The Insider's Guide to Tech Compensation, Negotiation, and Career Growth

Nikhyl: Hi, everyone. Welcome to the skip podcast. I'm Nikhil Singhal, and I'm here with Carly Malatskey she and I are tackling a great topic in today's episode, one of my most common around compensation more importantly, we're going to try a new format around what we call the mailbag the mailbag is a reflection of the weekly, monthly coaching emails and calls that I get where what happens is people ask me a career question.

I try my best to respond. And often I'm always thinking, boy, you know, this advice could really help a lot more people because these questions are often very traditional for folks that are in mid and late career trying to get ahead. And so what she and I are working on today is taking one of these questions, sanitizing it For privacy reasons, and then sharing it with you all, and we're going to have a conversation around some of the advice that I've given to this individual, as well as broadening up the aperture to other conversations and career guidance that relate to the topic.

So, without further ado, I'll introduce Carly. Carly was our host in the last episode, and she's generously volunteer time to help with this episode going forward. And so let's open up the mailbag Carly.

Carly: Amazing. Okay. Hi, Nikhil. So good to see you again. All right, let's do this. So the first mailbag on compensation, I'm going to read it and then we'll just going to dive into it. So it says, I've been running a job search for a new leadership role. I'm thrilled that I'm seeing traction in this market.

I took your advice and have multiple offers maturing at the same time. I know compensation isn't the only factor to making a job decision, but it's an important factor to me. Here's the setup. I have the following offers. So offer one late stage company, big tech company as a director, 250 K base, 50 K bonus, and 700 K annual in RSUs offer to growth company, number two, working for a VP, 200 K base, 75 K bonus, and 500 K annual in RSUs.

And now the third offer is a startup company, head of product, 1st PM at the company, 150k base, no bonus, 1 percent of the company in options. And they ask, how should I compare these offers? So, first off, They seem kind of like large numbers, so I actually just want to get this out there. Is this something common?

Because I know many people would probably have similar reactions to me, potentially, so yeah. Is this a common expectation for comp?

Nikhyl: Yeah, it's common for the people that that call or email me. And the reason why is that typically they're folks that are in number one, number two roles in, you know, top technical, uh, you know, growing companies. by no means is this a reflection of the broader industry. there's lots of services out there that will tell you what the comp looks like.

My concern is that often the advice and guidance that's out there for the average sort of rank and file doesn't apply. To the top leaders, and so a lot of the conversations that I have, and then I write about are really around leader compensation, leader negotiation, and how to compare offers. And in this example, we're seeing three offers that arguably are kind of similar ish, you know, but the difference is that they have, you know, higher or lower amounts of base and equity.

And so the core of this question, when I hear it is like, okay, well, how do I compare? You know, kind of bird in hand, which is your liquid compensation that you can kind of project of a later stage company with sort of these earlier stage companies, which have, you know, kind of funny money, you know, it's not equity.

It's on paper. It's, you know, unclear. Is this worth anything? You know, some people would say that it's not worth anything. You should just take, the cash and run. Some people would say everything's around equity. Like, how do you compare these is really the core of this whole discussion. But the numbers are pretty.

Consistent with sort of a, what I would call a director level manager of managers, that's probably 10, 15 years in career that is actually at the top of their game. So that's kind of where my head goes.

Carly: so you mentioned like comparing annual and expected compensation. I actually want to break down each element of the the comp package that they've been offered. So first, why don't we start with bonuses? Like, what's your take on bonuses? Should people include it in the expected annual? How do you kind of conceptualize all of that?

Nikhyl: So bonuses generally are just wonky instruments. what you really want to determine is the sort of past history on bonuses. So if a company has traditionally given out bonuses, then the likelihood, unless the company hits some financial jeopardy, it'll just keep going

Almost all bonuses tend to be liquid. So you can wrap that bonus into your base salary and just add it together. If it's a bonus that's never been given out before, or it's a privately held company, Where they're sort of like, well, we have some equation. We haven't quite figured it out. I would look at that with like heavy grains of salt.

And you mentioned, try to understand the likelihood of receiving it, maybe for a company that's a bit smaller. What does that actually look like? Does that mean in the interview process you're asking, you know, how often do you get bonuses like, or how often does that actually come through or what, how do people do that?

Yeah, and this is just a good question around like when you receive the offer, you have the right to just ask questions without negotiating. And in some ways, asking questions is the first step to negotiation. you're literally not passing judgment. You're just like, I understand that you're offering 40 K in bonus.

I want to understand how is this calculated? What's the history of when this has been presented? For example, have you in the past given bonuses? What was the bonuses? payout last year versus this year? How frequently is this supposed to be given out? Is it annual? Is it semi annual? What's the likelihood that this number will be higher, lower, the same?

You're just asking questions. you should have the total right to ask whoever's giving you the offer, whether it's the HR team or your manager, these questions, because they're Paying you and all you want to know is what does it mean to be paid by this piece of paper? you might then later say I worry about the number and I would like to change it But you don't want to bring those two conversations in the same you want to just start by Understanding and just like really digging in the details part of the reason I'm mentioning it is Some companies will be very clear on this Some companies will be like, Well, we have an annual process.

