I have quite a few friends going through the new grad Software Engineering hiring process and thought I’d write up a “State of Tech Offers” for 2019 - it’s meant to help shine light on how an offer is structured, how the big players are constructing their offers, and how to make sure you’re not being taken advantage of or being deceived.

Parts of an offer

A standard offer will typically have five key parts - yearly salary, stock/options grant, signing bonus, yearly bonus, and relocation. Sometimes they can include other, less common benefits, such as corporate housing, stipends for various living expenses, and deferred compensation/tax advantages, but they are rarely a part of new grad offers.

Salary

This is the most straight forward compensation. The vast majority of tech offers are salary-based - the amount of hours you work does not impact your compensation. You can figure out your hourly compensation by dividng the yearly salary by 52*40 (52 weeks a year, 40 hours a week). This is a rough estimate, as you will likely take time off, as well as not work 40 hours a week, but it serves as the typical United States baseline.

A note on this: some divisions within companies will offer hourly pay for a year before switching you to a salaried position - certain new grad positions within Apple follow this trend. For instance, an offer I saw at Apple was for $57.70 an hour (roughly equivalent to $120,000 salary) - it also comes with fairly generous overtime, which can go all the way up to 2x your regular hourly salary.

Signing Bonus

Your signing bonus is also fairly straight forward. There are normally two variants - one that is received in its entirety on your first pay check, and the other in which you receive a percentage of the signing bonus the day you sign (which, for new grads, can be up to a year before they actually start) and the rest upon starting your role.

At Pinterest, for instance, you receive a quarter of your signing bonus at the time of signing, and the remainder on your first paycheck.

Note that these bonuses are always taxed at a much higher rate than regular income, to try and insulate you from additional taxes you’d have to pay from being put in a higher tax bracket. Unfortunately this can mean that up to 60% of the bonus is withheld. Use an online tax calculator like this one to figure out how much of your bonus you will actually see, and how much of it you’ll have to get back come tax time.

Stocks

The stock grant is often the most convoluted to parse part of the offer, especially when it’s for a company that is not public that is offering options.

Stock Grant

The most straight forward type of stock grant will be for a dollar valuation at a public company. For instant, a typical Google offer will offer $200,000 over 4 years. You will receive the number of shares of company stock that equal the dollar amount you’d receive over your vesting schedule (for instance, in the previous example, if you vest monthly, you will receive $4,167 worth of $GOOG stock every other pay period). For most of the public companies, the number of shares you receive is set at the price around the date you join (Facebook typically does 1 week before you join, some companies do the first Wednesday of the month after you join, etc. Look into what your offer says). You will receive that many shares, not the dollar amount in your grant, on your vesting day. That means that any changes in the stock price will be reflected in your effective comp - if the stock increases, you’ll actually make more on your vesting day than originally promised. Be careful, though, as the inverse is also true.

Another typical stock grant is by discrete number of shares. For instance, your offer might include 10,000 shares of the stock over 4 years. Every year you will receive 2,500 shares, irrespective of price - if shares are worth $20 when an offer is extended, your stock grant value is $200,000. However, if next year the stock has risen to $30, your remaining stock grant will be worth $30 * 7500, or $225,000. The price of the shares is not a factor in how many shares you receive.

This can become more complicated when the company is private. You are given stocks, but you are unable to liquidate them. There are various methods to liquidate private stocks - this can include stock buy backs by the company, selling your shares to an accredited investor, or selling the stock on a private securities market. It is usually significantly more difficult to liquidate private stocks than public - when I was going through the recruitment process, I valued private stock grants at a steep discount compared to public, ranging from 40 to 80 percent the stock value, depending on how close to IPO the company was. For instance, if they are offering 10,000 shares and their last funding round gave a share price of $10, the company is saying that the stock grant is worth $100,000. I would value this at between $40,000 and $80,000, depending on how far along the company was. If they are unprofitable and are still on their Series A or B I might actually value the stock at almost nothing; startups fail signifcantly more often than they succeed, and even if they succeed there’s no guarantee that the stock will grow or even be worth what they tell you it is.

One of the worst trends that’s recently come up is when recruiters at private companies walk you through how much your offer would be worth if the company has an exit at a valuation of {insert large company market cap here}.

I had a recruiter hop on a call and walk through a spreadsheet he had created that showed how much the stock would be worth if the company had a liqudation event the size of PayPal, LinkedIn, Microsoft, Uber, and finally Amazon. There was a nice $2,500,000 next to the “Amazon valuation” column. It felt almost disingenous - sure, they theoretically could get that big, but to explicitly mention that your stock might be worth two point five million dollars is practically lying.

