Early employee compensation for Norwegian startups

Three weeks ago we held the third edition of Join a Startup at StartupLab. Prior to the event, we did some research around what early employees at Norwegian startups should expect when it comes to compensation. There’s a bunch of online resources on startup employee compensation, but most covers the US — and nothing is written by or for Norway-based employees. While you shouldn’t join a startup for the money (then you’re much better off other places), it’s still nice to know a thing or two about compensation if you find yourself negotiating with a startup.

First, a brief theoretical intro:

When it comes to employee compensation, there’s more than one perspective. Everything is negotiable, and depends on a number of different variables. You will be negotiating with the founders, and different founders have different philosophies and preferences as to how their early-stage employees should be compensated. Some might put a lot of value on the idea, others more on the execution that actually turns the idea into a business. [1] There are as many opinions about fair early employee compensation as there are founders, so the closest thing you’ll find a formula explaining what a fair compensation is is this:

Startup salary = market rate — discount

Put differently, you’ll probably have to accept a pay-cut if you want to join an early-stage startup, but that discount could be everything and nothing. It depends on a number of things, including:

Equity offered: In general, there is an inverse correlation between salary and equity offered. The more discount you can accept compared to your market rate salary, the more equity you should expect to be offered.

Employer and employee attractiveness: Are you offered a seat at a rocket ship, or will you be turning around a sinking ship? And are you Elon Musk or John Smith? These things of course matter when it comes to what kind of discount you should take.

Degree of risk: How mature is the company? Have they just started, or have they raised a few rounds of financing? Are they generating any revenue, are they cash-flow positive? Lower risk equals lower discount, but of course also a reduced potential reward.

For some, this theory is enough to sit down and negotiate compensation. But as mentioned in the introduction, many have inquired about ballpark numbers. So we reached out to a few of our friends who also happen to be either early-stage investors or entrepreneurs in Norway, and got their ballpark numbers regarding fair early-employee compensation.

We only talked to 15 people in total, and the ambition was solely to identify some rough ranges; where the outliers were, and what you as an early-stage employee probably shouldn’t expect when you sit down to negotiate your compensation.

We wanted to know what kind om equity compensation both junior and senior early-stage employees should expect in exchange for accepting different levels of discounted salary. [2] Here are the questions and results:

Imagine a plain vanilla Norwegian tech startup. It’s 1 year old, and have just raised a 3MNOK seed round using an uncapped convertible note. [3]

A JUNIOR software engineer wants to join the plain vanilla startup as their third hire. Her market rate annual salary is 600k NOK. How much equity (stocks) would you offer her in exchange for accepting an annual salary of 500k NOK? [4]

… and how much equity (stocks) would you offer her in exchange for accepting an annual salary of 400kNOK?

A SENIOR commercial executive wants to join the plain vanilla startup as their third hire. Her market rate annual salary is 1MNOK. How much equity (stocks) would you offer her in exchange for accepting an annual salary of 800kNOK?

… and how much equity (stocks) would you offer her in exchange for accepting an annual salary of 600kNOK?

According to these responses, a junior probably shouldn’t expect to be offered majority ownership if joining a startup. Most find it fair to offer some equity, but we’re talking low single digits. Obviously, senior staff is considered more essential, and are offered more equity than their junior counterparts. Still, the most important thing to notice from these responses is the variation. The responses from the few we asked differed by up 10 percentage points!

Put differently, there is indeed no one single answer when it comes to early-employee compensation. But if your expectations are outside the ranges — you should either adjust your expectations — or be spectacularly remarkable.

These responses does not in any way represent hard facts. Using parts from this post in startup job negotiations is done at your own risk.

[1] I’m definitely in the latter group, strongly championing that those who turn an idea into an actual product and company all should have significant ownership. This aligns the incentives, and also ensures that the right persons are rewarded if the company actually end up succeeding. If you’re even more liberal when it comes to employee compensation, I’d really recommend checking out Andrew Mason of Groupon’s way of doing things.

[2] Of course, no real-life person is a textbook junior or senior hire. Everyone’s background is different, and their background and experience is perceived differently depending on the company recruiting.

[3] I deliberately chose to not have a price on the company, as early-stage valuations startups (as in companies with high-growth potential) mostly is a function of how much cash the company needs, and not something that speaks to how much the company as a whole is worth at current state.

[4] All questions were asked open-ended to avoid framing. Some answered with ranges (eg. 2–3%), and then the median of that range was used.

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