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Ask HN: Pros and cons of working at a startup in 2018?
1139 points by snowmaker on June 11, 2018 | hide | past | web | favorite | 939 comments
I’m Jared, one of the partners at YC. When I joined YC, one of the things that I most wanted to do was to help make hiring and getting hired suck less. I have a business reason and a personal reason for this. The business reason is that YC's job is to help the startups we fund, and helping with hiring is one of the biggest things we can do. The personal reason is that before I joined YC, I did a lot of hiring for my startup, Scribd, and for me it was the most rewarding part of starting a company. Some of the people who joined us had life-changing experiences - they moved across the world, jump-started a new career, grew with the company and became leaders, or used their experience to start their own successful companies. I wanted to help more people have those experiences and not feel stuck in jobs where they don't have much impact.

So, a few of us at YC have been building Work at a Startup (https://www.workatastartup.com/), with the goal of making it easier for startups to hire, and engineers to get hired, at a YC company. We started with the same insight that everyone else has: the hiring process is broken and inefficient, and decided to look for ways we could make it better for everyone, at least within the YC ecosystem. For example, we could get rid of the burden for applicants of having to send a resume and cover letter to every company by creating a simple way to apply to all YC companies at once.

While working on this, though, and talking to engineers and HN users about it, I realized that there's a more fundamental question: why should people want to work (or not!) at a startup in the first place? This question has a history and has gone through several phases. In the early heyday of YC and HN and pg essays there was a ton of enthusiasm about startups, the freedom and creativity and opportunity they offer. In more recent years, when I read HN threads (like https://news.ycombinator.com/item?id=15916350, to pick one close to home), it's common to see people arguing that, for early employees, joining a startup isn't such a good idea. And frankly, some of their points are good ones. There are issues that need to be fixed. One of the big things that YC did in the early days was move the needle in favor of founders. That was an adjustment that badly needed to happen, and it did happen. I think the next phase is to move the needle in favor of early employees. Just how to do this is one question I'm hoping we can discuss in this thread.

So, HN: what are the pros and cons of joining a startup in 2018, particularly as an early employee? And where there are cons, what would fix them? If there are concrete ways we can find to shift the balance, YC is interested in doing that.

I was the first engineer at a TechStars startup that did have a successful exit (I was there about 5 years before the exit). If there is something I want YC to know, it's this:

You helped create the culture of founder empowerment. You have the power to evolve that narrative to those that sacrifice as early employees.

Tell the world that early employees deserve a lot more equity.

Tell the world that early employees contribute to the success of those companies and deserve to have that help their careers.

Because here's what I see are the pros/cons...


* I was forced to learn with no one else to help me. Not sure I'd be as good of an engineer without that.

* I got exposure to a lot of things I wouldn't normally be able to control, which propelled my career going forward.

* I built the seed to make connections with people in the startup community which I still leverage today for my own consulting business.


* I was paid terribly, and this was 8 years ago, so it was even worse than now.

* Even with the exit, I basically made enough money to recoup the money I should have been making at a bigger company, so it's net neutral.

* No one cares about that as a success for me. I'm surprised no one has brought this up. I was the 1st engineer for a company that had a successful exit for TechStars. Zero recruiters, companies, etc, have ever even asked about that company or my connection to it other than the fact they are reading it down on my resume (and when they do see it, they barely take note of it).

And for the record - I have no beef with the founders. But the culture around how to pay and credit early employees is institutional and was not their fault. They walked off with huge payouts and credit for their success, and I walked away with a catch-up check for missed EV and no one cares that I played an instrumental role in getting them where they are today.

But YC has the power to change that. I reiterate from above: you have the power to tell the greater startup community through your words and your actions that startups should provide better equity to early employees and make it so that the success of a company is shared far greater than that of just the founders.

Maybe engineers are more replaceable than founders? That would explain why founders walk away with a lot more cash and credit. After all, there are a lot of good engineers who probably would do a good job as an early employee. And relatively few people who have the vision, motivation, and skill to create a successful company.

That said, I sometimes feel that being a successful founder has less to do with skill and more with being at the right place at the right time.

Would be interested to see what others think.

This is such a laughably unprovable claim. "Few people who have the vision, motivation, and skill" is equivalent to saying "few startups succeed". It's just a truthism. It's equally likely that few companies are lucky enough to have a talented and motivated team of engineers.

Finding someone who thinks they have it all and will be the next big billionaire is easy. Finding a group of people who know what work needs to be done and can put their nose to the grindstone to match the "vision motivation and skill" is the hard part. Just look to google, the holy grail of tech visionaries. No one doubts that Page and Brin have vision/motivation/skill but they readily admit that their initial team of engineers is what carried them and they rewarded them like it.

What you're advocating probably feels good for the ego though... everyone loves imagining having demi-god-like status. For me it's always interesting to look at what people are fighting for. "The founder deserves 100 million, not 80 million, pay the engineers less!" At the end of the day it's just greed.

I get the sense that with the right set of employees all a founder has to do to be successful is not to run in the way. One might argue that in that case they were so brilliant at hiring they deserve the payout. Anyway, who is to say where the line is drawn between founders and employees re: who contributes most? As long as both sides know what they’re getting in to nobody is taken advantage of.

As an engineer of middling competence (I don't do poorly, but there are people smarter than me), I think you're wrong. The reason engineers receive less than they're worth by and large is because A. they cannot negotiate very well and B. they do not know their own worth. If you combine these two with some idealism, which is the only real reason you'd work for a startup (high-risk, low-reward work - if it's not for ideals you have no reason to do it), you get a prime exploitative opportunity for any employer.

Suppose getting a good engineer would contribute $2 million / year profit to a company. That company would offer a higher salary than the going market rate, and thus steal engineers from competing employers (in fact, that's exactly what FB, Google, LinkedIn, etc. do: you can ask them to match or beat the other company's offer). Since regardless of how badly engineers negotiate, they would still be attracted by a higher offer. Then other companies would also offer higher salaries, to avoid missing out in hiring. This cycle won't stop until compensation gets to a good fraction of that $2m/year; say, $500-800k/year or so, leaving room for overhead (office rental, benefits, etc.) and profits. The fact that it doesn't happen tells me that me that most engineers probably aren't worth $2m/year to companies.

I do agree with your last point: engineers are often idealists and/or they have very strong preferences about what they want / don't want to work on. So they may often be willing to give up much better comp in order to satisfy such preferences. That's why startups get away with paying maybe half of what large corporations pay. Still that's not nearly enough to explain the gap between engineer and executive compensation.

Hear hear all you young uns. This is what happens when you work your ass off for someone at low cost. Never ever work for less than you are worth. Your income minus stock should always be par or above with the market.

I agree, especially on your last point. Even when I think of my own career highs and lows, most of the highs has to do with lucking out with being given a chance or opportunity. By contrast, most of the lows has to with being denied a chance or opportunity. Of course you have to take advantage of any opportunity and work hard for it to pay off. But being lucky enough to be in the RPART is, huge!

Interestingly YC has encouraged startups to offer more equity to early employees and I'm not sure it's had an effect. See pg's recommendation in http://paulgraham.com/equity.html

I vaguely remember reading that article while I was at said company making basically the same salary (with the same company valuation at the time) and realizing my equity was far below that and scratching my head.

If I had PG's recommended equity instead of what I had I would have gone from neutral EV to basically pay-off-my-house money. Like I said, it's things like these that make me never want to work for a startup again and only come in as a founder.

If it had an effect, it would be apparent after 11 years.

The thing to really appreciate is you are one of the ones that got lucky. The majority would not be able to recoup the money they would have made by not working for a start-up.

Essentially a start-up is a school, don't join if you don't intend to learn a lot while getting paid a little so that if one day you want to do a start-up of your own you will at least be a little bit prepared.


Its all about the founders. The VCs don't care, the acquirer doesn't care and largely, the industry doesn't care. I have been at 3 startups and they all feel more like "come change my world" instead of "come change the world".

Equity is so lop-sided that its almost laughable.

I earlier thought that a successful startup exit actually carries weight on one's resume but that's only on the founder's resume.

Nobody cares in SV if you were an EE at a non-unicorn startup with a reasonable exit. After an exit happens, founders still get to keep their badge of honor and propel their careers, not the EEs.

I would recommend making a distinction between a startup that manages to get acquired as a small team for building a good product (Instagram is an extreme example... but I know of a few startups that few here have ever heard of where the outcome for employees was substantially better over the same period than if they had worked for Google or Facebook).

There is perhaps a warranted disdain for the behavior of founders on this thread, but I would also like to point out there are founders that genuinely care about the people on their team and would either ensure the equity was sufficient upfront or--if the total size and scale of the startup was miscalculated initially such as assuming the startup needed 100 employees when it really only needed 10--ensuring they receive ample compensation from the acquirer or not taking the deal. These types of founders do exist too, and I think there is an onus on an employee to figure out what kind of boss they have signed up to work for. If I had a few interactions with Steve Jobs, for example, I'm 100% sure I would have quit.

What's an "early employee" for you? (That is, who gets "a lot more equity?")

I ask because I've noticed with some high-dollar acquisitions a lot of times "engineer #50" makes his/her "F-You Money" on the acquisition, but having been "engineer #2" and "#4" and even "#1" (sadly, no big exits) I am skeptical that #50 took on much more risk or contributed more than, say, #200.

Pre-series A. Once Series A comes into play, you can get paid "market" - which is to say, the normal rate outside of FAANG.

"Market" is weird to measure, because you're not really asking what market rate is, you're asking what your baseline is. If you can get a FANG job, the number you care about is effectively the average of what FANG would pay. If you can't, then it's effectively average rate outside of FANG.

AND, arguably, "market rate" in SV is below market rate elsewhere, especially when you factor in cost of living.

So anyone who is good enough to work for a big company you have no interest in?

#2-#9 (roughly) are taking on more financial risk (this corresponds to the startup's market risk).

#50 is probably being hired for very specific skills and experience (to mitigate technical risk) that increases their opportunity cost considerably, and you aren't going to get an engineer with a track record of scaling operations like yours unless they get a decent salary and a shot at a significant upside.

For certain skillsets and track records, when a startup is having severe growing pains, it becomes a sellers' market.

The trick to this is find a company with large upside potential that is either about to IPO or has just recently IPO'd.

The list is small, but there are some obvious choices, even now.

Tangentially, I _really_ lucked out. I had other options that were lead engineer, or engineer #2-4, but this was unequivocally the best choice. The work is more interesting here too.

I had an extremely similar experience, but I do have a beef with the founders for not compensating me fairly with respect to the work I did in helping them create something they could eventually sell to a large company. [Before anybody throws shade, the site was developed by a Flash dev, a Java team for webdev, and me building the backend and running things as a solo sysadmin.]

None of these people are your friends, get as much as you can.

That doesn't have to be true, there are many decent and honorable people that decide to start companies. But I do certainly think you need to walk away as soon as you feel a founder doesn't recognize or value you or your contributions

My experience does have to be true, but sure, not everybody has to be like this. They often are, though.

I agree. There is a culture that founders are special but everyone else is replaceable which makes it self-fulfilling. If a founder leaves, it's bad and VCs won't invest in the startup - However, if a top engineer leaves, no big deal, they're only an engineer...

For me personally, I have a really bad perception of incubators, venture capitalists and big tech corporations. It's all a zero sum game to increase concentration of wealth in the hands of the few but there is little meritocracy behind it.