The board sets the number. We end up going through it on this day. We pay it. If you're employed by that day, you'll receive it. If you're not employed by that day, you won't receive it. It's this based on personals, this based on company. Some companies would be like, I don't know. You know, we've been giving it out the last few years.

We assume it will keep going. And you're like, Okay. The more the person knows, and it's like part of the DNA and the compensation philosophy, the more likely that'll show up next year. The more it's ad hoc, the more you have to sort of look at that and say, look, I shouldn't put a ton of stock into bonus.

And this applies to a lot of the different elements of compensation. It's the more. Clearer they are, the more likely it'll show up and the more they're making it up as they go along. That's definitely something that you want to factor into the discount rate of your compensation.

Carly: so better almost like be very transparent, have it out on the table so you're not blindsided by anything that can come.

Nikhyl: So let's go into the equity portion. How do you compare or how should we compare equity given those three offers that I, that I read out?

Yeah, I mean, this is like the biggest part of this, discussion, and there's no perfect answer. But what I would say is, let's start with, you know, the most important thing is if the company is public. The equity that the employee receives is likely liquid. Okay. So what I mean by that is in this offer, person's been told that they have 700, 000 in RSUs.

So 700, 000 annual in RSUs means that they probably receive some block of equity. Invest over four years and every, let's call it quarter or every month they'll receive a chunk of that equity and, you know, at the current dollar figure, if you add up all the equity you'll receive in their first 12 months of employment and you were to sell it and the stock was to stay flat.

You would receive 700, 000. So that's the interpretation of what this offer is. my perspective here is that that is relatively similar to receiving cash of 700, 000. Now, it's not quite and obviously I'll explain that in a second, but it is liquid means that you can trade it. Now, obviously, if the company stock goes up, it's worth more.

If the company stock goes down, it's worth less. But because it's, it's liquid, you end up, you know, thinking about it more like a cash instrument and more like in the same way you think of your base salary. that's the key element. Now, the reason why people like let's, let's take an aside for a second.

If you're working for meta, if you're working for Google, if you're working for, you know, um, Apple and others, you know, those companies have seen substantive run up. In their stock over the last three, four years, right? There are almost all of those companies are trading at an all time high. So let's say that you joined meta two years ago.

Well, the stock was like around a hundred, you know, and today the stock is around, you know, 600. so there's a big difference between 106 hundred. So let's say that this person receives $700,000 worth of RSUs and the stock was trading at a hundred. If you receive $700,000 of RSUs and stock's trading at a hundred, and now the chalks trading at There's 600 in this example. So it's six times more than your 700, 000 that you would get in this annual year will be multiplied by six X. you would be paid 4. 2 million for the same job that you were being paid 700, 000. Okay. So when people say that equity is worth ignoring and it's not very valuable, I'm like, are you insane?

That person in this example is being paid four plus million dollars for a job that if you put 250 plus 700 is worth about a million. So they're way overpaid for that job, which means the chances that they leave that job are relatively zero, which is why attrition in companies like Meta and Google and others are super low.

Now if that person leaves and they're like, well, I'm making $4 million, I'm gonna go to the open market. Who the hell's gonna pay them $4 million? If that person leaves and returns to meta, they would make $1 million. So they're just being overpaid. So equity at a late stage company has incredible value if it goes up, because one, you get those four years of vested, and it's a number of.

Shares. It's not a dollar figure to you can trade them every quarter in a window. that's not, you know, as long as you're not in the lockup period and they kind of act like instruments, you know, but obviously they can go down to, you know, a lot of fintech companies. They gave out a bunch of equity and then those companies drop by 80 90%.

Those companies are going to struggle and those, that means your compensations a lot less, but in general, tech has gone up. And so equity has been a very powerful instrument for the later stage companies.

Carly: okay. So the examples you mentioned, right? Meta, Apple, Google, like those are the top. and it's been known to be like the top late stage big companies. But you're saying that it should continue to be weighed so strongly, even, you know, if it's a little bit, maybe not as well known, but it's still late stage.

Is that right? Or how much does, because at the end of the day, you are kind of putting this bet and predicting is the stock going to go up? Is it going to go down? Like how much of that risk actually comes into it when it is late stage?

Nikhyl: My point is, the moment stock can be traded, you are essentially in a position of control. Meaning, lots of financial advisors tell you that every quarter that you receive stock, you sell it because you want to diversify and you have more coming. So that's a very common attribute. And so then yes, there's risk that you were granted it and it's gone up and down.

And so it it's worth more or less. But the main thing is you're not stuck. You can always sell that stock. You can always buy more in the open market. There's no problems about being locked up. And so that instrument is just easier to understand. And it's also easier to look back at the history of the company.

All the financials are publicly available. So that's why I equate public equity. Not necessarily big tech, high quality equity. I mean, it could be, you know, companies that are in the middle. It could be even struggling companies, as long as they're public, you know, you're essentially being able to garner those equity and turn it in dollars.

And that's a very powerful, powerful

element.

