
How Much Should Startup Employees Earn? Wealthfront Tells Us With A Clever Tool - protomyth
http://pandodaily.com/2012/09/18/how-much-should-startup-employees-earn-wealthfront-tells-us-with-a-clever-tool/
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lifeisstillgood
Am I reading this wrong - out of 8,000 employees surveyed, no-one had more
than 1/10th of 1% of equity.

That's a nice pension contribution not an equity share.

If you were in facebook at that level, you might get a house. But really why
is that level of equity share of any influence in anyone's hiring equation?

Or am I missing something?

~~~
potatolicious
Welcome to the ugly, ugly truth about startups. Employees have so little
equity compensation it's almost hilarious - and yet founders will hand out
0.1% offers and expect you to take huge haircuts for the privilege of owning a
tiny sliver of a 7-8 figure exit ( _potential_ exit, actually).

Having seen the stock and bonus structure at Amazon and Google, I can
confidently say that your expected outcomes are _considerably higher_ at a
top-tier tech company than at your average startup.

Sometimes I wonder where all of this "take a haircut for equity" advice is
coming from for employees. It's patently terrible given the amount of equity
that most deals involve.

~~~
pork
I'm sorry, do you mean "paycut" or is this some sort of idiom I'm not familiar
with? What does hair have to do with it?

~~~
lifeisstillgood
Haircut is usually a term for taking a reduced return on an existing
investment that is otherwise unlikely to pay off - for example many European
banks have taken a haircut of upto 50% on Greek government bonds, otherwise
the greek government would leave the Euro, default anyway and take its
chances.

Said haircut of course then stuffs their balance sheets, so they need bailing
out, from for example Spainish government, which then cannot payout its loans
and threatens a haircut to its investors. Who are the same damn banks it just
bailed out.

This leads to two situations - one ECB chief saying it will pay anything to
anyone to stop this idiocy, just ask. And two, the philosophical approach to
wealth "hair today, gone tomorrow"

------
BrandonM
The submission is mostly-useless blog spam around a cool tool:
[https://blog.wealthfront.com/startup-employee-equity-
compens...](https://blog.wealthfront.com/startup-employee-equity-
compensation/)

~~~
protomyth
Normally, I like to dig down to the first source, but I've noticed those
articles don't get the same attention as submitting from "the big sites". I
submitted the original source for a lot of today's A6 articles, but it got no
upvotes and only one comment.

Looking over my submission history, the original source rarely gets the
attention, and the rewrites articles get a lot of upvotes and comments. I'll
keep alternating to see if there is some secondary pattern.

------
jstultz
From the actual Wealthfront page:

"I illustrate the importance of growing the size of the pie to one’s share of
pie to my entrepreneurship students at the Stanford Graduate School of
Business by reminding them of the formula for a circle’s circumference versus
its area. The formula for circumference (a proxy for share of pie) is linear
(2 πr) vs. the formula for area, which is exponential (πr²)."

It seems to me that the value of growing the size of the pie as well as one's
share of the pie is pretty easily understood and not in need of an analogy.
But yet, this guy has decided to use one, and it is terrible.

Not only is it quadratic, not exponential (a relatively minor detail), but
what on earth, exactly, is the radius meant to represent in this analogy?

~~~
confluence
The bullshit you buy when you became a startup employee. Big companies grow
their bullshit in linear time - whereas startups are exponential (whoops - I'm
a wealth manager to stupid to do basic maths - of course I mean quadratic).

Seeing these math flaws make me wonder if most wealth managers are, in fact,
morons. I'm guessing they are - otherwise wouldn't they be making their own
wealth to manage?

Oh wait - this is how they are going to do it - ride the tech bubble and
impressionable young millionaires to make their fortune.

Clever girl (Jurassic park reference).

/sarcasm

------
confluence
> _We know Mark Zuckerberg did not build Facebook to get rich. His vision of
> “making the world more open and connected,” is Facebook’s real raison
> d’être._

Sounds like ex post facto rewriting history bullshit to me.

You start companies to make money (otherwise you'd start a non-profit). You
may or may not have other reasons for starting the company. However saying
that you didn't want the money after you become rich is false modesty and a
form of social signalling.

Founders may or may not want to change the world - but they unequivocally want
to make a lot of money regardless of their other reasons.

Indeed, most of these other reasons should be classified under the "reality
distortion field" umbrella.

These are used so that founders can say "Come with me and help me change the
world!" - when what they really mean to say is "Come make me filthy rich and
get paid less for pleasure of doing so you ingracious B player!".

Psychological arbitrage is a real factor in start-ups and a lot of social
negotiation. Be careful when dealing with others and remember - everyone is
trying to screw you in some form or another (see Facebook founder fight over
rights to stock).

Trust no one (this is a PR piece and I'm 100% biased).

