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Startup Stock Options – Why a Good Deal Has Gone Bad (steveblank.com)
678 points by furkansahin on April 10, 2019 | hide | past | favorite | 374 comments



I was part of a very well know incubator and a very early employee at a flagship company. Founder blew tons of cash and dilutions but that is part of it and I didn’t mind.

What was ethically shady was shortly after I left with 4yrs vested they decided to restructure the entire company so they could attract investment. They took all the debt from the original company and put that in a shell company that then owned a portion of the new company. Guess where early employees’ stock went? The debt vehicle.

I actually did make some money on the eventual exit, but probably 1 or 2 orders of magnitude off of what it would have been if my stock was in NewCo. Consider the tech we built was a major driver of the acquisition, it was frustrating.

People are greedy, no matter how nice they are to your face.


That happened to me too. Owner restructuring companies or moving from LLC to LLC and then starting the vesting schedule over again. It's fairly common it seems that owners play games with the people who actually build the company after the work is done.


What's amazing is that you didn't realize that all CEOs are like this. To be a CEO you have to believe that you deserve 99% of a company's profit. Also you have to feel like it's a mistake if the employees get more than 1%!


You are right (well at least from my experience). For a long time I decided to believe that people weren’t that selfish until I worked for this start-up where the CEO openly admitted that he didn’t want reward employees with options. Yet, at the same time the company couldn’t hire competitive employees... that’s 2019 in Europe.


Is that illegal? Sounds pretty illegal. I'd imagine the owner getting sued by his employees.


What would you sue for in a startup that doesn't yet have value? Later on, if the company became worth something then yea you could sue but how do you work with the people to build something successful when you know that they are screwing you?

It sucks because you sign on to something and change your whole career but once you do that they kind of have you trapped in a way. They can change the deal arbitrarily once you don't have a job to go back to and you don't have a lot of recourse until the company becomes profitable.


A startup clearly has value even though it isn't a public company yet. Figuring out that value just has more steps.

IANAL, but MobileVet's situation may have been illegal, running afoul of minority shareholder rights, if the situation was accurately described. I imagine what happened was the CEO divided the company then paid a pittance for the portion without the debt to the portion with the debt. You can't do this, or well, other shareholders have legal recourse if you do. If you play enough shell games, you can somewhat hide what you did. That doesn't make it legal. If this is the case, the CEO just relied on the former employees not doing anything.


You are totally right with respect to the fact that it isn't aboveboard, but one of the biggest problems with our legal system is that you need money to protect your money. Other wise you'll go bankrupt while their attorneys file delay motions causing you to have to pay your attorney more and more.

I was the CTO of a company and built its entire infrastructure for 4% of the business. One day I came into work and the CEO(and majority owner) tells me to put aside everything and start work on a totally separate project. Oh, yeah and the company name is now different. The new project that I'm assigned is much more intensive in terms of volume and uptime requirements and came with no rewards.

So I start building the company in good faith with no real contract in place with the new company with the expectation that we would negotiate while I developed so as to not cause delays. This was a naive decision. Always get the contract first because as soon as real money starts flowing in everyone starts grabbing theirs. Prior friends or acquaintances also get preferential treatment which is how I ended up with the VP of marketing taking assignments from me and yet somehow being given 9x as much equity.

Eventually, after the system was stable and I felt confident in my work quality I asked to negotiate my contract. I was instead let go. The joke was on them though, I revoked their access to the repository and told them to show me the contract that says the software is theirs.


What happened then?


I think they decided that it was infeasible to continue using my system without fully knowing how it all worked. I intentionally made parts of it opaque (ie hidden in DLLs) until my contract was resolved. This is part of the reason why they let me go. I insisted that they purchase the rights to those opaque code blocks as part of my contract since they were in fact developed by me for a different project long before I joined the company. (It was a proprietary web server written in c++ designed for high-performance web services and since it was 1 of a kind it had a degree of security through obscurity and therefore I didn't want to release the code for free) I guess a part of me knew things weren't right but I ignored the signs because I loved what I was doing and I was good at it.

Oh, also they tried to claim that they didn't withhold any taxes by not giving me a W2. So now I can't e-file my taxes but they mistakenly reported my income to the department of employment back in Q2 so I'm sure the IRS will be calling them.


Yea, I figured it was unethical at best, illegal at worst. I could have pursued it but chose not to. I should have at least talked with a couple other former employees to see if we could go after it together, but I didn't want to be blackballed from the startup space. This is a very well known individual... though their reputation isn't exactly stellar.

Maybe I should have, but it wasn't going to be life changing money either way and it would have required a lot of time, money and emotional energy.


My first job in the US was at a startup located in an incubator building. In the same building was another startup that wasn't doing so well after a lot of growth and management there made sure that they would make some serious money at the firesale while everybody else made nothing. It really opened my eyes about the ethics of VCs and a lot of founders (who were very pleasant and nice people if you met them at the gym or the cafe).


Curious why you don't mention their name? Feels like there's little recourse against this sort of thing other than reputation risk, why not out them publically?


While I'm sure it would be quickly sued out of existence, are there sites specializing in this sort of information? I'd love to see names of founders/early investors/board members/... easily associated with these kinds of decisions (i.e. track records of the good and bad). I have to send feelers out into my network to dig up this kind of information but that's not an option for a lot of people new to the industry.


Shame we don’t have fuckedcompany.com around for this any more.


Valleywag was essentially that, but did get sued out of existence.


I don't know... not a fan of speaking ill of others even if they deserve it. Besides, I don't know for sure that it was illegal and it was a while back. It isn't worth the energy to dredge it up.


it's all public info... fuckedcompany 2.0


A company I used to work for is in the process of doing this right now. Makes me feel really stupid spending ~10k exercising the shares.


While you're probably bound by some restricted shareholder agreement, you may get a lot of mileage by just asking a lawyer to ask some questions on your behalf. If this restructuring is going on in the context of some larger time sensitive deal, they may throw something your way to not screw up the timeline. Of course, this all depends on your tolerance for pain.


I have heard that too. By raising an issue you may delay some deals so they may choose to pay you off just to get rid of you. But obviously there are no guarantees and hiring a lawyer may cost money.


Yea, I pinged the acting CEO... but I really should have had a lawyer make the inquiry to the founder & lead investor.


I believe you should be able to write off a loss as cap gains or OID depending on how long after excise you liquidate. Will at least be able to get some back.


I don't know if this is illegal, but it definitely should be. It'd be interesting to hear someone with a legal background chime in.


That sounds like straight up shareholder fraud to me.


Sure felt that way.


I went through an acquisition with a medium sized buyer who later restructured the company making the common stock essentially worthless. However, we were offered to buy the new stock class to equate to what we had before for a nominal fee (we already finished earn out and we’re gone for 2 years).


I made a bunch of money from ISOs at large, established companies.

I made zero (well, negative, really) from startup stock options, even before things got really shifty in the 2000s. One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it.

Treat startup options as wastepaper. You might get lucky, but it's really, really unlikely.


I would be really curious if someone could shed some light on how a healthy company could simply decide to "extinguish" exercised shares. Like how exactly would they go about doing that, and do you have examples I can read up describing where and how this happened?

I would understand if that happened when the company is in trouble (e.g. valuation dropping below the last preferred valuation, so preferences kick in, or as a result of the company having to honor very high liquidation preferences), but otherwise?

The only couple very shady cases I know about where Facebook with the Brazilian cofounder (with a complicated legal process where they reincorporated the company into a new one or something like that) and Skype with the employees (who naively signed a clawback clause in their agreement stating that the company could repurchase shares in the future at the original grant value even if their price skyrocketed, or something similar).

In all the other cases I know about where employees got screwed, it was because the company saw its valuation plummet and the investors preferences kicked in, in one way or another, so "extinguishing" common shares in that case is "expected" and more similar to a public company declaring bankruptcy and seeing the shareholders being wiped out while the bond holders can generally recoup something, since they have "preferred" terms inherent in the nature of the bonds.


This is what startups pay a lawyer to do. It's not that hard: restructure the company ownership in a long document with complicated terms. Get the employee to sign it and voila, early employees are screwed. The only real response is just not signing, but they will tell you the company will die if you don't do it, and you probably will just take it rather than fighting. At least I did.


Oftentimes, the conversation is more like, "Sign this or we're shutting down and starting a new company."

But yeah. It does go down that way more often than many people know.

In fairness though, one thing I think a lot of people don't realize is that someone must've gone to bat for employees when documents like that show up. I can pretty much guarantee you that the greedy bastards in the room wanted to shut down, or layoff, and reorganize with just the employees that they needed.

Someone in the room had to say, "Hey guys, let's try this!" And that someone took a real risk at being seen as "not a team player" so to speak. (It was likely someone powerful. What I've seen is that it can be everything from a powerful VC of the religious variety, all the way to your more idealistic founder types.)


But signing something without not understanding it is too naive.

So, assume I already left the company and exercised a big bag of common options and so I have a decent amount of common shares. If they tell me to sign something that looks shady I just say: "No, it looks shady".

What then, can they do?


Send to lawyer's office to pressure you.

It doesn't take a lot of imagination to see that this can happen. People are generally naive, and there are just a few that will resist and fight.


Especially if you depend on the money the job pays now and you can't pay a legal battle while searching a new job.


This. Stated another way, you need to make a decision in the very small timeframe about the tiny chance of success in the far away future, versus guaranteed success (your next paycheck) in the very close future.


Very few people also have their own lawyers, although pretty much everyone involved in a startup should have one.


This is one of biggest recent learnings. If you go to start up, make sure to understand also the legislation around labor, private contracts and equity. You will be dealing with people personalities much closer than in a big co.


Threaten to shut down the company. Then your shares are worth zero.


I believe I am the kind of person who would just say "Go ahead, shut it down if that's the only alternative. If you would like me to sign a deal to restructure the company, then I'll happily do it, but the company needs to pay me a one time cash bonus that reflects the value of the shares that I am forfeiting".

I am not naive enough to believe it would work, as they would probably find a way to screw me regardless, but my stance would be firm.

After my experience with startups I have become completely intolerant to corporate greed and injustice, so these days I am purely in a business transaction with my employer and I know exactly what to expect and when to expect it (which is why I get paid in RSUs rather than stock options). I like to think I wouldn't fall prey to this sort of petty begging.


They usually don't need your signature anyway. They'd just say no and move on. The vote of the majority of the shareholders, or often, just the majority of the preferred shareholders, are enough.


It's better than the alternative of giving in. Shutting down / reopening the company takes $$ and I still think you'd have a decent lawsuit against the new startup.


But the new startup wouldn't yet or might not ever be worth anything and so you just gave up your steady paycheck for a chance to sue for a small percentage of possibly nothing.


But then it makes wonder, why would anyone get themselves into startups anyway? Especially when you consider the relatively low compensation and high risk.


A few reasons:

* Access to decision makers

* Greenfielding a product

* Excitement / fast pace

* Novelty

* Great learning experience before launching your own venture

It's not for everyone, but I've interviewed dozens of developers who only want to work at startups for these reasons.

And for founders, obviously there's the upside of owning a business, the status of being funded, the ability to be your own boss and the potential for massive impact and wealth.


See Zynga, cancelling options prior to IPO: https://news.ycombinator.com/item?id=3220819


Sure, that is incredibly shady, and doesn't deserve any sort of justification.

But, for the sake of the discussion, I'm purely focusing on common shares that the employee already owns, which means vested options that were already exercised.

Zynga's shady practice was affecting unvested options.


It happened to me recently, here's a couple of snippets document I received:

The TLDR is "The majority of the board has already approved the decision of eliminating common stock and distributing excess payments to two founders and the product lead"

Each holder of Preferred Shares is entitled to receive cash merger consideration in exchange for the cancellation of his, her or its shares pursuant to the terms of the Merger Agreement.

