6 out 7 start ups I worked for never had a liquidation event that resulted in any monetary gain.
The one that did ( i was employee #97 and worked there for almost 6 years) and they finally had a 2ndary offer which allowed me to sell 15% of my shares, for about 7K, but because it's short term gains, about 4K is what I got after taxes.
The rest of the shares were completely worthless because they couldn't be sold. I am not disappointed. I never assumed the options would ever be worth anything - I choose my employment based on Salary and work life balance. Options are just a nice bonus, if they do happen.
> I was asked to take roughly 40% pay cut now and expect 10X increase
Of course you were.
They are selling you on the dream, the best case scenario, etc.
The hard part is that no-one is intentionally or literally defrauding, but it is up to every person what terms they agree to.
It doesn't, from a financial perspective.
Second startup, I was told I'd get 5% of the company (no contract though). I quit after a year without pushing the topic: $0
Third job was not a startup, but it was a fairly small company, and I've made nearly two million in tax deferred accounts having made a healthy salary the entire time. I'm retiring this year.
I learned a lot of great things at those first two companies, but I would never recommend a startup from a financial point of view. I almost joined a third startup, but I didn't, and they folded as well. I suspect you've got better odds going to Vegas and putting your salary on a number from the roulette table.
I would love to know how. Am I just stupid? How am I missing these opportunities? Someone above posted that 4 years at FAANG would net you $1,000,000 savings. And you're saying that a "fairly small" company netted you $2,000,000 savings?
I am failing at life, apparently.
I started at BigCo four years ago as a SWE, after my phd in a not-cs hard science. My starting salary was $130k, with about $30k for signing bonus and moving fees. At my first full year, I received an additional $60k in vesting equity, for about $200k total.
Last year I made Senior SWE, which gave a bump to $165k base pay. Meanwhile, stock equity trickle has continued to grow, and looks like ~$100k this year. And an additional $40k from bonuses for performance, recruiting and general 'company has too much money' put the projected total for the year at about $300k pre-tax (and not including health or other benefits).
I live afaict unusually frugally. I don't drive, live in a shared house, and don't have short humans to worry about. But I occasionally travel to interesting places and give ~$8-$10k a year to stuff I care about. After four years at BigCo, I've got about $450k in the bank+investments. So, not a million, but probably way better than I would have done with the startup scene... and it sounds like the one recruitment bonus I've gotten so far is better than most people ever see from a startup exit.
Insofar as you seem to be "keeping score" against anyone but yourself, maybe a little. Otherwise, not really.
My situation was much more than 4 years, but it was steady (exponential) growth at a nice rate, and I'm exiting in my mid 40s. Maybe I could've done better, but to the point of this topic, my one stable job did much better than the three startups I was exposed to.
These huge bonuses, etc are handed out to people who either have really scarce skills or get lucky.
Wikipedia says there are nearly 4 million software developers in the US. If each were to receive a million dollars, then it would total up to 4 trillion USD (using US ways of naming large numbers). The GDP of the US in 2016 (same time the software developers demographics was reported) was about 18.6 trillion USD.
The idea that a million USD is reasonable for a developer is absolutely laughable.
 - https://en.wikipedia.org/wiki/Software_engineering_demograph...
That’s a ridiculous amount of money. Microsoft feels very stingy if this is the normal.
The newer software firms are much much better at adequately compensating software engineers, and especially senior software engineers. If you are a senior software engineer you should seriously consider trying getting compensated along those lines.
I can only say I truly got those packages and I’m an average engineer.
I suggest you ask to the close friends you have working at FAANG if those are true.
I am sorry you are 'disturbed' by my skepticism of random people on the internet, but I don't have friends working at FAANG so all I have to go off is my own experience and publicly available info. Based on those, I find it hard to believe how many people here post that they make 500k+.
AppAmaGooBookSoft do, indeed, pay deep into the six figures. Each of them has an engineering ladder, where promotions start off like promotions in grade school. If you're not fired, you make it to level X. (They don't fire many people.) The offer at X is, depending on negotiation skill, phases of the moon, perceived competition (particularly on the initial offer stage), and slight variations in performance, about $450k.
There are promotions available after X. People get them, approximately daily.