~~~
aidenn0
There are exceptions; Elon Musk clearly started SpaceX because he couldn't
afford to develop the technology at a non-profit. Similarly it is common for
well-off people who are retirement age to start a business that has no
possibility of making any significant money just to have something to do.

------
rabidsnail
Why would I use this instead of the BLS data:
<http://www.bls.gov/ncs/ocs/sp/ncbl1627.txt>

Search for "Software Engineers, Applications"

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urish
Could someone help me understand what is meant by job levels 1 - 5 ?

~~~
chrisa
It's a fairly common way to do advancement in large companies, and is usually
based on experience. "Software Engineer I" is entry level, "Software Engineer
II" has 3 – 5 years of experience, etc.

~~~
mcherm
Can you fill in "etc."? I'd be interested to know what definitions they used
for the levels (and whether it was consistent across different sources of
data).

~~~
Evbn
Beyond II (intermediate dev, not a college hire, the majority of working
engineers) there is no meaning beyond "suitably impressive resume or
reputation at the employer".

------
rbellio
So, am I right in assuming that this does not clearly reflect that early stage
in development when there are less than 20 people in your company and there
are individuals with multiple roles? I understand that there's a 6-20 group in
there, but what happens when your software engineer is also your
administrator, QA and tech support and your CFO is also your sales developer
and sales engineer.

Cool graphs though.

------
peacemaker
I guess I'm doing something wrong according to this tool! I recently moved to
the bay area and as a software engineer (I'd say level 4-5 on this tool) I'm
earning nowhere near the numbers this tool is showing. No equity either...

Are these numbers a true reflection of the compensation levels?

~~~
moocow01
Id say from being involved with hiring in a few different spots that they are
definitely on the higher side but not insanely so. There are a lot of jobs in
startups that are quite low on salary but higher on the equity side (or
atleast thats what the pitch is) and those may not be as represented here. The
shock to me was how little of difference there seems to be in salary based
upon location - with cost of living put into the mix it makes me question
being in California

------
SG-
I was hoping to read some real details instead of a simple paragraph and this
tool. My opinion is that if you're a startup and you hire some people that
don't get a share in the company, you're going to have to likely pay them a
decent salary and not make promises of wealth one day. You'll also have to pay
them more than you plan on paying yourself even if you're more qualified since
you are getting more out of it if it succeeds.

I worked for someone that started a small company (we were 2), I was simply a
contractor/employee. The problem was and why I left was that he treated me as
an equal in terms of responsibility even tho I had no stake in the company.

------
exxec
I'm from Germany, and 100k$ sounds enormous to me. This are saleries only top
tier manegement is getting paid. But I'm curious about your additional costs
like health insurance, unemployment insurance and so on. Also I'm curious
about how much taxes you have to pay and whats a common net-salery (right
word? opposite to gross^^)

~~~
donavanm
After taxes, insurance, etc figure $65-70,000 net or "take home". Then you can
invest up to $16,000 with deferred/sheltered taxes for 401k (private pension).

------
chudi
So if I moved to SF and work in the same start up that I'm working right now I
would be rich by my country standards.

~~~
NonEUCitizen
Your rent would go up a lot. But if you are careful about other spending, you
can probably save up some money.

------
at-fates-hands
This is actually a pretty interesting tool. Not sure how accurate it is, since
its telling me I should be making the same salary I've made at large
corporations the last two years.