In a high traction startup, founders are often the dumbest people in the company but they get treated like they're genius visionaries. I've even heard really smart colleagues/engineers say stuff like "A good CEO needs to be enthusiastic and shouldn't be too smart" - For me this sentence means that we've accepted that the system is not a meritocracy but we've found a way to rationalize it.

Working at a startup and I feel you a 100%. Won’t name the startup but it seems we’re doing better after CEO-founder left.

Thank you for your comment. I am a founder currently deciding how much equity to give to our beloved first engineer. Any tips are welcome!

A baseline would be making up for the employee's salary reduction with equity. If you're taking VC money then you have some dollar value per share to work from, otherwise base it on 3-5x annual revenue linearly projected from historical monthly revenue.

Formula: (Fair total dollar compensation - agreed salary) / (dollars / share) * 4 yr vesting

A sliding scale for salary : equity is built in and you can compensate based on hire desirability or local market conditions by weighting dollars per share appropriately. This system is fair as long as both the employer and employee agree upon the share value (some information asymmetry there benefiting employers that decent companies will try to correct for).

Saying this as startup first engineer ;)

PGs comments on equity resonate with me, and actually align with what I would have wanted. One of the replies to my original comment actually has the article.

I think the amounts should flow from the right attitude: that they are joining the team to help it succeed, rather than they are being hired to perform a task.

Not everybody that is an early employee adds to the company value! Some people are not so bad they get fired but they are living off of other people's input. Before you start giving away more equity to early employees, you need to seriously think about how you are going to make the employee earn that e.g. if they leave before 3 years, they lose it, if they fail appraisals, they lose it etc. Many companies go bad because they do give away too much equity then there's not enough left for subsequent raises.

Many companies go bad because they do give away too much equity then there's not enough left for subsequent raises

Citation please, because this sounds outlandish.

Selling equity to employees for their time is exactly like selling equity to investors for their money. Founders can only dilute their stake to a certain point before they’ll own too little to make fundraising worthwhile.

For a rough example, if the company gives 20% to early employees and 20% to investors, and want to raise $1MM A round at a $5MM valuation, they’d dilute down to 48% already. If they’d given 10% to early employees, they’d dilute down to 56%. That majority control could be significant. You can extrapolate lower numbers if a company needs significant cash and has to raise at a low valuation.

Hopefully the mechanics make sense and yes, there are companies that give too much away on paper and hurt the value of the equity long term because they didn’t have room to raise money or grant shares without giving up personal stakes.

100% correct and I say that as a startup founder that thinks SV startups ripoff their early employees.

As the startup gets traction and more money from VCs, wouldn't it be wise to give raises in cash to early employees?

Most companies don't give 50% raises when you finally raise money (which is to say, most companies won't simply bring you up to market if you came in super early).

No, but if you came in super early, wouldn’t you have (negotiated at the start) more equity anyways? A super early employee with decent equity ought to be treated as a late stage founder - so if the founders don’t take 50% raises, neither should the super early employee with decent equity. It would of course be silly for someone super early to not negotiate significantly more equity than the usual couple of basis points (0.0x % of the company)

> If the founders don’t take 50% raises, neither should the super early employee with decent equity.

You're missing the point of my original post. If a founder owns x100 the equity, why should an early employee be bound to the same salary restrictions?

If anything, since I have 1/100th the equity, that means I should be able to get a multiple of some raise when series A comes through.

Remember, equity is a lottery ticket (especially for an employee). If you're a founder, even if your startup fails, you can get a job as a highly-paid EIR or your founder reputation will allow you to join some other startup in a high level role (VP, Director, etc). This does not apply for engineer/employee #1.

If founder has x100 the equity of employee #1, employee #1 screwed up.

Welcome to this entire conversation on why early employee compensation isn't fair.

My point is Employee #1 should’ve asked for more. 1% isn’t enough. Maybe 5 or 10% is.

Yes, let's blame the person that structurally has less power in the dynamic for having that power imbalance used against them.

Of course you can try to negotiate for more. Enough people want to work at a startup however that if you ask too much, you'll get passed on, and they'll just hire the next candidate who doesn't act so entitled to a meaningful piece of the founders' pie. It's exactly the same phenomenon that lets the big game studios chew up and spit out engineers: there's always someone else willing to take the job for less, or even just put up with the status quo.

That's a massive part of the problem, and telling people to negotiate better doesn't address it — or even acknowledge it.

Well, but then don't look for generic cookie cutter startups that everyone wants to work at :) Go after the startup where you as employee #1 are uniquely positioned to negotiate for. If you're employee #1 and you just graduated from college and this is your first job, and you have no special abilities beyond every other CS graduate across the United States, then yeah, you really don't have much negotiating power... nor do you at any other large company like Google either.

Let them take the worse candidate then. The startup is probably going to fail anyway. Jobs are easier to find than good engineers, especially your first few engineers. That requires taking a leap.

I’m not too sure why you’re being downvoted, but it is probably because you phrased your statement a bit awkwardly.

But you’re right that (if there is only a very small number of co-founders) employee #1 should never be accepting 1/100 the total equity the founders have. Employee #1 screwed up in negotiating at least half way decent deal for themselves.

I was a bit blunt.

However, it is up to potential employees to refuse offers that are not in their best interest.

They aren't treated as founders of any sort. They get paltry equity and then don't get raises.

They do get raises. They just have to be persistent. Most engineers don't speak up and are bad negotiators.

And most of the few that do happen to be arrogant entitled pricks. People on this thread who're saying that the founders should try and be fairer towards engineers might actually have a point, although until recently I’d not have agreed with that sentiment myself, and might in fact have argued against it.

TLDR: 30 years experience, I learned: don’t go work for a SV style startup. Be a founder, even if you have no experience. Don’t take VC money for more than %10 of your equity in total. Better off, right out of school, founding a company and failing than working for a startup, especially if they take VC.

It’s lopsided against the founders too. They might walk away with big checks but the risk is too high.

This is the problem with the SV model. VCs take way too much off the table, founders and employees are not adequately compensated.

This is partly YCs fault because they basically groom startups and usher them into the maw of VCs while glorifying the exploitative VC model. But that model makes YC partners rich st startups expense.

Founders and employees in the SV model sell themselves way short. This is also why so many startups are BS non-innovative companies— they are chasing funding rather than the future.

Better model: - slicing pie with no bonus for money contributions- this rewards people fairly. - crowd funding, consultancy funding, boot strapping, angel money with no liquidation preferences, and no VC termsheet BS.

Having founded and worked for startups for 30 years, I won’t ever take a meeting with a VC again. I have not met any good ones (and people who say theirs is great are generally just kissing ass to keep money flowing.)

Worse- the number one cause of failures of startups in my experience is bad strategic decisions forced on them by VCs. The number two cause is conflict among the founders, and the number one cause of that conflict is VCs trying to force a bad decision in the company (and one of the founders realizing it.)

This is partly YCs fault because they basically groom startups and usher them into the maw of VCs while glorifying the exploitative VC model

I believe this is a part of culture that VCs are creating. I've been interviewing lately and I've noticed certain personality traits among YC founders that I'll call "Business Sheldon." I saw it a bit 5 years ago when I went to Startup School, but it's pretty pervasive now, so much so that I see it as a red flag. If you've seen the latest season of Silicon Valley, the character that Dan Mintz played touches upon this: https://www.youtube.com/watch?v=fzbwLktN60c

> Be a founder, even if you have no experience.

Easier said than done. Lots of people leave school without the faintest clue what they want to do. Getting a job somewhere gives people training and experience and maybe even credibility before they strike it out on their own.

Me and my previous co-founder founded a startup with both of us having no experience. It was a very bad decision for the company, but extremely valuable for our personal growth. It also allowed us to skip the biggest parts of the usual career ladder.

It's certainly not the best route for everyone, but definitely one worth considering.

It's great for you. It's pretty bad for any employees who have to pay for your mistakes as you get your personal growth on and skip career ladders.

I think being a founder is a great option right out of school--if you are working for yourself, responsible for your own mistakes, and not actively harming anyone else in your quest for personal achievement.

FWIW I've worked with "experienced" founders who also had no idea what they were doing (in many but not all ways). There's never a guarantee that you won't be working for people who will make you deal with their mistakes.

Heck, there is no guarantee that you won't be working for someone like that in any type of company, regardless of "maturity" or sector.

Bad managers (and most bad management - from death marches to protoduction - can be boiled down to "makes the people who report to them pay for the manager's mistakes") exist even in supposedly mature companies with good corporate cultures.

Con of startups, these are the people you might end up working for.

What's good for your personal growth was other people trying to make a living at a company being run by people who don't know what they are doing. Maybe it's fine, but that level of uncertainty is definitely a con.

I very much agree with you (as someone who has since worked for such people too).

Luckily we mostly had temporary interns as employees, and I can confidently say that they had a good experience, as we are still in touch.

The biggest problems of the inexperience were that we had to ramp up our skills on the job (for me programming), including the mistakes you make there, which killed a lot of the runway, and the lack of business knowledge which ultimately lead to us running out of money.

> Easier said than done. Lots of people leave school without the faintest clue what they want to do.

The rest of the startup game - building a product, pivoting correctly, building a team, overcoming oowerful rivals - is such a huge challenge, that gaining entry level experience before finishing school is perhaps the most straightforward piece of the puzzle.

  Anyone can start a business, and anyone should.  The things you mentioned - "pivoting" "overcoming powerful rivals" - goodness.  How about simply starting a business that earns more money then it spends. Do that and you will learn most any lesson you need to know about being a "founder."

The economics of internet-scale software businesses make this harder than opening a hardware store and selling nails and rope for more than they cost from the wholesaler. It often does require lots of risk capital. If you don't have it, you need a rich partner who does. If you don't know any rich people that want to go into business with you, you need to employ people who provide this service at a price -- and often that price is that you, in effect, become their employee, rather than their partner. This is the silicon valley VC model.

It's possible to build "boutique" scale internet software businesses, but it's harder than ever, and you still need to be well-off enough to "risk" some time that you would otherwise be working on definitely-getting-a-paycheck type work.

In short "start a profitable business instead working for one" and "start a business that's profitable right away instead of taking VC funding" are both rather useless pieces of advice for somebody who doesn't have the means or background to do either.

There are of course more choices about what to do with your life. You should explore those too. Maybe you'd be happier as an auto mechanic or a nurse. That kind of work is available almost anywhere in the country so you won't have the "three body problem" of having to live away from your or your spouse's family, or both.

I disagree with your entire post. It has never been easier to start q business online or otherwise. It has never been easier to start a business with virtually no investment or financial stake. It has never been easier to learn how to start a business in most any field and never been easier to find customers.

I'm not sure what you are defining as risk or difficulty. I can list a dozen day-one-profitable businesses right here that a person could start before tomorrow morning for less than $100 investment.

You could start them with little investment, but your time is also worth (a lot of) money. That's not coming from anywhere if you work for any startup, including your own. You might make that money back later, you might not. In the end that is part of your investment and it's a gamble. If you do not have the financial cushion required to sustain you for the amount of months it needs to become profitable for you, you cannot do it.

Baloney. Those are excuses. If you have no money the opportunity to make some/plenty is abundant and all around you. Everything else is excuses and procrastination. You dont need other people's money. You need to sell something.

