How much equity should I ask as a CMO in a startup?

We are in the common stock series. At the moment I have been investing 32 hours a week in the startup for the past 4 months without receiving salary. I handle marketing, communications, PR and sales. The equity pool reserved for first employees is 40%. There are around 20 people working at the startup, from which maybe 6-8 invest the same or a bit more time as me. The two founders included. Thanks for your help.


Greater risk = greater equity. How likely is this to fail or just break even? If you aren't receiving salary yet are among 4-6 non-founders with equivalent sweat investment, all of whom are lower on the totem pole than the two founders, figure out:
1) Taking into account all likely outcomes, what is the most likely outcome in terms of exit? (ex: $10MM.) Keep in mind that 90%+ of all tech startups fail (Allmand Law study), and of those that succeed 88% of M&A deals are under $100MM. Startups that exit at $1B+ are so rare they are called "unicorns"... so don't count on that, no matter how exciting it feels right now.
2) Figure out what 1% equity would give you in terms of payout for the most likely exit. For example, a $10MM exit would give you $100k for every 1% you own.
3) Decide what the chance is that the startup will fail / go bankrupt / get stuck at a $1MM business with no exit in sight. (According to Allman Law's study, 10% stay in business - and far fewer than that actually exit).
4) Multiply the % chance of success by the likely outcome if successful. Now each 1% of equity is worth $10k. You could get lucky and have it be worth millions, or it could be worth nothing. (With the hypothetical numbers I'm giving here, including the odds, you are working for $10k per 1% equity received if the most likely exit is $10MM and the % chance of failure is 90%.)
5) Come up with a vesting path. Commit to one year, get X equity at the end. If you were salaried, the path would be more like 4 years, but since it's free you deserve instant equity as long as you follow through for a reasonable period of time.
6) Assuming you get agreement in writing from the founders, what amount of $ would you take in exchange for 12 months of free work? Now multiply that by 2 to factor in the fact that the payout would be far down the road, and that there is risk.
7) What percentage share of equity would you need in order to equal that payout on exit?
8) Multiply that number by 2-3x to account for likely dilution over time.
9) If the founders aren't willing to give you that much equity in writing, then it's time to move on! If they are, then decide whether you're willing to take the risk in exchange for potentially big rewards (and of course, potentially empty pockets).

It's a fascinating topic with a lot of speculation involved, so if you want to discuss in depth, set up a call with me on Clarity. Hope that helps!

Answered 10 years ago

Great question! And it was literally just addressed in this podcast episode with David Skok:

Disclaimer the information below (until the last paragraph) is about venture-backed companies.

Short answer: It's dependent on the stage. Less risk = less equity.

Long answer: Usually co-founders (if one is a CMO) would expect around 10%.

If the company has raised seed funding, and you're joining post-money coming in, a lot of the risk has been removed and the company has been valued at a higher level. That phase is less black and white. For a CMO in that range, it's about 1.5%. If you bring tons of experience, you could get as high as 2%.

As the company grows and raises money at higher prices, even more of the risk has been removed and the company is being valued much more than previously. Thus, the stock you would receive is worth much more than it would be at the early stage, which has more risk. The amount will drop down, if it's near the company going public, it could be around the .5% - .7% range.

If it's not venture-backed, David says that typically the CMO is underpaid. If this is the case, then help them think which is more important to the cofounders (who own the majority) - "would they rather have 50% of a grape, or 10% of a watermelon."

I hope this helps. Best of luck!

Answered 9 years ago

1. Figure out what equity you would have wanted if the company already had raised a round
2. Adjust for anticipated dilution of the Series A round.
3. Then, either double or triple that adjusted number to account for pre-funding risk, depending on how far along you are in the bootstrapped phase.

If the company does not intend on raising capital then skip 2.

I would say you should be in 3%-6% range if you are working strictly on equity. The norm is a 4 year vest with 1 year cliff.

You can shoot me message and we can discuss.

Answered 10 years ago

Why are you working only 32/hr week? I have to assume that's because you have a day job with a paycheck. If you handle marketing, communications and PR, that tells me that you are not working at the executive level developing a business strategy, but rather as functional level where you execute already developed strategy.
The first question I would ask you is what do you want our of your career and financial composition?

Assuming that you are going to maintain this workload level, I think that covetable note is the best way to compensate you for your time. Figure out the salary for your role with a large corporation, then use that as a baseline for the monetary value of your time for the past four months.

In terms of equity, with a startup that already has 20 people involved, single digits numbers come to mind.

Answered 10 years ago

I have hired more than 25 C level officers and directors in companies ranging from startups to mature cash flowing operations. The conventional wisdom/rule of thumb, such as it is, is that as a C level you accept "half" your free market salary in cash and the rest in equity. The real rule is never work for free. Every company tries to get as much free work as possible, and every C level officer tries to get as much equity and cash as possible. When it comes time to negotiate, which should be soon, use the comp level of the other C level officers as a benchmark. If you would like to discuss this further, please feel free to get in touch.

