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What is a Series B startup?
Series B refers to (roughly) how many funding rounds a startup has raised. In this case, Series A would indicate 1 funding round, while Series B implies 2 have occurred. Many companies also raise pre-seed and seed funding rounds before Series A, so it doesn’t always correlate 1 to 1.
Since it’s very difficult for a startup to grow just using their own funds and revenue (also known as bootstrapping), the vast majority of successful startups use external funding from venture capital firms to help give them the resources they need to grow and, eventually, seek profitability.
These funding rounds allow outside investors to contribute money to a developing business in exchange for equity or a share of the business. When these investors want to exercise (or buy back) their equity, the price they’ll pay to exercise is called the “Preferred Price”. The investor will receive a return on investment in line with the amount invested if the business expands and turns a profit.
If you’re considering joining a startup as an employee, you must consider if you believe in the company and its growth potential. Often startups will compensate their employees with stock (or equity) grants, so understanding if it might one day have value is part of how you can evaluate the fairness of the compensation you’re receiving.
As Guy Kawasaki (co-founder of AllTop) once said, "Ideas are easy, implementation is hard.” This can be highly applicable to deciding whether or not to join a startup — it’s all well and good to have a great idea, but how is this company implementing this? Will this likely be profitable long term? Don’t be afraid to ask these questions, especially before making an investment like joining an early stage startup.
What does Series B funding mean?
Series B funding is the funding phase following the Series A round. Companies receiving Series B funding are expected to have acted on the strategy and business model they’ve developed, and have data points to support why this strategy will keep the company going.
Series A startups frequently have fantastic ideas and projections, but limited proof of ROI. In Series B, investors are looking for more than just great ideas — they want to see the hard data for how that idea has evolved into a thriving, money-making business, and what returns other investors have gained.
Series B rounds typically raise between $7 million to $10 million; however, we’ve seen this number get higher and higher due to inflated company valuations. Most Series B startups are going to be valued between $30 million to $60 million, because (again) they are proven companies.
Frequently, Series B funding will come from the same investors who initially offered Series A funding - this can be referred to as a “follow-on investment.” Other times, Series B funding may come from fresh investors. Either way, Series B backers are usually going to be paying more for less equity than Series A investors, because the company’s valuation will have increased.
Series B Startup Compensation Structures
Compensation at Series B companies is generally a mix of base salary and equity, with some companies offering annual bonuses. Signing bonuses aren’t the norm, but we have seen them before — and will discuss them in more detail below!
Base salary tends to make up the majority of annual compensation for Series B startup employees - since signing bonuses aren't the norm, and equity is very likely going to be illiquid (meaning you won’t be able to access or sell it until the company has some sort of exit).
Company cash flow typically determines the base salary a hire will receive. On average, Series B startups are less competitive on base salary than you would find at a more prominent tech company.
Hiring managers at startups will often justify this to new hires in two ways:
- “The experience, growth, and responsibility you’ll find here will be much more meaningful than what you would find at a later-stage company.”
- “The equity you’re being offered has a serious upside that will end up being much more valuable down the line as the company grows than what you would receive at a larger company.”
While the likelihood of getting an annual bonus is pretty low at a Series A startup, at the Series B stage, the company is likely more established, more stable, and more willing to extend performance-based bonuses to employees. These annual bonus percentages are typically non-negotiable, and depending on the level of seniority you are, could range from 10 - 25% of your base salary.
This is ultimately dependent upon the company performing well. If the company is struggling, it may be less probable that you’ll receive an annual bonus, as the bonus isn’t just based on your performance but the company’s, as well.
Equity (or stock) is a big part of how early-stage startups compensate their employees — and tends to be a focus during the negotiation process.
Typically, Series B startups award a type of equity known as “stock options,” which gives you the right to buy a certain number of shares of the company’s stock at a specific, discounted price - known as your "strike price," "grant price," or "exercise price.”