Each holder of Common Shares will not be entitled to receive any merger consideration in exchange for the cancellation of his, her or its Common Shares.

In case interested, here's the full redacted disclosure -- docusigns followed very shortly after: https://pastebin.com/q6q7XMvF


Hold on a second (and thanks for this!).

If I read your document right, it says:

  The Company expects that the proceeds available for 
  distribution to the holders of Preferred Shares,
  including the full release of the Indemnity Escrow Fund, 
  will be approximately $0.5816 for each Preferred
  Share (the “Estimated Per Share Consideration”).
And in another portion, it says:

  before any distribution or payment of merger consideration 
  is made to holders of
  Common Shares, the holders of Preferred Shares are entitled 
  to receive $2.66 per Preferred Share (the
  “Liquidation Preference”).
And

  The holders of
  Common Shares will not be entitled to receive any merger 
  consideration in exchange for the cancellation
  of their Common Shares because the maximum potential merger 
  consideration payable to the Stockholders
  pursuant to the Merger Agreement is less than the aggregate 
  amount of the Liquidation Preference.
Does this indicate that the company sold for an amount low enough that not even the investors recouped their original capital (selling shares at $0.5 instead of the $2.66 they were at least worth according to the liquidation preferences, so overall a significant "failure")? Because if that's the case, it seems completely normal to me that common shares were nullified and it's fundamentally different than saying that shares were extinguished for "no reason" (i.e. out of pure corporate greed), like I interpreted GP's comment.

If not, this is instead a horror story.


Yes that’s correct, I don’t think anything nefarious happened. The big bummer, though, is I had $0.01 shares and paid AMT at a much higher valuation and expect it to take a few decades to claim back the loss. Was my first time working with ISOs and didn’t know about 83b’s


Yes, that indeed sucks. Out of curiosity, how much AMT credits are you able to recoup each year? I understand it completely depends on your tax situation since it's basically the spread between regular liability and AMT liability, but just to get an idea, is it to the tune of $1k/y, $5k/y, $10k/y?

I, like you, have a good amount of AMT credits from a previous employer, and will just start next year to try to recoup them more seriously (since in the years before I was always affected by AMT even without ISOs, due to California income...).


My CPA said the maximum I can do is $3,000/year, I'm also in CA :)


mmm, as far as I know $3,000/year is the maximum capital loss (from schedule D) that you can claim against your income. But that has nothing to do with your AMT tax credit, which you should have generated the year you exercised ISOs (form 8801).

The AMT tax credit you can use every year should be limited to the difference between your regular income tax and AMT income tax each and every year (if positive). You keep going like this until you extinguish it.

For example, for tax year 2018 I had ~$10,000 of capital loss carryover (from unrelated stock sale), and ~$40,000 of AMT tax credit carryover (from previous ISOs).

When I filed my taxes, I was able to claim $3,000 of those capital losses against my income (thus generating a $7,000 capital loss carryover for 2019) and $5,500 AMT tax credit to offset my final tax liability (thus generating $34,500 of AMT tax credit carryover for 2019). As you can see, I used both the capital loss carryover AND the AMT tax credit, they're two different beasts.

I didn't use any CPA and did all of this by myself (+ TurboTax) since it seemed straightforward (and admittedly I might have studied a bit too much how taxation of stock options works). If you find that I'm horribly wrong, please let me know, but it's not the first time I find a CPA being not informed in this kind of stuff (not saying yours is), which can be costly since, if you don't claim the credit in a timely fashion, is just lost from an IRS point of view (the forms are pretty mechanic and always refer to "last year carryover").

In particular, I don't understand how your company going belly up can generate capital loss for you, since you said you had an exercise price of $0.01 per share, so it seemed to me the money you lost was because of the AMT, hence the $3,000/year limitation is like apple and oranges and definitely not a ceiling of how much you can claim each year on the AMT credit.


Thanks so much for this info! I'll look into it!


Sorry to hear that. On the subject of AMT, one of my accountant friends, on the side, advised to simply not report and not pay the AMT on the phantom gain of exercised options, but instead pay the AMT plus penalty when exercised option stocks actually pay out in the future. Reason being that in case of things not working out, the company is out of business and the stocks worth nothing, no point to look at the phantom gain. In the case of a home run, the large gain should cover the AMT and penalty.

Of course you need to be prepared to pay the AMT and penalty whenever the IRS comes after you.


Wait, I'm not getting the rationale behind this and it seems very dangerous advice.

Whether the company goes out of business or becomes the next Google, your AMT tax liability in the year you exercise the ISOs remains the exact same, it's not that your stocks becoming worthless years later can retroactively change (i.e. diminish) what you should have paid in AMT the year you exercised. In fact, you need to pay it because it will create a different cost basis for your shares for AMT purposes, you do need that calculation on your forms. So, your "no point to look at the phantom gain" is something I don't understand and I suspect the IRS doesn't understand either.

Hence, you're going to have to pay the original AMT liability + the hefty penalty regardless, either way. At that point, why not just paying it the year you legally owe it and then slowly recoup it over the years with AMT credits?

What you're proposing is like saying "I bought and sold TSLA and realized $100k of capital gains, but I'm not going to pay taxes now because there's a chance in 5 years TSLA will go to $0, and so the capital loss will offset the gain I owe this year". It doesn't work that way at all and there's no way you could come out ahead adopting this strategy, and it's the exact same thing when you talk about AMT. Yes, the law is draconian because with ISOs you don't effectively have liquidity, but it's still the damn law and it's clear that ISO exercise is an AMT taxable event.

Without even entering in the debate that consciously not paying taxes that you know are owed is effectively tax fraud and could get the IRS pretty pissed on top of just penalties.

If you leave me the contact of your friend, I'll be happy to reach out and confront him/her directly on the matter.


In germany, you can sell those claims to firms. Which then make use of it. Can't you do it?


That's a very common end result for startups, usually goes by the name "sad exit".


Your common shares were worthless because after the preferred got paid, there was nothing left over. This is very, very common (no pun intended.)


'Extinguishing' aside, there are ways to essentially devalue shares, simply by offering up a lot more, at a low price to current investors, thereby washing away the relative value of old shareholders.

Once investors do this, they can take control of a company, and even issue new equity to current employees to keep them happy.

This is a tricky thing in normal scenarios because obviously the shareholders getting wiped out might sue, unless they are 'in on the deal' and coughing up more money. There are legal obligations around valuation as well, it can't be 'made up'.

But if a company is effectively bankrupt, then the board can basically nullify old shares by making them worth 'near zero' and issuing new shares cheaply.


I should add that this happened to me as an employee of a fairly large telecom startup.

The common term is 'washout round' [1] and this practice is not entirely uncommon.

[1] https://www.investopedia.com/terms/w/washoutround.asp


On the other hand, I once worked for a large well known company that actually gave me a pension. I can't remember what it was, but I think something like 5-10% of my total compensation went into this pension plan, which was essentially a mutual fund (although you could opt for long stock in the actual company instead). It took 3 years to fully vest. I stayed 5. When I left they sent me a letter literally saying that they thought the cost for me to hire a lawyer to get my money back would be more than the amount of money I could retrieve so they were going to keep the money. By that time I was already so annoyed with them that I concluded they were right: it wasn't worth my effort to extract a few tens of thousands of dollars from them (hey, this was a long time ago -- salaries were a lot smaller then ;-) ). Six months later the company dissolved under allegations of accounting fraud. The upper management actually got the bankruptcy court to allow them to use the entire pension fund as "retention bonuses" so that the company would have a chance of succeeding under their illustrious reign. That was an eye-opener. I had a few friends who had worked there for 20 odd years and were counting on that pension. Eventually I think they were able to sue the bankrupt company to get a portion of the money back. Of course, none of the fraud allegations went to court and the executives retained their retention bonuses (after having done nothing to save the company).


Hindsight is 20/20, but seriously. If you want to save money for pension, it must be something you control. Having your pension funds in the same company that pays your salary, is putting all the eggs in one basket.

If they really want to pay you 10% in pension, they can pay to a fund in your name with some terms about when and how they can be used.


I totally agree. I was pretty young at the time. It was one of the experiences that taught me to ask for the salary that I want.


I had a former employer do something different but similar.

They sold all the products to another company, paid all of the proceeds out as a bonus to the execs and big investors, and left the holders of the common stock (ie, employees who had bought their options) with a worthless, empty shell. Thanks for working hard and buying shares in the company!


What stops ordinary companies from doing this to ordinary shareholders?


That no one would buy shares in the new company, making it worth dramatically less than the old one


Fiduciary duties - I'm not sure if those are being left out of these anecdotes or there were actual issues preventing the obligations from being enforced.

https://smallbusiness.chron.com/legal-relationship-between-s...


>Treat startup options as wastepaper. You might get lucky, but it's really, really unlikely.

I have a similar story. I've been a part of three startups (two exited, one still going) and the options in all were only worth an eventual capital loss. For my last company, I owned nearly a percent of shares, but they were still worth zero. The only money I got was a cash bonus and stock from the acquiring company as a retention mechanism (I was an executive of the company, rank and file got much smaller amounts). Startups are good for experience, being a big fish in a small pond, etc. but it's marginally better than a lottery ticket if you're looking for a big financial reward.


You got $0 from your equity with ~1% of the company: is the reason the fact that the company turned against its employees, or more that the company exited for less than its last valuation and so there was no other way than make common shares worthless (like in the other conversation parallel to this one)?

Thanks


Is basically fraud, but you need money to investigate it, collect evidence and sue which they fraudster know isn’t worth it for any employee.


>Treat startup options as wastepaper.

I must ask - is there a hint of hyperbole here or are you dead serious? I currently work for a startup, and let's just say... I could've negotiated better on options when I joined. It's been on my mind to bring that up during my performance review.

Is that a fool's errand then? What is your advice when working at startups?


Not GP but I would be prepared as one would in any company, bigCo or startup when discussing compensation. I.e.: Be prepared for a money conversation and have a Plan B ready to execute.


It's commonly stated around here that VCs expect 9/10 of their companies to fail. So yeah, theres a good chance they are worthless. I think lottery tickets are a better metaphor, as they can be worth something. Wastepaper is hyperbole.

I don't think its foolish to ask for more equity as compensation, though obviously I don't know anything about your performance or current compensation. :) In fact, I would recommend negotiating better. Sibling comment has good advice on preparation. I would add talk to an accountant about tax considerations, and talk to a lawyer about the legal aspects of it. The last time I talked to a lawyer, it was ~$120, and that was a somewhat complicated situation. If you don't want to spend that much money on something that could be worth thousands or millions, well... You might end up like a lot of the other posters in this thread, and that is sad.

Seriously, a number of the posts in this thread likely wouldnt have happened, or could likely be resolved had the victim talked to a lawyer. Its like if you were robbed; you call the cops. Some people are saying its not worth it, it costs too much money, etc. If you arent going to call the cops, you can be robbed with impunity. It also means the thieves might grow bold, causing more headaches for the rest of us.

A number of people have said that the company/management told them that talking to a lawyer would be a waste. This is the thief telling you not to call the cops. You wouldn't take legal advice from a thief, right?? At least one person stated that the company "made" them sign something. This is the thief saying you "have" to give them something. If you sign something saying they can take whats yours, then they can. So talk to a lawyer before agreeing. The more upset they get, the more pressure they apply; the more likely it is that you need to talk to a lawyer.