If you want to take a really conservative approach you can value shares of a private company at $0. This is going extreme in the opposite direction, but is a much better attitude to have than that of someone valuing them at face value.

One final note on pure stock grants is to keep an eye on the class of stock you receive. Tech companies have often adapted a dual stock class approach - where founders and early investors receive class B, and employees and the general public receive class A. The differences are primarily around liquidation events and voting rights. For instance, at Facebook, a small group of insiders, as well as all of Mark Zuckerberg’s shares, are Class B. Each share of Class B stock offers 10 votes, compared to the 1 vote of a Class A. Certain classes of stock also can be exchanged first - in the event of a liquidation event, some times the founders’ or early investors will get liquidation first. A simple example is if there are two people, each with 50% ownership of a company worth $2,000,000, with Person A having preferred shares over Person B. Technically each person has a dollar equivalent worth of $1,000,000.

The company is then bought for $1,000,000 due to hard times. This does not mean that each person gets $500,000 - the person with preferred shares gets the full $1,000,000, and the second is left with nothing. This can be compared to tranches in CDOs.

This isn’t as large of a concern for the vast majority of offers, but it’s worth keeping in mind.

Options

Options are not a stock grant, and it’s important you understand that. What they do is give you the right to purchase stock at a given price (called the strike price) at some point in the future. Additionally, the strike price of your options is rarely official; every offer I’ve received has mentioned that the strike price of the options has to be approved by the board of directors at the next quarterly meeting, which means that they could potentially deny that price and lower your value post-acceptance (note that this is rare but does happen).

The real kicker for options at a private company mean that you actually need to shell out cash to exercise your options - often times being a non negligible percentage of your actual income for any sizable option grant.

For instance, say you receive the following offer: 10,000 shares of company stock, whose last funding round was at $8.50, with an option strike price of $3.

This does not mean that you received 10,000 * $8.50 = $85,000 worth of stock. It means that the company will allow you to buy up to 10,000 shares at $3 per share. You are effectively being given a discount on the share price, provided its still valued at above $3.

The other danger with options is that they can quickly become worthless - if you receive your offer at an all time high company valuation, and then the company (or market) tanks, your strike price might actually be above the price of the shares. In the previous example, if the price falls to $2 a share, then you wouldn’t want to exercise your options, as you’d effectively pay $30,000 for $20,000 worth of shares.

Every offer I’ve received that gave options was also slightly different - they change when you have to purchase them, what happens if you leave the company, and what class of stock you receive. These can range from employee friendly to downright predatory. Many companies require that you exercise your options within 90 days of leaving a company - this can inovlve forking over lots of cash in exchange for shares that you are not even sure will be worth anything (exchanging $100,000 in cash for $1,000,000 in shares for a private company can be so murky that it’s tantamount to gambling). There are so many variations of rules and restrictions that I won’t even try to get into them - make sure to ask about all the parts of your option grant, and that you have a solid understanding of the structure of your companies offers and tactics.

Vesting Schedule

The final piece of the puzzle is your vesting schedule - this is when you actually receive your shares or options. There are historically three common new grad schedules:

10/20/30/40

1 year cliff, monthly thereafter

Monthly/Quarterly

Almost all offers come with a 4 year vesting period, meaning that 4 years after you join your entire initial grant will have fully vested.

These are arranged in order of preference. 10/20/30/40 is where you receive that percentage of your shares at that year - 10% your first year, 20% your second, 30% your third, and finally 40% your fourth. These are almost considered predatory nowadays - if you are given a $100,000 stock grant, it means you will only see $10,000 of that your first year. With the average tenure of an engineer in silicon valley reaching 18 months, it means that some engineers are only receiving 10% of their stock grant before leaving.

The 1 year cliff is the most common offer format. You will receive 1 years worth of your grant after one year of working for your company (12/48), and then 1/48 every month thereafter (or 3/48 every quarter).

The big tech companies, in 2018, changed their new grad offers to starting monthly or quarterly immediately after joining, dropping the 1 year cliff. This was done to be more competitive, and to provide better offers to entice the strongest engineers to join them.

Yearly bonus

The yearly bonus is usually a performance related bonus. It can be $0 if the company is not doing well financially, but is typically a range of percentages of your salary. For instance, at Google your bonus is derived from your performance rating. You have a target bonus (normally around 15% for new grads), which would be $15,000 on a $100,000 salary. If you get a superb rating, this could actually double the target bonus to 30%, which is a $30,000 year-end bonus.

This is withheld at the higher rate mentioned in the Signing Bonus section.