There are many people for whom it is not in their interest to tell you this, because it will make their offers or proposed life plans less attractive by comparison. There are many HNers who prefer ignoring reality on this issue, sometimes out of jealousy, sometimes out of pride, or sometimes out of believing that they can reason from first principles what Google should pay a Senior Software Engineer and therefore ignore what Google does pay a Senior Software Engineer.
These people are wrong. The market prints the deals where the market prints the deals.
For many good devs, immigrating to the USA is close to impossible in these times. Would be nice to know if these kinds of salaries are attainable outside the states.
Some places will try to pay you less based on your location. You can't blame them for trying, but you don't have to accept their first offer, either. The market is really good now.
You’ll quickly discover that either those compensations are real and very common considering how many posters are there, or the app is literally full of trolls pretending to have those offers and ask tips to other trolls, for whatever reason (except that they need to have a valid FAANG email account to post, so go figure why they would lie).
And there are many other resources to vet those numbers, such as http://levels.fyi or advice from “trusted” folks in the software community like patio11: https://mobile.twitter.com/patio11/status/100632191192687001...
As to why I am disturbed: people who don’t believe average software engineers can make that much are the reason why many employers don’t pay that much, so they drive down the overall compensation in the industry. If all software engineers were more aware of their market value, there would be less discrepancy in compensation, such as in other mature fields (e.g. doctors, lawyers). So, the fact you don’t believe me it’s disturbing because it’s directly affecting the job market I’m in.
That said, would love if someone made a site dedicated to collecting these offer letters. Would certainly help next time I'm job hunting.
I didn’t dig too deep into that because I recklessly opted for the startup instead of FAANG :), but the best deal was FB: everything was paid for and they were also offering a fat sign on bonus of 100k
What kind of tax-deferred accounts allow $2M in deposits in less than 50 years?
Make the nominal interest 10% (probably more similar to the actual returns in the past two decades) and we get there in ~20 years.
Contribute more (e.g. backdoor roth and/or mega backdoor roth) and we get there much faster.
Big company for some time
Startup 2: $0 for 2 years
Startup 3: $0 for 2 years
Startup 4: $0 for 2 years
Startup 5: $500k for 4 years
Startup 6: $1m for 1 year (still somewhat in play because 3/4 of my options got converted into the options of a public company as a result of acquisition, and I got RSU handcuffs on top of that)
All numbers before tax.
I hope I'm done with my startup adventures. Lost taste for it.
Financially, based on my experience, startups do not make any sense as an employee.
Mentally, Startup 5 made me question my faith in humanity.
Absolutely. Also note that you are an extreme outlier for having had a 7 figure payoff.
Most people who spent their entire career in startups will be lucky to see a 6 figure payoff at any point.
I’m not counting on the rest of the equity to be worth as much because I don’t believe in the company ability to execute well at this point, too many changes diluting the quality and the mission. Unfortunately I wasn’t able to sell more as part of the secondary transaction (company rule), otherwise I would have dumped it all (the vested part that is).
Yet I consider myself lucky after having read all these comments, but had I gone to FAANG 4 years ago my financial outcome would have been very similar, if not bigger.
That seems... crazy. Can someone explain how that works? Your salary alone living in the bay area, definitely isn't goin to net you $1,000,000 in savings.
Considering how well those stocks did after such offers were made to me, and how frugal I am (avid minimalist spending <50k a year in the bay), I would have saved even more than 1M (I know most of my friends working there did).
Also, the 1M from the startup wasn’t net, but gross (taxed at long term capital gain luckily).
Could you please explain how does this work? Is it a one-time payment of 600K spread over 4 years? And afterwards you just end up with 210K base (or maybe a small increase) for the following years, with no additional bonuses/etc?
This looks like an RSU grant of 600K; there are different vesting schedules (i.e. how much of the RSU becomes actual shares in the company, owned by you which you can sell/keep). Typically its 25% every year with a 1 year cliff (i.e. you get 0 actual shares when you start, but 25% after a year and so on).
This is not necessarily true if you've plateaued and is not necessarily true if your realized comp greatly exceeds your target comp. If your target comp is $500k per year but you're realizing $1000k per year due to stock growth then your refreshers will reflect the $500k rather than the $1000k.
I would not want to live that way but they seem to be pretty happy.