That would be great! What are they?

Buy a WHMCS license and a VPS. Go to YouTube to learn how to use it. Set up a simple brochure site. Join a $0 start fee affiliate program. You are now in the hosting business.

Too tough?

Spend $100 on a Beaver Builder license. YouTube to learn. You are now in the small business website building service.

Too tough?

Call a business and tell them you can help their local SEO for a price greater than $20/month. Once the check clears, get them an Advice local account. Pocket the difference.

Too tough?

Call a local business and tell them (true) that 92% of all visitors will seek out their business in a second source other than their home page. For $100 you will setup their Facebook page. For another 100 you will train them to post to it and reply to reviews.

Too tough?

Call a local company and tell them you can handle their social media strategy. If they have T, FB, LI, and IG then great. If not then charge 100 to build them. Signup for Hootsuite. Post to their accounts for the entire week on a Monday morning.

Too tough?

Call a small business and tell them that the number one way to generate repeat business is through a regular email newsletter to previous customers. Sell for $250/month. Signup for Outbound Engine agency program. Profit.

Too tough? Call a business and tell them that chat tech on the front of their site can increase lead flow by as much as 11x. Signup for Apex Chat account, charge $20 per less. (Apex charges you $10)

On and on. It's never been harder to start Facebook or Amazon or Google because we already have Facebook and Amazon and google. But divest yourself from needing approval and applause and you start to see one big truth: its really really easy to make a lot of money online.

> It's possible to build "boutique" scale internet software businesses, but it's harder than ever,

Can you expand a bit on the "harder than ever" point? I've observed a couple of phase changes since the 90s, but I don't think I've seen that particular needle move very much in the past ten years.

> Don’t take VC money for more than %10 of your equity in total.

Good luck man.

Build things for which there's actual demand and real hard problems are being solved and they won't need it.

Build Uber for X and rightly it'll fail without VC money.

Agreed. Yesterday, I replied back with similar sentiments. I was immediately down voted. I second that theory of yours where all the risk seems rational when you are one of the founders.


Why wouldn't you have beef with the founders? Their decisions left them rich and you with nothing in exchange for years of your life lived with excessive risk and a lower standard of living.

This is such a great area to work on.

The equity side is pretty rough. Founders are very sensitive about disclosing important information about company performance. They are sensitive about disclosing the cap table. Some will share info with investors that they don't share with employees. And they are sometimes trying to pitch optimistically and leaving out items that don't fit the narrative. So you end up with a very vague sense of where the company actually is when you are interviewing. A much better stance is "awesome opportunity, and these are our problems, come help us fix them". Standardization on more disclosure would push hiring toward a higher local maximum.

Something like Geoff's https://blog.ycombinator.com/transparency-in-startup-investi... for hiring companies. For workatastartup.com, you could say "if we make an offer, we'll show you this critical info". It's probably a bit much to expect companies to disclose this in public job postings.

Sam's thoughts on equity at https://blog.samaltman.com/employee-equity are spot on. Especially the 10 year exercise period.

Scenario one. You leave a company after 5 years. You think they will be successful but best case is 5 years before liquidity and 10 years is very possible. It will take most of your savings to buy the stock and pay taxes. You helped with the $20 million to $800 million valuation growth. Now you have no savings, and the money is still at risk because $800 million dollar startups die all the time. You get to bet all your savings that a die rolls 1-2 for 10 times your savings. Roll 3-6 and you lose it all. The expected value is great, but it's a pretty hard bet to take.

Scenario two. Your coworkers realize this and hang on at the company long after they want to move on. Now 20% of your team is just showing up and the company culture is dying. Everyone worries about retention, we should worry about over retention too. It's better for the golden handcuffs be "if I stay, I'll vest these options" rather than "I must stay to preserve the options I vested 4 years ago".

These and 10 other bad scenarios like them are definitely on the con side.

And so easily fixed!

Agreed re: transparency. I've had startups refuse to share what even the current valuation was (edit: even when actually presenting an offer!), let alone who has preferences and convertible notes and such. If I'm taking a substantial cut in liquid comp compared to BigCorp, I can't just treat equity as a happy little upside. I need to understand exactly what terms it is subject to.

As for equity amounts - if I have to assume your startup will grow at least 10X, without any further dilution, in order to break even on comp with a public corp, it's not a very compelling offer.

I've interviewed at places that wouldn't even disclose how long their runway was. I've even gone to work at one company that claimed a six-month runway and then ran out of money after six weeks.

The 10-year exercise is such a no-brainer. Just ask yourself, startup founders & investors: when you issue stock options to your employees, do you want them to exercise them or not?

If not, then what you're really doing is offering something you hope doesn't cost you anything and is therefore worth nothing. Good luck to you.

If so, then do everything you can to help them do it. Holding an employee hostage because in order to leave they have to write a check for a significant part of their life savings won't be productive. They're taking up a salary from someone who will actually be engaged and motivated.

In my experience, this definitely plays into individuals' job offer decisionmaking. At least the most sophisticated ones, which are usually the ones you're most interested in recruiting.

I don't agree with that... I would want all the early employees to be rewarded for taking a chance on that. I would want to go the other direction and give restricted stock (which can be early exercised) when the valuation is low and with less than 10 year vesting (such as the standard 4-year vesting with 1-year cliff), it's in the employees' best interests and costs the company nothing. Of course, down the road after later rounds the common stock valuation becomes prohibitively expensive and then it probably makes sense for stock options. But at least back in my day it seemed the common thing was to give restricted stock to founders and stock options to employees. Not sure if that's still a common thing or not?

Those are two great concrete suggestions. I agree with both of them - a standard of transparency and 10 year exercise periods.

> $800 million dollar startups die all the time

is this the case? i actually don't know that it is.

Oh yes.

Jawbone $2.7 billion valuation -> 0

Beepi $560 million -> 0

Better Place $2.5 billion -> 0

Quixey $600 million -> 0

YikYak $400 million -> $3 million

Fab.com $1.5 billion -> $15 million

Rdio $500 million -> $75 million

Here's 133 of them, most pretty big: https://www.cbinsights.com/research/biggest-startup-failures...

Also got some details from: http://www.businessinsider.com/startups-that-raised-148-bill...

great list, and i even knew someone who worked at Fab. thanks.

(Sample size of one)

I worked at a unicorn startup five years ago in the bay which no longer exists. Anyone who bought the options -- and the company was very cagey on providing cap table info -- was left with nothing.

Worthless, or nearly worthless, options are very, very common. The last options I exercised and did get paid out... but in the end, I didn't even make back enough to make up for the pay cut I took. Financially, I would've been better off taking a different job. At least I "had fun' and "got something" though.

Why the quotes? Did you not have any fun?

The quotes are there because it's basically a cliche. Every startup is "fun", right? Okay, I did actually have fun... at least for the first year or so.


Even if the company is sold at a high value chances are the payout will not be worth the risk. Unless your shares come with a board seat never buy the options in a private company because the shares are worth literally zero unless a secondary market exists.

> in the bay which no longer exists


That happens sometimes -- lava filled a bay in Hawaii just last week :P

No matter how far along the funnel you go a significant portion just fail to raise further funds: https://www.cbinsights.com/research/venture-capital-funnel-2...

I echo the comp aspect. I pretty much had a best case non-unicorn startup exit; wonderful benefits pre-acquisition, actual unlimited PTO, and normal ~40hr/workweek, acquired almost immediately after receiving my shares, golden handcuffs after. My total comp was more or less equivalent to my peers doing the big 4 grind over the same time period. They had zero risk and I had to win the start up lotto.

But if I had to do it all over again, I still might do the startup route. It's just more fun. There's more to life than money.

I think a huge part of whether it is more fun or not is about where you are in life. Startup life was great for me when I was young and single, and enjoyed the startup lifestyle of excitement and risk. Now that I am older and have a wife and kid, I really like the stability, predictability, and salary of a job with a bigger company.

Absolutely. Also, startups are intense, which goes both ways.

Intense can be great if you're looking for that, and the startup is doing well.

Intense can be terrible if the startup isn't doing well and/or the atmosphere has gone acrid. It is now intensely bad.

It's like a polite disagreement with a casual acquaintance versus bitter fight with a close friend.

When startups derail, they really do go far off the rails.

Also who you are in life.

When I was younger I didn't have chances. It's incredibly privileged to be able to take a position somewhere you might not have a job in 2 months because you have enough stashed away or enough family wealth that if you fail, you can pick yourself back up easily.

Yeah, I wasn't trying to imply it is just about stage of your life in terms of age and family status, but more just your stage of your life in terms of financial needs and tolerance for risk. For some people that need for lower risk and financial stability comes when they are older, and for some people they start out needing that financial stability at a young age.

Agreed. It definitely depends on your tolerance to risk. Not everyone wants to be part of frat party that takes up half your days and weekends that could potentially disappear tomorrow without notice.

>But if I had to do it all over again, I still might do the startup route. It's just more fun. There's more to life than money.

Easy to say because you have gotten the money. :-D

Not really. I've applied for a startup, got accepted, the next day received a one in a lifetime opportunity to do something I've been dreaming of (security research at a huge and famous company). Went to do the dream job only to quit after 6 weeks and return to the startup. Best decision ever. I didn't win the lottery ticket, but I am also not coming back to a regular job. Yes, you usually get paid less (or much less), yes my peers climb the corporate ladder, have better cars and houses, but I have a more rewarding job, I get to work remotely and travel often, and I can work from home whenever I want. I also hate the hierarchy that eventually comes as the company grows.

Yeah and it’s one hundred percent true. If the story wasn’t “I won the lottery” but instead was “I missed out big time” that may change things significantly

I'm a case where I don't really expect to ever see the equity pay out, but I might still have gone the startup route for the fun and the learning. But if I were to go back in time and advise myself, I would have taken more cash and less equity. At the time, I took more equity and less cash.

As someone just starting out, the hidden cost of exercising and the tax bill that follows was staggering. It would have eaten up most of my fledgeling liquidity and dug into my rainy day fund.

My advice to my former self would be to take more cash over equity and invest that cash in the public markets. Diversify your investments to reduce the risk of the giant startup bet you're about to make. Compounding is a hell of a thing, even over four years, and people tend to forget to account for investment returns when they value their cash.

Why have I been told to begin your career at a startup, before you work at a big corp in order to "level up" your work environment? I took that advice and it has just left me starving for better compensation and, and am pretty lacking skills-wise. And now I'm still unfit to get an offer at the big tech corps, or even a chance for an interview.

There's only a narrow window in your life where many of the cons of working for a startup don't ruin you. That window happens to overlap with the beginning of your career. If you have the skill to make it into a big corp at the beginning of your career, you can do it again later in your career -- they'll still be there later.

I'm of the opinion that the generalist skill set you typically get from a startup is far more valuable than the specialist (and typically exclusive to the corp) skill set you get from the corp, and I'll even argue that the entry level skill set of the corp is pretty damn useless, but that's only from anecdotal evidence.

What doesn't kill you makes you stronger, startups dance at the edge of survival.

I agree -- to an extent.

Some of the skills learned in big mature organisations tend to be very narrow and specific to the tools that the big organisation uses.

Some ... but not all.

The man-management and general engineering skills are still pretty transferable.

How long did it take you to receive your shares, if you don't mind me asking?

Less than a year. More shares than non-essential employees, but far far far less shares than founders/executives.