Carly: And do you find that the biggest slippery slope people fall into is that they don't view it? They're not putting a high enough lever on that element and they're maybe focused more on the bonus and the base salary or how, how do you think if you were kind of pulling on each thread?

Nikhyl: I think people in later stage companies, when they are public, they. Accurately equate the equity in the cash because the equity can be traded and they sort of see it as fungible. The more senior someone is, the more equity they receive, the more junior they are, the less equity they receive.

So. You would see at executive pay, 90 percent of their comp is in RSUs. And maybe in, uh, if you're just starting out, maybe five or 10 percent of your comp is in RSUs, which actually makes sense. Cause if you're a VP, you have more control over the direction of the company. And so if the company does well, it'll be reflecting the stock and then uplift will occur.

So these are all natural things to your question where people make mistakes is when the company is privately held. And then they value the equity either too much or too little because they're perhaps thinking about, well, I want the largest number, but they're not necessarily thinking about, is it possible that I'll ever be able to sell the stock that's where things get messy.

So. To me, the number one thing, and this was kind of a little bit of a long winded and complicated story, but what I would say is the number one thing you want to think about if your company is public is you want to know that since you can trade the equity, what's the history of the stock and the likelihood that it'll be worth similar amounts more or less.

kind of an obvious point. But if you are in these other categories where the company isn't public, the first and most obvious question you want to ask is what's the likelihood that the company ever is in a position of trading it? And then the second component is You know, do you have the right number?

Do you have the right magnitude of that stock? And then the third is what are the terms associated with that equity, right? So these are the three things that matter, which frankly don't apply in the case where you're just getting a quarterly grant and you can sell it because there aren't really, they're literally, it's like, here's the block of stock and he could have bought it on the open market with the cash or you just received it.

So that's why it's more complicated in the privately held case.

Carly: sticking just on the equity piece, how do you tackle this concept where they're comparing startup company, growth company, which we can assume maybe are both private, and then late stage public company?

Nikhyl: Yeah, so let's go through these three things that I presented was let's first talk about terms. Okay, because that's actually the one that's the cleanest. So you know, or in this case, this person saying to me that, Hey, I'm receiving half a million dollars. And let's say an instrument in the example you raise, it says RSUs are 1 percent of the company in terms of options, right?

So these are two examples that you raised. so the first thing that I wanna understand is how likely is it that you will leave the company and you won't be able to take the equity with you? Now you might think that that sounds crazy. you know, lemme get this straight. I worked for this company for say two years, and then I leave the company and wouldn't just like when they pay me cash, wouldn't I just.

Take the equity with me. And I'm like, well, possibility is high that when you leave the company won't be public, which means you can't trade the equity, which means that whatever you've, you know, vested when it comes to equity, the company has to ensure that you essentially own it. But for tax purposes, a lot of times they Give you an instrument that requires you to pay in order to retain that stock.

So the, concept is that company has a choice between giving you an option. To buy the stock that you're earning or some kind of a restricted stock unit, you know, these are the most common ways that people end up receiving equity in companies that are privately held. So if it's a restricted stock unit, That is a instrument that most likely you can retain it when you leave the company.

And that's the sort of private RSU. And when you go to a public company, you receive most likely a public RSU. And so these are very similar. The difference. Is that private RSUs, when you leave, you can hold on to it. There is some nuance that I don't know if I want to get into too much depth in this episode, but the biggest nuance is that they, after usually a period of seven years.

Might actually expire. So if the company in this example, this growth company that pays you half a million dollars in R. S. U. S. If it just sort of stalls out and eight, 10 years later, it's still privately held. It's possible that you'll lose these R. S. U. S. And never be able to retain them. But that aside, RSUs have a lot of protection for your ability to retain them on exit.

But in the case where a person receives 1 percent of the company and options, if the company is reasonably far along, but they're still giving options, you could work for two years, earn your half a percent and then leave. And then it turns out that they're like, look, you have 90 days. To write us a check in which case if you don't write us a check, your options expire, you will receive nothing for your equity.

And that's extremely common. That's an extremely common scenario because the company is like, well, we gave you options so that as you're earning it, you're not paying taxes on. A, you know, essentially ownership of this company So we gave you a more favorable tax instrument, but you need to be able to then exercise those shares.

Otherwise it expires. So what I end up talking to people about when they first come to me and they're, you know, it's an early stage company because I'm like, find out how long you have. To exercise the shares on exit, because nobody wants to talk about the exit case. They're like, Hey, this is great. You know, and, and, you know, the biggest thing that people tell me is they're like, Oh, I negotiated 1%, but I'm going to push for 1.25 And I'm like, Look, you can push for as big of a number as you want, but if you can't afford it, you're gonna have to wait until this company goes public before you quit. And the longer you're there, the less likely it is you're going to want to leave. But what if it doesn't work out? What if the company changes?

What if your boss turns into, you know, a jackass? Like, what are you going to do if you can't afford to leave? So yes, there's ways you can borrow and do loans and sell on the secondary market and blah, blah, blah. I'm just saying. You just want to know the likelihood that you can exercise your stock when you leave.