Answered 9 years ago

When there's no cash flowing, I think a grunt fund is nice ( The problem is often keeping track of work and effort done by everyone. Without knowing that, it's hard to determine value sometimes.

Aside from that, a grunt fund should also answer your questions about equity. Provided the other people in the startup are on board with this philosophy of course. Either way, it's a good guideline and a good way of thinking about things.

Answered 10 years ago

Start with 15% and go down.
Don't stop taking massive action.
Best of Luck,
Michael T. Irvin
My books are available exclusively through Amazon Books. Check out my book "Copywriting Blackbook of Secrets"
Copywriting, Startups, Internet Entrepreneur, Online Marketing, Making Money

Answered 10 years ago

Likely you should only be getting 1-4% max as a CMO in a tech start-up.

Answered 10 years ago

I infer from your question that you haven't worked in a marketing leadership role before at a startup. "I handle ...sales." Are you Head of Sales, too? If you are, and you're actually capable of making a meaningful contribution to revenue generation, your value to the company and the two founders multiplies.

The FAR MORE important issue is why you have waited so long and invested so much in this company without summing your role, expected contribution, quantitatve objectives and milestones, and already agreed on terms reflecting whatever this aggregate value is/will be.

You've just invested 500+ hours of your life based on assumption and hope. I've personally been down your road before, and done what you did. It's not smart.

The bottom line in startup life as an employee is that cash is better than equity. So few startups translate into anything that will improve the food or eat, or pay for your kids' education that you're far better off taking a cash/equity split as Alex Crutchfield suggested. If you're really the Head of Marketing and Sales, I'd ask for a high singe-digits equity stake (not options but with reverse vesting), with 50% in salary that you can spend to live.

If you're rootless (no kids or a big financial nut every month), and are up for the adventure, you might be willing to accept less.

Answered 8 years ago

Ask for the higher equity possible. Sit down with the CEO and other cofounders if any. Talk to them about what they have in mind... don't tell yours yet... listen. With your experience, with your 4 months without receiving salary, watch out, be smart. Marketing if done right is a hard needed task in businesses. Be creative, that is part of what you do. But don't be intimidated. Come up with ideas for them to ponder if they are unsure of how to keep you. I would count how much of the equity is giving to whom in exchange of what, and position myself (for the remaining equity if possible in some situations). I've been in a couple of proejcts in where equities were study over certain months and open to renegotiate. I started in one business with 49% of it. We all decreased when we brought one more person. And finally my plan have an exit strategy in place. My intention was doing what I love doing, helping someone bring their idea up, delegate and train, and move forward. We are friends, and once in a while we (the ex cofounders) consult on each other expertise.

Success to you!

Answered 8 years ago

When I was young and idealistic I worked for free.. Now I am old and wise.. Wish I was young and wise back then.. would have saved me a lot of heartaches...
Unless you are the founder and have a lot of go-to-hell money you don't work for free.The advice my colleagues gave you is true in the monetary sense but think about it...
If someone gives you something for free what value do you consider it to be?
Are you really worth 0?
good luck

Answered 7 years ago

Ask for equal sharing depending on the number of partners involved.

Answered 7 years ago

the best way is to calculate the monetary value of services you are providing and then calculate your equity share in proportion to the value of company or startup. as an example if you are rendering services for which you could have been paid salary of sixty thousand dollars per year and the value of startup is one million dollar you can take a proportion of annual salary to startup value which stands at six percent. the stake of investor should always calculated on the basis of amount he is investing and the value of startup in which he is making his investment because the price of share of a company is determined on the basis of value of an enterprise.

Answered 7 years ago

I would think 3 to 6 % with 2-4 year vest and one year cliff + salary for someone in startup as CMO.

