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Wait, what? Firstly: She's engaged to the founder. Secondly: This is on the company blog (which indicates she might not be 100% forthright). (And what am I supposed to learn about Keen.io, here?)

Finally (and most importantly): Did she run the numbers about what that 1.25% might realistically be worth? She compared the offer to her current position and (without the equity) there's a ~$55,000 difference. That's a shit-ton! How much of an exit would Keen.io have to have in order for that to pay off if she's on a reduced income for, say, four years? She'd have to get a couple hundred grand off of that exit. Will her share of equity get her that?

Anyway. This isn't a negotiation. And she didn't fully run the numbers.

[Edit]

I also wrote up my experience negotiating with a start-up [http://auscillate.com/post/238]. I'm pretty naive about this stuff, but at least I attempted to answer some of the issues of the value of equity.

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I'm not sure what this critique has to do with the point of the article. This is, I think, a more careful (and lucrative) negotiation process than 99% of engineers are apt to us. The point of the post was to explain that process, presumably in the hopes of benefiting other startup employees.

Do you disagree with the methodology? How? Let's talk about that, and not what you think about the blog author's personal life.

I think she used a valuation of $5mil when doing her calculations. What are the odds the company will exit at that number? What are the odds it'll exit higher? What are the odds that it'll flame out and be worth nothing? Will her shares dilute? How much more does she feel she should earn to make up for all of this extra risk she's assuming?

She doesn't appear to consider any of this. At least, I don't see any numbers that take this stuff into account.

She's using the note valuation; she didn't just make up $5MM.

Those are all good questions to ask. Some of them are questions she considers, some of them aren't.

Ultimately, though, the question of how you --- a prospective employee --- value equity is orthogonal to the question this post engages with, which is "how do I take the valuation for my role that I arrive at and effectively communicate it to the prospective employer so as to improve my initial offer". And, in that regard, I think this is a very good and useful post.

His point is that the methodology is flawed because of the unique circumstances of the author being engaged to the CEO. This skews the inputs upward in her favor.

You think because they're engaged that she was more likely to get a favorable offer?

Well, yes. Being engaged to the CEO usually has that effect, especially when the CEO himself is handling the negotiations. It would be different if someone else who she was not friends with (and who was not friends with the CEO) was handling the negotiation, but not much. In the end, being the CEO's future wife plays a substantial role in her situation.

I think that's a fair thing to assume. Full disclosure: I'm Dan, one of the other co-founders of Keen. I actually did the negotiation with Michelle - Kyle delivered our original offer. But she's one of my best friends as well. As is Kyle. As is our other co-founder and the two other people on our team.

The negotiation was awkward, but I'm personally convinced that we're a stronger team because of our close personal bonds. It's not for everybody or every team, of course, but I believe it works for us.

Did the team contemplate in making this offer that if something went sour in that relationship, you'd end up with a CEO who has both personal drama and potentially a very difficult situation in the office, given that she'd be reporting to him? How did your corporate counsel feel about this? Your board?

If she's not reporting to the CEO, how does her new manager feel about having a team member who's his bosses' fiancee? Would he be comfortable firing her if she fails to perform?

I know this seems hypothetical, but I think anyone who's been around startup has seen some variant of this play out multiple times. It's bad enough when it's friends; it's even more treacherous when it's a fiancee/wife.

Yes. Maybe a whole separate blog post coming on that :)

Of course we've thought of this (and a number of other hypotheticals). And of course we've discussed it, openly amongst the entire team as well as behind closed doors with our board and counsel. It does complicate things. In the end we felt like the positives (having Michelle on the team so we can take advantage of her strengths) outweigh the potential negatives. It could absolutely turn out badly. As with almost everything else in startups, we're making a hedged bet. And you're free to think we've made a mistake, of course, as long as you don't leave believing we haven't thought a ton about this. :)

It would be different if we were inserting Michelle into some rigid organization structure, especially if she was reporting to somebody other than our CEO. We don't have that kind of structure, though, and even if we did, we would never tell a frontline manager to hire somebody based on nepotism. That's a sure-fire way to kill a company in my book.

Fair enough, as long as you're going into this with open eyes. It's not like most risks that startups take; inherently, most people wildly underestimate the risk that a personal relationship will go sour down the road. (If we didn't, a lot fewer people would get married.) I'm pretty sure if you ask most folks getting married what they estimate their chance of staying together is, they'll pick a number higher than ~50%.

Even if she's reporting directly to the CEO now, that raises its own questions, in particular for other employees. If I'm at her same level, do I feel like I'm going to get a fair shake if she and I are gunning for the same promotion? Down the road, as the organization grows, is she forever tied to reporting to the CEO? How do you ensure there's never a quid pro quo exchange that opens you to a lawsuit?