Relocation

Many companies also offer relocation. This is often identical to a signing bonus. Sometimes they’ll use a 3rd party service that will then proceed to give you offers.

Many of the tech companies use something like ELO Relocation. You are given “points” to use - you can elect to take a cash value (normally $5,000 or $10,000) and be done, or you can use your points to mix and match various relocation benefits. These can include long-term hotel stays, city guides, moving services, and house buying help. The vast majority of new grads I know take the cash value, but it’s worth researching to see if you will receive more value from your relocation benefits than the cash.

There can also be a slight tax advantage to relocation - some companies offer tax adjusted relocation spend, which means if you spend the money on relocation and then get reimbursed for it you will receive a greater net amount, and the company will pay the tax differential in your stead.

Unique/Rare Additional Bonuses

Certain companies will also offer unique or otherwise uncommon offer incentives to try and convince candidates to join them. For instance, at Pinterest there is the “Pinspiration” bonus, which is a bonus on top of all of the above of $5,000 to be used on travel. You have to book the travel through them, and it must be used on travel, and you can’t take the cash equivalent.

These are not nearly as common as the above, though. These sorts of bonuses can include corporate housing, living stipend, or even cars and transportation assistance.

Other parts of an offer

There can be other facets of a company that should influence your decision, such as what type of healthcare they offer, what the 401k matching looks like, whether they offer a mega backdoor Roth, whether they allow auto-sell of your vested stocks, whether there’s an employee stock purchase plan, and whether they offer free food or gym. There can be gotchas with 401ks where your employer contributions are also on a vesting schedule, and you need to stay at the company for a certain amount of time before the match is actually “yours”. You should make a best guess at how much you value each of these in a company, and adjust your offer accordingly.

Offer timelines

With every year the start of recruiting season gets pulled earlier and earlier. For the past few years I’ve personally considered the Greylock Tech Fair to be the inaugural day of recruiting - usually the last week of July, a lot of unicorns and big companies will officially open up applications and start sending out offers. It’s not unheard of to have multiple offers by August 1st for the most enterprising and well prepared candidates.

There is no set time period for how long an offer should be out, although 2 weeks is a pretty good rule of thumb. If you are in university double check that your school’s recruiting office doesn’t put mandatory minimum deadlines - for instance, USC requires companies give at least until October 1st, so as to give students enough time to recruit with other companies and not feel too pressured.

Exploding offers (offers that expire 5 business days or less from the day you receive them) are unfortunate but they exist, and not just from companies that are not ideal places to work. There’s not much that can be done in these cases besides ask for an extension, and if you don’t receive one, spend some time figuring out whether your expected value increase from more recruiting will be worth turning it down.

Informational advantages

If possible sign up for Blind. It’s an anonymous company forum that has incredibly useful information. Keep in mind that, as it’s an anonymous online forum, it has it’s fair share of racism, misogyny, and problems, but there is still some good to be found, especially when it comes to comparing offers and learning the “truth” about company culture.

It can also be very instructive to communicate with other students or candidates, and to be open and honest about your offers. Keeping offers private helps only the companies - all candidates benefit from more transparent and clear cut offers.

Standard FB/G offers

Below are a couple standard offers received by either me or my friends for west coast offices of the big companies:

Google Los Angeles, Return Intern:

$114,000 salary

$160,000 equity/4 years, monthly vesting

$25,000 signing

Google Bay Area, New Grad:

$115,000 salary

$100,000 equity/4 years, monthly vesting

$15,000 signing

Facebook Bay Area, Return Intern:

$115,000 salary

$160,000 equity/4 years, 1 year cliff then quarterly

$60,000 signing

These are all pre-negotiation figures. All offers were raised significantly post negotiation. Hopefully you can use them as a reference point for other companies, especially FLAAG and unicorn status companies.

For instance, one of the offers above was negotiated to:

$115,000 salary

$240,000 equity/4 years, 1 year cliff then quarterly

$100,000 signing

Which is roughly $275,000 in TC (Total compensation) first year, a gain of over 20% just by negotiating.

You can check out levels.fyi and Blind for more offers.

Final thoughts

It’s very important to do your research as a new grad, as many of the companies, even the large ones, will take advantage of you if you don’t push back and understand what the market says you are worth. Haseeb Qureshi has a phenomenal guide on negotiating offers that everyone should read.

There is also a much more comprehensive open guide to equity compensation by Holloway. I highly recommend reading it to get a deep dive on the different forms of equity and compensation you can expect to receive.

Overall make sure you understand the lay of the land, understand how offers are changing, and make sure you apply broad and often.

Good luck!