Have you ever wondered how startups figure out how much to pay you? Thousands of people utilize Option Impact, a unique wage database.
Negotiating a pay proportional to your market worth impacts not just your work happiness but also your ability to accumulate wealth—and it may even influence when you retire.
Most line-of-business employees use sites like Indeed, Glassdoor, and Payscale to compare wages with other professionals with comparable job titles and years of experience. Still, research reveals that these platforms are notoriously inaccurate.
There’s a lot of possibility for inaccuracy since wages are self-reported and not checked, and they’re also produced by AI algorithms that trawl through millions of data points. Even sites for tech careers, such as Stack Overflow, include self-reported wages. Indeed.com gathers compensation information from job listings, which typically provide a salary range rather than a specific figure and are open to negotiation.
Second, startup pay arrangements vary from compensation structures at big public firms. In a salary package, how much stock vs. cash should you negotiate? What type of vesting timeline can a seed-stage business expect?
There is, after all, a database for it. What’s the catch? Unless you’re a venture investor at a tech company, it’s not accessible to most individuals.
How Does Option Impact Work?
Option Impact is a compensation database exclusively for IT entrepreneurs. In return for free access, companies must reveal the anonymous salary of every employee, from intern to C-suite. Employers provide the data, which are then reviewed by the Option Impact team, ensuring more accuracy than self-reported incomes.
According to the company’s website, over 3,000 VC-backed privately held businesses utilize it, and the bulk of leading VC firms have access. Users can search the vault by job title, region, business size, revenue, and financing stage to develop a reasonable wage range depending on their company’s current state. Users can also access compensation data such as equity burn, vesting dates, and merit budgets.
Unfortunately, the data’s accuracy is hampered in part by its exclusivity. According to Advanced-HR, the business that operates Option Impact, people desire access to this data so much that someone came up to the company’s San Francisco headquarters in 2016 offering chocolate in return for access to mid-level engineering data. The corporation, understandably, refused the extensive offer.
Furthermore, for continuing access to the “vault,” CEOs must update their data once every six months, ensuring that wages are realistic of the current employment market.
Let’s have a look at a few instances.
According to Option Impact, candidates often undervalue themselves. For example, in a midsize SF company, a software engineer with 4-6 years of experience makes on average $120,000. But, It’s more like $141,000, based on Option Impact’s calculations.
Because startups compete for top talent with FAANGs and more prominent corporations, having access to the database allows them to make more competitive offers.
Another example: a project manager with 4-6 years of experience earns $82,403 on Glassdoor, but $137,000 on Option Impact, a 66% increase.
According to Ask The Headhunter, more compensation estimates demonstrate the discrepancy between Glassdoor and Option Impact salary estimates. Here are the samples:
QA Engineer (having 1 to 3 years of experience)
- Glassdoor: $71,044
- Option Impact: $101,955 (+45%)
Data Scientist (having 4 to 6 years of experience)
- Glassdoor: $129,118
- Option Impact: $132,536 (+3%)
In a feature for Wired, freelance writer Rachel Nuwer spoke with a software engineer, “Troy” (name altered to protect privacy), who gained access to Option Impact by using a login from a former firm. He was offered $180,000 at a job interview, which he would have happily taken if he hadn’t discovered via Option Impact that the reported income for his work was far higher. His initial pay was eventually raised to $205,000 (+23%).
Because startups compete for top talent with FAANGs and more giant corporations, having access to the database allows them to make more competitive offers.
What Are Other Alternatives Beside Option Impact?
While Option Impact’s value proposition for startup employees is apparent, rank-and-file employees will not have access to the database any time soon. So, if you have a startup interview coming up and want to know your genuine value, what should you do?
Expect more shares and less cash when you join an early-stage startup. However, throughout the years, the worth of a private corporation has remained a well-guarded secret.
At a private company, compensation is based on equity—usually stock options—and the possibility to earn more money from that equity than you would if you worked elsewhere. But, on the other hand, your stock may lose its value.
Bureau of Labor Statistics
The US Bureau of Labor Statistics, which employs a mix of 12 distinct employer surveys on pay and benefits to group data by profession, industry, geographic region, and demographic characteristics of employees, is one of the most reasonable alternatives for collecting reliable compensation statistics.
The data is constantly updated as well as synthesized from numerous sources. The Current Employment Statistics Survey (CES), for example, is a monthly survey delivered to around 144,000 employers, covering roughly 697,000 individual work locations.
One disadvantage of utilizing the BLS database to determine your market value is that the job titles are old, and comparable positions are grouped. As an illustration:
- All “mathematical scientific vocations,” such as systems engineer, statistician, and even research mathematician, are lumped together in the category of “data science salaries.”
- A search for UX design wages, for example, returns a database that includes “web developers and digital designers,” which is a large area.
CompAnalyst by Salary.com is another alternative, as it compiles data from company surveys. HR personnel fills out questionnaires that contain information on basic salary, bonuses, and incentive compensation.
Position searchers may also pay $29-$79 for a tailored report that considers characteristics such as years of experience and education level (depending on the salary range for the job in question).
Salary.com does not give salary statistics for particular organizations, but it might assist you in determining your overall value.
One of the most accurate sources of salary information for startups is AngelList. As per AngelList, salary estimates are “derived employing salary data from several US businesses and third-party sources.” In addition, estimates are tagged with “AngelList Est,” indicating a range of options based on similar jobs.
However, for job posts from enterprises that choose to publish salary data, AngelList also displays company-provided salary ranges.
Triplebyte is a job search website for engineers that combines data from real-time offers provided to software engineers on the platform to produce salary estimations. According to Triplebyte, the average software engineer base salary (all levels) is $151,000, compared to $108,249, according to Glassdoor.
Salaries can be sorted by business size, experience level, non-college degree, and Bootcamp grads.
Keep in mind that Triplebyte only displays basic salary, not equity, bonuses, signing bonuses, relocation packages, or other forms of supplemental financial compensation. On the other hand, candidates may use the startup equity value calculator to estimate the potential worth of a stock offer.