How to negotiate even in a bear market

I’ve crowdsourced startup compensation, and helped people negotiate $10M+ in higher comp. A year ago, I wrote a short guide on hits and misses across all these negotiations. Since we’ve been in a bear(ish) hiring market, I wanted to adapt the playbook for a new normal.
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Elephant in the room

There are many reasons why negotiating is uncomfortable. To start, negotiation is a reluctant moment of truth. When we (re)negotiate, we are forced to confront the reality of what they really think of us. Do they truly believe in our value, or were they just paying lip service?
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Negotiating exposes truth on both sides — what we care about, what we’re constrained by, and how we deal with the friction of working together.
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When we skip these hard questions, it creates a bubble of unknowns that leaves us in the dark. It helps to treat negotiation less like a battle, and more like a discovery process. Are they cash-constrained? Where are they flexible? What are they most concerned about?
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Even if you don’t gain a ton in the offer, you can gain insights into their business, and get a better idea of how to help them win. Gaining information can be just as valuable as gaining dollars. Speaking of which, you’re probably leaking more information than you intend.
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Tipping your hand

A negotiation starts long before the opening offer. At every step, they’re evaluating what you bring to the table, and what it takes to bring you on board. Usually, the two move in the same direction — the more value you signal, the higher they can flex on comp. But not always.
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You can bring a lot to the table, but if they sense that they are the only table in the room, it reduces their willingness to pay top-dollar. Common slip-ups: “would love to join…”,  “excited to sign..”, “you’re my top choice..” — while it’s good to show enthusiasm, making premature promises backs you into a corner.
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Even if they are the only viable table in the room, there’s always one competing alternative: you can wait to find better opportunities. As long as they believe this is an option for you, you have fallback leverage. There’s no such thing as zero leverage unless you’ve fully tipped your hands.
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Prioritize what you want

Any business deal has a menu of options. Before you can know what you want, you gotta know what’s on the menu. There’s the standard fare: base, bonus, equity, benefits. But with startups, there are more details in fine print: stock option type, exercise window, strike price, etc.
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A common meta-game is to counter with items you think the other side is willing to give rather than what you really want. This is a play-it-safe strategy, but it comes with downsides you have to live with:

• You might be underestimating their flexibility
• You are guaranteed to not get what you really want
• If they grant your initial ask, they will probably assume the deal is “done”

All this to say: your first counter is the most important counter you will make. It sets the tone for what you care about when you have their full attention. Just as the company’s initial offer gives you a bottom anchor — the lower end of what they’re willing to pay — your first move should counter the other way, the higher end of what you would jump at.
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There are some rare companies that don’t negotiate. In these cases, see if it’s corroborated by others to check if they apply their rule consistently. The smaller the company, the more likely they are to be willing to bend case-by-case.
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Deciding on your number

A big misconception is that your personal comp band = market comp band. While the market influences what a company would pay, exceptions are not unusual — especially at startups where there’s less enforcement of bands and leveling.
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So while market comp suggests what’s possible, I would use it only as a starting point. Comp used to be a black box at startups, but I’ve now collected thousands of data points you can look over.
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Another misconception is using total compensation (salary $ + equity $) as an objective way to compare offers. First, equity grants are always relative to the company’s valuation. It grows or shrinks based on the company’s trajectory. This means equity is never apples-to-apples unless the companies are on identical trajectories.
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Someone once said every valuation is a number from today multiplied by a story about tomorrow. At early-stage startups, the story about tomorrow is the overwhelmingly dominant variable. Much of evaluating startup offers comes down to parsing their story because the equity is usually years from becoming liquid.
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Your equity payout is anyone’s guess, but what you want to ensure is that you’re getting a fair equity stake (%) given the uncertainty and illiquidity you’re taking on. More uncertainty and longer illiquidity justify higher stakes.
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Once you have an idea of market rates, you can adjust it to your situation. There are many personal factors, but if we had to boil it down to one sentence, it’s how much they need you and how urgently they need you vs. the other way around.
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When you want more cash over equity

Cash is always an awkward topic, especially at startups. They know public and later-stage companies have deeper pockets, so they are wary of entering a cash bidding war. But more than anything, every company wants to feel 1. differentiated, and 2. secure in knowing that you won’t immediately jump ship to the highest bidder.
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Once you understand their psychology, it’s easier to navigate asking for more cash. Make sure they know why you’re uniquely interested in them, why you’re keen on the long-haul, clarify if you have short-term cash needs, or a big cash gap compared to your other options. Handle this with care, especially with your top choice.
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Competing offers are no longer bulletproof

More and more, people are getting similar / identical competing offers, likely because companies are relying on a shared dataset. There isn’t always an obviously higher anchor to use.

When this happens, the onus falls on you to break the stalemate. Sequencing is king. Place your options in a 2x2 — how much you want to join them vs. how likely they are to increase your offer:

Start with low-risk negotiations in the bottom-right quadrant. These are companies you don’t mind walking away from and are likely to meet your ask (because they’re better-funded, generate more cash, are more interested in you, etc.). Progressively move towards your top choice — this maximizes your chances of getting higher offers to anchor on before the one that really matters.

Your greatest enemy in all of this? Your own psychology. We’ve all fallen prey to loss aversion:

I often meet people who are afraid to lose offers, even from their backups. “It’s better to keep them in the running”, “they’re a good back-up”... Backups make for a nice security blanket, but at the end of the day, there are only two real uses for an offer: 

1. So good you would sign today, or
2. So good you get what you want from your top choice
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You’re not doing any favors for your backups by hanging onto them. Play your cards.

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One more thing

Society nudges us to think of success and failure as opposites. They’re actually different results from the same thing — trying new things and growing from the process.

The more attached we are to the notion of success, the harder it is to grow. The more attached we are to never losing a good offer, the harder it is to get a great offer. Our attachments limit where we go.

I hope this was helpful! If you’d like to dive deeper, check out my Negotiation Playbook. Packed with battle-tested scripts, tips and examples.