Dear Mentor:

How do I negotiate equity and salary?

I am expecting a formal offer of employment as a product development manager for a small startup company. When asked, I told the prospective employer of my expectations of annual salary and an equity position. I was quickly countered by the fact that only a small fraction of equity, relative to my stated expectations, may be available. I had stated my lower salary expectation as an exchange for higher equity, with the thinking that a startup may not be able to offer salary as easily as it can offer equity. Now I am afraid that I may be stuck with lower salary, without any reasonable offset through equity. Can you suggest how I can successfully negotiate my compensation with this employer? I like the position and believe that it would be a good fit for me. Thank you.

Manisha, Foster City, CA, USA

Dear Manisha:

You have pointed out the two common components of compensation in a hi-tech business, particularly the startups in the Silicon Valley of California. Other components include signing bonus, annual bonus (most likely performance-based bonus), relocation package, other benefits such as health benefits, retirement plans, etc.

Negotiations are nothing but the art of making a deal. As you can see, your compensation negotiations include several components. It is important to recognize the constraints that each party may have on one or more components. For example, your prospective employer may be constrained, for whatever reason, from offering the equity position you believe is fair. However, you may be able to negotiate on other dimensions of the package. Should there be a dimension where neither party can "give," negotiations are all but over. You should explore flexibility of both sides on all potential dimensions, and reach a mutually beneficial arrangement.

We note that you have a strong interest in this position. It is, however, important to understand that you can not win a negotiation that you can not afford to lose. This position is not the only one available in Silicon Valley. In the long run, you are much better off if you take the "large view" and take into consideration all the available opportunities and not get anchored to just one.

Be fair to yourself and to your prospective employer, and the employer should do the same. With this mindset, the chances of successful outcome are great; however, they are finite.

We wish you a successful negotiation this time, and continued success in the future.

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