Having not worked in the Valley or a startup, I can say the biggest con to me is a lack of stability. You can get a job at BigCo or even MediumSizedButBeenAroundTwoDecadesCo and be reasonably sure you'll still have a job... as long as you want to work there. But with a startup, either they run out of money and you lose your job, they pivot and don't need you and you lose your job, or they get acquired and you very likely lose your job (or it becomes a vastly different job you didn't want). When taken in combination with the insane cost of living in the Bay Area, it seems crazy that someone would even consider this.

Here's a crazy idea from the IT contracting industry: Maybe YC and the like should hire employees and contract them out to startups. I work for a company which contracts me out to another: Even if my position is eliminated with the client, I don't lose my job, I just get reassigned. Perhaps as part of this, YC (or other funding group) gets the investment options an employee would otherwise have had, for example.

- For the startup, they'd be getting employees who weren't worried if they'd have a paycheck in the next six months, and they'd know their VC folks are confident in that employee's ability. For all the other risks startups take, hiring a good developer/designer/business manager would be less of one.

- For the employees, they'd have a stable income they could base real estate and financial decisions on.

- For the fund, they'd have possibly gained more investment, and ideally, having known employees that they've seen the work of before should add confidence to the success of a given business they've funded.

Disclaimer: I have literally no experience or expertise in claiming this would work out financially or otherwise for the startup industry.

For what it is worth, I tried this business model, IE: consulting focused on startups. Problem was, startups by and large are grossly undercapitalized, have huge business swings, and often you are dealing with first-time entrepreneurs who have no idea what things cost or how long they will take, but also aren't willing to be educated (because they are scared and there is a lot of risk). Point being - it's hard to sell services successfully to that kind of customer.

I should point out too that many investors want to see a team of employees, because they are investing in the strength of the personnel. So they didn't like this idea of a startup built using contract / outside talents.

FWIW, I had basically this exact experience and met exactly these difficulties. It can be done, but the market is just a lot smaller than "all startups".

I'm not saying this is a bad idea, but, I'll try to argue the other side for a moment:


Startups hire in-house devs because, basically, management does not know exactly:

A. what to build

B. what's possible to build

C. how the real world will react to the initial product/service offering and how the company will need to adjust

So, they bring devs in close, as high availability, high dedication employees, people who are in the center of the decision making. These intimately involved, trustworthy, motivated devs will then be more likely to come up with features and products that workaround management's deficits. And the company will benefit from that quickly and the company will own those features and products.


But, if this were contracted out to an outside stable of roaming rockstar developers, all highly talented but still less motivated and more in need of detailed direction from management -- how much insanely great startup flash-magic would really happen?

Is "possible homelessness" a required motivation to ensure you have motivated employees? Note that I don't suggest your entire company would be employed by YC, but that you might fill some roles with people who YC has worked with before and considers of high quality. I would argue in terms of trustworthiness, it is likely "someone YC provides" is more trustworthy than "someone you found on the street". Presumably YC would only retain such employees they found were good at getting fully involved in the companies they put them with, so you'd get the same.

Also, consider that not only could someone be contracted to you in a high availability/all hours arrangement, but that this would potentially also allow YC companies to benefit from roles they couldn't afford to full-time.

This is a very good idea and is something that venture builders and value add accelerators do.

For example (here in the UK) Founders Factory and Forward Partners both maintain large stables of designers, developers and other specialist executors that they assign to their portfolio companies.

This is an interesting idea. We've talked about ways that we could help create more job stability for people joining a YC company.

When I was a consultant, I liked two things about my company. I was paid by the hour, which kept my company honest.

I was paid when I was "on the beach"(bench), but I was expected to train and get tech certifications

Interestingly, I strongly prefer not being paid by the hour.

I find time-clocking incredibly irritating, as I may be inspired to a solution or want to fix something outside of hours, which is pretty common for me. And similarly, I don't want to feel bad about if I am doing something wrong or not the most efficiently, but still charging full price for that time. Possibly the most irritating thing for me in times I was on hourly was arriving at work a few minutes too early to clock in and having to twiddle my thumbs, or having to determine whether or not something I wanted to remote in and do met the official terms for being paid in after hours time.

My personal feeling leans towards paying for "a job well done", and leaving it on the idea that if you're doing your job well, I'd like to believe nobody will question how you spent the hours you were doing it.

Being paid while on the bench makes a lot of sense if they feel you're valuable enough to retain, and time to actually spend training is pretty nice when you can fit it in, and obviously works to their benefit.

I didn't have to clock in I just needed to enter my billable hours.

The occasional lack of efficiency/productivity should be reflected in your billable rate, that is, the rate should reflect your level of (relevant) skill, any specialized knowledge, and mean productivity, not max.

Then there is no problem with just billing the spent hours without any fudging one way or the other.

"And similarly, I don't want to feel bad about if I am doing something wrong or not the most efficiently, but still charging full price for that time."

- A lot of people at the company would feel guilty and put in free hours to the client. (They would usually also get rewarded with excellent customer feedback.)

Might want to rephrase the 2nd bit, if you're trying to conceal which BigConsultingCo you worked for.

YC would be competitive by providing health care and maybe some shares in YC if work at some YC companies. Seems doable.

Super interesting idea. One of the cons could be that having your employees not personally invested in the outcome of your venture could make them less likely to be "fully committed" (i.e. long hours, going above and beyond). You might be worried about higher levels of apathy -- "if this doesn't work I still have a job".

If the business works, I'm thinking the transition from the fund swat team to "real" employees might be difficult as well, probably at a time when you need to be firing on all cylinders.

My thought on the "if the business works" case is that such employees should have a clean path to either transition to the company they helped make a success, or get reassigned by YC. Either one is a win for YC in this scenario: An employee which helped a startup succeed is a hot commodity they'd love to reuse, but they also own a portion of the successful startup, so having it continue to succeed is also a big win.

The idea here would not be for YC to have a constantly growing outsourcing team, but to ensure they didn't lose the good employees because a startup failed. In a given failed startup, there are likely some rockstar employees that definitely weren't why it failed, and it's in YC's best interest, presumably, to hang onto those great employees and get them placed with other investments of theirs, should the opportunity arise.

> "fully committed" (i.e. long hours, going above and beyond).

Regular comp does that if the company can afford it. Startup equity is there so companies that can't, can offer early hires the "maybe money". Pay 200k and you'll get fully committed employees.

This is exactly how overseas outsourcing works. The vast majority of the foreign people I work with are under arrangements just like you describe.

This is also similar to how a lot of small software development firms work; they develop web sites and mobile apps for companies on contract.

There were some US companies that did this as well before the dot bomb. One of the selling points would be you get "bench time," which meant paid in-between assignments. I think large companies that make a lot with consulting fees use this model as well, but I'm not sure which ones.

I know of at least one successful entrepreneur/investor who does exactly this with his incubator: incubator/umbrella company hires FT employees who get contracted to the startups and receive stock in the startups proportional to the time spent on each.

I really like this idea, and I think something similar is done with high-level managers in the private equity world. You build your career across the portfolio of companies, and your interests are aligned to the portfolio itself, not the specific company.

That obviously creates a risk of perverse incentives, but from the PE folks' perspective it seems to work.

IIRC that's also how Berkshire Hathaway does it: builds managers for Berkshire Hathaway companies, and whether they're managing at GEICO[0] or Fruit of the Loom[1] depends on where they're needed and not whom they work for.

I don't know anything about how technical employees benefit (or not) from that setup but I suspect there is some amount of informal sharing of tech talent across portfolios.

It'd be really great to see something like that for tech people. Maybe YC can start and everyone else will follow. :-)

[0]: https://www.geico.com/about/corporate/at-a-glance/

[1]: https://en.wikipedia.org/wiki/Fruit_of_the_Loom

Currently it's not hard for a software developer to find a job, especially those that YC startups would want to hire.

So I don't think stability is much of an issue in the current economy, developers are not afraid to lose their job because they know they'll have dozen of opportunities just by activating their network.

Even with that being the case finding a new job is a hassle and means you have an interruption in pay and insurance. Gives me a lot of incentive to just work at BigCo and not worry about it until -I- want to worry about it.

These positions do exist. The VC maintains an engineering team that gets lent out to the businesses they're invested in.

This is great, because it essentially puts the employee in the same position as a VC with amortized risk. We know that startups succeed and fail according to some known distribution, but the odds that this particular venture will succeed or fail are largely unknowable.

Yes, this works, and there are tons of companies that do it, referred to as "bodyshoppers".

Competing with Wipro and other body shops? Good luck with that.

Presumably the difference between this and a "body shop" is that YC, having significant investment in the success of a business, would be less interested in "supplying bodies" than ensuring the business' success.

Whereas a outsourcing company would benefit by providing as many staff members as possible, if YC or the like were to do it, they'd likely want to zero out the "profit" on supplying employees: To keep it affordable for a startup, and to not break the incentive for YC: To push companies to success via whatever resources they can offer.

Particularly if YC's "cut" was solely in the form of share of the business, they'd have no benefit to over-pushing poor quality labor on their own companies: It'd just doom them.

In terms of how to move the needle for early employees, at my prior (and first) startup, I watched us go from 15-20 employees to >300.

One of the interesting things that struck me was how much advisement/mentor/training/etc investment went into the founders/C-team, and how little went into all the rest of us.

(Totally reasonable that this was a situational thing, but I don't think it is).

There's fame and reputation that comes from being a founder, and there's not much of that that goes into the EEs. For example, at my current startup, one of my founders wanted to sub me in for them at a panel they had a conflict with, but the guy running the panel "didn't want individual contributors".

Being a founder is celebrated; being an EE isn't: https://strongfemaleprotagonist.com/issue-5/page-63-2/ https://strongfemaleprotagonist.com/issue-5/page-63-3/

Note: I'm not talking about how employment is celebrated within any given startup - that's important, but it's going to be situational - I'm talking about the community as a whole celebrates the EEs.

> the guy running the panel "didn't want individual contributors".

That may be a reasonable requirement, depending on the panel topic.

But note: Plenty of EEs aren't individual contributors! An EE can be a "team lead" for example. Basically if you have any responsibility for directing or managing other people, you are already not an IC.

> That may be a reasonable requirement, depending on the panel topic.

Hmm. I really don't see how. That's a bit like saying that because you work in Java, you can't talk about Ruby, or AWS, or Scrum, or skydiving. This really seems like the sort of thing that you "opt in" rather than "opt out" - you're qualified to talk on a panel if you are X, rather than being disqualified if you are Y.

Can you think of any topics where that WOULD be a reasonable requirement? I cannot, but I'm biased.

Also, X and Y in this case are (mostly) mutually exclusive. We just don't have a common catchall term for technical non-ICs to be able to express a positive requirement without also including non-technical managers.

I can't identify the case you're talking about.

Seems like the problem is trying to have a category (as in folder, as in old school email) rather than a label.

"Technically capable", "contributor", and "technical contributor" all sound like ways to positively express "not looking for non-technical managers".

The problem comes back around to "do not restrict people to the categories you assign to them".

(Which is also a way to phrase many social justice issues and IMO where "being a cog in a machine" comes from).

Post-mortems, one-on-ones, dealing with toxic team members, adopting "Continuous X" practices, "Your team just added it's first woman engineer. Now what?", etc.