And sometimes you can negotiate 90 days to one year or perhaps even two years. But it's the most important thing you got to know when it comes to private options. If it's part of your offer package.

Carly: that's not a common, you know, like that's not part of the offer. Is it something that they just keep close to them, the company? Does that make sense? Like, is it something where they don't, they try not to share it with the potential employee?

Nikhyl: it's just not a common question that people ask, and it's oftentimes a term that's in paragraph seven of page six in the in the employee option agreement, and it's usually drafted by the attorneys, and there are lots of reasons why a company will want the period to be as short as possible.

Some of it is, sort of administrative. Some of it is taxation related for the company and a lot of it is control. they don't really want to optimize for employees that have left the company owning shares. it doesn't always turn out to be nefarious. Frankly, a lot of founders don't even realize that this 90 day clause is the standard.

And so the common thing that I negotiate a lot of times people will be like, Look, I'm an executive. I'm coming in. All the other executives that joined came in really early. Well, when the stock is super early, the value of price of that stock is tiny. It's like a penny. So if you get 1 percent of this company and options, and it's like a penny to buy, then often employees are like, yeah, I'll pay the 600 and I'll exercise File what's called an A3B, and that'll tell the state that I have acquired a bunch of stock and that's unvested and it's all good. But then, you know, executive comes along two years later, penny is now 44 cents. Now, 600 is 600 times 44. That's a serious amount of money to pay out of pocket when you're leaving a company.

So that's when the company employees like, Oh, well, my offer doesn't feel like the previous person because the stock's different. And then that's when the founder and the board is like, Oh yeah, that's kind of a challenge, but nobody's really like excited about solving this problem. And then it's a lot of overhead and the lawyers are always on the opposite side of the table.

and executives are usually breaking ground on this or becomes a mess. I'm making this point because I know one person at least will hear this, they're like, holy shit, I had no idea. I need to make sure I understand the exit and they're going to think about, even in their own case, I've been to go back and look, I was thinking about leaving in 2025, but now I realize that whatever I've accrued, I'm not going to be able to keep unless the company just figures out some way to, you know, to get me to acquire this stock.

that's the reason why that's an important term that often doesn't get flagged.

Carly: And it's like you said, too, there's almost this over index of, you know, I'm going to negotiate for a higher percentage you know, but what you're saying is like, no, you know, like, look at that, that period of when you have to actually pay. Is it 90 days? Do you want that? Like all of those factors, which people don't necessarily think about, from the forefront.

So that's super valuable. Is there anything else before I shift gears to more other factors beyond compensation, that should be considered?

Is there anything beyond on equity or on bonuses or on the, the, it? Yeah. Okay. Okay. Mm

Nikhyl: Yeah. So let's maybe do a little bit of a baseline here. So essentially, what we're saying is, look, you presented me with a person comes to me and says, hey, they've got this 250 K 50 K bonus 700 K annual and RCUs at a late stage company. So if you add up to 50 and 50, it's about 300 and we made an argument that if they've had a history of paying out the bonus, it probably is going to happen.

And then we said, it's about a 700, 000 annual and R. S. use. And so this is this late stage equity. And he puts 300 and 700 together. It's about a 1, 000, 000 bucks. Now, the thing that I would say is that, well, You're asking about a director level position at a later stage tech company. I know that a million dollars for directors is roughly right.

So the person's being paid at market for a strong candidate in a tech company. And I feel good about. The breakdown of 30 percent is in kind of cash bonus, 70 percent is an RSU. So this all checks out as a fairly solid offer. And I would then move to, well, it could be more money if the stock goes up. How much do you believe in the company?

And what are the other intangibles exactly, as you noted, that we want to think about? So this one feels like it's at market and solid offer. Now, if we go to the other side of the extreme, We had 150 K base for the startup. we had no bonus, so it's pretty simple. I'll be working there and I'll make 150 K but I'll receive 1 percent of the company.

in that example, you know, what we're hoping is that that essentially turns into at least a million bucks or more. And if we're looking at it purely from a comp optimization point of view, the theory is that if you're making, if you can make a million dollars, you need to make that 1 percent worth 850k or more, in order for this to work itself out.

Now. Caution number one is you want to make sure that whatever you're earning in equity, and clearly in this offer, the equity is the lion's share of the compensation that you want to make sure you can retain it. And that's why we talked about this whole point of check the terms, make sure that either you can buy the stock when you join because it's so cheap that you can afford it, um, Or make sure that if you can't afford it, but it's a 1 percent that it's either an instrument like an RSU, which you can keep when you leave, or there's enough time that when you leave, you can furnish the capital or you can wait for For the company to hopefully go public.

So that's like big capital, you know, watch point, you know, make sure that that's the case. The other part is like, look, there's no perfect answer. If it's 1 percent of the company, you know, in one way you start to think about like, if it's a leadership role, in this case, it's a head of product.

1 percent is roughly in range. For what you would expect for a company. Now, if it's like first employee, that might be slightly smaller. And if it's like a company that has hundreds and hundreds of employees, 1 percent seems reasonably generous because they don't usually have that much equity remaining for that.

