Equity Compensation for a Head of Sales/Business Development at a Seed-Round Startup

The equity offered to a Head of Sales or Business Development at a startup that has only closed a seed round can vary based on several factors such as the startup's valuation, the candidate's experience, and the role's responsibilities. In this article, we will explore the typical range of equity compensation and the factors that influence it.

Factors Influencing Equity Compensation

A general range for equity compensation at this stage typically falls between 1% and 5% of the company's total equity. This range can be influenced by several factors:

Company Valuation

Higher valuations often result in lower equity percentages, while lower valuations might lead to higher percentages. The amount of seed funding received (usually between 250k to 500k) influences the company's valuation and, subsequently, the equity offered.

Experience Level

Candidates with extensive experience or a strong track record may negotiate for a higher equity stake. This is especially true when they bring a proven track record or valuable industry knowledge to the table.

Role Responsibilities

The more critical and strategic the role is deemed to be, the more equity the candidate might receive. For a Head of Sales or Business Development, if their role is considered pivotal for the company's growth, they are more likely to receive a higher equity stake.

Negotiation

Individual negotiation skills play a crucial role in determining the final equity offer. The overall compensation package, including salary, bonuses, and other perks, will influence the offer. The candidate should aim for a balanced package that includes all components of their compensation.

Vesting Schedule

Typically, equity vests over a four-year period with a one-year cliff. This means that the equity is only subject to vesting if the employee remains with the company for at least a year. After that, vesting commences annually until the full equity is vested.

Example Scenarios

Early-stage startups: A Head of Sales might receive around 3% to 5% of the company's equity if they are joining at a very early stage and are expected to play a critical role in growth. This could be the case when the startup is at a very early stage and growth is one of the critical goals for the company.

More established seed-stage startups: If the company has a higher valuation or if the role is less critical to immediate growth, equity might be closer to 1% to 2%. In these scenarios, the startup might have more experience and the sales leader might have a less critical role in the immediate future.

Considerations for Compensation Packages

When negotiating the compensation package for a Head of Sales or Business Development, it's essential to consider the entire package and the potential for growth in equity value as the company scales. A balanced approach that includes a base salary, a commission, and equity is often advisable. Since most startups fail, the focus should be on the money you get now, which includes both salary and commissions over equity.

Ignoring Ideas and Tech

In today's market, customers are more important than the idea or the technology. A healthy equity model that vests over time and includes a walk-away clause and performance bonuses is a good model, especially if there is a base salary. Other measures, such as sales cycles and customer acquisition, should also be factored in, as sales cycles can be as long as nine months for even well-known sophisticated products.

By considering these factors, both startups and potential hires can create a fair and balanced equity compensation package that aligns their interests and contributes to the long-term success of the venture.