Case Detail

Case Summary

Look Before You Leap (A): Considering a Job Offer With an Early-Stage Company

Case Number: 5-208-257(A), Year Published: 2008

HBS Number: KEL374

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Authors: Steven Rogers; Sachin Waikar; Scott Whitaker

Key Concepts

Job Offers, Entrepreneurship, Employee Stock Options, Entrepreneur Career

Abstract

In the fall of 2007 a senior director of product marketing at Qwest in Denver, Colorado, gets an offer to work for an entrepreneurial high-growth venture. The vision is for greater wealth, accelerated business opportunity, more thrill on the job, and faster path to leadership by pursuing a position with a start-up firm. Kiva Allgood has management responsibility in her current position (e.g., manages a high-budget portfolio), with compensation of $145,000 in salary and incentive bonuses up to 100% of base salary. She realizes that she is not prepared for the negotiation because she has only negotiated job offers within large firms. She needs to know what many of these entrepreneurial finance terms mean and to understand whether she is being offered terms and amounts commensurate with the value she feels she will bring to the entrepreneur.

She also needs to understand her opportunity cost and the expected value of her options: staying with the current job, starting her own venture, or taking this offer at the entrepreneurial venture.

She had no idea there were also so many additional, non-financial factors to take into consideration. With her future on the line, she needs to work through the numbers fast. The entrepreneur gave her five days to come back with a counter offer, which he considered a generous amount of time.

In evaluating these questions, students will take Allgood’s point of view. The case is based on a real job offer to a real person named Kiva Allgood. The entrepreneur and his firm are fictitious in order to heighten the issues in this situation.

Learning Objectives

  • Exposes the customary negotiation between a prospective employee and an entrepreneur, taking into account the valuation of the entrepreneurial firm, salary, stock options, start date, ownership percentage and opportunity to increase ownership, and other important factors (e.g., vesting, vacation days, etc).
  • Articulates the difference between the various considerations that go into pursuing a position with an entrepreneurial venture and the considerations that go into remaining with a stable and larger corporate organization or starting your own venture.
  • Looks at compensation criteria that are typical for entrepreneurial ventures, particularly venture capital–backed ventures, in light of other compensation structures at other types of companies to which business school students have extensive exposure.
  • Introduces a rigorous assessment process by which the person pursuing a position on an entrepreneur’s team can look at the entrepreneur as a prospective future employer.
  • Number of Pages: 10

    Extended Case Information

    Teaching Areas: Entrepreneurship, Organizational Behavior

    Teaching Note Available: Yes

    Geographic: Denver, Colorado, United States

    Industry: Technology

    Organization Department: Marketing

    Organization Size: Small

    Decision Maker Position: Director of Marketing

    Decision Maker Gender: Female

    Year of Case: 2007