It's those kinds of questions that scare most organizations away from having direct reports romantically involved. It's especially fraught in a relatively unstructured organization like a startup where things like promotions and org changes can be fairly sudden and subjective.

It's true that being romantically involved with a direct report is fraught, because the whole team will assume favoritism. But it's also obvious, and it does not take a management genius to come up with mechanisms both to avoid the problem and soothe the concerns of the team.

If that was easy, it wouldn't be standard practice at corporations to disallow it. In most large companies, if you are in a relationship with someone in your reporting line, one of you has to transfer or leave.

Even if the reality is that there's no favoritism, it opens you up to lawsuits both from the people who are involved, and from their coworkers. If they break up, and then he demotes her or lets her go, lawsuit city.

I've seen this firsthand at a major venture startup (but wasn't involved in it myself) - a fiancee/employee decides to leave an officer for one of the other officers of the company. Disastrous for the company.

Anyway, it's their company, and I respect that they can do whatever they want - I only raised this issue because it happens fairly often in the startup world that a very tiny company wants to hire someone in a relationship with an existing employee, and there's a lot of issues you bring on board when you do that.

I'm biased, as I work with my spouse, but this is I think an overblown concern. People leave companies for all sorts of reasons, many of them dumb. They do not need to have made a lifelong personal commitment to their manager to find those reasons. Also, people do not need to have made that commitment in order to access their unprofessional self; normal team members find ways to be deeply unprofessional without entangling their relationships into their companies.

Yes. Strictly speaking, if you get into business with your significant other, you are increasing the cardinality of the set of things that can go wrong with your team. For people that think like us, maybe that's where you stop thinking, and if so, fine. But the set we're talking about is very large, and I also know high school statistics, and so can observe that the relationship stuff is unlikely to be the event that blows up your team.

Believe in working with your spouse (or close friends, or whatever) or not. Either way: it has nothing to do with negotiating for a job, and it's a little creepy to bring it up here.

Well as long as the reporting structure at work is the same as the reporting structure at home I'm sure it can work. When they are reversed its a recipe for disaster.

I'm not sure what you mean here. The working relationship I have with Erin is nothing like my home relationship with Erin.

I worked at a company where the husband was the CEO and the wife reported to him. But at home it was pretty clear the wife made the decisions and the husband reported to her. As a result we got to experience the CEO making some decision which the wife disagreed with, only to have the decision changed the next day after they had spent some time out of the office. It was uncomfortable for everyone, and ultimately fatal to their marriage.

Surely it messes with things that a favorable offer to her is also a favorable offer to her husband.

It completely distorts the negotiating position because (assuming no divorce), she's going to benefit from the success either way.

I have seen the opposite the case sometimes, too -- people overcompensate and treat their friends/spouses worse than they'd treat an arms length employee.

I personally worked with a married couple as founders, and would never do this again (a lot had to do with them in specific, but the general failure mode of any relationship problems spilling over into business, on top of them always ganging up on others, seems general). I'd probably work at a company with siblings as founders, and maybe at a company where a couple were in different roles (founder + employee).

Do you think the negotiating framework she wrote about here is unlikely to yield good results for normal startup people?

I feel like people put more weight on advice with personal experience behind it. That weight is understandably lowered when the circumstances turn out to be unique and odd and not really generally applicable.

I mean, would you take advice about how to move up in a company the same from the son of the founder?

I think her methodology was sound, and knowing to use it at all was great. I just question the CEO/founder for low-balling to begin with, and I'm not sure if the whole thing raises the perceived awesomeness of keen.io as an employer (which is what you'd want on a corporate blog).

On the meta point: I agree, it wasn't a great Keen.io boosting piece. Probably no blog post that has salary numbers next to equity allocations can be. But then, I found the honesty bracing in... mostly... a good way.

No really, this article was total nutso. "Another thing that made this situation complicated was that Kyle and I are recently engaged" was almost at the half way point. After reading about how she had received an email from "Kyle", one of the Keen founders, to meet for coffee or beer to discuss an offer, I had to assume they were both recently engaged to other people.

I finally realized that, no, in fact they are engaged to each other, but that was after she'd started referring to herself in the third person:

  Michelle: “What should I do? ..."

I hope that someone else wrote this article on her behalf.

hopefully I cleared up the confusion with the intro I added to the entry.

I modeled the cap table and various financial outcomes to figure out what 1.25% might be worth. In fact, we reviewed those numbers as a team (this was in my post).

The founders also set expectations that we'd adjust salaries to market value in the event of a Series A, though that isn't something I relied on as a part of my decision.

On a similar note, I would have preferred if she had posted something like this on a personal blog and not the company blog, because I think it looks tacky (especially when you are sharing your actual salary).

I thought the analysis was generally quite good though and she seems to be quite intelligent. Please don't take my critique to mean that I thought the point she was making was incorrect.

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