Negotiating Compensation In Tech
From broke seed-stage startups, to FAANG orgs with money to burn; an extensive guide on winning the negotiation game.
The First Negotiation Is With Yourself
“They’re going to think I’m greedy” is by far one of the most common misconceptions I encounter with job seekers when it’s time to negotiate. Nothing could be further from the truth, and in some cases, it’s actually a huge red flag if you don’t negotiate.
Chances are, if you’re pursuing a career in tech, you’re here to make money. Some folks genuinely have an interest in their particular domain and pursue a tech career with a more noble mission in mind. They too have the desire to make the most money possible. Your future manager knows this. Their CEO knows this. The compensation analyst who determines your salary band knows this.
More money means a better home for your family, better healthcare, healthier food, the ability to pursue your hobbies, support causes you care about, the list goes on. None of that is greed. Yet for some reason, some dark corners of modern culture have convinced folks that wanting more is a character flaw. In the worst of cases, the people you’re negotiating against understand this and take full advantage of it. I’m here to help banish guilt of being perceived as greedy, because it will literally change your life once you do.
If you’re going to negotiate, you have to firmly believe you are worthy of what you’re asking for.
You Have To Be Willing To Walk Away
Negotiating comes with risks. If you do this poorly, you don’t just get a "no”, you get your original offer rescinded, so doing your research is key. That said, getting an offer rescinded due to a good faith negotiation attempt is rare. You probably dodged working with horrible leadership if that’s the case.
Get Clarity In Your First Interview
Do not wait until an offer conversation to understand the compensation package. Any company hiring in good faith is going to have a salary range in their job description, or they’ll share it with you unprompted during your first interview. If a company makes you ask, and then shares, that’s a bit concerning, but not the end of the world.
Any company that demands a salary range from you in the application, or asks you what your target is without providing one of their own first is 100% going to squeeze every penny out of your compensation that they can. I’d recommend politely declining to proceed unless getting a new job is a life or death situation.
Employers are not legally allowed to ask you what you currently make or have made in the past, but they are allowed to ask you what your target is. At the time of this writing, CA, CO, CT, MR, NV, NY, RI, and WA all require salary ranges to be published in job descriptions, and it will likely become mandated federally in the near future.
Understand Equity Before Scoffing At Salary Ranges
There are plenty of companies offering uncompetitive salaries that try to sell garbage-tier equity as a remedy. There are also companies with uncompetitive salaries that have equity packages that could change your life. Learning how to value equity is essential to figuring out which of the two you’re dealing with. A good company will have competent recruiters that can walk you through the numbers. A shady company will hype up their equity without explaining how it works, or what the downsides are.
You need to do hours of research and possibly meet with an accountant to fully understand all the nuances that come with an equity package. For the purpose of this guide, we’re going to focus on “bigger number better” without doing a deep dive on equity. I have a separate in-depth guide that goes into detail on how equity works.
You’ll typically run into either RSUs (early stage startups), Stock Options (established startups), or Stock Grants (public companies).
Almost all equity packages have a 4 year vesting period, with a one year cliff. This means that the number of options or shares you are granted on your hire date is spread out over the course of four years, and you have to be there one year before you start receiving what is contractually promised to you.
All this to say - there are situations where accepting a 150k salary will put you ahead of accepting a competing offer at 180k if the equity packages vary significantly.
Who Determines Your Pay Package?
At Large Enterprises
Most large orgs of 1,000+ people will have a compensation team that reports into finance. Their job is to make sure no one is overpaid. Almost all of them utilize Radford for accurate data on the market, taking into account regional differences. Radford and other compensation data companies will give them an idea of the “market rate” range for the candidate they’re looking for, and the organization can adjust down or up depending on if they’re looking for “median” talent or “top X% talent”. The hiring manager and recruiter for the role you’re interviewing for have little, if any, say in compensation.
Most large enterprises are very up front about their compensation ranges, and will not negotiate outside of them. They usually offer the middle of the range listed, so you can be pretty confident that’s where you’ll land at the end of your interview process. The bottom end of the range is reserved for folks who are a bit too junior for the role but interviewed well, and the top end of the range is there to give hiring teams some wiggle room in landing candidates who can “move the needle”.
It worth noting that there are some large enterprises that do not try to get “good deals” when recruiting, and prefer to pay top dollar for top candidates. The offers are so large that negotiation is rarely necessary and anyone hired is prevented from leaving due to the “golden handcuffs” of having such a large pay package that no one can compete with. Some prominent examples of this are Netflix and Hudson River Trading.
At Startups
On the startup side of things… there’s no consistency. This can often work in your favor since startups have more pressing issues to deal with than winning a few dollars in a compensation negotiation. At startups without compensation analysts (which is most of them), the person determining your salary is usually some one in recruiting, or your future direct manager, who will run the numbers past the CEO or finance. They often have access to good compensation data, but there’s less pressure to stick to a rigid range. Often times they will recruit without a range in mind whatsoever, with the attitude of “we will pay what we need to to land the right person”. These folks usually have years of experience interviewing, hiring, and changing jobs themselves, so they’ll have a general understanding of what most roles pay.