All the post-mortems I do are as an IC; I (occasionally) lead my own one-on-ones either with other ICs as a fellow IC and/or manager; I've seen "continuous X" practices pushed by both ICs and managers (ICs vastly moreso, actually); and management does not qualify you (and IC does not disqualify you) from being able to teach people how to treat fellow humans like fellow humans.

In short, I completely disagree both by opinion and experience that any of those topics have "not being an IC" as a reasonable requirement.

> One of the interesting things that struck me was how much advisement/mentor/training/etc investment went into the founders/C-team

Can you give a sense of how much that might be?

Offsites, speaking gigs, trainings - but really, time with people (in this case, the investors/advisors) that can really coach (or straight role-model) you into being that much more amazing. I can't quantify thing-over-time both because this was an anecdotal impression, and because it was a decently long time ago.

You invest money in successful ventures, and they snowball; people invest themselves in other successful people, and you also snowball.

PS - Also just getting invited to meet other interesting people. It's suprising-not-suprising how much of an effect that has on yourself.

As a two time early employee starting right out of college, I can think of these points:

Pro: I've seen and learned things I wouldn't have in a big tech company. The rapid growth and constant fight for survival means I've picked up skills my big company peers didn't even have access to, especially leadership skills.

Con: In hindsight, the equity was a joke for the pay cut I took. If I had fully appreciated all of the gotchas of startup stock options, I would not have taken the pay cut relative to what I could have gotten from the big company offers that I had. Chief recommendation there: no 90-day exercise window, and employees should have ongoing access to details like liquidation preferences, revenue, burn rate, etc. I appreciate the need for confidentiality for strategic reasons, but I no longer believe that this need outweighs the principle that employees should know what they're signing up for.

The big issue is that there is not remotely enough institutional/cultural wisdom around what it means to be an early employee, so it feels like startups are often exploiting early employee naivete.

Pro (from my personal perspective, YMMV): You get to work on something that will actually see the light of day. For me, there's nothing worse than being this tiny little cog in the machine that comes into work from 9-5 and produces something so microscopic that you question your importance at all. Working at a startup means you have to pull your weight, wear many hats, and get shit done. This also means you can climb the later and get noticed much easier. It also means you can't slack off and fuck around all day. Most of my friends that work at larger public tech companies — it just feels like they're constantly doing unimportant things, going to conferences just for the sake of it, getting into work late and leaving early. etc. That life, that cushiness is just not for me.

Cons: As others have said, the pay is always going to be lower. The stock options are, in most cases, always going to be worth $0.

Huh, I really had the opposite feeling when I went to work for a big company instead of a startup.

Both startups I worked for never had serious traction and both shut down as failed. We worked so hard to create really cool products, but there just was not the demand for what we made. Cool software with no users.

Now, I work for a huge company. My work gets deployed to tens of thousands of servers, and I know that people use and need what we make (because they pay us a lot of money). I can tell people who I work for and they know who it is, and I can point to things they do in their daily lives that my work touches.

I feel like I have a much bigger real-world impact at my current big company than the startups.

> Both startups I worked for never had serious traction and both shut down as failed

I think this is the big difference. When you're working for a startup that literally can't keep up with demand (such as the one I work for now), it's an entirely different animal.

Right, but in reality more startups are like the ones I worked for than like the one you work for. Most startups fail.

Although, given that both of our stories are just anecdotes, the advice might come down to "Work for a good company that does valuable things that make a difference to people"...

> Most of my friends that work at larger public tech companies — it just feels like they're constantly doing unimportant things, going to conferences just for the sake of it

Working at a BigCorp(tm) right now, this is somewhat of a false statement imo, at least for us. Being in such a standardised place, it is very hard a lot of times to find new inspiration for technologies to adopt and things like conferences or meetups are the perfect opportunity to network and hear about how people make use of new things. Usually, we don't really get much time to explore new technologies as capacity is always planned for our current workloads. That's why I love being able to go to a conference every few months (this year it'll be 4 for me) to be able to bring some things back into my team that might be interesting to us.

We get the time approved for conferences, but not to explore things "while at work".

This obviously differs from company to company but that's my experience at my current one so far.

Yeah, and I didn't mean to slam conferences. I enjoy going to conferences and find the well regarded ones beneficial (especially ones offering workshops and certifications).

My point was more about the token conference goer.

I have an acquaintance that has given the same talk at 13 different conferences over the last 12 months. I don't know how that benefits him or the company. He's also on twitter literally all day. I just don't get it (as I hypocritically type this out on HN).

Are you really saying that you don't get how presenting to multiple conferences benefits the presenter, or the company he works for? Or am I misunderstanding your point?

From my perspective it seems that there's tremendous benefit in becoming known by thousands as an expert in a particular topic and in having the skill to present that material to others.

There’s certainly career value to being a “celebrity programmer” of sorts and it can be a signaling thing for the employer and hiring pipeleine.

> For me, there's nothing worse than being this tiny little cog in the machine that comes into work from 9-5 and produces something so microscopic that you question your importance at all

See, I'm the opposite. I couldn't care less about the importance of my work. I work for one reason and one reason only: to fund my life. I just want to put in my eight hours a day, draw a paycheck, and then go home and have fun.

And I honestly like the idea of being anonymous. I just want to blend into the background and not be noticed, and I couldn't care less about climbing the ladder because my career is the least important thing in my life.

> Most of my friends that work at larger public tech companies — it just feels like they're constantly doing unimportant things, going to conferences just for the sake of it, getting into work late and leaving early.

Honestly, that sounds like paradise to me. I'm pretty satisfied with my current job, but if I wasn't I'd definitely be asking you for the names of some of those companies.

> Most of my friends that work at larger public tech companies — it just feels like they're constantly doing unimportant things

Obviously that is not universally true: All the things that do see the light of day, some small, some big, are done by actual employees of a big corporation. Maybe you will not be working on them all the time, but chances are good that you will at least get the opportunity to have a public, meaningful impact.

Just as an anecdote, when I interned at Google long ago, I got to work on a public feature in Google Maps. It was a great feeling to directly work on something that anyone could potentially use, and see even just a few public reactions.

That experience probably set my path on favoring working at big corporations, because I knew I could do meaningful things there if I position myself correctly, whereas startups seemed much more like a big gamble (which by itself is probably an exaggeration also).

Just yesterday I spoke to someone at another big corporation who proudly proclaimed that people clapped at the mentioning of their own feature, when it was unveiled as part of a bigger announcement. YMMV.

Agreed. I always think of the greek word "arete", which (as I understand it) means roughly achieving excellence and living up to your potential.

I'm currently at a big co (though not really a "tech" one, so can't speak to FAANG) and can relate to many of these. I can def see the attraction in taking less money in order to have a better shot at achieving excellence.

> they're constantly doing unimportant things, going to conferences just for the sake of it, getting into work late and leaving early. etc.

uuuh, do you have any links I can follow to apply for a job like that?

Keep looking, most jobs at BigCorp are designed to make sure everyone is easily replaceable, which means positions can't have too much responsibility, else the person couldn't be easily replaced. It's like the very definition of ITIL.

Here's what I consider the 'sweet spot':

A small company, say 20-50 people or thereabouts, that has a profitable niche and does not require much in the way of investments. Here's why:

* Small is more fun for me - I like knowing everyone I work with, and the chance to see what other people are working on, and maybe move around some in what I'm doing, rather than 'the same thing day in and day out at BigCo'. Your work also feels more valuable and meaningful. Startups are a lot of fun that way, however...

* Investments and not living off what you sell are inherently unstable and stressful. That's ok to take a chance on when you're younger, but as someone with 20 years of experience in the industry, a family, hobbies, an interest in local politics and so on, it's not so much fun any more.

* I have a bias for cash, not equity. It's fine to roll the dice a bit on that when you're younger, and even now for the right thing... you never know, but ceteris paribus, I'd rather just have the money.

Of course actually finding a place like that is easier said than done. You need to avoid things like winner take all markets.

> I have a bias for cash, not equity.

I'm like you. I'd rather take cash and dump it into my 401k or an index fund for retirement.

Any startup worth its salt will pay you a high enough base salary to max your 401k and still have a ton leftover for after tax investments.

> You need to avoid things like winner take all markets.

Another thing that might work is looking at industries with a lot of software needs that are not traditionally considered "tech companies."

A long time ago I worked in Biotech. There's tons of money there, and an awful lot of software made both in-house and by consultancies. (And I bet it's a hotbed of machine learning right now.)

I'm sure there are lots of other industries where their core business makes a lot of money but there's no way for startups to just "disrupt" them out of existence; however if you can move the needle 0.01% that's more than enough to support a very profitable smallish company.

> You need to avoid things like winner take all markets.

i love this idea.

yet, it seems like the whole point of startups nowadays is to become the winner in the winner-take-all market. and VCs seem to be looking for that kind of play mainly. and markets become winner-take-all with alarming frequency.

so, it's like, how do we get to the kind of market with room for multiple long-term, profitable players?

That's basically the thesis of Zero To One, and yet it's responsible for burning how much Venture Capital?

One of the interesting things is how companies like CB Insights seem to have built quite successful mid-sized startups with very little funding (CB Insights are at $11.7m in funding), or Atlassian who didn't raise until they were pretty close to IPO. Compared to Uber at the opposite end - how much capital has been squandered on making very marginal gains in the name of growing market share?

It'd be an interesting research project to compare outcomes against funding raised, over say a 10-15 year period.

Markets that have a high barrier of entry and products that require a certain degree of in-house customization. The trade-off is scalability but the gain is that your space won't get slammed (or is less likely to get slammed) with VC-flash funded 'start up' versions of your start up in the medium run.

Open plan offices and general lack of a quiet, contemplative, professional working environment is the hugest con to me, even huger than the compensation issues pointed out by other commentors.

I would look to start-ups to be leading the effort to improve industry practices for software development ergonomy and human-centric working spaces (i.e. focus on privacy, quiet and individual customizability).

But instead, start-ups often try to conflate “collaborative spirit” with some shallow and false idea that collaboration is equal to being continuously embedded in a real-time stream of preemptible audio and chatter.

Headphones, jabberboxes, telephone rooms, limited freedom to be remote — none of these are useful and none address the underlying privacy and human centric ergonomy points.

Practically the only thing left that can convince me to take the risk of a startup, with its lowered compensation, poor insurance, and the poor risk characteristics of equity, is giving me my own private office, and making sure everyone on the team who wants one also has one, from the summer intern on up to executives.

If a start-up cannot offer a private office, then the start-up has to offer me the same market rate salary, bonuses, insurance and work-life balance that any other company would have to offer me.

I review the Joel Test occasionally, even if some of the items are kinda dated. It's amusing how both big companies and startups consistently fail two of them (and the test says if you're at 10/12 or lower there are serious problems).

    8. Do programmers have quiet working conditions?
    9. Do you use the best tools money can buy?
Startups could out-compete larger companies here by providing both shared working space and private space, but they don't. Similarly for one of the tools, development hardware, if all you're providing is a macbook pro and maybe a monitor... well I'm sure Apple will significantly upgrade it any year now. Meanwhile those of us who like Linux distros (or, god forbid, Windows after disabling all the crap) can have quite a bit of power on the go. My current (big) co gives everyone a desktop and a laptop, it's nice to have both. You might quibble if they fully pass #9, but at least they make an attempt.

"... programmers are easily bribed by giving them the coolest, latest stuff. This is a far cheaper way to get them to work for you than actually paying competitive salaries!"

