Securing a verbal offer from any VC is a great feeling. But before you pop the champagne, there’s one more step to make it official - finalizing your offer terms on paper. At Bowery Capital we've had a fellowship program since inception. Many of our fellows end up getting jobs in the VC ecosystem. As a result, we've seen a lot of offers and helped our fellows negotiate that offer. Here are some tips to closing out a VC job offer. There are several key documents you should receive from a VC firm upon receiving a verbal offer.
The first is an Offer Letter which encapsulates the main components of your compensation plan that you likely already negotiated: base pay, bonus pay if applicable, carried interest, and job title. The offer letter has a lot of language and at first glance seems comprehensive. It is, but it is usually not enough. The main output you will likely notice is related to bonus or carried interest. Broad generalization, but there will probably be a reference to a fund or a structure that is not outlined in the offer letter. At Bowery Capital this goes something like "Your interest in the plan is expected
to be initially equivalent to a X.XX% interest in the “carried interest” earned by the general partner of
Bowery Capital I, L.P." This is just an example, but you get the idea. More questions come up.
You'll want a few more documents as a result. The first is the Limited Liability Company Agreement that outlines the LLC where your carried interest is coming from. It is usually a very large document. With this in hand, you will also want a draft of the Assignee Interest Issuance Agreement related to this LLC. This assigns you your portion of carried interest in the LLC. Key terms like your vesting schedule are usually laid out in one or both of these documents. Lastly, in some cases it could be valuable to receive a fund’s Quarterly Report or the Capital Account Statement to assess what the value of your carried interest is. This is applicable if the fund is mid-investment cycle, meaning the fund has already made investments, and you're joining in the middle of the fund’s lifecycle. You may have some version of these documents. Or, you may start to realize when asking for these documents that what you have is not really carried interest. Once you've gotten all your documents it is time to review and potentially negotiate.
Get your ducks in a row before an offer is made. If you’re reading this post that means you’re already halfway there to understanding offer fundamentals. One step you can take further is forming a "review committee" of people you trust that can review your offer with you. This can be your lawyer, a lawyer friend who is happy to review, someone in the industry such as a Managing Member of another VC firm who is familiar with these documents, or your accountant to help understand the tax implications. The cost of not having this review committee and getting peace of mind on your options and what you truly have can have major consequences. Don't miss this logic.
You will typically only get one to two opportunities to "turn" the offer document before someone starts asking whether you truly want the job. Keeping this in mind, strive to get as much feedback as possible at each touch point with the firm so you best utilize your opportunities. This is another reason why having a review committee on standby is so important. For instance, if the fund has a titling structure that largely correlates to experience and you lack that experience or skillset, do you really want to push that lever in the negotiations knowing that they will probably decline?
Most importantly, feel empowered to gain clarity on your offer and negotiate the best outcome. If a firm starts getting frustrated by your clarifying offer questions, specifically on carry, this should give you pause. Transparency should be table stakes in any offer process. Feeling confident on this front when crossing the finish line is a sign that you’re in the right place!