuations associated with later-stage companies.Vesting Schedule
Equity is often subject to a 4-year vesting schedule, with a 1-year cliff. This means that the employee earns their equity gradually over four years, with no equity earned if they leave the company before the first year is completed.
Additional Considerations
In addition to base salary and equity, startups may offer a range of benefits, such as:
Flexible Work Hours: Many startups offer flexible schedules to accommodate different work styles. Remote Work Options: Remote work can be a significant perk, especially for engineers who value work-life balance. Other Perks: These may include health insurance, professional development opportunities, and other financial incentives.Negotiation Tips
The compensation package can often be negotiated, especially in early-stage startups where resources may be more limited. It is advisable for candidates to:
Research industry standards and local market rates. Consider both salary and equity when evaluating an offer. Develop strong negotiation skills to advocate for the best possible compensation package.Comparison Tool for Salary and Equity
We recently released a tool to help folks compare salary and equity compensation across the tech startup community. While this tool may not specifically cover the case of 5 employees, it can provide valuable insights into the compensation landscape by function, seniority, company size, and region.
Conclusion
The specific compensation offer for an early engineering hire will depend on the startup's financial situation, the competitive landscape, and the candidate's negotiation skills. It is essential to consider both salary and equity when evaluating a job offer, and to be prepared to negotiate for the best possible compensation package.