I'm always checking to say, well, 1 percent is about what I would expect for an early stage company. And now the conversation that I would have with this person is, do you think it's going to be Worth 850 K or do you have a confident line of sight into it being worth substantially more?

if you're going to make 8 million over, say, a four year period of time in the stock vest over that four years, every year you'll make about 2 million annually. And now when we think about, well, maybe there's a one out of three chance this is going to work itself out, we're in kind of ballpark. So on an adjusted basis, if it's expected that it will make 2, 000, you know, roughly speaking, there's a 1 out of 3 chance it gets there. Then this feels like it's real.

You know, in the same ballpark as the million dollar liquid salary, you're just taking a greater risk. And that feels like it's about right. But if you're like in the best case scenario, I think this thing is going to be worth a million bucks. And I'm like, but then the best case scenario, you have like a one out of five chance that that happens.

The expected value of this thing is more closer to. 200. you're kind of making like 400 K and you have an office for a million. So you're making less than half your market rate in this example. So this intangible of what you're gaining, like maybe the next job is substantially better. or maybe you're going to hate that first job that we described, like those are factors, but it's got to be a pretty compelling reason why you're making half your market, that's how I end up having these conversations with people and how to compare these two sides of the spectrum.

Carly: My big question now is when people come up to you and they say, you know, Here are the comp packages that I'm considering. The conventional wisdom, right, is to also prioritize factors like your manager or your role that you have and learning above compensation. So I want to know, like, how do you weigh this factor?

What kind of advice do you give people when they are presenting these options to you?

Nikhyl: I fear that people when they're early in career spend too much time optimizing comp and then when they're later in career, spend too little time optimizing comp. compensation matters quite a bit. in terms of a person's freedom on professional decisioning.

So when you have more calm, you can take greater professional risk. So there is a value in getting comped because you can take more and more substantive risk in one's career. So the problem is when you're early in career. the difference that you'll be discussing is should I make 150 or 175 you know, when you're later in career in this example, the person may be making a million dollars.

So in 2 months, they make the same amount as they made in their 1st year you know, I think when I left meta, I was making more money in my last month that I made in my 1st 10 years of my career. Now, of course, I did a lot of startups and I wasn't particularly good at the beginning of my startup. So it took a while for things to kick in.

But my point is that when you think about the fact that when you're in your 40s and in your 50s, you might be making two orders of magnitude more than you do in their early days. What you really want to do is make damn sure that your 40s and 50s are power years and that you get great jobs. So everything should be optimized towards like, am I learning?

Am I networking? Am I building a core skill and I'm becoming excellent. And frankly, if I have to do that, I make a little less money. I don't probably have the same obligations that I'll have financially that I will in my forties and fifties. So that's the reason why compensation is fairly low on the list.

You want to be paid fairly, but even if you're quote unquote paid unfairly, but you learn a ton, it makes up in the skip job that you have and beyond, but there is a point in time, particularly when you move into leadership, when you really want to. Take advantage of the fact that, hey, I'm now managing folks, or I'm in a company where I'm one of the leaders.

Maybe I'm early in this 1 percent case. You want that to return. You want to make as much capital as you can, because you might be able to then take substantially more risk and really change the trajectory of your conversation. So you want to kind of do these step functions.

So that's why I'm like when you hit 10 years in compensation starts to rise on the prioritization Your expectation of your comp starts to also grow exponentially.

You know, you start out 150 $250 You're now in the million. If you become like VP or executive, you might be looking at 2 to 5 million. I mean, the difference between 2 to 5 million and 150 K is pretty dramatic. That's slow. That curve is fairly, you know, steep. So your goal is when you start getting into that seven figure type number, you really want to make sure you're earning that seven figure because that is substantially more than your burn rate, most likely.

And it's where you start saving. And that gives you the ability to perhaps take pace down, you know, go found, perhaps even take even a greater risk on a much larger role, et cetera, et cetera.

Carly: So on that thread, I want to go a little bit deeper into each section. So one is, you said, if you're early in your career, then comp should maybe be a little, less weighed, you know, not as much, more learning.

And so, in that case, just pulling on that, do you kind of advise people to say, like, look, consider all options as if comp was equal, and then, and then choose your favorite option, or what, what is your take on that?

Nikhyl: maybe the way that I think about this is I first want people to ignore a comp. And so this is a great clarifying question is like, if someone comes to me with these three offers of director number two, number one, in this example, yes, we went directly in a comp, but really one of those, those are three different jobs.

we're really trying to figure out is which of those three jobs is really the one that really speaks to you. what's the one that's going to pull on your superpowers. What's the one that's going to get you the best next job. What's the one that's going to have the fastest growth trajectory and are teaching the most relevant skills in the future.

And honestly, that sees you that as a right culture for your skillset, you know, it gets the right kind of logistics of work from home and all that good stuff. So we would definitely want to know There's definitely going to be a stack ring.

One, two, three. Now, the second question that I'm going to ask is like, look, what is the liquidity expectation that you have in your life?