Salaries are such a hot topic, startups unable to match need to differentiate from what the big players are doing in a better way across many dimensions at once, not solely the nebulous "more control of the product direction".


I was just writing a comment on here the other day about whether there should be a “Paul Graham test” based mostly on the essays “Great Hackers” and “Maker’s Schedule, Manager’s Schedule.”

The unequivocal importance of private offices is mentioned in both (in the latter, it’s focused on how meetings swiss-cheesify the day, but the point is obviously the same as that of private offices vs. open plan interruptions.)

So it remains a mystery why Y Combinator and YC-backed companies, so informed by many of Graham’s viewpoints, aren’t more proactive about this.

"... programmers are easily bribed by giving them the coolest, latest stuff. This is a far cheaper way to get them to work for you than actually paying competitive salaries!"

Past time (20 years ago) programmers yes. Today's programmers? No.

The Math is very simple: if a company throws a lot of money, I can buy the latest coolest stuff for the next 10 years.

I doubt programmer is that gullible (otherwise they're probably a "Yes" man).

Past time (20 years ago) programmers yes. Today's programmers? No.

The economics of hardware are very different now. In the 90s you might have a SPARCstation or an SGI on your desk at work, amazing gear you could never have afforded for yourself. Now you can easily buy a home PC that’s better than any corporate model.

I’m sure it’s still true in some industries, 3D printing maybe, but not in software anymore.

You'd be surprised. Many programmers don't negotiate, don't ask for severance or bonuses or better acceleration/vesting terms etc., feel afraid to be rejected after completing interviews, and a lot of people end up working for far lower pay than they could have otherwise gotten. I've known a lot of people who joined start-ups because they were promised various things (freedom to work on X, guarantee of publishing research, attending conferences, etc.) and then 6 months later they feel miserable that they accepted lower pay and none of the promises turned out to be true (sometimes through no intentional fault of the start-up founders, but sometimes through complete bait and switch shenanigans).

The risk that start-ups won't follow through on ambiguous work promises is super high, yet people keep falling for it year after year.

> Startups could out-compete larger companies here by providing both shared working space and private space, but they don't.

i agree that they should do that. OTOH space isn't cheap. i recall a scrappy startup where 20 people were packed inside a live-work loft. the CEO's office was the master bathroom.

Not every start-up could afford it, sure. But by the time you are well-capitalized, it’s not an excuse, and as Stack Overflow has shown, it’s not that hard to afford even in Manhattan.

When young start-ups are spending millions on the company’s third wave coffee station and opulent roof deck for obligatory alcohol drenched happy hours, you know it’s not cost keeping them from prioritizing ergonomy-focused private & quiet work space.

I think part of that is the high cost of office space in places like SV and Manhattan (the SV startup little brother).

Small companies end up in post War art deco buildings with flimsy elevators that open up to a mess of open plan tables, cables over the floor and pillars in strange places. Some of them have the audacity of handing out laptops and making a group sit in a conference room around a table all day (and days are long in startups).

That's what I've observed in Manhattan at least.

The problem is exacerbated by rapid hiring growth and the inelasticity of physical office building plans.

Private offices are great, sort of. I haven’t had one in the last 15yrs in both big and small companies. I find it surprising that you have had access to this “benefit.”

Between 2008 and 2012 I worked in 3 different places where all developers and researchers had their own offices (interns were paired usually). It wasn’t even a second thought, it was just baked into the culture that obviously the work requires huge blocks of hours spent alone, privately engaged in contemplative work.

One was a defense research lab, one was a boutique company that makes computational fluid dynamics software, and one was an education technology company.

The ed tech company went through a huge remodeling effort to rebrand as more of a straight up tech company, spending bonkers amounts of money to tear down offices in favor of open plan designs, despite outrage, protests and resignations from longterm staff, especially in some of the offices where there was no planned headcount increase and no engineering presence (like the Columbus, Ohio, office).

I ended up leaving the final place to take a more lucrative job in finance in a company with high-walled cubicles, and couldn’t believe how distracting and frustrating the ambient noise and discomfort from headphones was. These days I would give my left arm to have even just high-walled cubicles.

Since then I took jobs in two places with fully open-plan shared desk areas and I flat out will never do it again. It’s just too unhealthy and too counterproductive to even bother with it at all.

Whatever my next job is, it has to give private offices, end of story.

> Whatever my next job is, it has to give private offices, end of story.

Given how incredibly rare private offices seem to be these days I can't imagine what kind of leverage you must have to be able to stick to such a requirement.

Especially since unlike salary and other benefits it's not something that any company can decide to give you.

Either they have private office culture or not. If they are an open office company like most of them are you just have to exclude them, severely limiting the type and number of companies you can work for.

The most important leverage is to just say no if they won’t agree. It doesn’t matter what level or specialization or education or experience you have. The only way to win a negotiation is to just genuinely not want what the other party is offering if it doesn’t meet your criteria, and turn it down.

Obviously, if you are desperate for a job due to other factors, you may be literally unable to turn down a suboptimal offer. It’s unfortunate that companies bank on this, and sometimes even angle their search criteria to specifically find classes of candidates they can exploit with low offers, inadequate workspace, etc. But it’s a fact of life.

When you’re not in that situation and you are free to turn a place down, then you just have to decide what matters to you and ruthlessly stick to it.

To your other points, I think they are not actually big deals. Relative to other costs, building private space on an existing floor is not that bad. Of course, companies are mostly not worried about the cost but are worried about the anger and reaction from existing staff who hate the open plan space they are stuck in.

If a company has a top-down “no office” culture, like “not even our CEO has an office!” then just walk away. Those people are so far gone it’s not worth it. You know from day one that insincere corporate evangelism matters more to them than your actual work. You are more office furniture and less engineer at that point.

It doesn’t matter if this is ~70% of all IT jobs. They are bad jobs. Ok to take them if you’re in a pinch, but why would anyone choose them? They’ll never be forced to reform their habits to recruit adequate staff that way.

Another big option is to ask the company to rent a dedicated office for you from a co-working space. So you’ll be “remote” except working from a single office that they lease for you (or you could lease it yourself and be reimbursed or grossed up for it). This is exceedingly cheap for well-capitalized companies and if they are serious about your productivity and ability to actually collaborate, they’ll do it (as opposed to only being concerned if it superficially looks like people are collaborating because of the open plan layout).

There are plenty of solutions for a motivated company. Existing office build out is not a serious barrier, only cultural unwillingness to be adaptable to people whose jobs require private space to work.

I get it. But what you are describing is quite optimistic/idealistic.

Most companies will say "no thanks" and move on to the next candidate in their list.

There are much smaller things that companies treat as deal breakers, let alone asking for a private office. The dynamics of it just doesn't work if there is a open office plan with 20 people working in it, then there's one lone snowflake demanding their own office. Even if they agreed to that you wouldn't want that nightmare.

Your practical options would be limiting your choice to companies that have private offices baked into their culture or remote jobs.

Most people can't realistically afford to exclude that many job opportunities from their pool.

> "Most companies will say "no thanks" and move on to the next candidate in their list."

I don't see why this makes any part of it idealistic or how it is connected.

I view it as pragmatic.

Consider an employer who feels so entitled to workers that just take whatever unproductive office space they give that they would just say, "no thanks" to a qualified candidate and move on. Never mind the fact that in many domains, it's extremely hard to find good engineers, and 'just moving on to the next candidate' is not really a thing. Beyond that, this employer would be telling me how entitled they believe they are, and inflexible about a top-down mandated open floor plan design.

It's not idealism to want to avoid that sort of employer, it's just pragmatism. Like I mentioned, unless you're in dire straits and you have to compromise to take a job right away, then just say no. In other situations, you can by definition afford to just search longer and longer until an employer meets these standards.

I agree it would require patience for a very long job search, but I don't agree that it is optimistic or idealistic. Rather, it's pragmatic and being patient to reject all the bad employers who won't care about your ergonomic health is important and worthwhile, even at the cost of a slow job search where you turn people down for failing to provide private offices.

I work in a software company in the midwest, we've had private offices for the last 10 years.

One of the “weak” points a startup has is the brand perception.

Some-role at FANG sounds more impressive than same-role at a no-name startup.

Even the startups themselves like to brag that they were started by alumni of brand name employers, rather than alumni of other startups.

So, in what concrete way can you shift this?

There is no easy solution, but you can try and follow the same route you did for startups.

No-name (YC 18) is a better brand then just-no-name.

Allow/encourage employees and encourage/require your startups to brand people as “YC Startup Engineer” rather than “no-name Engineer”.

It may sound a little strange at first but there is a probability bigger than zero that if you promote this correctly, as you did for startups, you may end up at top of the prestige pile.

Just 2 cents from a guy with none ;)

+1 to not dismissing prestige, although I'm not sure I agree with this plan. Prestige is easy for some people to dismiss, but it can be a very big deal to others, especially (in my experience) in Asian cultures. My girlfriend's family still doesn't believe that I quit Google to work at a startup--they assume I got fired--because who would willingly give up that prestige?

I'm not sure if that's an Asian thing, I actually only learnt the importance of prestige after coming to bay area. When you mix with people with prestige and without, sharing job hunting and interviewing experiences quickly lead you to realize the importance of brand name recognition of your school and past employers.

I rose in a sales role to be a non-Founder CEO of a material science startup. We were successful - but after 9 years I was burned out and came to a friendly resignation with my board. The name recognition component is real. I got great offers within the industries we sold to - but outside of that there was a lot of explanation about the business, etc.

Brand perception is a real issue - and it doesn't get covered up by your title or role.

That is a great idea! I agree the brand perception is a big issue for startups, and that is a clever and unique thing that YC could do to help.

  [powered by YC]

So, I work at a startup. But, to echo what literally everyone else has said:

The money is better at big companies.

There are exceptions, but you almost certainly won't work for one of them. You will make more money at Google or Facebook or Netflix than you will at all but the luckiest choice of startup. Note I didn't say "best" choice or "most successful" choice. Gotta get in small, and exit big, which, no matter what anybody tells you, is more luck than skill.

That said, why do I work at a startup? Because the feeling of being able to meaningfully affect its trajectory (both technically and in terms of product) just matters to me. You can't get that at a big company, and for me that more than makes up for the ~50-75 k$/yr I gave up for it.

But I'm in the extremely fortunate position of having very frugal tastes, a significant fallback fund (I could afford to not work and maintain my current lifestyle for several years), and no dependents. Beyond the raw dollar amount, this also means that I'm basically indifferent to the prospect of losing my job, which as the other comments point out, is the other significant drawback of startups.

It's unclear to me that the combination of intangibles and tangibles works out positively for many other people, and I kind of feel that to a first approximation, recommending against being an employee at a start up is the right advice.

What if you were giving up $100-150k a year? Would that move your needle?

Or what if you were actually giving up $200k a year?

Yes, money isn't everything, but that's no reason to let someone take advantage of your excitement.

I am seeing a lot of people doing the devils work here, depressing engineering wages with arguments against higher pay. The VCs dont need your help, why are you helping them?

Your worldview will change when you've dependents. :-)

GP said "I kind of feel that to a first approximation, recommending against being an employee at a start up is the right advice."

Are you saying you think startups are better for people with dependents? That's surprising to me, could you elaborate?