Please, everyone, stand up for yourselves and get a lawyer. There are so many sad stories in this thread. The idea that people making 6 figures, with equity that could be worth that much or more can't spend ~$100 bucks to protect themselves!? It's appalling. Saying that it costs too much, not worth it, it wont matter anyway; that is like Stockholm Syndrome. Ok, that was hyperbole, but seriously, protect yourself.

Edit: EVIDENCE! The cops can't do anything without evidence, neither can the courts. Well, your testimony is worth something, but its better to get it in writing. Consult your local laws, or a lawyer regarding things like audio recordings, recording phone calls, etc.


I had a similar experience. It was a while ago so I don't remember the exact details, but the long and the short of it is the three founders started a new company, moved all the company's assets over to it, then dissolved original company.


I got enough cash from stock options at the last small business to afford to job search for a few months without too much worry, so there is that.


>One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it.

Sounds like an opportunity for a class action lawsuit. If they did it to you, they probably did it to others.


> they probably did it to others.

They all do it to everybody. They're careful to make sure there's nothing/nobody to sue - the stock options are offered by an S-corporation, which then goes "out of business". You can sue the now out-of-business S-corporation if you'd like, but it has no value, being out of business.


It seems fairly rare for large, established companies to issue ISOs (preferring to issue NQSOs or RSUs).


I am not sure how you are the top comment when you are complaining about issues that generally are not relevant to the post, you didn't explain your "extinguished" shares, and you do not explain why it would not be worth it to go after them if they have done something to you...

However, your last comment holds up well and I echo that sentiment.


He glosses over an important point: it's now typical for founders to take money off the table as part of financing rounds, sometimes as early as the A round. Founders will request it as part of a funding round and, there's so much competition to invest in the top startups, that VCs go along with it. Decades ago, this wasn't the case. Founders waited for the IPO like employees.

If you're an engineer sitting on $5m of vested stock in a decacorn, it makes financial sense to sell some of it. Today, companies make that really hard to do.

If employees could easily sell their stock while the startup is still private, this would solve a lot of the problems.


If early liquidity wasn't an option for founders, this massive pre-ipo/private-ipo market wouldn't exist.

Without early liquidity, a pre-ipo zuck/kalanick/etc. would be a paper billionaire with $0 in the bank and >$1bn "invested" in a risky tech startup. That's not financially or mentally sound, even by their risk lovin standards.

If investors demanded every penny go towards growing the business, those CEOs would just IPO earlier to get liquidity.

It's a necessary alignment of interests, if investors' interest is delaying the IPO.

Employee options holders can't just decide to take a company public, so their interests can stay misaligned.


> Employee options holders can't just decide to take a company public, so their interests can stay misaligned.

Not for long, though. The standard HN advice of "value options at $0" came about from a generation of employees conned by this, as you call it, misalignment.

Also, when you trap employees into heavy golden handcuffs, abuses of power in line management thrives (as what happened at Uber).


Given tech workers complete inability to form a union or guild I wouldn't bet on it.


Tech workers now have a lot of power in negotiations and are using it to demand high salaries. If options were ever offered to me in lieu of salary I would simply say no.


Do we?

Having a look at the revenue generated per person in Facebook vs General Electric we seem pretty shit at negotiating. The revenue per employee at GE is 400,000 at Facebook it's ~1,400,000. I'm not hearing FB paying people ~4 times the wages that GE does. Most I've heard is ~1.5 times for similar positions in similar locales, having friends in both.

We have convinced ourselves we're special snowflakes while the lucky and ruthless laugh all the way to the bank.


Good companies will often let early employees cash out in whole or in part with a "Tender Offer". https://carta.com/blog/tender-offer-faq/

This can benefit the founders and major investors, because they take less dilution.

Personally, I think founders should do this any time they take money off the table.


Going to IPO doesn't mean investors can't invest.


It means they have more competition.

It also means the way the company operates is different. Public markets don't allow (at least they're currently extremely intolerant of) high risk-reward strategies in practice, or cultural weirdnesses.. especially in a major stock. See: Tesla's issues, contrasted with spaceX's "must not be listed if we want to go to mars" stuff.

So, in practice, buying 2015-ipo Uber stock is a different investment to what Uber investments actually were.

Also (possibly the real factor) it goes through different channels. VCs and PEs business is investing people's money in investments they can't just buy on an app.


Biotech companies are frequently public and are rolling it all on a single drug.


Why do investors want to delay an IPO?


From the article:

Suster points out that the longer the company stays private, the more valuable it becomes. And if during this time VC’s can hold onto their pro-rata (fancy word for what percentage of the startup they own), they can make a ton more money.

The premise of Growth capital is that if that by staying private longer, all the growth upside that went to the public markets (Wall Street) could instead be made by the private investors (the VC’s and Growth Investors.)


I think the implication of the question may have been "why not just hold the stock after the IPO if you expect.

Further down, continuing the Sister quote:

three examples Suster uses – Salesforce, Google and Amazon – show how much more valuable the companies were after their IPOs. Before these three went public, they weren’t unicorns – that is their market cap was less than a billion dollars. Twelve years later, Salesforce’s market cap was $18 billion, Google’s was $162 billion, and Amazon’s was $17 billion.


If it stays private, not only do your existing shares appreciate (which would also happen if it was public), but as an existing investor if you have pro rata rights, you can buy more shares (vs them being sold in a public offering) increasing the number of shares you have that will appreciate.


A lot of VC funds are required to liquidate and return proceeds to LPs in the event of an exit, whether through IPO or acquisition.


It was mentioned about half-way through the article.

> And finally, in many high valued startups where there are hungry investors, the founders get to sell parts of their vested shares at each round of funding. (At times this opportunity is offered to all employees in a “secondary” offering.) A “secondary” usually (though not always) happens when the startup has achieved significant revenue or traction and is seen as a “leader” in their market space, on the way to an IPO or a major sale.


One problem with this is that later round investors usually want their investment to go into growing the business, instead of paying off employees. So the incentives aren’t aligned here to allow employees to sell their stock while the startup is still private.

Employees are also not usually invited to the investor meetings where these types of negotiations would take place. They would probably need the founders to vouch for them to make this happen.


It's not impossible for private companies to allow employees to sell stock in funding rounds. Tanium basically follows the recommendations in the article - employees get RSUs, and have been allowed to sell in every recent funding round.


No way they'll make it easier to sell. That's not solving a problem for the business. They need to keep the carrot dangling.


The article is right but misses the biggest problem with options: the need to spend money you may never get back in order to have a chance to be paid anything. There are two ways this happens:

- You leave the company after 4 years and have 30-90 days to exercise. The exercise will cost you $20,000. The company is nowhere near an exit. Do you do it?

- When you exercise you are either immediately hit with a tax bill for NSOs or you get screwed on AMT with ISOs. You suddenly owe money to the IRS simply because the company received a very high 409A valuation just before you left. A liquidity event is nowhere in sight.

You've taken a huge gamble by joining a fledgling company that pays little with a low probability of success. You toil for years an overcome tremendous odds to just keep the company alive. But now when you leave the IRS and the company itself wants you to take a final gamble with your hard earned cash.

I used to be an attorney who drafted option agreements. Now I've been at two startups as early employees. The reason why this never comes up is because employees do not know what they are getting themselves into. The options are worth very little BY DESIGN. Unless you are among the first 5 hires, you will have no leverage to negotiate a better deal.


A number of startups screw over their employees with options. 90 days is a terribly short exercise window. Kinda like a scam in a way.

But not all startups are like that. Where I work (Mixpanel), that window is 5 years. Which I feel is a much generous and fair offer.

With stock options, I pay no tax. If the company liquidates, then I convert the options to real stock (yeah i’ll have to pay money to do that). If things go better, I hold that stock for one year and when I sell, I pay capital gains tax at a much lower rate on the gains.

But. Big BUT, there’s a lot of assumptions. Things may not go well, may it doesn’t get valued as much, may be it takes longer than 5 years. Lots of may be’s. That’s part of the startup gamble.

We are hiring btw if anyone is interested in analytics space. DM me.


But you have NSOs though, not ISOs right? From what I understand, ISOs are required by law to have a 90 day exercise window, so companies that offer more than 90 days after leaving a company are having ISOs converted to NSOs. When you exercise the NSOs, you still will have a tax bill.


Why don't startups offer actual equity grants instead of options? It seemed strange to me when I was starting out in my career that I needed to take a lower salary and options to exercise upon my exit, which wound up costing me thousands of dollars from that lower salary.

Two years later, one founder forced out his two other cofounders, started a new company in the exact same space, and poached his best employees, essentially jettisoning the cap table in the process.

The small frys who exercised their options were totally screwed. That was a real lesson for me on how crazy this stuff can be.


Share grants would be seen as income by the IRS and most states and taxed at their Fair Market Value. Options on the other hand usually qualify as Incentive Stock Options that aren’t taxed at grant time and “when exercised, it isn't necessary to pay ordinary income tax. Instead, the options are taxed at a capital gains rate.” [1]

Options are better up front because there is no outlay for the employee. They are a hassle down the road. However, if you exercise during a liquidation event your tax liability is probably covered.

Stock is a pain upfront unless granted before the first round of funding or any real revenue when the stock value is very little. They are easier down the road, though.

Just my two cents. HackerNews, please correct any errors in logic or how this stuff works.

1. https://www.investopedia.com/terms/i/iso.asp


You are taxed at your marginal rate on the value between when they are offered and you exercise, and on the capital gains rate (provided you hold them long enough) between when you exercise them and sell them

In practice you either buy them the day they are offered (but before they vest, so a gamble) to switch to the CGT rate asap, or exercise and sell in the same process which means you pay at your marginal rate. You tend to do the former if you are early series A (penny a share or so so low financial risk - for example I once paid $1000 for 100k founder's shares), and the latter otherwise. Doing something in between means a largish tax liability with no matching liquidity event to pay for it - during the first dotcom bubble a lot of people did this, got a huge unexpected tax liability at the end of the year (and AMT) AND lost their jobs as things crashed and their stock became worthless (they could write that off in the next year, but owed the IRS lots of money while unemployed) ... so be careful here, make sure you know what you are doing if you're exercising in a situation that's not one of those first two I listed.


Companies should either:

- award RSUs that have a liquidity event as the final vesting requirement and don’t expire (so you are not taxed until you can sell, and don’t risk losing what you already earned), or

- pay annual cash bonuses that are “grossed up” so that the after-tax amount of the bonus is enough to cover the taxes levied against the employee’s value of actual stock or vested RSUs, etc., and ensure the company bears that tax burden.

I’d be more forgiving to fully bootstrapped companies, which are often fairer to employees anyway.

Not willing to compromise at all for VC-backed companies, period. They also should be paying full market wages and the equity portion is solely meant to be competitive with the equity compensation or bonuses at public companies.


The IRS considers RSUs that don’t have an expiration date as being close enough to actual shares to be taxable income. There has to be a “substantial risk of forfeiture” to qualify for deferred taxation.


In that case, then only the second suggestion.


That's usually referred to as Phantom Stock, and is a thing.


>Instead, the options are taxed at a capital gains rate

As I understand it, they ARE taxed as income for all intents and purposes at exercise time (based on the value difference at exercise). They are not regular income but they are part of Alternative Minimum Tax income. You pay taxes on the greater of the two. The difference between exercise price and sales price is then taxed as capital gains assuming you held the stock for a year (or two?).

The one trick to this is that if you exercise very early then the tax is on basically nothing (literally nothing if your option price and current value are identical). However, you still need to buy the options so it's not free but just tax free.


Another trick, if it makes sense at the time, is to work out what your AMT threshold will be and only exercise enough options to keep it at 0 or something you're comfortable with.

This is especially useful if you have ISO's currently vesting and the company has since gone public.