And I'm not passing judgment here. I'm just sort of trying to figure out, how much liquid comp do you need for you to be feeling like you're being paid fairly? You might have someone that says, look, given my situation, the real estate I own, the savings that I need, the obligations I have financially, I need 600 K.

and if someone says they need 600 K and if that's a hard limit, then of those three jobs is going to have 600 K and it's going to be the one that's public because it's going to be the one that you can trade because no job is going to pay you 600 K in base salary. and so that becomes an immediate you know, kind of a deal breaker when it comes to liquidity. Now, if the person's like, look, I only need about 200 K. you know, the question then is that, okay, are the other privately held offers. Actually better jobs for the person compensation aside, and are they being paid fairly, meaning, can we have a line of sight to a market rate?

As I said in an earlier case is this person make a credible argument that this thing is going to be paying a million bucks, because that's a person's million dollars is how much they should be making. If the answer is like. Hey, this job is great. They love me. I'm going to have a ton of fun. It's great for me from a career point of view, I can afford it for a little while to be paid 150, but my guess is it's probably going to be only at about a 400 when all of a sudden done.

Then I think we go back to the earlier conversation, boy, that definitely needs to set you up for some bigger job in the future. Otherwise it's not worth it. On the other hand, we take the middle stage and it's like, well, it's about 250, 300 K and the company's fairly far along. There's a good chance it'll be liquid by the time I leave.

And I'm pretty sure it'll pay me like a million and a half, but I'm taking some risks that it won't. Then I'm like, well, that sounds like a pretty good situation because You can afford to take the risk. You'll probably make a little bit more in the positive case. And if you don't, you'll at least gain something because it's a number two role.

And, you know, that's a growth company and it's great for your background, et cetera. So that's the way I would have this conversation. But you kind of have to understand what is their expectation from a liquid point of view? And are they being paid market

Carly: Okay. Got it. And I'm glad you actually clarified that as well, because in my mind, it actually, when I first read this, it was similar to our previous episode, big tech for small tech, right? Like Such different roles, different, you know, whether it's the actual title, the, stage of the company.

So there are other factors to consider, but when we just take comp alone, there's so many considerations that you can, that you can look at, which is great. So I want to actually go a little bit into negotiation. You know, at the end of the day, unfortunately, you probably can't be in the phone call with people as they're negotiating their comp.

But I want to know what advice or tactics do you have for people as they approach that conversation?

Nikhyl: I'll start with sort of philosophical advice. one is I don't think that you should negotiate in a way that seems unnatural or foreign to the way you like to do business. So oftentimes, and I've been on the receiving side of this, you know, everyone's got an advisor that they call, you know, the phone friend.

When it comes to comp, I'm often that person, for the people that are close to me that I coach. And. You know what you don't want to do is negotiate so passively or so aggressively when that's not your nature. And that just makes you feel inauthentic and it won't get you very far. you also can't credibly involve others.

Like I know people are like, I'm going to just have my lawyers negotiated when I've talked to lawyers. They feel like their leverage is much more when the person is the one that's going to actually get the job doing the negotiation. We're just not in an industry in tech where you can hire your agent and have them do this for you.

So there's an authenticity that I think is important. But the second thing is you want to also avoid putting yourself in a position where you create resentment when you join. So I've seen situations where this person is so aggressive about negotiating that the employer really wants to hire, but,

you know, they grudgingly agree, but then in their mind, they're like, well, this person better walk on water. And of course, the person never walks on water and you've put yourself in, you're behind the eight ball, so to speak, and then the reverse takes place to the reverse takes place where it's like, Look, I really desperately need the job.

I'm being paid way under my market rate, but I'm willing to kind of join. And then the entire time the person in their mind is like, Yeah, I'm doing a great job, but I'm, you know, definitely getting screwed because they took advantage of me. So, you don't want to join in that example. You want to make sure that, look, this is the minimum that it's going to take for me to feel like I can be fairly compensated for my best work.

And you also don't want to over negotiate. So, anyway, those are sort of soft value based things, but I start with that as the model. Now, to more concretely answer your question. There's definitely a sequence in which you negotiate. the first part of negotiation is pure understanding. As we started the episode, you just want to understand how the equity works, how the bonuses work, how frequently you're being paid, what are the benefits package.

But you want to know kind of what is the expectation for comp? Sure, you may be falling in love with the job and you may be excited about joining, but just the first step is to make sure you can answer all the questions when it comes to how you'll be paid. You don't want to be in a situation where you join, the company isn't really clear, and then you've lost all your leverage.

This happened to me once where the, I was receiving RSUs. The RSUs weren't drafted yet, and so I didn't know, what the details of the RSU agreement are going to be. I just knew what the magnitude was going to be. I had trust in the employer that they would do it in a way that made sense. The lawyers came back.

I looked at the agreement and I said, hey, this is terrible because if I leave, I won't be able to keep my RSUs. And then the company's like, well, that's just the agreement that we've decided to draft. And I had no leverage and I'd already been there for a few months and the company was like, look, we're so busy.

We haven't gotten down to it, but you got to trust us. I wish I had, in that example, written down some expectations around the RSUs will pay in this way. Otherwise, I want this other instrument. And yes, that's detailed work, but it was, you know, a lot of calm. That was writing on that detail, you know, companies are trying to do the right thing, typically, but oftentimes asking questions and knowing that, hey, this is unknown, you might want to write down what your expectations are and have them agree to that, just in principle, so that you're not in a stuck situation.