No, it was a response to OP writing he had no dependents so doesn't value job/income stability so much. He seems quite lucid about the fact that this might change the moment he'll have a dependents. I was merely confirming it will. :-)

I strongly agree with all of this. I made the same decisions that you did, and while it worked out well (we rolled between 90 and 95 on https://danluu.com/startup-tradeoffs/), it was clearly a negative EV play. I wouldn't have done it if I didn't have a solid record at an established company (so that I could easily return to a similar job at any point), or if the income reduction would have had a material impact (which basically implies no kids and no plans to have any in the next few years, no mortgage or student loans, and no health issues).

I kind of feel that to a first approximation, recommending against being an employee at a start up is the right advice.


As a former startup founder, I tend to agree that most startups are low-balling early employees. These employees over-value their stock by imagining what it would be worth if the company reaches $1B valuation. It really is a lottery ticket.

But in my opinion, the answer is more pay, not more equity.

Employees should get market comp, period. Doesn't matter how early-stage the startup is. If a founder can't afford employees at market rate, they shouldn't be hiring yet. They could perhaps offer to take people on as co-founders -- with an appropriately equal share.

People looking to join early-stage startups as employees should be extremely skeptical of equity. Obviously, you want to take some. But if a small chance of getting super-rich is your goal, you should start your own startup. If you are going to make bets, bet on yourself, not on someone else, because you know yourself much better than you know anyone else, and wise bets are all about having information no one else has. Yes, non-founding early-stage employees can have a big impact on a company, but they are still beholden to the founders -- if something goes wrong, they can fire you but you can't fire them. Making a big bet while letting someone else hold the cards is just too risky.

Instead, demand market comp. Do not join a startup that won't offer you market comp. It's not worth it.

I don't quite understand. On the one hand you're saying that early employees should "demand market comp" and on the other you're saying that equity basically doesn't matter (and if you feel this way, it doesn't really make any sense to be joining a startup anyway). Are you conflating "compensation" with "salary"?

"Market comp" for a good engineer with several years of experience in the Bay Area is something like 250k - 350k at a Google or Facebook (with some variation in both directions here). It's not realistic, nor consistent with the market, for an early-stage startup to pay people this much in cash.

Early-stage companies should offer sufficient equity such that their employees should in expectation earn at least the same as they would at a public company. If their expected earnings are less than this, then more equity is absolutely a good solution.

> Early-stage companies should offer sufficient equity such that their employees should in expectation earn at least the same as they would at a public company.

That's the joke! Nobody comes remotely close to offering enough equity that their total comp is equivalent!

Imagine a company that just raised a $1M seed round on convertibles at a $6M valuation cap. Now say they offer an "extremely generous" 2% equity package to their first employee. What is that 2% worth?

Well, the investors think that preferred shares in that quantity would be worth $120k. Of course, equity vests over four years. So your equity comp is... $30k/year. If it were preferred shares. But it's not, it's common shares. So it's worth even less.

You'd need to offer more like 10% to claim you are matching the RSUs people are getting at Google or Facebook. But at that point, you might as well call the person a co-founder. And maybe that's in fact the answer: add co-founders, not employees.

But this isn't what people are doing today. Instead they're convincing employees to take sub-market pay and sub-market equity to take a stressful job with almost no benefits.

Yes, I mostly agree.

There's one nuance that I've been thinking about lately that I haven't seen anyone ever point out before, which is that high volatility will make options worth more than they are on paper.

Here's a thought experiment: imagine that there are two employers on the market. One will always pay 200k/yr guaranteed and you can choose to work for them at any time for this wage. The other pays 100k/yr plus one Coconut per year, and Coconuts are currently worth 100k each. So far these are equivalent monetarily. But now let's add the stipulation that after one year, the price of coconuts has a 50% chance of going to 0 and a 50% chance of going to 200k each. Which would you choose?

The expected value of each of these job offers is still equivalent (after 4 years of working at each, you'll have 800k in expectation). But you should definitely take the second one. Why? Because after one year, if coconuts drop to 0, you can just quit and join the first company. Then you have a 50% chance of 100 + 200 + 200 + 200 (coconuts to 0) and a 50% chance of 300 + 300 + 300 + 300 (coconuts to 200) which comes out to 950k, which is better than sticking with either company alone.

This thought experiment fascinates me because it clearly shows the extra value that up-front stock grants have. The point is that you have some protection from downsides in the form of switching jobs, but no similar cap on the upsides, and the higher the volatility of the stock the more value this provides.

I'm not sure what the numbers look like when you view them through this lens, but it does mean that an equity grant of 2% of a 6M company should trade off for more than 30k/yr.

I think that's a good point, but it's just unlikely to actually happen with startup options because of the typical 90-day exercise clause and limited information.

The 90-day exercise clause and options instead of shares effectively forces you to buy the coconut, meaning that instead of a 50/50 chance of 0/200, if you plan on leaving before the event that resolves 0/200, then if your strike price on a coconut is $50, it's more like 50/50 chance of -50/250 because you expect to have to exercise when you leave. You can play with the exercise cost, but it does change your math quite a bit regardless. Now if startups gave actual stock instead of options or if they don't place a 90-day time limit on exercising vested options, this wouldn't be an issue. But almost all startups do it this way.

The second point is that the company often doesn't look dead until much later. You're just not going to be able to tell one year in, or two years in, or three years in. So you won't be in a good position to capitalize on volatility like you would on the public markets.

Then you have things like liquidation preferences that will skew your EV calculation, except they might happen after you join, but you may or may not ever find out that those gotchas are there.

As it stands, all of this just creates an incredibly inefficient market that requires employees to take badly informed, high risk bets, where they often don't have deep enough pockets to absorb the risk.

Both of these are good points. 90 day exercise windows are both unnecessary and terrible for employees and we should move to eliminate them as quickly as possible. I think the trend is slowly in that direction, but it really should just be a deal breaker for engineers.

The limited information is also a good point. Some level of saviness and understanding of your company and market can help with some parts of this but certainly not all.

If anything this may be a good argument for working at late stage private or smaller more volatile public companies. Then if you get lucky and get, say, Square from two years ago, whose stock has gone up 7x, you capture this upside (and if they do poorly, roll the dice again after a year, perhaps). This is quite mercenary and might not be the route that makes one happiest, though.


Funnily enough, the fact that equity grants are "options" to purchase stock at a strike price less than the real share price is much less valuable than the optionality you describe of continuing working to earn the rest of a stock grant after more information is known.

Unfortunately I think it's very hard to pin a value on the optionality to continue working, and I haven't seen anyone mention it when considering joining a startup over a larger company.

But while FAANG equity has a 95% chance of still being worth hundreds per share in 5 years, the startup's equity has more like a 98% chance of being worth $0 in 5 years (based on startup survival rates). The expected value is essentially zero. That's why you can't make up for startup salary with startup equity.

this also requires one exercises the cocounut option at the end of every year. If you don't and they drop to zero in year 4...

For the purposes of this thought experiment we're assuming that there's no price movement after year 1. In the real world this probability of failure in the future should be priced in to the year 2 price and doesn't affect the expected value anyway.

When you offer 10% per employee, how many employees can you actually take on??

I believe it was Sam Altman who had proposed a good solution to this, which is that you start off with a high number like that for employee #1 with decreasing numbers as the employee count goes up. If you are Instagram and become worth $1B with only 6 employees then everyone should benefit massively. On the other hand, if it takes 1000 employees to get to a great outcome, then obviously the founders and first employees will have been diluted by the addition of all the future employees required to achieve scale or an exit.

Yes, that’s a good way to go about it… Any educated opinions of what form it should take (resricted stock, rsu, options, etc.) to be most employee friendly?

That was part of the comment: at that point it's more like a co-founder not an employee. So: very few obviously.

Perhaps more reasonable is 1-2% per for the first 5-10 hires, then 0.5-1% for the next batch, etc.

Also I really think these should be RSUs, not options. Employees are already invested in the startup by paying a premium in the form of reduced salary and opportunity cost.

If you give them Restricted Stock, though, they have to pay tax on whatever the 409(a) value is -- which is what the strike price would have been with options.

You can give them a signing bonus to cover the tax, but at this point it's easier and actually better for the employee to give them the cash separately and say "you can use it to exercise if you like".

Really the difference between options and Restricted Stock is measurable in dollars, so might as well just give people the dollars.

(Note that Restricted Stock is not quite the same thing as Restricted Stock Units (RSUs)... RSUs are for later stage companies. But the principles are similar.)

Sure; point being that employees ought not have to pay for their equity, because then it's not really compensation.

Yup, all the options for granting non-founder equity are absolutely awful from an employee POV.

Maybe YC could lobby for a sane way to grant equity to early employees without penalizing the employee?

250-350k is low for Google and FB. It's more like 400-500k if you are senior, 500-700k if you are staff. This is including RSUs

Indeed, and even well-funded startups can't afford to burn $400k on a single engineer.

They basically have to give out generous equity to compete, but they and the VCs would rather be greedy and dole out fractions of percents under the cynical misleading pitch that these scraps will be worth millions when the startup exits for billions.

To their credit, This scam did work for a while, shortly after a whole lot of early employees really did make millions on generous equity grants at early startups like Google.

Being an "early employee" means nothing now. You get the token 0.01% bottom-preference shares that will net you 0 in almost every imaginable scenario, and somehow this is supposed to cover the 200-300k/yr difference you'd get at a profitable established company.

I'm not really interested in arguing about these numbers, it's not really relevant to my point. I was basing this off of https://www.teamblind.com/article/google-engineer---total-co... where 250-350 includes the majority of L4 and L5 engineers. Based on this your numbers look off by one level or so, at least for Google. But again, I don't think this is very important for my point.

I always feel like every developer on HN is making like $200k-$400K without blinking, maybe that's true. Just for a perspective on these numbers, the top 1% of income in CA is $450K - https://www.reddit.com/r/dataisbeautiful/comments/8qhh3x/ann...

Those are not Google and not Silicon Valley.



And keep in mind that base salary (what's reported on that page) is usually about half of total compensation. (Bonus and stock being the other half.)

Also this appears to be the H1B database. I'm not sure how H1B salaries compare to the overall average.

> I'm not sure how H1B salaries compare to the overall average.

H1B salaries are typically lower than average. Why do you think companies spend millions lobbying for more H1Bs? To pay them more than average? :-)

Also, keep in mind Google only has to disclose base salaries for these H1Bs. For a staff engineer, most of the total comp would be in bonus pay and especially RSUs. They can easily be making $400k or more through those means.

Do you have evidence that people coming on an H1B visa get paid less than their non-H1B coworkers (at same level / same seniority / same office) at Google?

I would suggest that while new hires of H1B might not get paid less, the market dynamics of not having as many alternatives would invariably lead to less valuable retention efforts by the employer. i.e. fewer raises, fewer promotions, smaller bonuses, etc.

As I understand it, H1Bs aren't too bad (transferability is a thing here), but other forms of visas are brutal in this regard.

https://news.ycombinator.com/item?id=13579226 is one example. In addition to the article, HN is in near-unanimous agreement on this issue from the contribution of many H1B visa holders. I've seen it pop up many times.

> To pay them more than average?

No, to get a bigger talent pool.

H1b data doesn't include rsu or bonus. Many are getting 16-17% bonus and ~50-150k/year in rsu.