One problem with startup RSU is limited liquidity. If you got $1M RSU and have 25% tax rate then you need to drill a hole for $250K in your bank balance right away. If private market exist and you can sell 25% of your grant, that probably works but otherwise the $1M RSU sits there just looking pretty next to that ugly hole you just drilled. Now if company goes down for any reason then that's $250K not coming back possibly not just making you work for peanuts but you might have paid out of pocket to work at that company, i.e., received a negative salary. With stock options the same outcome could occur. The great outcome occurs if you got stock options and stick around all the way until successful exit. This would be desirable by founders and investors but things may not be under your control because, you know, life happens.

This basically means that to avoid negative salary outcome startups must arrange so at least portion of grant can be sold privately to cover tax liability at the time of grant in case of RSUs or at the time of exercise in case of stock options.

If this condition is not met, trade waters very carefully.


Maybe this used to happen earlier, but I only really saw this after the DotCom bust. In my case it was founders/execs issuing themselves new/preferred stock and diluting all their coworkers into oblivion on an exit.

Granted, these were small shops ~30 people and the exits were small ~$100M, but the effects were devastating. Everyone who could quit, did. People for whom an extra few $100k would have been a big deal would throw drinks at founders in a bar. The code became an unmaintainable worthless mess and they basically failed to live up to the value they existed at.

Why would someone give the founders such a deal? If they don't care about their employees to share 10%, they probably don't care about even medium term success.


I lived through an experience very similar to this. The little people got peanuts. Two things really burned me. One was exactly the point you made, with such a small team it would haven't been much to make the payout go from pathetic to meaningful for the peons who put years into the company. Second the sale contract specified employees would continue to receive similar salaries. So our salaries did not change, options that took years to vest were cashed in for little money, and the company suddenly had plenty of extra money to go on a hiring streak.


Could you/should you ask founders if they have such unilateral dilution powers? How do you check for this when joining a startup? Should this be explicitly written in the offer letter you get?


In general a majority stock holder(s) can rewrite the rules any way they like. You could have a poison pill written into your offer letter (requiring an immediate payout for certain events), but I don't think any founder/VC would sign it.

But I AM NOT A LAWYER.


A lot of smaller/early stage/seed startups actually do this. It's a restricted stock grant. And for the people saying they don't do it because of taxation on an illiquid asset, this is why 83(b)'s exist. They let you pay the full tax on a stock grant at time of the grant, not time of vesting.

You get a 409A valuation to establish the Fair Market Value of your stock. That valuation isn't based on the same criteria that investors use, it is much more rigorous and based on income, cash in the bank, etc. You could very well have a company raise money at at $10MM cap and be "worth" less than $1MM. If you grant someone stock at that price, their taxable income will be negligible - usually only a few hundred to a few thousand dollars, and then they don't have a giant tax bill at the end.

You still have to pay capital gains, but that only applies when you sell the stock, so you have the money to pay it.


That only works if you're a really early employee. Most moderately successful companies reach the point where their equity grants are worth enough that the exercise cost plus tax bill for an early exercise will be in the thousands.


> Why don't startups offer actual equity grants instead of options?

Great tax advantages. For ex one startup I worked for did it the other way resulting in recognizable tax income and everyone got hit with a tax bill. Fortunately when it was brought to leadership's attention they were enlightened enough to offset the tax bill with cash but don't expect that, ever.


Because you'll be taxed on something that often has no liquidity nor market. The estimated value on your stock may be $5 and you'll get taxed on that but if you were to go sell it you may only be able to fetch a fraction of that on the secondary market (if there is even one for those stocks), possibly not even covering the taxes you have to pay.


Late stage private startups almost always grant RSUs. If they didn't it would be way too risky for most people to join because the cost to exercise would be very high.


Valid reasons to work for a startup:

- You are a cofounder.

- You have little experience and you are using this to break into the industry, and get experience on many different technologies ("wear many hats").

- They are working on a very specific problem or using a specific technology that you strongly desire to work on and it's difficult to do it anywhere else.

- You want to work a certain way (remote, on the beach, whatever) and they are willing to go this route.

Invalid reasons for working at a startup:

- Getting rich off stock options.

- Making a lot of money in salary.

- Work / life balance.

- Stability.


Not exactly a unique experience, but my .05 - I started of at a startup with a "lol just do it" attitude to whatever the problem was. Worked 12 hours a day a lot, was stressed out all the time, didn't have a life, got calls at odd hours to deploy...but, if I didn't have that experience, I wouldn't have grown nearly as fast. Got to see all aspects of the products and the consequences of the decisions we made early on. Learned more in a year than in the last 3 at corp/consulting jobs. Then again, maybe it was noob gainz and I made at least a third less than I would have at a corp job.

Not sure if going back to a startup would be nearly as beneficial in terms of "levelling up." Seems like the game now is to grind whiteboard before I get too old for Google.

A friend grew from junior developer to director of IT at that startup, so there's that aspect as well, though I have also seen a number of startups hire leadership outside.


FANG is undisputably the best risk-adjusted compensation return for a programmer, and they're up there in terms of working with super smart colleagues, and therefore they have a high floor, compared to say a startup that goes nowhere with the blind leading the blind, but the ceiling is also constrained by what projects you're working on. In terms of raw software engineering development there's probably no substitute for joining early in a hypergrowth scenario, because you'll have to solve way more problems in an efficient way, and understand the direct impact on the business in a way that is totally obscured when you come into a massive corporation with thousands of engineers. It's likely company growth will outpace your personal growth (hence the outside hires), but even so you will get challenged in ways that just don't exist in large, stable companies.


All compensations are risk + skills adjusted (a technical term is expected return). With lower risk you must sacrifice possibility of higher reward and vice versa. This universal law is not broken by FANG or anyone else. FANG is not better risk adjusted and there is nothing special about their compensation.

If you are young and blessed with no dependencies, you should attempt exploiting higher risk domains. As you get older with more dependencies, you need to lower your risk tolerance. The technical term for this is exploration vs exploitation. The maximum payouts in many complex system requires some balance between two and sticking with just exploitation is often not the optimal policy when you look at life span as a whole.


[flagged]


If you put a lot of mental energy into organizing your ideology to think of them as evil, sure.


Can you elaborate?


The world is at peril, and full of people who are suffering. I can easily call an oil company evil, because they are burning the earth. I can call a food manufacturer that knowingly puts poison in their products to save a few bucks evil. I cannot bring myself to call Facebook or Google evil because they are configuring computers to display ads that introduce people to products they might want to buy. It’s really a triumph of human progress that they have managed to amass such wealth while causing so little harm.


The harm these companies might cause is primarily in the future. This is still the sunny phase where they have not been incorporated into some Orwellian system (pardon me, google tried really hard in China but got stopped for now)


Upvoted, but at the same time it's worth considering that right now, we have little idea how to account for the harm of the concentrations of personal data that both companies (among others) currently have. Even in the context of marketing, but more pressingly, once it becomes accessible to actors whose intentions may be either more malevolent, or simply up for sale to malevolent actors (e.g., Cambridge Analytica). You're speaking of poisoned products; what happens when data-intensive psych profiling is used to taint or outright poison discourse?


Nobody ever said that about the As!!


I'm pretty certain I've heard Amazon described as "evil". Apple are less objectionable, but I'm sure there are some things that somebody wouldn't like.


It seems Amazon's evilness mostly stems from their reputation for how they treat their employees - not how they treat their customers.

My weak sauce rationalization re Amazon is that I wouldn't work there (I love hearing the big sigh from recruiters when I ask if the client they are hiring for is Amazon.)

Others who choose to work there do so voluntarily. They haven choosen their own pain.

In my mind this is different than using your PhDs to build dark patterns to trick consumers, survelience tech to monetize people, using that surveillance information and neuroscience to manipulate people, and so on.

edit: to add -- I forgot about Apple, since I stopped buying their stuff a few years ago. At least they see that privacy protection may have some value in the marketplace.


Maybe you missed it but Amazon entered the advertising space in a big way, somewhat recently:

https://www.businessinsider.com/amazon-advertising-explained...


Most plausibly their:

- Attitude to third party repair

- Puritanical content restrictions

- Apparent disdain, in many cases, for their 'power users'


Which seemed like a big deal in 2009 but here in 2019 with the misdeeds of Facebook, Google and Amazon they look like a shining beacon of corporate ethics. Funny how things change.


Labor conditions for workers at their factories and at supply-chair partners are not the best. Closed software ecosystem. etc


not really on the same level of "evil" as people perceive FB, GOOG, Amazon etc


Amazon warehouse employees had to pee in bottles because they were worked so hard, and there is that business about selling large scale facial recognition services to governments (possibly in emulation of what China is doing)


They don't look "evil" from the inside. And even from the outside, one needs to considerably stretch the definition of "evil" to call them that.


What are the chances of the startup becoming successful and not turning evil?


and for me that cost is easily covered by the salaries they hand out


FWIW, I've worked with a lot of entry-level people at normal companies over the years and would estimate that noob gainz are 30-50% higher in startup land for the first 1-2 years of career, maybe 10-20% higher the next two, then flat or actually lower than corporate thereafter. I think it comes down to 1) startups pile a lot more responsibility onto their young hires than normal companies are comfortable with + 2) startups have a lot higher tolerance for failure + 3) small companies in general don't have headcount for specialized roles, so everyone has to level up in multiple areas.


I've worked at two startups, then a BigCo, and now another startup. The wearing of many hats was definitely a leveling-up experience, but I felt that I plateaued in just the way you describe. Equity from both of those first two startups is now worth zero.

In my years at BigCo I worked with engineers who have 10-20 years more experience than I do. Often felt like the dumbest guy in the room. I learned a ton. No comparison. But I would never have gotten the job there without my previous startup experience. And without that experience I'm not sure I would even have been able to learn from my BigCo co-workers so successfully.

I got tired of corporate politics and a high traffic commute, so now I'm happily back in startup land.


I feel similarly; I started my career at a BigCo, didn't get much out of it, joined a fairly young company, with (1) more responsibility than someone of my tenure should reasonably have due to (2) high tolerance for failure and (3) they didn't have headcount for the specialized role I was doing. Going back to a BigCo, the experience there was utterly invaluable. I realized that my first go round I had absolutely no idea what I should even be trying to get out of it. This time's different.

There's huge value to getting the lay of the land.


I think there's a similar dynamic with consulting - ThoughtWorks / Pivotal Labs type places. You get shunted around between many different projects, there are never enough people, so there are opportunities to take more responsibilities, and things are often a bit fluid, because a consultancy coming in tends to (should!) crack the organisation a bit. There are downsides to all of that, but it's also a way of getting wider faster, if not getting a lot deeper.


I worked in Pivotal Labs for about two years. It is an amazing place to learn the craft.


Yes startups will give you more responsibility, but that comes at the cost of far less mentorship. I often wonder if people only feel like they're growing faster at startups because the results are a bit more visible.

It is true that it's easier to be stagnant as an associate at a larger company. If you're not interested in taking on new challenges you can generally sort of fall through the cracks. However, folks who are proactive at a FAANG style company can find great mentors and support to develop skills really quickly. Often skills that simply aren't available to people at startups...

What's more valuable: spending your formative years working on systems at really high scale, or building a quick RoR MVP and managing 3 VM's in AWS for a startup?


You're not taking into account when the larger company simply won't allow you to to work on X because you're not the right team, title or level.

You may never get to manage a cloud VM. You will probably never get to help decide how a CI build pipeline works, how engineering hiring should work, etc etc.

I'm not discounting your point about learning to develop software at scale, but your overall scope of responsibility is much narrower. It's a tradeoff.


You won't get to do those things at BigCo likely until you've done it at a startup.


