The compensation equation - what's a good mix?

Here is the compensation equation, as I see it:

1. Equity - how much ownership one has, and when (roughly) it will be worth something
2. Wage - how much salary one recieves
3. Career - how the position advances one's career
4. Life Balance - what types of time (and other) sacrifices are required
5. Peers - how much one enjoys / benefits from working with the people one works with
6. Work Itself - how interesting one find the work / industry / technology

In my experience, whether they realize it or not, this is the equation that determines if an employee (or founder, for that matter) thinks working for the start-up is "worth it" - and determines when the employee decides to leave.

For example, a founder might look like this:

1. Equity - very high, 30% ownership stake
2. Wage - at least 40k less than they could make elsewhere
3. Career - very good for the career, even if the start-up fails (lots of learning)
4. Life Balance - terrible. Divorces, unhealthy habits, etc.
5. Peers - hopefully high, since the founder is one hiring these people
6. Work Itself - very high - it's their baby, their dream

It's not really about the details - it's more about how this equation is balanced.

So my questions are:

In your experience, how does this equation change over time as a start-up grows from early stage (beta customers) to later stage (flirting with profitability, hundreds of customers)?

How does one know when this equation is 'broken' for the current start-up, and should begin looking for a new start-up to join which gives a better equation?

This is an interesting way of attempting to address the life - balance debate that we all in the pursuit of finding in the world of entrepreneurship.

Answering your questions directly first:

As a startup reaches a more mature stage the equation outlined by you changes in the following manner in my opinion.

1. Equity: Percentages reduce dramatically as you may have raised funding or the acquisition of new partners etc. Also the value of your equity percentages should have increased exponentially over time. Even a fraction of your original ownership should be worth a lot more.
2. Wage: Most likely one has a more stable income stream at this point. Focus is still on the bottom line as a majority of your payout comes from the performance of the company.
3. Career: At some point you begin looking for new ventures and ways of improving yourself. This could be through angel investing or even developing/being part of new side projects.
4. Life/Balance: This one really depends on the type of person you are and what your ambition levels are. For the overly ambitious I think achieving an optimal life-balance really isn't possible. Difficult sacrifices have to be made.
5. Peers: As your startup matures and payroll increases one begins to work and interact with a lot more people. I think the type of culture that is developed in the early years of the company has a direct impact on the type of peers that one should expect in the latter years.
6. Work itself: If you started a project that you were truly passionate about or in an industry that you have a keen interest in, work should be very satisfying at almost any stage.

-

The second part of your question which deals with the imbalance is a little tricky. A disequilibrium in any of the variables outlined can ultimately through the whole equation out of whack.

1 & 2: If you don't think you are getting compensated enough for the work you are doing, one is going to lose steam quickly.

3: If you are not learning something new at work, side projects will tend to take up a lot more of your time and you will realize that it is time to leave.

4: If you are sacrificing a lot and not really getting anything in return it is bound to frustrate you and you will be finding ways of getting our of your situation.

5: This one is an immediate deal breaker. If you can't work effectively or optimally with your co-workers this will kill productivity and your drive to continue working at the startup.

6: Work itself: If you lose interest or don't have the passion to keep working on what you do. Chances are you will leave sooner rather than later.

-