Startups · Marketing

How Much Equity Should a Chief Marketing Officer Get (when working for sweat equity)?

Horacio Ochoa

January 9th, 2015

There isn't a lot of information about this out there, but I found this article from HubSpot where they suggest a range from 1.5 to 5% equity to a CMO.  However, I think it is implied that this CMO is already getting paid.

In the hypothetical case of a very early startup, with a product developed (still in beta), under 2k users (in serious need for someone who can come in and bump that number) and only 10 employees (all in the product development/design side). all of them working for sweat equity... what is a reasonable equity grant for that CMO who will come and work for sweat equity, provide valuable insight into the initial branding, messaging, but most importantly, get the go-to-market strategy and traction to take the startup to the next level?

Mathieson Sterling Senior Software Engineer at Apprenda

January 9th, 2015

If they're not being paid, they're pretty much a founder as well, no?

According to Y Combinator, they say they've never seen a successful startup where the equity between partners is very lopsided.  Which makes sense - it's hard to work crazy hours as a team when you're getting much less, and it's easier to walk away with a small percentage.

Of course if you've put in years of work and they haven't, you want to be compensated.  However any equity award should have a vesting period as well, so perhaps you simply make the previous work count for the original partners, and the CMO has to match that time. 

Vijay MD Founder Chefalytics, Co-owner Bite Catering Couture, Independent consultant (ex-McKinsey)

January 9th, 2015

Its always a balance of risk against the market opportunity for the person you're hiring (and how many people would fit the bill).

You can see a farely wide distribution of equity for the founding team of FB and more importantly, that number was more dynamic over time than most people think about so things like vesting, dilution, board seats, option pools, etc really do matter as much as the initial number

http://whoownsfacebook.com/

James Green Chief Marketing Officer at PurebredBreeders.com

January 9th, 2015

If you were in their shoes, how much would you do it for? If they are key to your success it seems 5% is the floor you should use. - Sent from Mailbox

Mike Moyer

January 9th, 2015

Your equity should always reflect the risk you take relative to the risk everyone else is taking.

There are a number of considerations. If you contact me through SlicingPie.com I'll send you a detailed outline on how to figure this out. The model will give you an exact number.


Rob G

January 9th, 2015

@ Horacio, here's a site with some interesting market data:  https://blog.wealthfront.com/startup-employee-equity-compensation/

is this consumer or B2B?  I'm guessing B2C.  The answer has significant impact at this stage.  Early stage (tech) companies need a minimum of two talents: tech (i.e. a product) and sales.  If B2C then sales will come primarily via marketing (in the broadest sense of the term - generating awareness and interest).  If B2B then revenue comes via sales and as you know sales (in the B2B world) is not marketing and visa versa and the roll of CMO is of less value at this stage.   So, If consumer and you are the only non-dev person (1 of 11) then this job is really CRO (chief revenue officer) and your skills are far more important to the company's success at this stage (unless they are intending to bring on other revenue/sales generating resources at this stage too).  If all 10 current contributors are working only for equity then it would be reasonable (feel free to correct me) to assume that several of these 10 each have equity somewhere in the 5-10% range (if we assume a coupe of edge cases: A) common cap table of 30% set aside for A-round investors and 15-20% for the options pool then you have 45-50% divided 10 ways or B) perhaps 2 co-founders each started with 30%, and split the remaining 40% among the remaining 8).  given the above assumptions (pulled out of thin air): If B2C i'd say you'd be hard pressed to get more than 8-10% and if B2B i'd say more than 3-5% would be real challenge.  Obviously a lot depends on your track record in their market and in startups.  my $0.00002 worth. 

Andrew Royal CEO ILLUMAGEAR, Inc.

January 9th, 2015

I think this is a good read on the subject. http://venturehacks.com/articles/option-pool-shuffle Personally, I’ve never seen a CMO get more than 1-2% unless s/he was a founder. Of course, they also need a competitive salary. Going above 2% might be rationalized if the pay is low.

Chip Royce

January 9th, 2015

Seeing the CMO is working for sweat, we have to assume this is pre-funding. Based on this, I think there's 2 variables to calculate the share:

1) Company Progress: Depending on how far along, either:
 - the CMO needs to be considered a co-founder and % that's appropriate to the other co-founders 
OR
 - if the other co-founders can't justify that kind of stake, certainly a large % (5% or so) comes to mind based on where the company is at.

2) CMO Need. Figure the % above change +/- 2% or so based on how badly you need the role filled and/or how good this CMO is.

Hope this helps

James Green Chief Marketing Officer at PurebredBreeders.com

January 9th, 2015

I've been offered 4% with a small pay cut at a Series B funded startup. It's high but certainly not unheard of. - Sent from Mailbox

Jose Mejia Passionate Global Executive | Engineering and Breakthrough Leader -

January 11th, 2015

I have headed a few compensation committees and yhe first thing I would do is separate equity given to founders vs equity associated with an executive role.  Even if we are talking about the same person. Under these conditions I have never seen a huge deviation from the following for executives and  employees,  you can always decide to be more generous, but this is a good starting point.  A CMO is a VP in this table.  Again,  this is separate from what you would give the founders and I would have that discussions separately.  

TitleRange (%)CEO 5 - 10, COO 2 - 5, VP 1 - 2, Board Member 1, 
Director 0.4 - 1.25,  Lead Engineer 0.5,  15+ years Experience Engineer 0.33 - 0.66, Manager or Junior Engineer 0.2 - 0.33

Vladi Vexler Looking for new challenges - VP Technology & Products @ ScaleBase

January 11th, 2015

My experience is similar to Jose A. Mejia:
Active-Chairman 1-2%, CEO 5-7%,VP 1-2%,Director level (employee, not board) 0.4-1%, Lead Engineers 0.3-0.7, Engineers 0.10-0.25
The above makes sense for funding rounds Seed-B, in fully-diluted basis and post-round calculation.
Board Members are mostly the investors representatives, and for that they do not get extra options.