Also, what was the tax bill on the $14k and $1.1M in terms of percentage? Was it long term capital gains 15% fixed?
Back when I was a tax lawyer, you could exclude 50% of your gain, though the rules may have changed. Also, if you rolled over your gains into other “qualified small businesses”, you could defer taxation altogether.
Not sure what you mean about a business that has no stock (sole proprietorship?).
20% earned in a probability friendly way, is much better than 100% in a low probability way (as very high chances would have been of it nearing 0%)
What GP was trying to convey, albeit in a slightly confusing fashion, was this:
1. He had $14,000 in capital gains
2. No tax was directly accessed against this $14,000 amount, in other word: "tax bill was ~0 on the $14K".
3. The taxable portion of his capital gains was $14,000 * 50% = $7000
4. He paid his marginal tax rate on the taxable portion of his capital gains ($7000)
I got $130k, and their options were worthless.
Luckily the acquirer offered retention bonuses that helped dull the pain, but of course those are taxed at regular income and not long term capital gains.
Oh, and like a previous comment mentioned: the VCs have preferred stock so they get their investment back 100% before any common stock sees a penny. If employees had the same stock as VCs, I estimate I would have walked away with about $400k.
What usually happens is, say the company has received $x million in funding. Everyone is plugging away working hard, but runway starts to run short and the product isn't getting the traction originally anticipated. At that point it looks obvious the company will go bankrupt relatively soon, so the investors push for a sale to try to recoup some of the their money. Often times there is value in the team and perhaps industry knowledge to the acquiring company, but the tech itself is often worthless, so the sales price is below the $x million capital raised and only holders of preferred shares get anything.
Note that founders rarely own preferred shares. They have common stock just like employees, so they are usually wiped out, too, in cases like this.
A few hundred million exit will result in ZILCH (almost $zero) for any common stock shareholder every single time, unless the company was in series A or lower.
VCs have a separate share class called Preferred, and they also negotiate "Liquidation Preferences" with a multiple. So a Liquidation Preference x1 means they get their money back, as much as possible. A Liquidation Preference x2 means they get double their money no matter what, before anybody else - like common stockholders - get paid.
And this is before your stock options' strike price matters.
Its a shitty deal, investor protection laws should be extended to cover this, because the information and transparency is lacking.
My impression is that founders or early investors often have a lot of ability to dilute the value of stock prior to making a deal (there’s description of similar shenanigans early in “Chaos Monkeys”)
Of all the companies/startups I've worked for, this one was by far the most corporate and least startup-ey, yet this was the only one that made me more than a penny after an exit, despite working at a few other startups that have had "exits."
Overall, simply bank on it being nothing
I only planned on staying a year before moving so I didn’t negotiate any stock into the initial comp package, but later re-negotiated that into the plan which resulted in the weird timing around IPO so have a weird mix of options and RSUs.
As a junior employee who didn't know any better (and no negotiation leverage anyway) I accepted the deal. Fast forward a couple of years and as a potential sale of the company approached it was announced that the stock was going to split 10 for 1. What this means is everyone with shares now had 10x, while option numbers were unaffected (ignoring that the stock price is now 10% of what it was).
When the company was bought the price per share was equal to the strike price of a second grant of options I had, making them worthless. I suspect most of the employee options were at this strike price.
A fellow employee with shares made 40x what I did for starting a month earlier. My payout was <$30k.
Startup 2: $0
Startup 3: $3,000,000
Startup 4: $0
That's over the course of 25 years, with a few stints at non-startups as well.
As someone from humble origins, it surprises me more people don't live frugally 5-10 years in the Bay then retire in luxury somewhere with lower cost of living.
I have never worked in the Bay Area. Or anywhere on the West Coast for that matter. And most of my career has been outside of the US by this point (including the successful exit).
I had 300 options at $5.
post-IPO price was around $15.
I did the "sell to buy" thing, so I sold roughly 100 shares to pay for buying all 300.
I haven't sold the other ones yet but the stock is north of $50/share.
It seems like there's less than 20k shares total in circulation. (that's like an order of magnitude less than I expected? I took "shares held(000s)" and divided by "% Own", and rounded.)
