offer-letter

Overview

Based on The Alliance by Reid Hoffman (mutual benefit framing), Who by Smart and Street (selling the A player), and Work Rules! by Bock (transparency in comp). An offer is not a form - it's the last sales pitch. Candidates are deciding whether to leave security for uncertainty. The offer has to make that decision feel rational and safe. The framing of total comp, growth, and the mission all matter as much as the number.

Workflow

Step 1: Confirm Hiring Decision and Comp Budget

Before constructing the offer, confirm:

• Final hire decision is documented and approved
• Budget range: base, equity, bonus, start date flexibility
• Comp band for the level (if [your company] uses bands)
• Any approved exceptions or flexibility

Do not make a verbal offer before budget is confirmed. Verbal offers that get walked back destroy trust.

Step 2: Understand the Candidate's Priorities

Before presenting numbers, the recruiter should know:

• What's driving their decision? (Mission, comp, role scope, team, flexibility?)
• What's their current comp (base, equity vesting schedule, unvested equity)?
• What's their competing offer or BATNA if known?
• What's their target start date?

This comes from the phone screen or ongoing recruiter relationship. Without this, you're presenting blind.

Step 3: Frame the Offer as a Mutual Bet

From The Alliance: the best offer framing is tour-of-duty language - here's what you'll accomplish, here's what we'll provide, here's how this role sets you up for your next step.

Opening frame for the verbal offer call:

"Before I walk you through the numbers, I want to share why we're excited about this offer. We're asking you to take a risk on [your company], and we want to make sure the opportunity is worth that risk. Here's what we see: [2-3 sentences on what they'll own, build, or lead in the first year]."

Then move to comp.

Step 4: Build the Total Compensation Summary

Never lead with base salary alone. Present total comp clearly:

Total Compensation Summary - [Candidate Name] - [Role Title]

Base Salary: $[X]
Annual Bonus: $[Y] target ([Z]% of base) - [explain trigger conditions briefly]
Equity: [X,XXX] shares / [0.X]% (based on current [409A / preferred] valuation)
  - 4-year vesting, 1-year cliff
  - Current estimated value: $[X] at last preferred price
Benefits:
  - Health: [coverage summary]
  - [Other key benefits]
  - [Equity refreshes, if applicable]

Total estimated year-1 value: $[X]
Total estimated year-1 to year-4 value (base + vesting): $[X]

Step 5: Explain Equity in Plain Language

Equity is the most misunderstood part of any offer. Candidates often discount it entirely (if they've been burned before) or overvalue it (if they haven't). Give them the honest math.

Required equity explanation:

1. What they're getting: # of shares, % of fully diluted shares, grant type (ISO, NSO, RSU)
2. The vesting schedule: 4-year / 1-year cliff is standard; explain what "cliff" means
3. Current value estimate: Based on 409A or last preferred price - be explicit about which
4. Liquidity path: When might they be able to realize this? (IPO, acquisition, secondary?)
5. Dilution disclosure: "In future funding rounds, your % will dilute, but the value of your shares may increase"

Do not oversell equity. Give the honest scenario. Candidates who feel misled about equity leave or become resentful.

Step 6: Write the Formal Offer Letter

[Date]
[Candidate Name]
[Candidate Address]

Dear [Candidate Name],

[Your Company] is pleased to offer you the position of [Role Title], reporting to [Manager Name],
starting [Start Date].

COMPENSATION
Base Salary: $[X] per year, paid [bi-weekly / semi-monthly]
Signing Bonus: $[X] (if applicable) - repayable if employment ends within [12] months
Annual Bonus: Target [Z]% of base, paid [annually/quarterly], subject to company and individual performance

EQUITY
You will be recommended for a grant of [X,XXX] stock options ([ISO/NSO]) at an exercise
price to be determined by the Board at the time of grant, vesting over 4 years with a
1-year cliff.

BENEFITS
[List key benefits: health, dental, vision, 401k match, PTO policy, etc.]

START DATE AND CONDITIONS
Proposed start date: [Date]
This offer is contingent on [background check / reference check / I-9 verification].

This letter does not constitute a contract of employment. Employment at [your company]
is at-will.

This offer expires on [Date - typically 5-7 business days from send].

We are excited about the possibility of you joining us. Please reach out with any questions.

[Recruiter or Hiring Manager Name]
[Title]
[your company]

Step 7: Navigate Negotiation

Candidate negotiates on base:

• Understand their anchor: "Help me understand what you're basing that on."
• If within band: move base, reduce signing bonus to stay within budget
• If above band: explain the band honestly. "The band for this level caps at $X. We set it based on [internal equity / market data]. I can get you to the top of band."

Candidate negotiates on equity:

• Equity is often more flexible than base in early-stage companies
• Offer additional shares if equity is a sticking point and it's within the refresh budget

Candidate has a competing offer:

• Don't match automatically. Ask: "Is it the number, or is it [other company]?"
• If it's the number: find out what it will take and evaluate against budget
• If it's the other company: selling harder won't work. Let them decide.

Deadline enforcement:

• Set a real deadline (5-7 business days). Extend once, once only. Unlimited extensions signal desperation and give candidates indefinite optionality on your role.

Anti-Patterns

1. Presenting only base salary Bad: "We're offering $150,000." Good: Present the full total comp summary. Base alone underrepresents the offer and doesn't compete with companies who do this well.

2. Vague equity language Bad: "You'll get equity." Good: "You'll receive 10,000 options at a $1.20 exercise price, vesting over 4 years with a 1-year cliff. At our last 409A of $4.50/share, that's approximately $33,000 in current estimated value."

3. No offer deadline Bad: "Take all the time you need." Good: "The offer expires [date]. I'm happy to extend if you need a few more days, but I do need a decision by then."

4. Matching competing offers blindly Bad: "They offered $175k? We'll match it." Good: Understand whether it's truly a comp gap or a preference for the other role. Matching a number rarely fixes the underlying decision.

5. Skipping the verbal call and sending the letter cold Bad: Email the offer letter without a call. Good: Walk the candidate through the offer verbally first. Use the call to address questions, reinforce the mission, and gauge their excitement level before they see the letter.

Quality Checklist

• Hiring decision documented and budget approved before offer is made
• Candidate's priorities and current comp are known
• Offer framed as mutual value, not just compensation
• Total comp summary includes base, bonus, equity, and benefits
• Equity explained in plain language with current value estimate and vesting schedule
• Offer letter includes start date, contingencies, and expiration date
• Negotiation approach is tailored to the candidate's specific ask
• Offer expires within 5-7 business days