For a staff engineer, I'd say even $150k is very low. Even for an H1B, I'd guess $200k/year at least in additional pay beyond the base salary.

I work there and I'm surprised by the numbers you propose, they seem too high to me.

rough numbers on http://levels.fyi

> Early-stage companies should offer sufficient equity such that their employees should in expectation earn at least the same as they would at a public company.

This would still be underpaying people for a few reasons: expectations are not risk-adjusted, it also doesn't take into account the timeline you get paid on, i.e. the ROI you would get investing your Google salary in an index fund and taxes make getting paid a regular amount over time more valuable than getting a large startup check.

Maybe you were taking these factors into account, but most startup equity offers are massive low balls.

> in expectation earn at least the same as they would at a public company

No, it should be multiples. Otherwise why is the employee taking on that risk?

I don't see why this follows. I said "in expectation". So some % of the time it's going to be 0 or thereabouts and some % of the time will be much higher. The best case scenario needs to be multiples in order to make the average work out, but I don't see any reason the average case needs to be.

> If a founder can't afford employees at market rate, they shouldn't be hiring yet.

That's a little bit too strict, and as such is not a position founders are likely to accept. Sometimes they need employees before they can pay market rate, and market rate is pretty steep for a senior engineer in the Bay, for example, and most other areas startups are heavily recruiting.

It's reasonable to offer generous equity for early employees willing to take the risk. What does need to stop is the toxic culture of giving out 0.01% even to earliest employees (engineer number less than 10, often less the 5) with the cynical fake-stardust pitch that "this will be worth tens of millions since we're definitely exiting at $1bn+".

As you mentioned, this culture of deceit has become commonplace and it's poisoning the well of future employees. You can witness its corrosive effect throughout this comment thread.

Give out substantial equity to those early engineers who take risk. Give them a realistic estimate of the risk they're taking, and the value they can get. If they take it, it's their prerogative.

> Sometimes they need employees before they can pay market rate,

But you don't get to have something just because you need it. That's not how it works. You need to raise more money, so that you can afford to pay the employees. It's not fair to make the employees act as unofficial investors in your company, and then give them a deal that the real investors wouldn't accept.

> giving out 0.01% even to earliest employees

I hope that's an exaggeration and no one actually goes that low. (EDIT: Re-reading I think you actually meant 1%, not 0.01%?)

But if you go based on the valuation paid by the investors, then even 1% is a laughably low offer during the seed stage.

> It's not fair to make the employees act as unofficial investors in your company, and then give them a deal that the real investors wouldn't accept.

Which is why I'm saying they should be offered a deal that investors would accept.

Demanding everyone pay market rate is just unrealistic. Never going to happen. I'm proposing a realistic, possible change.

> I hope that's an exaggeration and no one actually goes that low.

First ad I clicked on from Angel List front page:


$130k salary and 0.01% equity. But that's OK, I'm sure their CEO will be happy to tell you about their surefire $Xbn exit.

Last I checked Angel List, 0.01% equity was quite common, even for early engineers at very early stage startups. It almost always goes hand in hand with blatant lies about the certain $Xbn exit.

> Which is why I'm saying they should be offered a deal that investors would accept.

> Demanding everyone pay market rate is just unrealistic.

But they're the same thing! If investors would accept it, then you could just as easily have the investors buy the equity, and then pay the employee with it.

So if it's totally unrealistic that founders would actually pay market, how could it be realistic that they'd offer equivalent equity?

> First ad I clicked on from Angel List front page:

> https://angel.co/everlane/jobs

> $130k salary and 0.01% equity.

That's not an early-stage startup, that's a company with >200 employees and a valuation in the hundreds of millions.

> But they're the same thing! If investors would accept it, then you could just as easily have the investors buy the equity, and then pay the employee with it.

See my [response to inimino](https://news.ycombinator.com/item?id=17291045). It's absolutely not the case that if I have $100m worth of stock according to some valuation, I can just go out and sell any amount of that for what you'd expect based on the valuation.

VCs are the only ones who are generally ready to buy this sort of equity, and raising money from them is a long difficult process, and I can't just decide I'm going to sell 0.5%, get $500k, and pay that to a new employee.

Finding a non-VC to buy your equity is very difficult too.

> That's not an early-stage startup, that's a company with >200 employees and a valuation in the hundreds of millions.

Like I said, it's the first random ad I clicked. Last I looked at Angel List, there were tons of startups offering 0.01-0.05% equity.

Also, notice they're offering this 0.01% with a maximum salary of 130k in SF who is skilled with "Python, Java, Scala, Ruby on Rails, React.js":


That's way below market.

> That's not an early-stage startup, that's a company with >200 employees and a valuation in the hundreds of millions.

Do you have any idea how many startups were worth >100m at one point or another on paper, and ended up with an exit where nobody but the VCs made any money due to stock preference? One down round is enough to effectively wipe out most of the rank-and-file equity in these scenarios.

> See my [response to inimino](https://news.ycombinator.com/item?id=17291045).

Yes I responded there.

> That's way below market.

I agree the salary looks lame but none of this conversation is about companies at that stage.

Equity packages in percentage terms are obviously going to be much smaller for later-stage companies, since there is much less risk baked into them. 0.01% of a company valued at $200m is equivalent to 1% of a company valued at $2m.

>> giving out 0.01% even to earliest employees

>I hope that's an exaggeration and no one actually goes that low. (EDIT: Re-reading I think you actually meant 1%, not 0.01%?)

What I witnessed as guidance from a top-tier VC to its portfolio companies: 1% for employee #1, then ramp downwards for each employee: .07%, .05% etc and very quickly you reach .01%

"You dont get something just because you need it"

Huge applause.

"You need to raise more money"

Crowd falls silent.

How about trying to sell something and generate revenue. I long ago stopped subscribing to Startup Porn but I remain baffled as to how seemingly smart people are so intoxicated by it that the notion of building an actual business is an afterthought.

Well yes. But the premise here was that in order to generate that revenue you need the employee. If you don't need the employee then by all means don't hire the employee (and don't raise money to hire them).

My view is that business owners hire too early. Nothing kills a business faster than hiring people.


> Give them a realistic estimate of the risk they're taking, and the value they can get.

Herein lies the problem. Founders are uniquely well-placed to evaluate the risk, and uniquely psychologically motivated to evaluate optimistically.

Because of that, founders sell equity dear.

If the generous equity offer is reasonable, then would be reasonable to make two offers, one with only cash and one with generous equity, in an "I cut, you choose" scenario. If a company has taken funding and isn't willing to do this, then employees are being asked to take risks that the financial backers are not willing to take themselves.

[Edit: removed something about a typo]

Again, you make it seem very cut and dry. It's not.

Suppose my startup is current worth $100m. According to you, I should be able to sell 0.5% of it for $500k and give that to the employee, or offer them that 0.5% directly, right?

Well, no. I can definitely offer them that 0.5% since I control the equity, but I can't just go to a VC and tell them "hey, here's 0.5% of my shares, now give me their fair value worth of $500k".

Ever been close to a startup raising money from VCs? It simply doesn't work that way. VC investment is a big, complex package deal. They're not just going to accept whatever shares you give them, and pay you. They have their own idea of how much equity they want, how much they're willing to pay for it, how much besides equity they want (control of the company, seats at the board, various forms of preferred stock and other guarantees, etc).

Also, fixed the typo, thanks.

> Suppose my startup is current worth $100m.

Then you're way beyond the stage any of this conversation is about... But let's say you said a smaller number.

> Well, no. I can definitely offer them that 0.5% since I control the equity,

... no you can't. You can grant equity out of the option pool, which you defined in collaboration with your investors. If you want to grow the pool you're going to have to talk to them first. You don't have free reign to dilute the investors away at will.

> but I can't just go to a VC and tell them "hey, here's 0.5% of my shares, now give me their fair value worth of $500k".

Well sure, not on a daily basis. You have to raise a round of funding, obviously. Hopefully you don't do that too often, but when you do, you make sure to raise enough to pay your employees a fair salary until the next round.

If you can't raise a round of funding, then your stock is worth nothing and the employee should consider it to be worth nothing.

> Ever been close to a startup raising money from VCs?

I have raised money from VCs.

> You can grant equity out of the option pool, which you defined in collaboration with your investors.

Obviously I'm simplifying here, but overall yes, it's far easier for a startup to give equity than cash, for the reasons I mentioned.

Especially if I'm an early stage startup, maybe after a small seed round, I will surely have enough options in the pool, or investors lenient enough to let me issue these extra stock in the unlikely case I'll need them.

> I have raised money from VCs.

So you know how unrealistic it is to raise VC rounds just to support salaries for a handful of new engineering hires.

> I will surely have enough options in the pool,

At a $6M seed stage valuation, 1% in equity (vesting over four years) is worth the same as $15k in salary.*

Which is harder for a founder to authorize, 1% in equity or $15k in base salary? Honestly $15k salary sounds a whole lot easier and cheaper to me.

$105k in salary converts to 7% in equity. So if you want to hire than $400k Googler you're going to be paying them $200k salary and 14% equity.

An entire option pool is typically 20% or less.

The only reason giving away equity seems so much easier than cash is because you can trick people into taking far less of it.

* Disregarding the fact that the valuation is based on preferred shares while the equity grant is common shares, which only makes the equity grant even more worthless.

> So you know how unrealistic it is to raise VC rounds just to support salaries for a handful of new engineering hires.

That's literally the entire point of raising a VC round?

Yes, I'm eliding a lot of complexity, in that you can't just take the equity and sell it to the bank or to your VCs. However, you as a founder have some control over how much you raise and at what valuation. So the fact that you can't make that decision at the time of hiring is certainly true, but you are making those decisions when you decide to raise a round (or not).

That's why I restricted my final remark to companies that have taken funding. Of course there are a lot more moving parts than I let on, but if a company has taken funding and would rather keep their funding than their equity, then it makes sense to think carefully about why that is before buying that equity with, potentially, years of your irreplaceable life.

If its worth 100 million it isnt a startup.

Hm? Plenty of startups have current valuation over $100m.

However, I just chose this number because it is nice and round so the math is obvious.

Then I would argue that they aren't startups, they are fully formed businesses.

Frankly, the early employees often build more of the company and its success than the founders do.

They should be rewarded proportionate to the growth they create and catalyze.

> If a founder can't afford employees at market rate, they shouldn't be hiring yet. They could perhaps offer to take people on as co-founders -- with an appropriately equal share.

Brother, I have worked with both startup & MNC's and i can understand what you are trying to say but it is a bit harsh to say that if a founder can't afford employees at market rate, they shouldn't be hiring. Some part of me says you are right but other part says that some employee should have some faith. If I look from employees perspective its safer/more rewarding/less riskier to join as co-founder then getting market rate. I believe somewhere faith also counts :)

I would say the 'market rate' for the big tech cos cannot be applied to the financial analysis of hiring in startups because most startups have cash burn, and big tech is profitable. If you somehow negotiate a startup to pay you a google like salary you probably won't have much fun because you will be viewed as an even riskier hire than you were to begin with. There will be even more pressure to perform than there already was.

Faith is cool. But it needs to flow both ways. If you have faith in the person, make them a co-founder and give correspondingly respectable equity.

Not sure how you're viewing getting paid less as safer and less risky. Also, the parent is saying the issue is when an early employee is not considered a founder and isn't getting paid market rate. That's the downside of each of those points - no/little equity and no/little pay

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