* If you're not interested in taking on new challenges you can generally sort of fall through the cracks.*

BigCo titles are much more narrowly defined, so most of the time you can't even see the parts that might have new challenges...or cracks.


It depends. When I was at IBM I worked on a small team and we had about 4000 VMs/systems I was the Network Guy, the Storage Guy, the VMware Guy, the Windows Guy, the Linux Guy, the AIX guy, the AS/400 guy, and the Security Guy. Gees now that I think about it, no wonder I was so stressed out back them.

I learned a lot from that job and it opened a lot of doors for me in my career.


Just pointing out that noob gainz would be the easily-attained gains at the beginning (of a weightlifting program), suggesting that maybe you learn so much basic stuff at the beginning of your first job, regardless what job it is.

http://nattyornot.com/bodybuilding-basics-noob-gains-explain...


> 2) startups have a lot higher tolerance for failure

I disagree. They have, necessarily, a greater willingness to accept risk since they are already in a risky situation by definition.

If anything the startup is likely less tolerant of failure compared to a big established business, in that it has nothing to fall back on and will simply fail and go out of business.


I resonate with your observation. I did the reverse, i.e.: FANG, fintech, pre-ipo then start-up after already achieved senior staff level. Start-up didn't tech me anything new unfortunately.


"A friend grew from junior developer to director of IT at that startup, so there's that aspect as well, though I have also seen a number of startups hire leadership outside."

This was the main benefit I got from a startup, but that also required winning something of a startup lottery. I was at a company that went from two to 200+ engineers. I was able to grow into the tech lead of the entire thing.

That put me into a leadership track at a relatively young age at larger companies. Which has been great. Financially, however, I suspect I would have been better off working at a FAANG from day 1, even being a very early and key employee for a company that exited at 9 figures.

Still I now know how fortunate I was. At my current gig we routinely hire startup "tech leads" for non leadership roles. They're probably generally thought of as a tier below a mid level IC coming out of a FAANG company.

Startups are a huge gamble. It worked out for me but even the inflated titles are only valuable if the company itself proves to be a winner.


The matching start-up TL to mid-level FAANG seems fair to my observations.


"Seems like the game now is to grind whiteboard before I get too old for Google."

the sad reality of this industry...


I can attest to this as well. I can't recommend this to anyone else, but personally I'm glad I went through it. I had one hellish week where I was so nervous I couldn't eat. Slept 2 hours a night and lost 5 pounds in one week.

Employees shouldn't be treated like that, and I will never work at a place like that again, but I am a dramatically stronger engineer because of those experiences.


> Worked 12 hours a day a lot, was stressed out all the time, didn't have a life, got calls at odd hours to deploy...but, if I didn't have that experience, I wouldn't have grown nearly as fast.

Congrats on using the opportunity to grow in an abusive role. It should not be normalized is the point.


On the opposite side of this argument. I was there. I was shit in college but managed a degree and self taught programming. I was hustling hard to graduate and convince someone to hire me as a programmer even though I had no degree. I was 23 at the time.

If you are in this scenario, just you, no wife kids etc. What is wrong with working really hard on a problem? I loved the startup and it fit my perfect niche. I would grind 12 hours days, but also had lots of freedom. Remote work, unlimited days off etc. Sure at sometimes you get burnt out but you are a sponge soaking up everything you can.

now i'm 28 with wife and kids, no overtime for me. I still work extremely hard and lazer focused, but i show up at 7:30-8am and leave at 4 everyday :p


> What is wrong with working really hard on a problem?

Because you're normalizing abusive workplace practices. Need I explain further? It's not right, it's not okay, and if you tolerate it, you do a disservice to your colleagues. Maybe you don't care, that's fine. But when you say "What's wrong?" I will point out that it is not to be commended or supported.

If your employer encourages, supports, or allows this sort of behavior to exist, I hope you find yourself on the business end of a lawsuit.


It seems like what's wrong is if it's not telegraphed that this is expected beforehand. We're all adults here and should be able to make informed decisions about how we want to live. Some of us want a lot of pressure and to not sit around bored wondering what to do with our lives.

When I was in grad school, 100 hour weeks and working 100 days straight was the norm. Also I made 25k a year. And I loved it, because I loved doing science and I got to be paid to do what I loved. And also, it's maybe worth mentioning that your experiments don't give a damn about labor laws. There really are some important societally beneficial things that simply won't get done if there aren't crazy fuckers like me around (not necessarily the projects I happened to work on, they all turned out to be crap)

Honestly what made me mad was that there were a lot of kids who got out of college, and went to grad school because they didn't know what to do next and nobody told them how crazy grad school was. These jokers depressed the asking price for a grad school salary.


I'm on team work/life balance but, in this case, I agree. First job out of school I had an engineering job (not software) in the oil business. Spent lots of time living in shipyards and offshore. Long days. Etc.

But I had a lot of responsibility. Was sort of thrown in the deep end with respect to a lot of things. It was a great experience out of school and, in retrospect, was absolutely the right job choice relative to my other options.

Would I have wanted to have done it long-term? (I left after 3 years to get another degree.) No way.


It's "pissing in the pool" for the rest of us. I know it feels validated internally because it worked out for you though.

Even when I did a startup, I held pretty normal hours. Working on someone else's problem to make them rich is silly to me. I think it's something that you either get or you don't. I don't plan to convince you to change sides, but I'd 100% of the time rather spend hours 8 or 9 through 12 working on my own hard problems. They're easy to create. I definitely had more responsibility, did more coding, and felt more energy at a startup than a big corp though. Pay and nearly everything else was shit in comparison.

If someone did 10-12 hour regularly on my current team, we'd be pissed. It would set a new normal and management would think they could start replacing people until they get 10 of those guys that are willing to sit here half the day.


I don't think it sets the normal. We had a great senior dev who never worked a second past 8 hours, never did prod support during off hours, never picked up the phone on the weekend, etc. But when he did work, he delivered way more than the junior devs did. He works there to this day, at a great salary, with no pressure to work OT.


Sorry, but that's ridiculous. People have different levels of dedication to their work. If you want to do 40 hours a week, that's fine, but don't crap on someone who wants to put in more effort.

Sounds like a union where they'd beat on the new guy who actually tried to be more efficient.


Versus management demanding everyone work 50-60 hours a week in an at will employment state? I won’t disparage your work ethic, but recognize that allowing yourself to be exploited enables your company to more easily exploit the unwilling, and without labor protections, it leads to systemic employee abuse.

You can’t say it doesn’t happen. HN is littered with these abuse stories.


I get what you're saying, but don't try to act like working more is equivalent to being more efficient.


Wait, I enjoy my job, want to write code and get lost in my work and you think that’s pissing in the pool?

I know some people at work that sort of have your mindset. I think it’s the worst. Not only do they not want to help someone who’s passionate you now make me suspect they’re incentivized to undermine hard workers as well, since they make you look bad.

Fine, take it easy at work, I don’t care. Just don’t make it harder for people who are trying to get work done.


I want you to work hard, I just need you to be paid more (hopefully a lot!). I'm saying it's better if I'm paid less than you.

What I don't want is for you to put in more effort for the same pay and establish a "new normal".

That's all it takes for us both to be happy. I don't want to hold you back, m'dude.


You are being exploited. Do you get compensated 1.5x your base for all those 12 hour work days?


Making multiples of what the median American household makes, sitting in front of a computer, in an air conditioned office full of free food is being exploited?

I'm sure a lot of American workers are being exploited but I'm not.


At most startups (with illiquid equity), TC adjusted for cost of living (assuming Bay Area) is probably not far from median American household. Employers take advantage of youthful zeal which prevents ICs from understanding their true worth to the business. After startup engineers reach the point where 12 hours days become unacceptable from a logistics standpoint (kids, burnout), what do they have to show other than enriching their founders? If they enjoy programming and would do it in their spare time, why not dedicate 8 hours towards their job and 4 hours towards a personal project with potentially much higher personal reward?


> what do they have to show other than enriching their founders?

I don’t get it. Being debt free and having a big pile of money, and a body that still works since I haven’t been doing backbreaking manual labor?


So you recognize the abuse disparity. Good! You can then understand why people fight against abuse despite the complaints from the comfortable.


I recognize that a lot of workers in America are exploited and abused. And I support policies to mitigate that. However, trying to associate myself with those or comparing my minor inconveniences to that of blue collar workers seems like it would be extremely spoiled and tone deaf given how exceptionally privileged the average tech worker is compared to blue collar workers.


On salary (not hourly) this is a useless question.

Say they make 100k/yr. With 40hr weeks that's roughly $50/hr. With 60 hour weeks and 1.5x base pay, you could say it's $20/hr. It's all the same.

What you seem to be asking for is for companies to pay you the same, just say your base is lower so they can pay you 1.5x you base for appearances sake.

Now, optics aside, if you take an offer with an expectation of 40 hrs / week and they make you work 60, then sure. That's exploitation. But if the expectations are clear upfront, "base pay" is just legalese.


Maybe I can rephrase. Is OP's base 1.5x that of the average (8 hr/day) worker base at comparable companies?


> You want to work a certain way (remote, on the beach, whatever) and they are willing to go this route.

This is me. I quit my well paid job and took a massive pay hit so that I could work from home and so be able to spend more time with my daughters.

Absolutely worth it.


At a start-up? How do you manage live/work balance? Are there any on-call duties? Thanks in advance.


In my very personal experience, many times startups are not full of the brightest engineers, especially if they are based in a major tech hub such as the Bay Area: most talented engineers these days, if location is not an issue, first try a shot at FAANG or similarly big companies where they can experience problems at massive scale and very high compensation.

Hence, many folks who end up accepting to work at a startup are less talented engineers (you're left with the "scraps" of the market), so if you're a high performing individual you might find that you really don't need to put that many hours in to be effective, as compared to your peers (and that's deeply depressing as well, and one of the reasons why I left startups for FAANG, other than compensation; talent is SO SO SO much better).

I speak for direct experience, I rode a startup train for a long time at a company that grew a lot, and rarely put in more than 40 hours a week into the job, while others were routinely putting 60+. And I kept being praised by the management and technical leadership.

The problem (lack of local talent due to big company competition) became severe enough that we had to bootstrap multiple remote teams in easily overlooked areas because the new local hires (San Francisco) were literally trashing the product due to poor development/testing.


I hear conflicting ideas about who's getting the most capable people, and I don't know what's true.

Maybe a decade ago, a knowledgeable colleague, speaking of one of the better-regarded FAANGs, told me, "First they hired the A students, then they hired the B students, now they're hiring the C students."

More recently, the sentiment I heard among CS-ish PhD students at one big university was that FAANGs (or, at least, particular ones) aren't seen as the cool places to go anymore, and people would rather do their own startups, or get professorships.

Personally, I'd consider most of the FAANGs (but not one-sided hire-hazing rituals). But technical cofounder, or working on a startup that's already funded, or a rare research lab position, is seeming more likely to be a good match.


In my 10 year career, I've done 2 startups in the Bay Area (both early, one I left after Series A, another one I left after Series C) and more recently Google, and I can say the level of talent doesn't even compare in my opinion: from my experience, the engineers were so bad quality that I was feeling depressed and wasting my time most of the time (and constantly saying to myself "am I just a jerk in thinking of everyone else as doing bad work?").

Typical thing, that really happened: a coworker at a startup ("senior engineer") had to do some calls to a very simple HTTP API from an embedded C++ component. She proceeded to hand craft her own HTTP requests and manually dispatch them to a manually instantiated connection using sockets, and then manually parsing HTTP responses (!!). I suggested to not spend time on such irrelevant code, I was ignored. Management didn't chime in.