So like asking questions, maybe step one, then that too, is as you negotiate the way and the technique that I tend to use is Pick the biggest things first and then avoid the small things until the end. So here's a classic example, let's say a person comes in and they get this offer of 1 percent and 150 K and no bonus.

Right. That's and we decide that's the one that they want to optimize for. the first thing that you might want to say is like, look, this company's pretty early. I can't get line of sight that this thing is ever going to pay me a million dollars a year, which is my market rate. Given the 1%, I think the fact that this thing will exit in anywhere closeto $850 per year seems off.

I need 2%. Let's just take that as an example. And the company is like, okay, 2%. Now, big mistake is you're like, I need 2 percent with any of these 77 other things in my offer letter. A company is going to be like, this person's so much work. I cannot possibly see ourselves getting there. We're done. Instead, you're like 2%.

Now, 1 percent to 2 percent is a massive shift. So the chances that they hit 2 percent is almost null. Now, what you instead say is, look, 2 percent and that'll get me comfortable. Company says, look, it's not going to be 2%, it's going to be 1. 5%. You're like, okay, well, shoot, 1. 5 is a lot smaller than But looking at the terms, it seems like I only have 90 days to exercise.

Now, if I work here for three years, and then for a variety of reasons, I end up exiting, I can't afford this stock. Can we make this 90 days, two years? And they say, sure, that's a, that longer period is an easier trade than, half a percent. but we'll give you one year, not two years. So you're like, okay, I got one year.

Now the problem is you've given me 150K in base. So now we move to the next biggest item. And I think that, you know, what would be helpful is something closer to 200. Then they're like, look, we can get you to one 75. Then I'm like, well, for the remaining 25 K in gap, maybe we can do it as a bonus. And then they're like, well, we don't have an annual bonus program.

Then you're like, well, why don't we give it to me as a signing bonus?

That mechanism. It felt like when we're having this conversation, we're not holding a gun. We're just like, well, I'm just trying to get to what I consider to be a line of sight to my market rate.

And this was maybe the adjustments that needed in different instruments to get me there. But I probably, when I looked at this offer, had that in my head as what we wanted to get to, but I started in a way that felt like at any given time, if they agree, I'm going to stop. But if they don't, I have something else they'll ask.

And it's the equivalent of like, you go, and you're negotiating for a car, and they sell it for 20, and you start at 15, and eventually you're at 15, 5, and they're at 15, seven and you say, we'll throw in the car mats and then I'll call it a deal and they're like car mats are easy. I'll just throw it in.

Right? But you're trying to do that. So that's like a negotiation technique, but it feels like it also is always making progress and you're always on the same side of the

table.

Carly: you touched on even like the psychological piece of negotiation, right? Which is like, start with the big, knowing that, you know, they may not reach there. So then like kind of sneak in something a little bit smaller, like go to the next one, kind of treat it incrementally.

but, I think what's really important here to know is as the potential employee, you know, it's like having a very clear mind of what you hope to get, you know, like having a clear mind of what your expectations are going in and like making sure step one is done, which is, is everything very clear to you and then go into that conversation.

I think that'll create a much more fruitful conversation. And like you said, It probably prevents more of that resentment that can come on either end, you know, because it's more methodical. It's more of like this active negotiation rather than this passive negotiation,

Nikhyl: Right. And it's prioritized and what's meaningful to least. And in some ways, you're prioritizing and you're also being flexible. In the conversations as you're moving through things, so it doesn't feel that you're stubborn and you're holding fast. But because it's prioritized and because you're negotiating 1 thing at a time, you know, what you're essentially doing is making it easy for the person to respond.

If it's a document that's. Filled with red with nine terms from I want to change the clause in case the company gets acquired and remove more than 50 miles away. I want that number to be 75 all the way down to the percentage of equity. Turn companies are going to be like frozen and they're just going to negotiate for a while.

And then you'll either turn into the resentment case or you'll break the deal. And ultimately you want to close, right? And so that's the reason why I'm like, help the company close you by being clear on what matters to you and being clear on when to have the conversation. And you can move pretty quickly through this.

Carly: So I have a last related question on this front, which there's a lot of narrative about in that early conversation in the process, you know, there's a lot of narrative saying never, you know, share your, Goal of salary first. Always let the employer share it first. But it's always like a very uncomfortable, tricky situation to actually navigate.

Because it kind of comes down to who asks it first and you kind of, you know, dodge the question a bit. Do you have thoughts about this? Do you have like, you know, opinions of who should say it first? How to navigate that really, really early conversation of setting the benchmark of what a salary could be?

Nikhyl: you know, as you know, my advice is always somewhat unconventional. So let me ask, let me put it this way, if you're an elite performer and you're asking for a big number, I think it helps to put that out earlier rather than later. I think if you're a type of person who's probably going to get an offer and you're going to have relatively little leverage and negotiation power, I think that it might be better for the company to move first.

because ultimately you're not gaining that much. By presenting your number, if you know, you're not going to be able to change it. But, you know, like I've been in negotiations where I knew that the company had some range of flexibility and they were excited about my candidacy. And I made it clear what my market rate was.