The idea is that over time, the market or “preferred” value (aka the amount investors pay to exercise their options) of the shares will increase, so - when you exercise your shares - you’ll be able to buy the stock at a very steep discount. Typically you calculate the value of your shares by subtracting the strike price from the market price, then multiplying that by the total number of options offered.
Just like at a larger tech company, startup equity tends to have a “cliff” - meaning you don’t receive any of your equity until you’ve been at the company for a year - and typically vests over four years. This is known as the “vesting schedule.”
Types of Equity
Two of the most common forms of options are Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs).
The primary distinction between the two is how they are taxed. ISOs are the form of stock option that receives the most favorable tax treatment - you want these!
- ISOs: taxed when sold, not when exercised (i.e., purchased) & lower tax rate when sold.
- NSOs: taxed when sold AND when exercised & higher tax rate when sold
It’s very unlikely that a company will change the type of option they’re offering you (ex., from NSO to ISO) - however, we’ve seen people effectively use this as leverage for an increased number of shares offered or additional base salary.
How Equity Is Priced
When an employee is given an offer, the strike price for the options they were granted will be set (through a process known as a 409A valuation) and remain constant until the grant has been fully vested. Any new equity the company issues in the future - even as a refresh for you for continuing to do great work - will have a new strike price. You may have a different strike price than some of your co-workers depending on when you joined the startup.
Benchmarking Equity for Series A companies
The chart below, based on data found on Pave, provides suggested equity amounts that many consider appropriate for companies in Silicon Valley that have just raised a Series B funding round:
- Vice president (VP): 1–3%
- Director: 0.75–1%
- Staff engineer 0.27–0.99%
- Senior engineer: 0.17–0.6%
- Junior engineer: 0.07–0.12%
These would usually be for restricted stock or stock options with a standard 4-year vesting schedule. They apply if each of these roles is filled just after an B round, and the new hires are also being paid a salary (you would receive more equity if you are forgoing any cash compensation!).
Still feeling confused about stock options? Check out our blog post about negotiating startup equity stock options to learn more!
Another way companies can offer you equity is in the form of RSUs, or Restricted Stock Units. Unlike options, Restricted Stock Units are actual stock in the company with no purchase required (see chart above for more detail). RSUs are most common to receive from public companies, or very late stage startups (i.e. Airtable, TikTok, and Snowflake). It’s highly unlikely that a Series B startup would offer you RSUs.
Most startup offers do not include a signing bonus by default — and most hiring managers or recruiters (if the startup has them at this point) will tell you it’s very uncommon to receive one.
However - it’s definitely possible to negotiate a signing bonus if the offer is much lower than your current compensation, you have other offers, you have an annual bonus/equity payout you’re walking away from, and/or you are a great fit for the specific role. Do be aware that the signing bonus will not be significant compared to FAANG companies. Depending on your role, you can expect to receive somewhere between $10K - $50K (if very senior, otherwise expect it to max out around $30K).
What’s unique about negotiating with startups
The first thing that’s unique about negotiating at a Series B startup is that (almost) everything is negotiable! Since the company is still in early stages, it’s less likely that it’ll have the same level of process and structure in place as a later-stage company, so you can often impact outcomes more than you might be used to! But if they have implemented any strict policies around annual bonus percentages or a standard benefits package, it may be a bit more challenging than at a Series A company.
Startups are heavily focused on growth and profitability. If you frame your negotiation around the impact and growth you hope to drive for the company, it will likely be easier to negotiate a higher offer.
Negotiating with the C-Suite
Given that the average Series B company has between 50-100 employees, you’ll likely be negotiating with the company’s founder, or potentially another higher-up like a director or VP.
This can feel intimidating, especially since you might report to the person you’re negotiating with in the future and want to ensure that you start your working relationship on the right foot.
Furthermore - the executive will likely be really good at selling their vision for the company and might convince you that their offer is competitive based on the future value of the equity. They also likely have negotiated with both investors and new employees, so they’ll definitely be prepared to haggle with you. Don't let yourself be swayed by these tactics!
