If you work at a startup, it’s likely you’ll have faced the following question with a job offer: "Want a lower salary and more share options?" The second answer is the one they want to hear. And what they really want to hear is that you’re willing to take a pay cut on your current salary.
Startups do this to save themselves money and to test the dedication of the new hire. They’re also taking advantage of people by being deliberately opaque around what the value of the share options actually is. For the new hire, it’s almost impossible to know. Startups are playing a dodgy game where they’re asking people to gamble on their future, without giving them the right information to make the choice. Added to that, no-one knows when that exit and promised future ‘pay day’ will even come. But we do know that it’s unlikely you’ll get anything meaningful if you’re joining after employee number 10.
Asking people to make a financial sacrifice to prove their dedication to a company is damaging and wrong. It also plays into the weird pretence, too common in startup culture, that working isn’t about making money to live. Giving people the choice between salary and equity is hugely problematic. It rewards people in stronger financial positions than others. Taking a lower salary is a sign of how rich a person is, not a sign of their dedication to the company. There are countless scenarios, such as family commitments, that make a salary sacrifice extremely difficult for people. I see this as no different to unpaid internships in the media industry — for some, it’s no problem at all, for others a barrier that stops them from getting in — or even aspiring to. The level of sacrifice you are asking people to make varies hugely depending on the situation of the person who you are asking.
Dedication from employees is something that is earned, not demanded.
It is also extremely unreasonable to test people’s dedication and ask for them to make such a big sacrifice so early on in the relationship. Sure, you may have met them over six times during the interview process, but no-one really knows what a startup is like until they’ve started working there. Dedication from employees is something that is earned, not demanded. I like to compare work matters to matters of the heart. You certainly wouldn’t ask someone to make a big sacrifice and demonstrate their commitment to you on a third date. As a test, it’s deeply unreasonable and comes from a place of arrogance about what you and your startup have to offer that others can’t.
This is also part of a wider issue around not taking the time to properly understand the value that a particular hire is going to bring to the business. In a rush to hire when growing fast, startups fail to think deeply about what role a new person is going to play in the company’s growth. They’re also unable to attribute a monetary value to that person. Instead, they wait to leave it to the time they are negotiating the package with a new hire when they give them a job offer. This ambiguity from the outset means they are not transparent about what the salary and equity package is going to be when advertising new roles. This then leaves it to the best negotiators, who are often the most entitled, or the most privileged, to benefit financially.
Let’s stop pretending that working isn’t about money.
It is time to be more progressive and transparent in how startups hire people. Let’s stop pretending that working isn’t about money and that ‘we’re a startup’ is an acceptable excuse for offering a salary below market rate. Take the time to work out what value that person could bring to the company and have those numbers ready upfront before you start advertising the role. Let’s be transparent about what share options and equity are actually worth and educate new hires about their meaning. A more transparent system that focuses on what value that person is going to bring to the company will benefit everyone.
Founders need to be more humble when reaching for the best talent. They should also seek to foster dedication over time, rather than demand it upfront — as you should in any relationship. So enough of this sacrificial nonsense. Let’s be transparent and invite people into startups who come from a range of backgrounds, and let’s create working cultures that foster true and meaningful employee dedication.