I have the impression that most of the "old-timer" employees did quite well as long as they sold their stocks at the right time: one guy spent 6+ months traveling and then took his time finding his next job, another guy thinks he might be able to retire in his '40s.
edit: as elsewhere in this thread, I also worked at a startup that failed ($0), and I've left a couple that to my knowledge are still going ($ -4k , because both times i bought options on my way out just in case they make it)
- 20k total shares would mean a market cap of $1M, and an IPO price of $300k. Those are not viable numbers.
- 20k total shares vs. you having 300 options means you would have been given 1.5% of the company in one year. That's totally absurd given you worked there for a year as an entry-level engineer and the company had several hundred employees.
When sold we got 15% in cash, and 85% in stock in the public internet company, that was locked up for one year. The cash was a $800,000+ check. A year later i sold the stock for maybe $150k.
If I could have sold earlier I would have. Even then i understood a near revenue-less business couldn’t be worth $500M+.
haha WOW oh my god, and the software engineers getting a fraction of a fraction of a percent and being "reassured" that its a generous offer!
extremely relevant and the 2007, in italics for emphasis, is irrelevant ... or is it timeless
Peter Thiel? yeah I'm going to go with "'Missed the Point', for $10,000"
Startup 2: 2M$ (Joined as a mid level engineer, built the product ground up to scaling it to millions of users and hundreds of customers)
$6M exit, our shares were bought with the acquiring company's publicly traded shares. Those shares had a 6 month cliff before we could sell them.
~$9 a share at the time of acquisition, ~$4 a share at the end of the 6 months. Sold about 1 year after acquisition for ~$10/share, now at ~$17 a share and climbing.
Made $11k pretax in the end. (+$4k cash gift from founder that got a bigger payout, due to the board not approving more equity for employees pre-acquisition)
I have always optimised for salary although I can see why a young engineer with no dependants might opt for the gamble of a big payday instead, likely without really understanding their true chances.
Too much industry focus is heaped on 'unicorns' when these kind of companies really are a drop in the ocean.
My unscientific impression is that in 9 figure exits the founders typically do make money, because they typically retain enough equity even after significant dilution.
However, I have heard of high 9 figure exits in which nobody but the founders and VCs made any significant money.
They had taken on a relatively small amount of VC funding when I joined, so just doing the math on the number of high-quality employees and the fact that they were making market-rate salary offers made it obvious that they had been successfully running on their business model for a long time, even though they wouldn't disclose finances or customer numbers to non-employees. And sure enough, they eventually IPO'ed as a company that had been (mostly) profitable for a while.
Some context: The initial offer was either higher salary and lower equity, or lower salary and higher equity. The difference in pay was $5000 / year. Given the nature of the exit, I felt like a decent thing to do was at least make up the difference in pay. (The terms of the deal were confidential.)
Things were eventually "made right" by the new owner.
The problem with startup equity is that employees almost always have little bargaining power and always are kept in the dark about the real value of the equity. It almost always turns into a lottery ticket... Some people make out well, others don't, and always for reasons out of the employees control.
Why would shareholders stay in the dark? Is it because these employees-shareholders are not curious enough to request information about the company they own?
Equity is really a benefit that's part of compensation; it's not the same as voting rights. I like equity because I feel like I have "skin in the game," but I never consider it ownership.
A simpler way is: you are only an owner if you have >= 1% and some kind of voting rights.
They gave me stock options worth 300 $ but it increased 2000 times, in a span of 10 years. It increased so much, that I sold it eventually(to avoid all eggs in one basket). Got myself a house. Loan free. And started my own startup. Which I run till date.
1) optimize for cash. Stock is cherry on top.
2) if weighing two offers the one with RSUs should be weighted more. No "handcuffs" needing to pay to exercise if you leave.
Number 2 is referring to later stage private company. I haven't worked at a company where strike price is pennies or whatever, or a public company where you can sell at time of exercise. Then handcuffs may be worth it.
NEWR from 2009 to 2011, employee #20 or so, 20k shares (0.05%), exercised most of my vested ~10k before leaving, sold post-IPO-lockup at ~$36/share for a gross of around $385k . Would have gone up if I had waited to sell, to around $1m now. Most of my former coworkers are independently wealthy now, solid folks who all absolutely deserve it. Should have negotiated for more shares or cash, stayed longer, and exercised all vested shares. Live and learn I guess.