Answered 6 years ago

Asking is valid only when the other person is ready to give. From your question I can clearly see that you are working extremely hard investing 32 hours. I will put forth the views of Skok and Paul Santinelli so that you can understand the things better.
Skok was speaking to marketers from tech companies in the Boston area. Skok is an expert on digital marketing and on the software-as-a-service business model. And as a VC he has been involved in a lot of decisions about how much equity each member of a start-up’s C-suite team should get. Most of the session involved questions about the funnel and the myriad other topics that digital marketing people worry about: the funnel, conversion rates, CAC, AQLs, MQLs, SEO, SEM, SERP, CLV, CPC, PPC, and all the other alphabet soup of digital marketing.
Skok said a “raw, unproven person” joining in the CMO or VP of marketing role would get 1% of the company. “More likely a low average is 1.5%, and a seasoned good person will get 2%,” he said. “If the team is very technical and young, and you’re missing a business person, and you see someone who is the business part of a founding group, you can see a massive change in that number, up to 3.5% to 5%,” Skok said. That is a huge disparity. Consider that if your company ends up with a $1 billion valuation, a 1% share is worth $10 million, and a 5% share is worth $50 million. Both are nice but the point is that if you do not negotiate well you could be leaving a rather huge amount of money on the table.
Paul Santinelli, a venture capitalist with North Bridge Venture Partners, in part to see if other VCs agreed with Skok's estimates on the range and also to do a deeper dive on how these percentages are determined. His take is that a seasoned winner, with a track record of building successful companies, is obviously going to get more equity. The highest CMO packages he is seen were in the 3.5% to 5% range. “CMOs come in different shapes and sizes,” Santinelli said. Being able to run sales in addition to marketing is probably the biggest boost to compensation. “If the CMO is carrying not just the marketing function but also sales, then the total compensation is in the $400,000 range and they’re probably getting north of 2.5 points,” Santinelli says. “It really has to do with the breadth they bring to the table.”
In some cases, a CMO may even end up getting a bigger chunk of equity than other members of the C-suite, like the chief financial officer and chief technology officer. “A good VP of engineering with 10 to 12 years of experience is going to cost you 1.5 points. A good CFO with public company experience is about the same,” Santinelli says.
Besides if you do have any questions give me a call:

Answered 4 years ago

Very simple.

B - A - C = D

A. The business value before you join the Startup.
B. The business value after you join the Startup
C. Your salaries and respective expenses
D. Business value added

Use D to negotiate your equity value.

Call me, if you have any question to ask

Answered 3 years ago

This depends on what stage they are, how badly they want you and what is the future look like at the company. Also on the qualifications as well. But as a bare minimum, C-level equity compensation for start-ups, anything 3-4% and above is a fair game.

Answered 2 years ago

Determining the right amount of equity to ask for as a Chief Marketing Officer (CMO) in a startup depends on several factors, including the stage of the startup, your level of involvement, the equity pool available, and the contributions of other team members. Here are some considerations to guide you:

### Factors to Consider:
1. **Stage of the Startup**: Early-stage startups typically offer more equity since they can't afford high salaries. Your investment of time without salary is also a factor here.

2. **Equity Pool**: Since 40% of the equity is reserved for the first employees and there are around 20 people working at the startup, understanding how this pool is distributed is crucial.

3. **Your Contribution**: As you handle marketing, communications, PR, and sales, your role is significant, especially in a startup where these functions are critical for growth.

4. **Comparative Contributions**: Consider how your contributions compare to those of other key team members. If 6-8 others are investing similar or slightly more time, their equity stakes can provide a benchmark.

5. **Market Norms**: Typical equity for a CMO in an early-stage startup can range from 1% to 10%, depending on the stage and the value you bring.

### Suggested Equity Range:
Given your situation, a reasonable equity range to ask for as a CMO could be between **2% and 5%**. This is assuming the following:

- You are one of the key contributors.
- You are working almost full-time without a salary.
- There are other team members with significant contributions as well.

### Approach to Negotiation:
1. **Assess the Current Equity Distribution**: Understand how the 40% equity pool is currently allocated or planned to be allocated among the first employees.

2. **Highlight Your Contributions**: Emphasize your roles and responsibilities, and how they've impacted the startup's growth.

3. **Consider Future Growth**: Be prepared to discuss how your role will evolve as the startup grows and how you will continue to add value.

4. **Benchmark Against Others**: If possible, find out how much equity other key team members (especially those with similar time investment) have or are asking for.

5. **Negotiate Terms**: Be open to negotiating not just the percentage but also the vesting schedule, which ensures that you earn your equity over time, aligning your interests with the company's long-term success.

### Example Calculation:
If the 40% equity pool is divided equally among 20 people, each person would theoretically get 2%. However, since contributions are not equal, key members like yourself could justify asking for a higher share.

If you aim for 3% of the total equity, here’s how it might break down:
- Total equity pool: 40%
- Number of significant contributors (e.g., 10 key members including yourself): 40% / 10 = 4% per key member on average.
- Asking for 3% is within reason, given your significant contribution and the average allocation.

### Final Recommendation:
**Ask for 3% to 5% equity** in the startup, presenting your case based on your contributions and the comparative benchmarks of other team members. Ensure to discuss and agree on a vesting schedule to align with the company's growth trajectory.

Answered 12 days ago

Based on the company valuation you have to set a base line with your 'market' annual salary. For ex. Year 1: Your market annual salary is $300k and the startup actual valuation is $3M, you have to own a minimal equity participation of 10% if your salary was ZERO for year #1. For the next year its important to set a mixable equity/salary to avoid common founder problems. For ex. Year 2: You have 10% equity (from last year), This year the company valuation is $5M, and your 'market' salary is $350k. With $175k salary assignment you have to negotiate an equity increase from 10% to 13,5%.

Answered 5 days ago

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