She kept having problems and problems once that 100s-lines long thing hit production, as you can imagine (every software engineer should know that writing a network client from scratch is not easy!): finally I broke down, linked libcurl in the application, and in 2 hours and 30 lines of code I had the whole thing solidly working. And that's how I afforded working 40 hours a week instead of 60.

At Google, this would never happen.


At a Startup, especially one that's "long in the teeth", the senior engineering team are those that have been there the longest and have the largest institutional knowledge.

"Why are there 4 unique keys on this table named masterkey, masterkey2, mk1, mk4?"

Principle Engineer. "Well, the masterkey indicates which key this was mastered on, if you check the masterkey db, which is just "id, timestamp, masterid", this is required to comprehensively log the creation date of the row to maintain the db's audibility in case of SOC audit.

masterkey2, refers to the masterkey2 db, which contains "id, timestamp". Any change to the row requires an update to masterkey2, again for auditbility for last modification reason.

mk1, contains "id, userid". Which is the user that created the row.

Finally, mk4 refers to the new mk4link table, which is a LinkTable that links the main table to the mk4update table. mk4update is 'mk4id, username, timestamp, creator' and contains a list of any changes to the table and a flag indicating this is the creation date. Have you done a SOC compliance report before? No? Well, all of this is mandated by the SOC compliance, its kind of ugly, but it works and is absolutely required."


I get it, you've been at some bad startups and choose to generalize that experience. I can assure you I've worked in some large successful companies with building after building full of the dumbest people you've ever met.


This situation is common in acquisition/acquihire scenarios. The critical people end up leaving because they have the skills to move on or the new leadership above them becomes grating, and many other people end up being left behind. This leaves a piece of software/sub-organization that's making money but can't take it much further than where it was left when these people moved on. It is possible to not end up in this kind of situation but in my experience this was the most common reason why there was a whole floor of people without skills or leadership somehow staying on as a zombie.


Some developers use work as an excuse to try something new (or to do something different). This was probably someone who thought a problem was easier than they imagined. Hubris comes hand in hand with experience (seniority?).

These kinds of initiatives happen all the time in every company, including Google. A team lead generally would quash this in the interest of reliability/safety/etc, I think.


Interestingly, I have had the opposite experience. In a legit startup, at least one that is pre-significant revenue, when you are still looking for "market fit" (aka bleeding money), you don't have the time to reinvent the wheel. Its more like "Please god let there be some reasonably workable library already built for this so I can focus on the important stuff!"

Bigger companies IME, tend to be the ones that can afford to reinvent the wheel, and also tend to have the ~~arrogance~~ size to feel that they are a special enough snowflake to eschew something off the shelf and build something custom tailored exactly to their needs. They also have big enough budgets to be able to spare the manpower on it.

My experience has been largely in the financial space, maybe that is the key difference.


That's some incredible anecdata. ;)

I've worked at _very_ large multi-nationals where, in my anecdata, I've seen such hand-tuned monstrosities deployed.


> At Google, this would never happen.

At a startup, a flawed but functional deployment today is better than a perfect deployment tomorrow. I've never heard of a startup that was successful because it got software right in it's early stages.


Sure, that's generally true, but in his example the developer actually spent significantly more time and effort on their bad implementation. It was the worst of both worlds, flawed and tomorrow, so to speak.

I've seen people do things like this more than once, even talented people. They some how get an idea in their head and go way down a rabbit hole without stepping back and realizing it's the wrong design. I think that pattern is more possible in small companies because they are less likely to have their work reviewed often, do formal design sessions, or be pairing with another experienced engineer. I don't buy that things like this don't happen at FAANGs because they are just oh-so-much-better, I would guess it's mostly because they have more mature practices.


Right.. at Google, you have immense numbers of people work on entirely useless products that get canceled a year later.


I shouldn't reply, but oh well:

> people work on entirely useless products that get canceled a year later.

You just described 99% of startups :-)


[flagged]


I am actually very, incredibly proud and happy of what I do.

First of all, selfishly I am learning like crazy. I am able to work on the world's most advanced software defined networking implementation in Google Cloud, and it's just amazing and mind boggling.

Second, I create real value for a lot of people: the reliability I help improve has a direct effect on the happiness of the Google Cloud customers that run on our platform.

Third, even outside my Cloud business unit, while no company is perfect and there are clearly issues around data usage and centralization, I still think Google's effect on society is wildly and massively positive, it improves all our lives like not many other companies have ever done, so I have no problem at all working here.

But that's just me, I have no problem in accepting that your opinion might be different and you would never work there for ethical reasons, your (my?) loss :-)


I am curious how reasonable people with many options of where to work turn a blind eye to what their companies do.

You are correct that no company is perfect, but some are less perfect than others. It seems many people like just shrug their shoulders and move on pursing the fun projects they are well-paid to work on. Such is the human condition.


>I am curious how reasonable people with many options of where to work turn a blind eye to what their companies do.

In my case a lot of it comes down to me, as an insider, knowing that you're wrong. "Monetizing people" is sort of meaningless. That's an objection to capitalism, if anything, not Google. Google no more monetizes people than a bank, or a rideshare company or even a university. Short of maybe fundamental research, you're not going to find a job that doesn't monetize people under some interpretation.

As for a "surveillance society", I don't really think that's true. The care my coworkers take with user data is, in a word, significant.

There are certainly things that Google has done that I think aren't ethical, but I'm much better positioned to be aware of and change those things as an insider than an outsider.

And then of course there's the multitude of selfish reasons: compensation, interesting technical work, intelligent coworkers, etc.


Well we are way OT so I will let you have the last word. Thanks for sharing your thoughts.


I've worked at both (Google from 09-14, technical cofounder in 07-08 and again from 14-present, and also a financial software startup from 05-07) and my perception is that the kinds of problems you work on are very different.

At Google you do rigorous engineering, you're intensely data-driven, you have to work at massive scale, everything you touch is a distributed system (with all the skills and pitfalls that comes with working on that), and you'll often learn a lot of fundamental CS algorithms because you need to re-implement them to work across 1000s of machines rather than using a standard library built for a single address space.

As a founder, it's just one problem after another, rapid fire, and you might have 1-2 days to solve something that took 2 months at Google. You do a lot of hacky 80/20 solutions. You need to think big-picture on everything and understand how everything fits together. You solve a much wider variety of problems, but you don't really go into depth with anything. Rigorous engineering isn't really part of a founder's job description, and some people view that as being dumb or poorly trained, but you make up for that in speed, ambiguity, and breadth.

I'd say that when I joined Google in '09, the level of colleagues there was much higher than the general level of technical founder prowess in the Valley, and it remained that way for the whole time I was there. But the types of employees Google hired in '13 were very different from the types of employees hired in '09 (who themselves were very different from those hired in '02), and it wouldn't surprise me if starting in '15 or so the balance started shifting back towards startup founders. Honestly I think the best technical minds today are actually doing cryptocurrency "non-profits" (scare quotes because they're actually being paid by capital appreciation of their founder tokens) - I've been quite impressed by the algorithms being discovered by projects like Ethereum, OmiseGo, MakerDao, zCash, Monero, etc.


I've personally cut Google's interview process short several times now; I get far enough to seriously reconsider, and tell them I'm not interested.

> As a founder, it's just one problem after another, rapid fire, and you might have 1-2 days to solve something that took 2 months at Google. You do a lot of hacky 80/20 solutions. You need to think big-picture on everything and understand how everything fits together. You solve a much wider variety of problems, but you don't really go into depth with anything. Rigorous engineering isn't really part of a founder's job description, and some people view that as being dumb or poorly trained, but you make up for that in speed, ambiguity, and breadth.

This is why. While I sometimes yearn for a little more rigour, I certainly do not miss change reviews taking weeks and months at a time, and projects languishing while we attend endless meetings which seem designed to _undermine_ consensus rather than build it. I find the glacial process of large corporations to be utterly frustrating.


That's probably because you were talking to " CS-ish PhD students".

First of all, they're looking to validate the choice they made in lieu of becoming a millionaire. It helps them sleep at night to think Google or whatever isn't cool (maybe it isn't).

Second, they're interested and driven by different things.

Every single good/great practical software engineer I know from college is working at FAANG or a unicorn.


Good point: that sample was of people who chose to go to PhD programs rather than to (or stay in) a lucrative FAANG engineering position, so maybe not representative of people considering engineering tracks.


Interesting... i'm in a similar space where I found a decent startup, grinded for a year or two... and have pretty much been riding a gravy train ever since. In the midwest, making 100k in my late 20s and going full time remote soon. we got bought up by some corporate shmos as well so got a pretty penny in stock options


It's a startup, yes.

I work eight hours a day on average, and being that we have staff on most continents we don't really have a need to be on call. That said, I've had a handful of 3am emergencies over the course of the last few years.

I work in my garage; so I have no commute, and I no longer lose over two hours a day to commuting. That's meant I contribute far less to open source, which I did while on transit. However, I don't miss commuting at all and am thankful for the time recovered.

Balance is blissful. While my wife was on maternity leave for twelve months our girls were at home as well, and so my breaks consisted of spending time with my family. Now I walk them to daycare before work and listen to the rain on my roof while I work.


Thank you for your reply. This gives me more food for thought.

I am lead engineer at a start-up and my goal is to create a good work environment for our current and future devs. #1 enemy is the on-call, which should be resolved with customer support + some automation.


FWIW, we're a reasonably successful social application that's _heavy_ on real time networking; so there's always a large number of users active and our services are generally humming along at high throughput.

Lots of automated tests. A good community team. Code reviews. A _rigid_ feature-branch-and-test process. A _rigid_ closed beta->open beta->release process.

And we still have bugs. But things don't catch fire often, and when they do, it's usually not our fault. ;)


Sounds like what we want to achieve. Good to know it works for others.


One more question if you don't mind.

What is your vacation policy? Fixed amount + required to take or unlimited + take what you need? I am not a big fan of the latter, but not sure how it works for others.

Thanks.


AFAICT, unlimited. I just ask and they always say yes. Last year I took around 4 weeks of vacation _as well as_ 5 weeks of paternity leave.

I think it helps that they've never taken issue with my general performance; if I weren't satisfactory in my output then I probably would have some push back.


Eng at my startup (I'm a founder) can work a straight 40-45 hours per week, which translates into probably about 30h/week of heads-down coding, and be highly appreciated.

We rotate on-call duties, but seriously, if you're fighting fires all the time, it's because you're bad at computers. Get some discipline about writing code that doesn't blow up constantly, get good at blue-green deploys, do code review, run post-mortems, etc. Basically, exercise some professionalism.

We definitely have fires, but it's not a weekly event. Or monthly.

Now, not every company is going to be professional, but as a software engineer in this market, where you work is your choice. You can work at a startup building comparatively boring software (like mine!) that sells to enterprises, for founders who don't work 80 hour weeks, and have a good working environment. Or you can not. But now, perhaps more than any other time ever, the choice is yours.


Adding to the other responses here; in my experience many engineers at startups get sucked into the mindset of aggressive sprints and crunch time. This manifests as a failure to properly estimate project time. If you are working remote, managing your own hours, and properly estimating your tickets then there is no reason you can't have a very reasonable work/life balance.


There seems to be some kind of understanding that start-up means aways working overtime etc. AFAIK that is not often the case, but people can work quite normally in early-stage companies as well. And mostly it is the founders who are working hard and employees are not required to work the same way.


I've worked at mostly startups and I have had a normal work schedule except for maybe 1-2 days a year.


Yes, I agree. We have (trying to have) a similar culture. The overtime is not expected, but the problem is task/context switching, which got better (less).


I've worked at a startup that mandated no developers worked outside core hours (unless responding to an on-call issue, we all took turns on call).

