Is my equity compensation fair/normal?

Jtek

Hi I have been offered a job with a startup and, as I have never had anything to do with startups before, I have no idea if what I am being offered is normal/fair. Gut feel is that it is, but would love some opinion from the market before I go ahead. I don't want to put a load of work in only to resent it down the line, so just checking..

The company is a media agency and has been going for a couple of years. They have decided on a particular growth strategy whereby they will create some separate companies under the existing company as a holding company. So I have been approached to start a new specialist company within this structure. 

The main company is largely funded/started by the CEO, and there are 3 other board members whose equity ranges between 5-10%. 

I would be the MD of the new company and equity would start at 5%, vested for 3 years, but would rise to 7.5% and then 10% but based on turnover/growth milestones, which are a stretch but not impossible. A further jump to 12.5% is achievable but pretty tough. I am not investing/funding anything. 

The remaining e.g. 90% equity goes to the holding company to be split between those founders according to their percentages. 

Does this sound normal? 

Tuah Bao

Hi Jtek,

I think the plan is okay. Everything industry or company is different. One cannot expect a standard remuneration plan will apply to all companies. It is just like if someone is fortunate enough to look for a high pay job with little works.

Your remuneration package is depends on your goals or KPIs. Do you think it is worthwhile to spend the time and effort to receive the promised equity in future? Since you do not invest any fund into the business, therefore it is completely 'risk free' to you, at least in the short term as you will receive salary.

Equity is actually a bonus to you. For example: The business has a $1m net worth of assets at the startup and grows to $5m within 3 years. Then, you will be receiving $500K as bonus (after selling your equity).

My recommendation is you should accept the offer only if you are able to achieve the KPIs (or show improvement, at least). Else, I believe the CEO will not renew your contract and you will need to get another job. 

It is entirely up to you to decide. Good luck with your new offer!