Based on the interviewing I've been doing, most of the start-ups around here
(Midwest) were offering close to 30-40K less than my corporate gigs.

~~~
svdad
In SF Bay area, my experience in the last year or so has been that salary comp
is pretty much the same between start-ups and big companies, the only
exception being super-early-stage startups (i.e. pre-series A) where they
really don't have the money yet. The difference is that at bigco, they add
bonus and equity grant that have real value, while at startup, they add some %
of equity with unknown value. Companies like Amazon and Netflix are also
different because they adjust the base salary up to compensate for their
different equity award policies.

~~~
Evbn
Amazon pretty famously does not adjust base salaries upward compared to other
big companies.

~~~
svdad
Yeah, I think I misspoke somewhat, but not entirely. The Amazon comp
structure, at least for the first four years after you join, as far as I know
is something like this (and take this with a grain of salt, I haven't worked
there):

Y1: Base + large annual cash (non-perf) bonus + 5% stock vest + optional perf
stock bonus

Y2: Base + large annual cash (non-perf) bonus + 15% stock vest + optional perf
stock bonus

Y3: Base + 40% stock vest + optional perf stock bonus

Y4: Base + 40% stock vest + optional perf stock bonus

So yeah, they don't adjust the base upward, but they do give you extra cash in
the first two years to compensate for their back-loaded stock vesting
schedule. That's what I meant.

------
clarkmoody
I would really appreciate a link to the page with the tool itself instead of
to the blog post describing the page with the tool ;-)

------
dsolomon
What a load of crap.

If companies paid that much then unemployment would be next to nil.

~~~
jasonkester
I've noticed you make comments like this every time salaries are mentioned
around here, with usually the same reception. You seem to honestly believe
what you're saying, and you seem to be genuine when you say that you've
observed lots of low salaries in your portion of the industry.

<http://news.ycombinator.com/threads?id=dsolomon>

But you'd benefit from knowing that it's not like that, pretty much anywhere
else in the developed world. Real developers really are making six figure
salaries writing code for a living, working 40 hour weeks, no tricks. More
important to you, specifically: _You_ could be making six figures as a
software developer. You just need to step out of your niche and go find a job
for a public sector company.

Given your comment history, I doubt you'll believe me, or any of the others
here replying to you, or the dozens of people who have replied to you over the
years. But it's true. We look forward to seeing you out here some day.

~~~
strlen
I think you meant "for a private sector company".

What dsolomon is saying sounds completely incredulous to me: I've yet to hear
of a single company that requires employees to purchase their own hardware or
software. This is true not just of the top tier SV companies, but of _all_
companies who are aware that building software is their core competency.
That's simply the difference between software being a cost center vs. a profit
center.

~~~
dsolomon
Citation needed.

~~~
strlen
1) Re: equipment

Typing this on a work supplied Macbook Pro, 16gb of ram, 256 gb SSD. Cost to
me: $0.

I am ssh'd into my development server which has 78gb of ram. Cost to me: $0

I have IntelliJ Idea Professional (price comparable to -- if not greater than
Visual Studio) open in another window. Cost to me: $0. I didn't even need to
submit an expense report, just asked IT to provide me with a license.

I have Windows 7 installed in a VMWare Fusion VM. In this case, I didn't even
need to request it from it, there was a self-service application that I used
to install it. Cost to me: $0.

I have an Android Nexus Galaxy 4G LTE phone on Verizon for work purposes.
Could have an iPhone if I chose to. Cost to me: $0.

Google is my employer's primary talent competitor, so I can't imagine they
(per game theory) can be any different when it comes to this. I have not
worked at Google, but I do know anecdotally (many of my friends work at
Google) they're very generous when it comes to equipment.

2) Re: hours/flexibility. I am currently at home typing this and it's ~11:30
am here. I can chose to work from home where are no meetings scheduled and can
come in/leave whenever I'd like. Earliest recurring meetings I've ever had
scheduled had been at 11 am.

3) Re: salary. Look up my employment history (titles and employers), then see
Glassdoor figures (same title at same employer). They're actually lower (on
average) than what my own base salary had been at those companies.

You can choose not to believe me, but in this case, you're simply being
paranoid.

tl;dr Get out of defense contracting/working for the government or traditional
(non-technical) corporations. You'll fare far better working for private
sector technology companies.