It worked fine. The founders were fairly enlightened people, and well aware that we were in this for the long haul - success would take time and nobody could work long hours without the quality of the work suffering.

This wasn't the case for all staff, mind. There were definitely people in some roles who worked longer hours. Marketing and PR mostly.


Thanks, there is hope then! Something similar I see at my current work place. I always try to send the message it's a marathon and not a constant sprint.


Why not do consulting/contract work instead? I quit my job (ironically at a startup) and took a massive pay _raise_. I worked from home while I was consulting. For some reason people find it much easier to part with cash if you're not a permanent employee. :-) I was making _more_ money than I ever did at FANG, by quite a margin, even accounting for taxes, health insurance and PTO (lack thereof).


"Making a lot of money in salary."

I think a bit of perspective is in order. When the bar for comparison is technical principles at FAANG, yes.

If you want to own a house, have paid-for cars, put your kid through school, put away savings, and otherwise be completely comfortable then you can do just fine. That is "wealthy" for a lot of people in this country.

I know someone that delivered food to restaurants. He woke up at 4am, and periodically did double shifts. His work life balance was worse than almost any developer I know. And he had to carry stuff. [That was a bad work/life balance].

Seriously, count you blessing if you're in software now. I have been doing this 20 years and this is the best it's been since before the .com bubble ended.


> “If you want to own a house, have paid-for cars, put your kid through school, put away savings, and otherwise be completely comfortable then you can do just fine.”

lol wut ? if you work in a typical SF startup, you can do precisely none of these things. Like, literally zero.


SF startup cash comp for engineers is comfortably in the 150k-200k range, and often higher. This is series A, series B stage companies. If you have a few years of experience and are making less than this then I'm please to be able to inform you that you are underpaid.

If you have one of those incomes at the higher end, you can do these things in the bay area. If you have more than one then that stuff is not hard at all.

Berkeley has pleasant single family homes in a great school district around the $1MM mark. You can absolutely do that on $200k/year. IMO you should for sure be able to reach the mark where this is comfortable financially by the time you're around 30.


> Berkeley has pleasant single family homes in a great school district around the $1MM mark. You can absolutely do that on $200k/year.

Let's say you make $200k/year and manage to put together a $300k down payment and get a $700k mortgage at 3.8%. Here is the breakdown of your annual spending (using 2018 numbers):

$18,500 to 401K

$35,930 in federal income tax

$10,593 in FICA (Social security and medicare)

$13,724 in California income tax

Take home after tax + retirement savings: $121,253 Also, remember that the rules have changed and only $10,000 in state, local, and property tax is deductible against federal income.

Remaining payments:

$39,140 in mortgage payments

$10,500 in property tax

$1,000 in homeowners insurance

$10,000 in car ownership costs (gas, maintenance, insurance, financing or depreciation)

$4,000 in utilities (gas, electricity, water, trash, internet)

$1,000 for phone

That leaves you with $55,613 of "real" annual take home, or $4,634 per month, without counting the cost of food, entertainment, other debt servicing, etc. Certainly not poverty wages, and many people get by with far less, but you'll also spend 2+ hours per day commuting and have a significant fraction of your net worth tied up in a house in an earthquake-prone area.


2+ hours per day commuting? BART from Berkeley to Powell St station is 30 minutes. You have last mile for sure, but this totally works for most SF based startup jobs.

But either way... doesn't this prove my point? This does not sound like a difficult way to live, _and_ it factors in luxuries (I for one definitely do not spend $10k/year on car ownership).


> 2+ hours per day commuting? BART from Berkeley to Powell St station is 30 minutes.

1 hour on/waiting for BART + ~40 minutes walking between your house and BART + ~20 minutes walking between BART and your job gets pretty close to 2 hours.

Car cost is indeed high, but if you have a kid you'll probably need one and then you have to factor in the cost of childcare... $2k/month?


I generously based this on one income. If we need childcare then we presumably have a second income?

I realize that single parent households do exist, but we're not covering every case here.

You don't need to spend $10k/year to have a car. This is pretty trivially provable because there are lots of people who own cars who clearly wouldn't be able to do so if that were the case.


Buy a Brompton folding bike - not sure if the US has the same tax advantages that the UK has.


rent a bike locker at the station, bike to BART - 10 minutes


Since we've already accounted for all housing and car payments (btw, your car ownership costs are way too high as a lower bound. I would say an decent $10k car you hold on to for 5 years at a time would have total annual costs closer to $5/year) that doesn't sound bad at all


I was using the numbers here: https://www.nerdwallet.com/blog/loans/total-cost-owning-car/ but you could certainly get it down a bit if you don't mind driving an older car.


15k miles a year is also a lot of miles. I probably drive less than 5k.


Berkeley -> Mountain View is 50 miles one way (25,000 per year)

Berkeley -> San Mateo is 35 miles one way (17,500 per year)

Berkeley -> San Francisco is 15 miles one way - 7500 per year (at an average speed of 20 mph)

If you can use BART or CalTrain to get to work then you can get those numbers way down, but it's not an option for everyone.


Well, if you're commuting two hours a day, you'll certainly be driving quite a few miles.

I drive around 40,000km (~25,000 miles) and that's around a 2 hour round trip commute.


Unless you mean both spouses should earn around 200k and thus bringing in a FAANG-equivalent income of 400k, I really don't know how you could afford what you are saying on a single 150k-200k salary (and perhaps another 50k for your spouse's salary, since not everybody works in tech).

After paying for CA taxes, fed taxes, kids' schools, rent, car expenses, 401k contributions, I really don't know how you would come up with the savings necessary for the huge down payment required for a house there.

Just last week, a friend of mine got outbid on a ~1.5M house in the East Bay Area because another buyer came in and offered a down payment of $700k (!!), whereas my friend just had a more traditional 20%.

Good luck getting to those savings on a 150k startup salary and mostly worthless options.

In my experience, and I certainly respect yours, people just need to stop working for startups and go to big corporations, period.

And I speak as someone who had a low 7 figure liquidation event from a startup, and I'm still so against startups, because that liquidation event still didn't match the compensation I could have gotten as FAANG all along.


Yes, based on my own experience and that of my peers, I think it's very plausible that you would have accumulated savings to get you 20% down on a $1MM place over the course of (say) spending the last six to eight years in San Francisco with household income in the 150 to 200k range. You might have to make a tradeoff of (eg) not maxing your 401k contributions if you're on the lower end. I mean, we're talking probably about saving $20k/yr when you factor in compounded returns from (eg) the S&P500.

I agree that this math does _not_ work as well if you're moving to San Francisco and already have a family but no preexisting savings, so don't do that.

It's also true that if you rely on financing you will get outbid on some houses. But I know plenty of people who've successfully bought using financing.


also, self reply to observe: not saying this means you should or should not work at a startup. just that the idea that you can't live a decent lifestyle at startups is not true.


Why would it matter 20% or 700k as a seller I get the full amount from the bank.


I believe the buyer was also slightly more aggressive, i.e. was willing to let the deal close faster than my friend, who rightfully wanted to take his time before getting into the biggest purchase of his life (inspections and such). That, paired with the massive downpayment the buyer was ready to immediately put in earnest money, was enough to convince the seller. Real estate transactions are not always that rational.

Also, many folks in the Bay Area just go all cash, and that's obviously much better for the seller since it means very fast closing.

But this if off topic, because a person on a 150k startup salary in the Bay Area won't be able to participate in any of these discussions.


Because most offers are "subject to favorable financing" and if the person doesnt get favorable financing, the offer falls thru and the seller ends up holding the housing longer w/o a seller and paying the carry. People will often sell at a lower absolute price (slightly lower) for all-cash offers without the issues of financing.

Also, financing can fall thru for silly reasons (eg the bank found some crazy lien from the 1940s) and want it cleared before they offer financing.


>>FAANG-equivalent income of 400k

LUL dude, I hear this shit being parroted ad-nauseum. The amount of FAANG people that hit this level or more is like, 5-10%. Take a look at the top 5-10% of non-FAANG companies and you'll see those employees are also hitting this mark. There's nothing special about FAANG. I understand lots of FAANG employees parrot this around to make themselves feel better about their life choices.


According to my experience (and again, that's the only thing I know), that's not even remotely true.

When I interviewed a couple years ago, I made sure to interview at FAANG (specifically Facebook, Google, Netflix) and I also interviewed at half dozen big public companies in the same couple months (among which Oracle, Salesforce, Cisco, Juniper, Palo Alto Networks). I didn't interview at any private company (Uber, AirBnB, ...), since I was coming out of the startup world and I wanted liquid compensation.

The FAANG offers that came back were all significantly higher than the other ones, and the constant was certainly me (a software engineer with 7 years of experience at the time and a BS + MS in Computer Engineering).

All the FAANG offers (luckily I got an offer from all the 3 I interviewed at) were at a total liquid compensation of $~400-450k/y (annualized cash + RSU), and I'm certainly not in the top 10% of their tech workforce, not even remotely close, I come in as a generalist with some ops experience who spent a couple months studying algorithms and data structures. I don't even have an active GitHub profile.

All the other non-FAANG tech companies (I got an offer from 4) were at a total liquid compensation of $~220k/y (annualized cash + RSU).

The only other companies who matched the FAANG offers were a couple of hedge funds on the East Coast, but I didn't want to relocate and I wanted to keep working for a tech company.

In the end, I joined Google.

So, I'm just reporting my own personal experience based on the data I directly experienced (I have PDFs of all the offers :-)). Feel free to ask any follow up question, I love educating software engineers on their real market value, since I think many sell themselves too short in this thriving market.


Sounds like you were interviewing at the ~L5 equivalent level. Any insights on getting hired (or even interviewed) at L5 vs L4?


How has your TC changed since you’ve joined Google?


The stock value has slightly increased over the past year or so, and have received some refreshers. Very happy with the compensation part. I don't have kids and am looking for an early retirement outside the US, so I'm able to stash away significant amount of savings every month.


You pay for it in commute time, though. I just checked Zillow; the houses that are anywhere within walking distance of BART go for $1.7-$2.8M, with the $1M homes clustered near the freeway. Driving across the Bay Bridge into SF can easily take an hour; hell, I know people who've been stuck on the bridge for over an hour.


For precisely this reason, the most valuable real estate in Berkeley is BART parking. It's also (officially) not for sale at any price. You have to sit on the waitlist for a few years. I'm sure there's a black secondary market somewhere but I haven't found it.

BART is looking to eliminate all its parking, so this strategy won't work much longer. (They claim that the parking program doesn't bring in much revenue, but also refuse to charge a market-clearing price!)

Maybe the houses away from BART will get a little more affordable and those willing to walk 45 minutes or so will get a break. Or it'll end up like Sunnyvale where most of the "Caltrain" parking is actually provided by the City.


I checked this before I posted to make sure things hadn't changed.

Here's an example: https://www.redfin.com/CA/Berkeley/2333-Sacramento-St-94702/...

BART is a 20 minute walk, five minute bike ride (and with the weather and topography cycling is a great option).


That's still an hour+ commute: 20 minute walk + 5 minute wait + 35 minute BART ride. Plus however long the walk/connection is on the SF side. If you're working at Embarcadero it could be a few minutes shorter; if you're where a bunch of the post-2010 tech companies are clustered at 7th street in SOMA, it's another 25 or so via bus or light rail connection.


I started a remote job in August (8 months ago) and I've saved about 400 hours of commute time since then.

(~2.5 hours / day) x (~20 work days / month) x (8 months) = ~400 hours


You mean people have quit coming in full cash 10-15% over ask for houses in the bay area ?

2 years ago people with standard financing didnt have a chance in hell of buying a house in the Bay


I know a bunch of people who have bought in this price range with standard financing, and I based the numbers on sale prices.