Not a huge financial loss, but I learnt a valuable lesson.
I have done far, far better at larger companies in terms of salary and stock programs. If I'd stayed one of the big companies, I'd likely be able to retire right now (not that I will -- I like writing software and I plan to continue doing it as long as I can, ideally well into my 70s).
$2.95m before taxes.
People who had been there long had both lower option prices and more options and made quite a bit.
This is the one startup I worked for that exited. I was only there for a little over a year. But for a few months, they couldn't make payroll and issued stock instead.
Ironically it was the project that I was working on which ultimately led to the acquisition. Not really because I was writing brilliant code though, so I'm not bitter about that.
Walked away with $140k after taxes
Startup 2 (6 months): $10k. Mainly from the profit-sharing of the startup incubator, not from actual equity.
The good news: none of this has mattered. After 20 years of work, I've done well through traditional savings and investment.
I quit a couple of years before the company got bought by a major player, leaving my remaining unvested stock which would have been worth another $300k at the moment of the acquisition. Good money for me as my first job in the US, although not as good as a bunch of colleagues before me that were turned into senior management and made millions. Loved the job, and I would have stayed if they hadn't assigned me a new boss that, albeit not a bad person, his professional demeanor was awful.
Have worked for 3 other startups since then. The next one, also a medical device company, looked promising. Joined as their first contractor/employee but I could not secure equity. They also changed directions on their development so I left. Salary was not terribly low but half of what I usually make. They are currently supposedly doing well and are shipping product after 5 years, and received around $30M funding mostly from a Silicon Valley VC last year to accelerate their growth. I know other employees left after me for similar reasons. They got compensated even less than me.
The following one again as a first contractor/employee in the connected home space with some promises for equity if the company soared (founders had done that before and were successful, with strong ties to Apple). Salary was not superb considering my skills, but above market. However after 2 years the founders could not do a buyback and the company was absorbed by their single investor, a big security business that was just in the process of rolling their IPO. They only offered us employees options at market price with a lot of restrictions. They were also going to reduce my salary and obviously I didn't like the terms.
Currently almost two years at a SF startup, with all the pains of working and living in the preposterous SF zeitgeist under a small startup company salary. Own more than 1% of the company but I know it will get diluted after we receive our series A, and where I don't have much control of the circumstances.
Before all these deeds, founded my own startup with a friend right out of college, mainly building industrial systems. We were naive and business inept, never made serious money but managed to stay alive for five years doing some cool customer projects, having fun and learning a lot. Plus the gratifying feeling of having control over our destiny, even if it was a bit for a small period of time. Hands down one of the best experiences of my life.
There is a reason startups - technology startups in particular - are declining in number, specially in the US. The field is too mature, consolidated and institutionalized now. There are some niches and pockets of opportunity, however competition is intense. Sadly most affairs and regulations are rigged against employees, and if you are not being compensated at market level with all the associated perks, you will never get rewarded as you deserve as an employee compared to a founder or investor in the minuscule event that the business is successful.
If you really want to be part of a startup, first try to work at a FAANG type of company even if the idea does not appeal to you. Leverage their massive resources to learn and grow your wealth. Save enough to a point that you are comfortable and don't need to worry about money anymore, whatever that means to you. Then, and only then, if you still feel the need to scratch your entrepreneurial itch, make your move. The full monty - not as an employee but a founder. Your increased experience and business network will further increase your chances of success. And you will also have come across real industry problems that desperately need solutions. Win-win.
In this age where work is changing so fast and the future of security for workers is uncertain, hoping for the best and planning for the worst has more relevance than ever.
I was the 2nd employee too.
