startup equity, salary and position title and ranking

hello everyone, in the near future, there is a distinct possibility of my company merging with another company and forming a c-corp. at this time an equity structure will be put in place. Has anyone ever dealt with a scenario such as this?

a little background on positioning. I am the only designer on staff and will likely take a role of either VP of product development and marketing or Director of product development and marketing under a general VP who overseas marketing, design, sales and possibly software engineering. my current CTO suggested that it might be a good idea for me to go after the director role so i have someone above me to more or less take the heat should something go unfavorably. what are your thoughts on that? As the only designer, I have no choice but to own up to mistakes now, so i feel i would have no issue with it otherwise, but having a staff under me is a different story, as a vp I would be accountable of their actions as well.

lastly equity and salary. does anyone out there have experience with negotiating this? I have read some articles but most if not all of them are about joining a startup at or after seed round. Im part of it before we even go live and have been for the past nearly 3 years. There are likely to be about 10-12 people once we join together, ideally I would like at least 5% equity and a seat on the board. Are creatives usually on a board of directors?

ok thats all for now, please chime in if you have any thoughts on the matter-thanks!

First, I think the advice of your CTO is not sound. If you don’t want to take the heat, you probably shouldn’t have an equity stake and definitely should not be on the board. I would skip VP and ask for CDO. Also tittles frequently have salary and bonus bands as a company gets bigger.

Second, I believe that typically equity is distributed in shares. Share can dilute with investment. Get a lawyer and understand what you are asking for and getting.

Third, slaty is what you can negotiate. To properly negotiate you need information and leverage. If you want to substantially increase your salary you will usually need an offer from another company that shows what your market value is. Otherwise you already work there for your current pay and have no motivation to pay you anything more. Don’t let title become part of the salary negation. I’d rather be called staff designer and get my current pay than be called CDO and not truly get paid at that level.

Lastly, if you want to be taken as a leader in a business endeavor, your writing will matter. I hope you write more formerly than the above example in your daily work communications. At least capitalize the first letter of the first word in your sentences and attempt to use proper punctuation. We need to represent the professional practice of design at a high level to be taken seriously. That will contribute to your experience being transferable to your next position.

“Yo”, First off thank you for giving me your feedback. I have been a follower of yours for many years now and value you opinion substantially. Secondly I agree wholeheartedly with the above statement. I have no problem owning up to my mistakes or taking the harsh criticisms of naysayers. I feel its the nature of a good designer to be able to handle criticism and “failure”, learn from it, and make yourself and your designs better from it. Perhaps its something that others cant wrap their heads around as they are not used to it.

Sorry to send the wrong message off the bat, it was not my intention to carry myself in such a manner. As the old adage goes, “actions speak louder than words”, in this case my actions were my words and they didn’t paint the best picture. I assure you that the way I conduct myself in business is professional. Thanks again for the insight.

kdino13, I didn’t mean to be harsh, but just wanted to make sure. :slight_smile:

No, I completely understand. I didn’t take it as harsh, it was a welcomed criticism. You called me out, made me take a look at how I conduct and portray myself in the virtual world, and I thank you for that.

Don’t get too focused on titles. Upstart companies always tend to throw big job titles around like Senior VP of Product Design and Development when there isn’t anyone else even designing! Just say designer.

If you only have 5% share, it’s likely you won’t be on the board. You don’t have enough interest. Board meetings focus on the financials and generally never include design.

Guess I don’t understand but why would the owners give you 5%? Charity? Be sure to read up on the differences between common and preferred shares. Is there an exit strategy where this 5% could even be beneficial? I’d suggest dropping the shares and just trying to get more in salary. As a former entrepreneur that acquired investors, I can assure you that it’s a big pain to deal with K1’s at tax time.

By-laws, By-laws, By-laws…

You really need to understand the corporate by-laws that will be part of the C-corp paperwork sent to the state that your company will be registered in. By-laws are written specifically to outline the responsibilities and of Directors and Officers. The only positions that really matter (in a small corp) are the President, CFO and Secretary. Officers like VPs are selected by the Board to serve them, but do not carry much fiduciary responsibility to investors. In the United States, a C-corp by definition means that directors and officers are allowed to hold foreign nationality and participate in the company from outside the country that it is registered in.

You need to know how much legal responsibility you will have in order to negotiate things like share ownership, salary/bonus structure and decision making power when it comes time to invest the profits. The more legal responsibility you have (i.e heat taking ability), the more you can negotiate for you, your staff and your future departmental resource growth.

Yo…are your spelling flourishes vis a vis your communication advice to kdino13 deliberately added as an ironic twist (i.e salty and formerly)?..:wink:

Thanks everyone! Our business plan should be finalized shortly, so I will soon know more details. Its an exciting and somewhat stressful time just thinking about what the future may hold for both the company and myself. I’m looking forward to the outcome! Any other input from the Core community is of course very welcome and appreciated.