Some examples I’ve seen of how startup pay is determined in my career:
Series A, less than 100 headcount, on a budget: I’d have candidates share their target range during the initial interview, and I’d let them know on the spot if it was reasonable or not based on their experience. If their ask was unreasonable, I’d let them know it would be a stretch, but we’re happy to continue interviews in case they see potential in our equity, or a hiring manager makes it clear they’re a “unicorn” hire we are able to pay a premium for. The hiring manager had final say at the end of the day, but I’d guide the initial numbers. Upper leadership defaulted to trusting the hiring manager’s judgement and were not directly involved in comp.
Series D, 1,000+ headcount, virtually unlimited funds: Similar process to above, but approval needed from HR during the offer stage, followed by additional approval by a C-level exec. Bit of an unusual setup since HR is not usually involved in comp at most orgs, and it’s hard for the C-suite to prioritize this task. This led to some animosity between HR and recruitment, and offer negotiations stretching out for weeks.
Series B, less than 100 headcount, moderate funds: Strict adhesion to Radford data. Ranges were firmly established in the job description and anyone wanting to negotiate outside of them received strong pushback to the point that many would choose a competing offer. Leadership had the attitude of “these candidates should be honored to work here, how dare they not accept our offer immediately”. Candidates had to accept within 24 hours or their offers were rescinded.
Series D, less than 200 headcount, running on a tight budget: No ranges involved, each role clearly advertised one salary number, and a bonus structure. If you apply, it’s assumed that number works for you, and we would double check during the first interview.
Building Your Narrative
Negotiations start well before any numbers are discussed. Top-tier recruiters are trained to gather any data they can to determine how to negotiate with you. They’ll want to know what your timeline/urgency is, if you have competing offers on the horizon, and why you’re looking for a new role.
Conversations Elsewhere: You want to make it clear from the start you are having conversations with other companies. You should be anyway, but even if you’re not, you need to have them under the impression that you are. This is an easy way to build a bit of leverage with 0 risk. Job searching is a lot like dating in this sense - people are more interested in you if you’re already dating some one else. Single and alone? Something may be wrong with you, regardless of you being the best candidate they’ve talked to.
Be Employed: Unfortunately, you will usually have more leverage if you’re currently employed. I would not recommend lying about being unemployed, because it can be verified during a background check. Pretty creepy, right? Why is it legal for that data to be public for anyone willing to pay Equifax for it?! A topic for another day I guess. That said, if you’ve been let go and want to stretch your last role on your resume/LinkedIn and make it seem like you’re still employed, most HM’s aren’t going out of their way to dig into your background check if it comes back clean. If you crushed your interviews and they see you stretched a role out by a few months, it’s not a big enough issue that they’re willing to rescind your offer. I’ve been involved in plenty of recruitments where it was ambiguous if the candidate was still employed or why they were let go, and nobody pressed the issue. Use your best judgement and read the room if you want to go that route.
Offer Time
You’ve done all the above, crushed your interviews, and now it’s offer time. With the exception of companies that have been up front about a rigid salary, you should probably negotiate. If you are going into a client-facing or sales role, you HAVE to negotiate. Your negotiation is literally considered part of the interview process. If you can’t advocate for yourself, how could you possibly advocate for the company?
Have a number in mind: You should be going into these conversations with a clear idea of your salary + total comp target. Know when to back down and happily accept, and when to push back. If you need help figuring out your “market value”, or getting an idea of what your target company pays, check out Levels.fyi or Blind. Glassdoor is a pariah at this point and their numbers are always trailing behind by a year or two.
What’s happening on the corporate side: Companies usually do not throw out their best offer first, and leave some wiggle room for you to negotiate up. A lot of companies go into an offer conversation with two numbers prepared - an initial offer, and a higher backup offer if you push back. In my experience, most senior level+ candidates are aware of this, immediately push back on offer #1, and then immediately accept offer #2 if it hits or exceeds their target number. Some companies are less organized, and have to circle back outside the offer conversation to get a higher number approved from what was originally offered. In these cases, I recommend requesting a 10-20% bump depending on how close to your target they were. Some will tell you “tough luck, take it or leave it”, at which point you just need to accept if their offer is reasonable, or be willing to walk away.
Justifying your pushback: This is probably why most folks clicked on this Substack post. I don’t have any sage advice here, there are only a handful of narratives to use. Regardless of what you choose, make sure to express enormous gratitude re: receiving an offer before pushing back.
Some common and effective examples I’ve seen:
Competing Offer Approach: “I’m expecting an offer early next week. and their salary target is (share your target number). If you’re able to match that, I’d be happy to accept right now since I love the (mention product, team, leadership) at your org.”
Market Comparison Approach: “Based on my research and discussions with peers, I’ve found that similar roles in this market are typically offering around (insert your target number). If it’s possible to adjust the offer to align more closely with this target, I’d be eager to accept.”
Current Employer Leverage: If you’re still employed, you can use your current promotional trajectory as leverage. “This is a generous offer, but I’m concerned that I’ll be leaving money on the table in a year since I’m currently on track for a promotion in Q2. If you’re able to get me closer to (insert target number) I am happy to accept and leave that opportunity behind”.
There are other popular approaches out there such as “restating your value proposition”, but they are much less compelling in my opinion.
Post-Acceptance
Send everyone in your interview process a thank you email letting them know you’re excited to work with them in a few weeks. Make sure to include a week for some vacation during your notice period so you can start your new role feeling refreshed.
Fin.
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