3) Financial Reward
Alright, let’s talk about money! Earning a significant financial reward was the third reason industry leaders wanted to join early stage companies. Being an early employee at a startup can be incredibly lucrative and a chance to grow generational wealth — how exciting!
In early companies, resources are limited and that may reduce how much cash compensation a startup can offer. However, early employees are taking a big risk to join a new company and need to be compensated in alternative ways.
Cue Beyonce’s legendary lyric — ”pay me in equity.”
A standard part of a startup’s compensation package includes receiving equity in the business via stock options. The magic of equity is that it lets employees participate in the upside of the company as it grows. This aligns incentives for success and rewards employees for taking that early risk.
It’s simple: As a company does well, the value of the equity/stock increases. If the company has a significant exit — either an acquisition or initial public offering (IPO) — that equity can turn into a life-changing amount of money.
While equity is part of many startup packages, it can be hard to figure out how to navigate conversations to maximize your equity and ownership. We asked operator Iheanyi Ekechukwu (ex-GitHub, Digital Ocean) what he wished he knew before joining a startup:
Preparation and learning about this side of early companies is key before plunging in. Compound, Carta, and SVB have great tools to help employees at early companies learn about equity, options, and financial planning.
Of course, every startup won’t have a massive exit, but that’s part of the risk-reward tradeoff of joining an emerging company versus one that is more established. While there might be more uncertainty, the potential payoff for taking the leap can be substantial.
When it comes to professional pursuits, we all have our motivations — learn, grow, earn. We hope this blog sheds light on how joining an early stage company can help you achieve all three!