And I knew that that number was a big number for them. And, you know, sometimes it hurts your ability to get through process, but oftentimes what it does is it starts warming up the people that need to make the decision that, Hey, to get an offer to this person, we should interview him or her. At that compensation level, which is very different from, Hey, they're coming in at a dollar figure of a million and my expectation is 3 million.

And it's like, oh my gosh. Like we interviewed this guy, we had an expectation he's gonna be a million. now he's like, a $3 million person. Like, I can't even imagine us getting there. Everyone's upset. The board's like, well, screw him. Like nobody makes that much money in this market. Blah. You know, you, you get into a bad, bad, bad situation.

But if you're the type of. Person. It's like, look, I mean, I'm, this is a position. it's constrained. There are five other people in the company that have the same exact position. The chances that I'm going to make twice as much as they are because I've told them ahead of time what my number was and they're like, okay, we'll just pay them that much.

Like, it's pretty unlikely. That's why I'm like leaders typically signal early. Most everyone else tends to hold. And by the way, in the state of California, you're not technically allowed. to ask as an employer to the employee how much they currently make, that's for discrimination reasons. So there is some, people don't want to say it, and you're not actually required to give that number.

But in the leader case, I typically sneak it in just because I want to make sure that they're paying at the top of the market.

Carly: probably not the best way of phrasing it, but it's almost like who gets more out of the offer or at least like the potential offer

Nikhyl: there is no hard and fast rule that never share because let me put it this like this is probably more more mechanical. It's just it's easier for a company to adjust their first offer than their second one. Okay. So just think about it from the employer side. Employer is like, look, we have a pretty wide range.

And we've never hired this person this level before, so we could see ourselves giving a percent all the way up to 2%, depending on the right person. Now the company ends up deciding they want to make an offer and it's going to be a percent. Now, if it's a percent, you have a different process around, well, should we increase the offer by 2x?

It almost implies that you screwed up to begin with. So company is like resistant to say, well, now we have a philosophical question around when we make offers, do we really negotiate or do we not? How much you're in a whole different conversation. So you're better off making your initial offer. Closest to what you will take, but again, if it's a constrained situation, you don't really gain much by telling people, Hey, we're going to do this because all it's going to do is potentially prevent you from even getting the offer to begin with.

But if you are in an unconstrained situation by sneaking it in, you might start that number at one and a half, even without doing anything. That's why I present it

this way.

Carly: This has been so great and I know you also have a lot of written content about this and you get, you know, many, many emails in the, in this mailbag purely about comp. So keep that coming. But I want, I want to actually finalize or at least close with what do you think is like the, elements that is currently out there about comp that we need to just be really like our red flag should go off when we read this about compensation that people, you know, there's a lot of narrative out there, but it's something that.

Maybe you should be a bit more cognizant when we're taking that in.

Nikhyl: Yeah, I mean, we did a good job of hitting on some of those in this episode. I feel like one is that there's lots and lots of services out there that give you averages of compensation, and that could be everything from venture folks that survey leaders all the way to levels of FYI and other services that are great about what the averages are.

Hey, I think those make those are really valuable and helpful, but if you are a leader in your field, you probably get paid differently than the average. And so I would be very careful when companies say that they use averages, you may not be an average person and you might be shortchanging yourself by assuming that.

Those averages really serve that company more than the candidate. now, that doesn't mean that every candidate is an elite candidate. By definition, that's not possible. But elite candidates definitely, you should ignore more of what's on the internet than pay attention to what's there. And the second thing is make sure the compensation is a thing, not the thing.

For the reasons we mentioned. It's it should be the case that you are paid fairly, and if this is a position that could change the trajectory of your career, that's worth some amount of investment. And then the 3rd thing is don't just focus on the magnitudes as we've discussed. A lot of times the terms matter.

And negotiation of the sequencing matters. There's some, there's some, there's some points that I think are very rarely discussed that are out there. Um, those 3, I would definitely hit on. And then, you know, the other thing is that if you have a compensation question, I think it would be fun to do another mailbag episode on maybe some nuances that we didn't cover here.

Uh, and so feel free to email me and I'm happy to kind of work through it and. you know, try to stay personal in the way you negotiate, you know, don't try to read something on the internet and then just regurgitate and use some spreadsheet you found, you know, make sure that the comp that you're asking for is fair comp for you.

And I think then you'll do right.

Carly: Amazing. And I think that last point is so important because I think the reason why people probably go more into being inauthentic is because they don't truly understand all the components. You know, it's more of like they're getting it fed by whatever, article or chat GBT or whatever, but they don't truly understand it.

So they have to go into this conversation being like, this is what it should be. This is the numbers that is spit out, but you know, not considering privatization and whatnot.

Nikhyl: Yeah.

I'm hoping this episode helped in that way and let's continue to keep doing more mailbags and more comp episodes, Carly.

Carly: Amazing. Let's do it.