Don't do it. Less than half is a more than a reduced salary. That's a major cut. After 3 months do you get any compensation for the first 3 months of reduced pay?

Even in tough economic times like now, I would not take the offer unless I had nothing else. Its hard enough to work at a startup without this added stress.

I believe that employees are absolutely critical to the success of a start up and I can't image that this start up is going to attract the best and brightest to work there with this attitude. I suspect that no matter how you perform, after 3 months, they will try to keep you salary low because they have already undervalued your contribution in the first 3 months.

What we do is to offer a short term contract during which we pay them normal contract rates, but we have the option of not hiring them at the end of the contract. No matter what they get paid for their work and if we like them, we bring them on at above industry average rates.