#0 = 0
#1 = 0, ~500k options on day 1 eventually underwater and unexercised
#2 = 0
#3 = 25k
#4 = 0, but left unexercised options that were worth 500k about 8 years later
#5 = 0
#6 = 100k with additional options exercised and held
#7 = current gig, tbd
Background: I'm a software developer first, a good architect and team-lead but a reluctant manager.
startup #0 was a summer gig doing "web consulting" before my last year of college. I got put on a huge e-commerce project with tight deadlines (in C++). Slept under my desk for a few weeks and got it shipped. I rearranged my double major to a single degree to graduate early and the bigger company hired me away from the consulting gig. They had just gone public and were pretty flush. Turned out the web consulting shop actually got acquired and staying would have been more lucrative. Oh well.
startup #1 went public shortly before I was hired, ended up with approx $500k in options which were underwater by the time I could vest. Learned a lot about options, it was the first dot com bust. Had some great experiences, went to India, went to Japan, went to SF. Learned a lot about running software dev projects with global teams.
startup #2 was a combination consulting + java middleware/framework company, which was kind of a new idea at the time (again, post dot com crisis, pre-rails, java was new). We were building VB6 for the web, basically. Doing consulting work to eat our own dog food using our own tools. A few dry months led to missing a few paychecks here and there, and it would always take a really long time to get re-paid. Eventually our largest customer left and that wasn't enough work to sustain the whole company. Learned a lot though, especially about software schedule estimation (it's not THAT hard if you really put the prep work in).
startup #3 I was a co-founder, we were aqui-hired for zero up front but future promises/profit share etc. Ran as a small subsidiary of the parent company so we stayed independent and sank/swam on our own merits. After a year of zero salary (credit cards) we could eventually pay ourselves and got up to 6 employees and generated enough profit to be sustainable but I lost my interest in the product space. Sold my fraction for about @25k and moved on. Also learned a lot on that project. Parent company is still around and from what I can tell, very profitable.
startup #4 was a job offer from someone I met at startup #1. It was Ad-tech, which I have come to loathe, but I grinded it out there for a few years. When I left, I was so burned out I didn't exercise any of my shares which if I remember would have been about a $1k check. Of course, a mere 8 years later they were quite successful and those shares would have been worth about $500k.
I never took vacation at any of those previous companies, a span of about 10 years. At that point I was able to take a year off. Unlike #2 and #3, #4 were solidly profitable and paid well and I was able to save a bunch of money. Paid off all credit cards and will aim to never have debt again.
startup #5 was a facebook game company. Some kind of farming game thing, but not the famous one, a ripoff of a ripoff. Still, I met a bunch of great people there and learned a lot about cranking out content to pay the bills. At one point, there was a rumor of an acquisition by the famous farming game company, but that never came to pass.
startup #6 was a good experience, I worked with talented folks, got to travel to Europe for work, had the 401k etc. That's the place I worked the longest and it was managed the best out of all of the various dysfunctional places I've worked. Got to go to conferences, travel, work on open source projects, company wide hackathons that actually ended up in the product. Good work/life balance. After 6 or so years a new leadership team came on board and things started to change. I got an offer from #7 and decided to take it. I was able to exercise some options before they expired. Sold some and held the rest. The experience from #4 informed that choice. In the past I let a lot of options expire when I'd leave a place because I wasn't that personally enthusiastic about any more. Now I see it as leaving the bet on the table that might hit in 10 years, but if/when it does it will be worth it.
startup #7 is tbd. It's an interesting project, but it's back to the 60 hour / week grind with a bad commute and much less work/life balance.
I'm in my mid 40's now and I've pretty much decided that I'm done with the startup thing after this. If #7 doesn't hit then my next gig I'll go to some BigCo and apply all this weird knowledge and experience making software engineering teams function.
I do have savings, more than most, but definitely not enough to retire yet. Startups tend to underpay on salary. One side effect of all this is that I also have no family/kids/etc. I think that's partly due to choice but also partly due to having worked my ass off for the last 20+ years. I worked weekends, holidays, and 100+ hour weeks. I bought tickets for shows and never went. I've had my laptop open on Christmas day troubleshooting something or other that I don't even remember now. I was always able to do that because I never had a family. In the long run, I don't think the companies I worked for were any better off for that sacrifice. In the short term it always seemed necessary but in retrospect, the forces that made these companies successful or not were always much bigger than me.
I have done the "founder" thing once (at #3), and at one point I had to lay off employees that I had just hired. That sucked. I think when I'm just the technical lead, I can work hard on that and let revenue be someone else's problem. Also, most of the companies I've worked for have been founded by people that I know who asked me to come on board and take a senior technical role. Ultimately that's led to relatively low pay and low ownership stakes and a couple of decades of wasted time. So... don't do what I did?