Victoria Pynchon is the founder and chief negotiator at “She Negotiates,” a consulting company that’s helped hundreds of women use the spoke model negotiation strategy to make more money. In today’s conversation, we talked about negotiating your way into a startup. What are the biggest mistakes that people make? How do you build leverage into the negotiation? What should your plan look like? Listen to hear Victoria’s thoughts!
Outline of This Episode
- [1:46] Learn more about Victoria Pynchon
- [3:25] Negotiating your way into a startup
- [4:50] The biggest mistakes people make
- [10:16] Decision quality and negotiation
- [14:24] Building leverage in the negotiation
- [22:15] Building a plan is critical
- [23:59] How to connect with Victoria
Negotiating your way into a startup
During the pandemic, millions of dollars were flowing into startups. Many people were freaked out about what the pandemic meant to the stock market. Victoria had many clients blindly recruited from Facebook, Google, Microsoft, etc. by startups.
Victoria notes that the problem is that most people moving into startups don’t understand equity. They don’t know the difference between a restricted stock unit and a stock option. They don’t know how to value the stock or equity that’s being offered to them. That’s why 30–40% of Victoria’s clients are people who are negotiating equity.
The biggest mistakes people make negotiating equity
Victoria notes that people aren’t doing their due diligence. Many people that are being recruited by startups are taking cuts in compensation in exchange for equity. They’re also taking cuts in compensation because they would never have become COO, CFO, or CEO at Facebook—but might get that role in a startup. They see an opportunity. It’s a rational reason to give up early compensation to do what they’ve always wanted—running and growing a business.
But they don’t see the decrease in their salary as an investment in the company. Victoria tries to remind them that what they’re doing is like digging into their bank account, taking out a second mortgage, or paying out $200,000 a year into this company for five years. Most people offered equity get none for one year and start getting compensated in years 2–6. If they’re being compensated $50,000 in stock a year for five years, it will be $250,000 total. But many are taking a $250,000 pay cut in their first year alone, which is substantial—but not unusual.
The purpose of the negotiation consultation
By the time most people call Victoria, they have one foot out the door. They’re utterly disappointed when she tells them that they’re giving up $1 million over five years and asks them what they’re getting in return. Are they going to get $2 million? $5 million? $25 million?
The negotiation consultation is like being a lawyer—Victoria is the bad news, the rain on their parade, and the cautionary tale. But she’s also their cheerleader. She gets why people want to do this but she wants them to do it with their eyes open. They’re making a huge decision and need to make it well. If you’re making $400,000 a year, maybe you should take a risk. If they’re entrepreneurial and see an opportunity—Victoria cheers them on.
Victoria helps them think about questions like, “How much is it really worth? How can you calculate it? Will there be a market for it? What is the runway to acquisition?” She also helps the people she consults build a plan and determine their leverage in the negotiation. Learn more about negotiating your way into a startup in this episode of Negotiations Ninja!
Connect with Victoria Pynchon
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