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?

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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/

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. 

Mike Moyer

January 9th, 2015

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

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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

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.

Peter Kestenbaum Advisor, Investor, Mentor to Emerging firms

January 13th, 2015

The question do you have experience as a CMO of a really successful firm? (My vantage point is from two IPOs.. One that got to F500, currently involved personally with 12 startups, two adjunct appointments in this space, and serving as an outside advisor to a VC fund). I just think that your views at times are academic and one size fits all. I may be wrong (if so apologies) but it appears you are providing guidance to many young people who are easily influenced when you appear to be at most a half step ahead of them. Thats the danger of social media. Happy to help. pk

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

Peter Kestenbaum Advisor, Investor, Mentor to Emerging firms

January 12th, 2015

Jose.. the standard, in both silicon valley and silicon ally in New York thinking revolves around value points in a company's development for equity. Is it pre/post revenue, is it pre/post its first institutional funding event, is it pre/post product or where is it in the code process ( scribbling on a whiteboard or a code base. Then there are the other factors... Is this a cofounder (as you accurately described) and even if a cofounder is it an equal co founder ( meaning is this the sixth startup, with two successful for one person and the first trip to the rodeo to the other )... there are bounds but to apply a chart for anything other than guidance does not make sense...

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