When it comes to negotiating job offers, there’s a lot of unnecessary back and forth. It’s painful, unfair, and inefficient.
There has to be a better way. Let’s take a look at how pay is commonly determined in tech startups and how Apollo Dealmaker™ changes the game.
A common scenario for how pay is set in tech startups:
- A company retains an executive recruiter, who attempts to identify candidates and define the target compensation range for the role
Historically, the recruiter would narrow their pool of potential candidates down to five to eight good prospects, determine the average compensation for this talent pool, and communicate this to the client. Previously, this was pretty straightforward, with most candidates being willing to share their current data. But in the past few years, new laws have restricted the ability to ask candidates about current compensation.
What the recruiter might have typically found is that the panel of candidates each were making somewhere between $300k-$425k cash compensation, with a mean of $338k. Notice we haven’t yet introduced equity into the mix.
- The compensation dance begins
The CEO at the Series E company has told the recruiter that they’re willing to pay $300k cash for this role. Hiring companies tend to think that they can set the price. This is their bid for talent. The recruiter tells the CEO that the market for this role is at $338k or above. Candidates like to see a 10-30% increase when they make a job move, so the CEO should be prepared to pay at least $375k. Jessica, the CEO, seems annoyed. While no one really knows today’s closing pay in any given micro-market, assumptions are made. The problem is there’s no reliable real-time data for this market. No NASDAQ for pay to settle differences. Jessica uses a VC salary survey that says compensation for this role is $302k at the 50th percentile. But the data is shaky, a little old, and doesn’t break down to fintech. It probably doesn’t reflect the real market.
Despite all this, Jessica says, “Let’s make an offer to the number-one candidate, Helena.” The recruiter tells the CEO that Helena is currently making $350k and she’s looking for $400k (this is her ask). Jessica is irritated and says that the highest she can go is $325k. Despite the fact that few job candidates will take a pay cut, the CEO says, “Just make the offer!”
The recruiter then extends the offer to Helena at $325k cash. Helena is put off. She feels undervalued. She can’t believe the company made such a low offer, one that’s below her actual pay. Now, both the candidate and the company are on their guard. No one has access to today’s actual market pay to settle their differences. This is how the pay perception gap (see Closing the Pay Perception Gap) works. The company wants to pay $325k. The candidate wants a $400k cash package. Without reliable, shared data, they’ve come to a stalemate.
Helena will do one of two things:
- She’ll either turn down the offer and go to another company, or
- She’ll counter-offer the company and say, “Pay me $400k and I’ll take the job.”
- The Candidate Turns Down the Offer
If she turns down the offer, Helena may get $400k at another company or some other new offer. We don’t know. But the cost of not hiring her to the Series E company can be $35k per month or more (that’s $400k divided by 12). This is the opportunity cost for not having a VP of Marketing in the seat. Costs can easily mount up to $50-100k before a suitable replacement candidate can be found. Pricey.
- The Candidate Counters the Offer
If Helena counters the offer, the company can accept her counter-offer or make another counter-offer. In this case Jessica sees a $75,000 difference (23%) and decides to meet Helena halfway. Jessica offers $362,500. She says it’s her final offer. Helena can accept this (a 9.3% deficit from her target pay), or she can move on.
Let’s say that Helena accepts the counter-offer as is. Then, implicitly, the new market for a top VP of Marketing at a Series E company in fintech in San Francisco is roughly $362,500. But is it really?
- The Cycle Begins Again
Unless someone captures this data somewhere and shares it, no one really knows anything new about the VP of Marketing micro-market for this pay profile. So another nearby Series E company in San Francisco has to go through this same process.
In a nutshell, this is how compensation is often established in technology for executives and professionals, especially at start-ups. Like we said at the beginning of the post: it’s a drawn-out process that’s inefficient, painful, and unfair for everyone involved.
When companies and candidates bargain to a final price, the better negotiator—most often the company—wins, leading to inefficient and often arbitrary outcomes. This approach distorts the labor market and violates all supply and demand models. It is, in essence, a market failure. The tech industry can and should do better.
This is the problem Apollo Dealmaker™ addresses. This revolutionary tool uses AI to predict competitive pay for people making job moves now. Dealmaker shows you actual market pay based on recent job offers. We call it Real-Time MarketValue™. It’s something you can’t find anywhere else.
Dealmaker changes the game. In just four clicks, Dealmaker gives you hyper-targeted results. For the first time ever, you can:
- Predict the market rate for roles at thousands of tech companies.
- Instantly share compensation reports with candidates, companies, colleagues, and recruiters.
- Negotiate better deals with real-time market data.
Imagine how it would feel to walk into your next interview knowing that everyone involved is aligned on the Real-Time MarketValue™ for the role. No more guesswork. Way less stress. And an outcome that feels fair to everyone. That’s the beauty of Dealmaker.
Want to win the compensation game? Quit negotiating and get Dealmaker instead.