June 15, 2018
I’m a 4th year law firm associate and want to move in house at a tech start-up. What is “market” compensation for someone with my profile?
When moving from a law firm to a technology start-up you can expect an experience like no other. The pace, the excitement, the passion, the innovation, the highs and the lows. Anything goes…and usually does. It’s an alluring proposition that has been a major driver for the exodus of today’s young law firm associates.
As law firms work feverishly to retain its best and brightest, they have historically tried to play – what they perceive – as their best card to retain associates and stay attractive: More money. Consequently, associate salaries in big law firms are in the stratosphere. Surely this big money is keeping associates happy and sitting tight, right? Wrong. Associate attrition is at an all time high. Why? Because associates don’t just value the money. They value other things as well: Time. Family. Autonomy. Flexibility. Broader experience. Mentoring. Working closer to the business. And the desire to be part of something bigger – like being at a start-up. So until law firm brass understands these values…and I mean truly understands, and starts creating effective solutions, associate attrition will continue and lawyers will continue to yearn for a legal life in house for the foreseeable future.
The high salaries at law firms have traditionally created some obstacles for associates and partners seeking to transition to the corporate world. Priced out of the market – as some employers see it. So in order to overcome these potential hurdles, lawyers are required to be flexible on compensation when making the transition. While law firm lawyers today are socialized around taking a pay reduction when moving in house, many don’t know just how much of a hit they will have to take. So there can be a bit of a shock once the actual numbers roll in. With this said, the compensation gap has narrowed significantly over the last 3 -5 years due to the flourishing private company activity, fierce competition for top talent and companies like Google, Amazon, Netflix and Apple driving the market by paying premium bucks to fill their empty seats. Base salaries have risen roughly 10%-15% – and when combined with an also rising target bonus and stock grant, law firm associates aren’t faced with such daunting economic choices.
So what is the market compensation range at a technology start-up for a lawyer with 4-6 years of legal experience? The base compensation range for a later stage emerging growth company is $170k – $185k. Bonus range is 10%-15%. An earlier stage start-up may offer slightly less on the base salary – roughly $160k-$175k with a similar target bonus range. The stock grant will be relatively modest due to the junior level of the role and will usually be in the form of options [a very small percentage of start ups will offer a mix of options and Restricted Stock Units (RSUs)]. The stock grant will vary from company to company and will align with the company’s internal comp grid. So there are no “predictable” option ranges, but general dollar valuation numbers are between $50k – $150k. Of course there are outliers, but these are the prototypical numbers in today’s market.
Another important point to note: Early stage start-ups have small legal departments. So execs tend to hire lawyers with more experience than fourth years because the roles require a broader and deeper level of experience with greater responsibility. So if you want to maximize your odds of successfully transitioning in house, I encourage you to cast a fairly wide net and apply for opportunities with late stage private tech companies with larger legal departments as well as public companies, which can offer a robust number of opportunities for junior lawyers. The public company option may not be your ideal choice, but it will provide the opportunity to move in house and provide the experience to become more competitive for startup positions in the future.
As you transition in house, you will encounter learning curves as far as the eye can see. So it’s good that you are asking questions now. Knowing what to expect on the compensation disparity is an important part of the education process and will help prepare you for the numbers that lie ahead when it comes time to talk turkey.