Negotiating Equity

Learn how to negotiate for equity in a sales role, game out your potential stock payout, and more

7 months ago   •   5 min read

By Bravado Staff

Negotiating equity in a startup sales role can be an especially daunting task for a salesperson. In an industry where roles already have uncertainty built into their compensation structure, the additional pressure of understanding how much equity you deserve in a startup, how it’s structured, and understanding the intricacies of quota based equity comp can feel overwhelming.

That’s why Bravado has broken down some helpful pointers to help you feel confident you aren’t leaving a single vested share on the table.

Bone Up On Your Comp Negotiation Skills

Before you negotiate equity in a sales role, it’s important to remember that all of the basics of comp negotiation still apply here. So make sure you bone up on your comp negotiation with our comprehensive article on the negotiating sales comp.

For example, when you’re negotiating cash comp, it’s crucial to stay positive and negotiate from a standpoint of trying to find the best deal for both parties. The same holds true for equity.
Perhaps even moreso, as negotiating equity effectively will likely require more research, more rounds of negotiation, and more willpower to make sure you’re getting the best deal possible.

The Two Bets

When you negotiate a sales comp package, you’re generally forced to decide how much of a bet you want to make that you’ll hit equity in your new role. Not very confident? Then you’ll negotiate a higher base at the cost of OTE. Same goes in reverse.

When you’re negotiating equity however, you’re forced to make a second bet. Not only do you have to guess whether you’ll hit earnings targets (and consequently, try to peg additional equity to those targets), you also have to bet how much the stock is going to be worth looking forward.

Ultimately, you need to juggle a lot of odds that you’ll get what you want. Look, you’re in sales, you didn’t get into it for certainty, but make sure your stock comp reflects the risk you’re taking, and that you’re at peace with the uncertainty (especially if it’s tied to quota).

More Risk Means More Reward

When you negotiate equity, or anything for that matter, it’s crucial to remember that risk comes at a premium. Let’s say you’re negotiating equity as part of an AE role at Amazon Web Services. The odds those vested shares are going to go to zero are basically nothing.

That said, Amazon is probably not going to grow 1000 times more valuable, as it would be worth more than the entire global economy. So your stock comp is probably going to basically serve as a form of delayed comp with mild fluctuations in value.

But let’s say you’re negotiating stock at a series A startup, one for which you’ve likely taken a pay cut. The odds that stock goes to zero are very, very high. High enough to get a lot of stock. Oftentimes, a very early seller can get whole number percentages of the company if they take a serious pay cut to work there.

In short, high risk, high reward, so make sure that your potential payout is commensurate with the risk you’re taking. If your stock would be worth $200k in the event a series A company became a unicorn, well, you could make that much hitting quota at another company, and that would be money that’s real. But let’s say it would be worth $800k, or $1.5 million. That’s enough money to offset the risk you’re taking knowing 99% of startups fold before going public.

There’s No Free Lunch (For Your Employer)

Don’t fall for the myth that a startup employee shouldn’t expect to be compensated as well as one of a major company. You deserve fair sales comp Whether it’s upward-mobility opportunities or equity, you need to be compensated to the greatest extent possible for the value you bring.

As a salesperson, you’re probably well-versed in comp, but just don’t go into a startup equity negotiation with a foolishly lenient attitude. You’re worth every penny you can get regardless of context. No pool table or video game room in the office is going to replace getting paid what you’re worth for your sales role, even if there’s an element of chance involved.

Game Out The Worst Case

We said it in our article on sales compensation negotiation, and we’ll say it again: Never accept a comp package you couldn’t be comfortable living on in the worst case. Game it out. If you don’t hit quota or the stock goes to zero, will it be worth the risk you took over months or years of selling?

Don’t wear rose tinted glasses. Sales jobs are cruel, and if you work at a struggling company for a year and only have 80k to show for it with stock worth nothing, you might be kicking yourself that you didn’t take the more reliable job at a company with steady revenue.

Get It In Writing

Equity is not the time to negotiate off the cuff. You’d have to do a lot of homework to understand your equity offer on the spot verbally, so get all of your offers in writing. Evaluate them thoroughly, and understand what kind of stock you’re getting.

Is it nonqualified or incentivized stock ?
What would it be worth in a unicorn event and when does it vest?
What is the strike price?
What’s the risk and reward?

Until you understand your equity comp as well as the person offering it to you, you are at a negotiating disadvantage, so have them write it up, and read it thoroughly.

Take Your Time

This is implied by our last point, but never accept an equity offer on the spot. It’s easy to understand your OTE goals, or what base you need, but equity should always be slept on before accepting.

To put it another way, accepting an equity offer on the spot will make the person hiring you feel lucky rather than satisfied, and when you make a deal, your goal is to make them feel satisfied.

Talk To Your Peers

The nice thing about working in sales, is you meet a lot of salespeople, and they’ve usually worked a lot of different jobs. So work your contacts to understand the context around how good of an equity offer you’re getting.

Specifically, you’ll want to talk to people who’ve worked in similar contexts. Similar series, similar industry, similar upside. Get multiple data points as close as possible, and use them to negotiate the most fair package possible.

Not sure where to get started, or have too small of a network? Ask the Bravado War Room and you’ll have a wealth of past successful offers to compare yours against.

Don’t Be Afraid To Get A Second Opinion

If you’re scared to accept an equity package or confused by the particulars of your deal, contract lawyers can offer a consultation to help you understand the legal particulars of your offer, such as what kind of bad leaver clauses you face, when you vest, and what rights you’re entitled to, as well as information on if you’re just getting an all around good deal.

So if you’re worried or feel in over your head?
a) Don’t show it. And
b) Reach out to a lawyer before you sign anything.

Closing Thoughts

Negotiating equity can be daunting, but you’re a salesperson. You live and breathe pretending you know what you’re talking about to close a deal. So with a little advice and consulting your peers, you’ll be ready to negotiate stocks and shares with more knowledge than the person hiring you.

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