Why would anyone competent enough to work at one of these companies choose that path instead of being a founder?
You can titrate the amount of startupness you get in your job by
the size of the company you join. If you're the first person hired
by a startup with one or two founders, you'll probably be a de facto
cofounder. Whereas if you get hired by a startup with 30 people
you'll have a lot less risk and stress, but it will probably still
be more interesting than going to work for a big company.
Another reason is that luck (usually in the form of timing) is a
big component of startup outcomes, so in some cases it can be a
better bet, measured both financially and by how much effect you
can have on the world, to join a startup that is obviously taking
off than to start your own. All the first several hundred employees
at Google, to take an extreme example, probably made more money and
had more effect on the world than they would have on average by
starting their own companies.
Plus you need more than ability to start a
startup. You also need an idea and probably a cofounder. Joining an existing
startup can be the easiest way to get both.
Business is a very particular discipline in its own right. While the technocrats and bureaucrats of corporate America's professional management and executive corps have certainly done enough to exaggerate its exclusivity and idiosyncratic character, the fact remains that it's a rather distinct kind of thing. The qualities that make one a good programmer, a good technologist, a good innovator, etc. aren't necessarily the same qualities that make one a competent or happy business owner, especially when, as a matter of practical necessity, much of the everyday workflow is tedious administrativia or other things banal to engineers.
I'm all for the idea that intelligent, confident and well-rounded people are better off doing something more interesting than fighting mediocre fights in the cubicle trenches, but that doesn't mean they're all--or even a majority of them--are entrepreneurially disposed per se.
Plus, as has been pointed out elsewhere in this post, joining early often brings equity with it, which, from a certain point of view, is quite an entrepreneurial proposition.
If nothing else, it's simply not mathematically possible for everyone to be the chief in the driver's seat; many technical endeavours seriously require people to build out and scale.
I think this is my favorite metaphor ever. (I'm titrating it all the way down to homeopathic levels myself...)
The latter requirements (interesting project, high amount of autonomy, non-capricious requirement) does, however, exclude the typical "I'm an alpha-male with an MBA who can't code, I need a beta-male coder to implement my vision"
situations. I have a very strict requirement when joining other companies: I can't absolutely be the smartest or most technical person in the company.
Several times I've worked on side-projects/ideas that could bloom into something and I am not opposed to starting a company to pursue that, along with another technical founder. Being a founder also means the ability to completely set the technical direction, something you can't quite get when joining as an employee (corollary: if you can't set the technical direction of a company, you're not a founder).
Success in a start-up requires drive, solving fascinating technical problems drives me. I've absolute zero interest in being involved in media or enterprise-y start-ups (either as a founder or an employee), no matter how much money is dangled in front of me.
I like to code and I'm not big on risk but I hate bureaucracy and bullshit even more. So startups are a great fit. They're generally places where people get things done.
Common in a group of entrepreneurs? No! Common in the workforce of the average company? Definitely.
That implies a certain apathy that I didn't (intend to) convey. Strlen's comment is a good expansion of what I said: http://news.ycombinator.com/item?id=1346626
Simply out of curiosity, what range equity stake would a programmer get? More specifically, if there is a $10mm exit, what would a programmer stand to make? How about $100mm? I know it varies by company, vesting, additional funding rounds, and a bajillion other factors. I'm just curious as to rough order of magnitude.
While I think it's a great idea to work for a startup because they're exciting environments which offer a lot of learning experiences that big companies do not, "big exits" for non-founding programmers are exceptionally rare and are too easily oversold.
In a $100m exit you'd probably have been diluted more, because
the company would probably have taken VC funding to get that
much. So suppose your 10% was diluted by 2/3. Then you'd
get $3.3 million.
This is assuming you're the first person hired by the startup,
of course. The amount of equity you get decreases
by time to a power. Someone who joins the
company after 6 months would get way less than half as much as
someone who joins after 3 months. It's rare
for a series A funded startup to give more than 1% to a
(Obviously this affects the risk/reward trade-off)
It's best to look at this as a theoretical upper bound, not a likely outcome. Usually the investors, founders and board members fuck around with the corporate structure, option splits and preferred vs. Common stock so that the employee options are worthless, anyway.
That's not common in successful startups. No successful startup would want to alienate their employees this way. It wouldn't be worth it, just to recapture a few percent of stock.
Common stock only gets massively diluted when a company is in trouble. And usually startups in trouble end up dying, or getting bought in a fire sale, so in those cases the equity isn't worth much anyway.
Edit: I think you edited your post as I made mine and made my point for me.
I don't agree that "usually startups in trouble end up dying, or getting bought in a fire sale." I don't know if anyone has a big enough data set to give us the "correct" answer.
But if you talk to thoughtful, experienced VCs and entrepreneurs who have seen many companies through their whole lifecycle (birth to IPO and beyond), I think they'll tell you that a lot of the successful startups get in significant trouble along the way. And if that trouble coincides with the need to raise a round, common stockholders get diluted.
Preferred stockholders have anti-dilution, pro rata rights, protective provisions, and cash reserves to protect them.
The reason to work for a startup as an early employee is the fun (if you like working 12-14 hour days on cool stuff) and the experience. I'm guessing having a successful startup under your belt makes it a LOT easier to get your own company funded down the line. Also, people can end up much higher in a large organization earlier than they could have without some serious corporate climbing.
Of course they say so. Deloitte says so too, and Wachtell, and Cravath, and every other high pressure professional outfit. Doesn't make it true.
> There has also been research to suggest that working that much is anti-productive.
Yeah but most of those are in different circumstances. It all depends on where the motivation comes from. If you take a wage slave and whip him into working 80 hours, while paying for 40, and not dangling any form of carrot in front of him/her (making partner), of course productivity will go down. If you've got a product you believe in, a vision to make it come true, an innate drive to succeed no matter what, and no personal life, you can work 80 or 100 hours a week for months on end and get the work of 5 or 10 people done in that time.
However, if you want to get a bit of experience working at somewhere where you can work on many systems at massive scale, want to jump a few levels ahead on the risk curve, or are interested in first seeing what a startup is like from the inside, then Justin.tv, Airbnb, Weebly, Scribd, Dropbox or any of the others are some pretty good places to do that.
I'm currently a founder of a company that is likely to have a pretty good outcome in the next not-too-long. I've learned so much about what I don't know, that I've determined my next gig will be working for somebody who can mentor me and help me climb to the next level of competence.
He wants to be a founder deeper in the future, but wants to work under a serial entrepreneur first, for the experience.