One effective tactic for negotiating with a founder (or senior leader) is to show that you genuinely believe in the company's mission and potential growth, and you want to stay there for the long-term — versus being there for a year or two before moving on. Asking for additional equity is one way to demonstrate this commitment — since you won’t capture much of the value of the equity if you leave before it vests (and it will go back into the company’s pool of stock to give out to future hires).
Furthermore - founders tend to love hires who they believe will roll up their sleeves and do what it takes to get the company to the next level — so sharing specific ideas about how you can contribute and grow within the company can be helpful. Showing these as part of your negotiation can demonstrate the value you’ll bring and why you warrant higher compensation.
Lastly - some candidates ask to negotiate compensation increases tied to performance or future funding rounds. Often, this is done when you’re asked to take below-market compensation. Make sure that you’re tying in your impact during those funding rounds in the justification for this ask.
The most helpful counter-offers come from other startups
While it is helpful to have offers from big tech companies to use as leverage in a negotiation, most startups won’t try to compete with a Google or Meta offer. If you try to, be prepared to hear “well, we’re not Meta, and if compensation’s your bottom line, then best of luck at Meta.” In fact, startups often justify a below “market” rate by saying that the standards differ for an earlier-stage company.
So, a higher offer from another early-stage startup (either with a higher base, higher equity, or ideally both!) can be a more effective way to ask for an increase. Especially if the startup is in the same sphere of work - fintech to fintech, robotics to robotics, etc.
However, if you’re not in this situation and either have a big tech offer or currently work in big tech and are considering making the jump to a startup, it can be helpful to ask the startup to try to “close the gap” between their offer and your other one (or current compensation). Don’t expect them to match, and make it clear that you understand that this Series B startup and the big tech company do compensation differently, and that comp isn’t your only priority.
We recently worked with a client moving from Meta to a startup who was able to get her offer (base + equity) increased by 14% + a more senior title by showing what she was leaving on the table – and then outlining all the ways she hoped to create impact in her new role.
Whether or not you end up with multiple offers, having ongoing conversations with other startups and competitors will improve your understanding of market trends and offer you an advantage when negotiating your salary.
Data Science, Engineering, and Product Manager Compensation Ranges
Before we share compensation ranges for different roles at startups, it’s important to note that Series B compensation varies WIDELY — and employees will have different preferences for what mix of base and equity they prefer based on their own circumstances and tolerance for risk.
The numbers shared below are the 90th percentile salaries for mid to senior level roles at Series B companies in Tier 1 locations (New York, Bay Area, Seattle).
*Disclaimer: These compensation ranges are an aggregate for companies valued at $25M-100M Post-Series B funding round.
Additionally, some startups will give you an equity percentage instead of a dollar amount. Your equity value can be calculated by taking your current equity percentage and multiplying it with the current company valuation.
However - we actually prefer talking about equity in terms of percentage ownership since the equity dollar value can be fairly subjective and understanding your equity ownership is helpful in estimating potential earnings. For instance, if you own 1% of a $50 million business that goes public for $500 million, your equity interest is worth 1% * $500 million * dilution rate. Although the dilution rate varies, a good rule of thumb is to assume 10-25% percent dilution per funding round. This implies that you become more diluted in a startup the earlier you join. Albeit, you'll start with a higher equity percentage and a lower strike price.
Series B startups that are paying well
While certain startups do pay more than others - it is hard to generalize what constitutes “paying well” in the startup space as this depends highly on what you’re looking for. Some individuals would value the learning experiences much more than the compensation that Series B startups may be offering. And, one startup may pay less but offer a better path to growth than another.
Either way - we’d encourage you to think about joining a startup as a longer-term play since you won’t see your options be worth anything until there is an exit event (like a sale or IPO).
Here are some Series B startups that have recently raised $100M+ of Series B funding and are hiring:
Another great way to understand the compensation offered by Series B startups is to check out job boards on angel.co. Many roles include compensation ranges (both base salary and equity).
We know that recruiting for startups can be confusing, challenging, and quite different than focusing on big tech companies. However - working at a startup can be incredibly rewarding and interesting and present an amazing opportunity for growth. Good luck!