They'll be a lot more expensive by the time some of us turn 30.


Well, it depends on the definition of "startup." If you work exclusively at seed-stage or A-round companies with like less than 15 employees, your salary will be a lot lower than if you work at lots of B and C-stage companies.

I've worked at companies that at least called themselves startups for my entire career, and I own a house in San Bruno, my wife and I each have paid-for cars, we can put our kids through school, and we put away savings.


How much more expensive would your house be today than when you bought it? How about 5-10 years from now?


I bought my (current) house eight months ago.


That's a California problem, not inherent to startups themselves.


It's a big world, and a lot of interesting startups are not in SF. A lot of interesting startups in SF hire remote, too.


I didn't pay a college and skip out on 4 years of full time work to compare my work life balance options to your delivery driver buddy. He's simply not at the table in the conversation. I don't care about his situation.

That said, I do Postmates for fun on the side and it's awesome. Grinding out hours delivering stuff is honestly pretty chill. Engineering is at least 2x as mentally taxing, unless you're delivering in weird weather conditions. I can put in 4 hours of delivering without grabbing a meal prior and be ready for 4 more no problem.

The work never comes home with you. You're never sitting there wondering "how do I be more effective?" or "how do I even start to solve this issue?". There's little to no politics and 80% or more of the gig is me riding a motorcycle around and popping a few wheelies.


Not in the Bay Area, where a lot of interesting jobs are (startup or not).

In order to afford those things there, you need to laugh at startup offers and go work for a big company.

Seriously, I would love a world in which every single damn engineer shows their middle finger at a startup trying to hire them unless they pay market rate AND offer the written possibility to sell their shares every year or so, at the current company valuation.


The comparison isn't between working at a software startup and delivering food. It is between working at a software startup and a different software job. The other software job is almost always better for the reasons listed above.


At some point in my career I discovered - to my horror - that I was learning as much or more new tech at consulting gigs than I did as a salaried employee. Even, I daresay, when I was working at startups.

When I pointed this out to people they didn't believe me. So it turned into a bit of a troll for me to say "yeah I'm going to go consult for a while to build up my skillset" and then watch their eyebrows do gymnastics.

You might assume, as I did, that they hire contractors who already know everything. They hire people with a reasonable skill in a couple areas they don't possess. But to actually contribute you have to drink from the firehose, going deep into the tech you were hired for and the constellation of technologies they use that interact with those things in any way. As soon as you start discovering XY Problems you find they were trying to get you to make X happen because they don't know how to do Y (or didn't know Y was possible) and the clock is ticking.


Other reasons for working at a start-up:

- way less big company type politics

- you won't get lost among the crowd at the big company

- if you join early enough you get to define how work is done, instead of just going with whatever process already exists at the big co

- you will know the CEO personally and have chances to discuss ideas and concerns with them in person, at big co there is zero chance of that

Also, the stability argument is interesting. I've actually experience more stability at the start-ups I've worked at than I have at the big companies. Big companies re-organize often and your manager, manager's manager, etc. might change several times in a single year. Lay-offs happen seemingly willy-nilly for reasons peons will never be told. Start-ups don't have any organization to re-organize, and don't have the people to be continually shifting things around and laying people off.

Big companies have multiple projects running in parallel, waiting to see which one will pan out. If you are working on one that doesn't pan out, it will be cancelled without a second thought (often with lay-offs involved). Start-ups have one project and it better work out or the company dies. It will not be cancelled lightly.


Or if you are an older dev, picking up some more modern skills. I joined a startup for just under a year, and while I did not go in intending for it to be short-term, it ended up that way. But I modernized my skill set, got to work with more modern processes, and walked out a stronger dev than when I walked in.


Do you mind saying how old you are? One of my fears is if you're an programmer, you either need to move into management or quit being a programmer because of age bias. I prefer coding over management though.


I'm 46.

I cannot say whether age bias had any impact on my job searches. There have been interview processes that did not result in offers, which did not happen when I was younger. Maybe I was lucky early on. Maybe something has changed.

But I can say that every time I have looked, I have found work.


> Work / life balance

Disagree here for one specific type of startup...remote (which I know you mentioned).

Here's an example day at BigCorp:

- Rise and shine at 5am to work out early enough

- Leave the house by 7am

- 1+ hour commute into work

- Start work at 8am

- Stay until 8pm

- Get on/in the car, train, bus for a 1+ hour commute home

- Late dinner around 9pm

- Veg out because you're exhausted and go to bed by 11pm

Here's an example day at RemoteStartup:

- Rise at 7am to work out

- Make breakfast at 8am

- Standup at 8:30 while eating breakfast

- Work until 5pm

- Spend some family time and eat dinner until 8pm

- Work another 2 hours before bed around 10pm

The work life balance in scenario #2 is far and away more desirable to most people.


Who the fuck works 12hr/day at bigcorp? I work at bigcorp and I think most people are probably working an average of 7 hr/day working generally any hours that have them in the office during core business hours


I know ~10 people that work at Google and 20+ that work at Amazon. I haven’t asked every single one, but the consensus is that around principle level your work days are pretty much always 12+ hours.


What an absolutely ridiculous strawman. Anyone can come up with lopsided scenarios to make one seem better than the other.

Here's an example day at BigCorp:

- Rise at 9am because standup isn't until 10am

- 10 minute commute since you're paid well enough to live near the office

- Arrive at work at 10am

- 1 hour lunch break at 12pm

- Leave work early at 4pm to miss the gym rush

- Get home by 6pm, enjoy the rest of the day until midnight

Versus RemoteCorp:

- Rise at 6am, immediately start working since you're online

- Work through lunch and eat your desk because you don't have a separate space

- Don't clock off at 5pm because you're always on. Keep checkin in on emails until 10-11pm

- Don't go outside at all because you never changed out of your pajamas. Sunlight seen: 0. People talked to: 0.

I definitely know which I prefer.


You can have an unhealthy work life balance in any job, whether on site or remote.

Some of that is undoubtedly controlled by the job itself, but some is usually also controlled by you and the boundaries you choose to set for your job.


I don't see the argument here. Strawman or not, the case I made is fairly common (ask around). The case you made is not.


many of my friends have that schedule. It's kind of what you make it (and to an extent your team at BigCo). But definitely fairly common in my friends' cases.


You're being downvoted, but I agree.

I worked at a BigCorp and it was one of the worst years of my life. The work/life balance was awful, and the pay was shit compared to the hours I put in and satisfaction I got out of the job. All other experiences I've had have been much more satisfying.

On top of this, people think BigCorp is a safe bet where a startup is not, but BigCorp lays people off in large swaths all the time because their stock price moves a millimeter in some random direction.


Can someone tell me what letter "BigCorp" starts with? I'm scared because I'm looking at a job at a big corp., but I was under the impression that I could leave the office at 5pm.


I was at AOL.

My team was acquhired as a "startup within a larger company!!1" which ended up meaning: lower pay, longer hours, no equity, no actual autonomy.

But I was young and foolish and, caving to peer pressure, decided against my better judgement to take the gig. After my 1 year cliff (and successfully launching the Editions app that they soon after shitcanned) I got the fuck out.

EDIT: keep in mind, my hours were a product of my specific team, and the fact that I was commuting from Santa Cruz to Palo Alto. It would have likely been a regular 9-5 on other teams, and I'm pretty sure most of the other people there had regular hours.


It all depends on the team you are on. When I worked at IBM I knew lots of people who were 8 to 4. My team was pretty much 60 hour weeks minimum. Though it was because of the asshole management I had.

I once got a dressing down from my director because I took a PTO day after working 20 days straight. I am so glad I don't work there anymore.


I've worked at Uber and Salesforce, and put in very normal hours at both. 8 hour days were standard for devs.


Most people work around 7-8 hrs/day at big corp. It is also possible to stay inside of 15 minutes from work (A lot of Boston, Seattle people I know do this)

I know some people who go back home for a quick lunch or disappear for an hour in between. Many of these companies only care about you getting your work done and being present for all the meetings.

Ofc, there are just as many where your case applies. But, it is certainly not the norm for FAANG-eque companies


> Invalid reasons for working at a startup: > - Making a lot of money in salary.

Once a startup raises a series A is there actually any reason to pay below-market? Fresh out of college I was employee #1 at a startup that had funding, and was basically at the mythical "Google salary for new college graduate" figure that is thrown around here, and higher than competing offers from name brand tech cos.


Yes, because startups are usually still cash poor after a Series A and you don't want to burn more than you need to. The whole point is to conserve cash until you can find more money or turn a profit, and employee salary is usually the largest cost for most companies.


>> Once a startup raises a series A is there actually any reason to pay below-market?

Yes, because there is a greater fool competing with you who seems to thinking the theoretical value of their illiquid options is worth a trade-off for equivalent actual cash.


> is there actually any reason to pay below-market?

"market" is a big chunk of change. "Google salary" is not market. It's closer to 50% of market. (GSUs and annual bonus are significant aspects of comp that are basically cash). "Netflix salary" is market, and for a series A company there are a lot of reasons not to pay senior engineers 300k+.


Equity grants from public companies are pretty liquid and as good as salary.


I'd personally add one - if you're an early enough employee, you can have a hand in personally shaping the culture of the company around you. I suppose this can fit into "work a certain way".


It's fulfilling to do that, but all successful startups go through a phase where they become more professional and hire a lot of experienced leaders. The culture the 'old' team worked to create very quickly gets diluted and replaced. Not necessarily for worse, or for bad reasons, but it's a reality that a lot of early employees find challenging.


Another valid reason: - You'd like to found a company yourself but would prefer to learn from other people's mistakes first.


To add another invalid reason for working at a startup:

- get good experience on many different technologies

If you want to learn how to do things quickly, often in a way that barely holds together, then yes, you will get that work experience in a startup.

If you want an opportunity to learn how to do things right, you need to work with experts. Your startup is incredibly unlikely to have experts on many different technologies.


What's "valid" isn't a matter of immutable natural law. Clearly there are some contributors to startups---founders and early investors---who demand and get low-probability, high-reward financial bets that can, albeit probably won't, pay off big. Whether that bet is available to others, and to what extent, is a matter of choice.

If you've got something valuable to offer, and want founder-like exposure to risk and reward, negotiate a founder-like equity package. If they won't give it to you, it's not because they're a startup. It's because they're unwilling to give it to you. Perhaps they don't think you're worth it. Perhaps they just don't want to share the pie like that.


Maybe, one more in valid reasons.

- Less politics, and more autonomy (if you are given a certain role). - The dopamine or kick that comes with solving problems and the joy of getting results fast. Quite a few occasions, I have felt more involved in a startup than a big MNC. Maybe different kind of culture. (Consulting is the worst in case you like to see results for your ideas though)


In general, I agree with this. I'm also working with a startup now, and not as a founder, and a couple of your reasons to do so resonate.

But also, as to your invalid reasons list:

- The money is good.

- The work-life balance is excellent.

- And it's perfectly stable.

This usually is not the case. But if you're in a position to negotiate for these things and the founders are in the right position to offer them, it can be.


"- You want to work a certain way (remote, on the beach, whatever) and they are willing to go this route."

for this you have a much better chance at an established small company that doesn't need crazy growth. From what I see most startups prefer putting everybody into a big bullpen.


What kind of startup are we talking about here? E.g., 1-10 person company, or one that's accepted a few rounds of founding and has a measurable likelihood of IPOing in a few years? Both can reasonably be considered startups.


I think a point of confusion is that "startup" means different things to different people. I believe the parent comment here really means "average, early-stage SF startup" in place of "startup".


I've had great work / life balance at the last couple startups I've been at. I think you can find the full range at both startups and big companies.


Wow, the music business.


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