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Working for a startup makes less sense (zainamro.com)
572 points by zainamro on Dec 23, 2019 | hide | past | favorite | 378 comments



I've had a related discussion with a few VCs in recent months. Some kinds of startups are effectively impossible to build given current structural constraints on financing them, creating an adverse selection for startups that fit the classic model rather than startups with the highest expected ROI.

Broadly speaking, engineers will work at a discount to market-clearing wages of maybe 20% if they really like the startup. This is not necessarily an issue if you are well-funded and require ordinary levels of skill from your engineering team, which is most startups. Some types of software startups can't be built without a team of engineers where the market-clearing wages are typically more like $500k-1M. Even at a 20% discount to market, the amount of capital involved just for headcount is far too large for early stage investors, and startups that try to fit within the capital they can raise by getting by with less qualified engineers always fail at technical execution. Consequently, startups that have this property are effectively un-investable because there is not enough capital available in the early stages to achieve technical viability even though they may be great investments in the abstract. This wasn't a serious issue a decade ago, but it is spreading to a larger set of startups as wages rapidly escalate.

Given a long-term glut of capital, this could be addressed in principle by designing a model that modifies the distribution of capital/equity over time to accommodate startups that have difficulty financing the initial wage gap. As the startups grow, one would expect the average wages to start reverting toward the mean, but these startups won't get out of the gate without that initial investment in capable and very expensive engineers.

I've had interesting and productive discussions around this, it is seen as a way to bring fresh blood into an early stage pipeline that is drying up. It is obvious to almost everyone that the classic model of how you finance and build a startup team is breaking down in the current market environment, with an adverse impact on expected returns.


This is a good summation of the current challenges with startups that are attempting to compete on technical merit. I know this first hand as I started a computer vision company right around 2012 when the "AI" boom was really picking up steam. I would never dream today of starting a very technical company because every major will poach your talent (happened to me), invest in your competitors or attempt to acquire you (some people don't want to be acquired).

Contrary to your points, I don't see any way this will change until some big technology revolution happens that puts power back into the hands of creators - though that might be a pipedream.

Note, that doesn't mean you can't start and be successful with a company. What I'm trying to point out is that the days of a scrappy upstart coming along to "unseat the leaders" doesn't seem anywhere near realistic.

The only counter to this might be worldwide competition - so for example I could see Tencent getting bigger than Facebook in total user numbers. I'm not sure if these are comparable because they are in segmented markets.


Your points are well taken, and I have thought about them at length because I like to build startups in areas where this situation is the norm.

One unorthodox strategy, which I've discussed with investors, is funding early stage such that you can pay comp that BigCo can't easily compete with -- their scale works against them. In early stage, the absolute amount of capital is trivial (and there are trillions sloshing around these days), but the quality of the initial engineering team will have an enormous impact on the success probability of the investment. A few extra million in wages can have enormously high leverage in generating billions in returns. Imagine poaching literally the best engineers in FAANG and the kind of core team that would give you to attack markets no one has attacked before.

I'd like to see top engineers in tech compensated like top professional athletes. Investors pay the wages for athletes because the returns justify it, the scale of the wages is not material if you are chasing results. I believe that model applies in tech as well.


I think we may be past the point where even this would work - too many startups are offering deals that are transparently awful in a way that discredits the startup ecosystem at large. I've gotten a few early-stage startup offers recently and every single one came out to be over a 50% paycut (even accepting their generous valuations) despite the fact that I made it relatively clear where the total comp needs to be for me to move forward and I was assured that at the end of the process they would be willing to make it work.

Meanwhile, if you apply the same math to the founders and their equity, in every single case they are paying themselves multiples of what they are offering me and significantly above their own market value, despite them not having done anything yet beyond getting seed funding.

What then happens is that startups like these end up getting what they pay for - they get the appropriate level of talent at market price. This maybe a market-optimal result but the cumulative effect of all these startups doing this is that most top people have sort of written off "working at a startup" as a reasonable career option, because of pay and what pay implies about the talent level of the people they would work with. This hurts all startups, even those that are willing to pay up to get the right talent. And if top engineers won't even consider your company, offering top-tier comp may backfire - you run the risk of overpaying for the same talent you could've gotten at a lower price. It's hard to break out of this cycle - consider how the same few schools are able to persistently attract the best students - and I suspect the entire startup ecosystem is trapped in it.


You are not wrong, and FWIW I am a force for sanity on the boards I am on. I am a comp realist and I will always pay for quality, I am strong advocate for that.

The behavior of startups is not intrinsic, it is the product of incentives. If I created a startup tomorrow, I am confident that I could pull world-class engineers out of FAANG. But to your point, I would not play games with compensation. I hire the people I would hire because they are clever, they aren't going to be fooled by bullshit nor would they respect me if I tried that. That is an essential quality of good startups that should not be lost in this mix.


> If I created a startup tomorrow, I am confident that I could pull world-class engineers out of FAANG.

This is easy. Offer relatively competitive TC with a real potential upside to the equity package and a work environment that's attractive. BigCorp is mired in politics and decision-making that's grounded in risk mitigation. Do something legitimately interesting and folks will come. Give them some agency and the ability to really get things done and they'll stay.


A blog post I read on why hard-tech startups are counter-intuitively easier (especially, in terms of attracting talent): https://blog.samaltman.com/hard-tech-is-back


I read an article a while back that described one trait of the "10x" engineer as dispassionate curiosity. Setting aside the argument of what a "10x" engineer actually is, I'm sure those of us working in the field can recall folks that were exceptionally talented. Every one of those people that I can recall have exhibited this trait.

It's easy to deduce that those folks would be more interested in hard tech than any paint-by-numbers startup. I've worked at startups and well-established companies, and have found it surprising how easily really good engineers will turn down lucrative but uninteresting opportunities at well-established companies and how readily they'll take an "interesting" role for less or sometimes way less money.


Could you elaborate on what “dispassionate” means in this context, or link to the article?

As an aside, I’ve just re-read a Terry Pratchett novel and your description of the good engineers’ behavior made me think of Leonardo da Quirm :)


I may be confusing the term with "disinterested curiosity". Wish I could fine the article if only to refer to again. Here's a bit of an explanation that seems to match my understanding of the concept:

https://www.tandfonline.com/doi/abs/10.1080/00221546.1943.11...

To my mind that's an engineer whose curiosity is uninvested in the outcome of the exploratory work.

I've known good engineers and great engineers and to some degree, they were all like Leonardo da Quirm, though not all quite as naive.


I don't feel like a top engineer. I think am no way near that tbh. I rank myself as an ok-ish engineer. I feel more like a hybrid though and I feel like I am valuable to a startup as I can bring on the table several things which include some photoshoping skills, being able to build a comprehensive front-end, can contribute to ideas as well as manage a db, build an api etc (to a level).

The past 2 years I was working part-time for a startup as I am running a business of my own which is almost on autopilot and allows me time to work on other things as well.

After 2 years I realized the positive and negative sides of working for a startup that is hard to find out before working for one.

First of all there were 3 main guys running the show. Only one of them was a tech guy, the other two came from a business background with no tech knowledge wanting to build up a tech startup. Joining that startup as an early employee didn't mean much apart from getting close to 1% in options (which is nothing considering my contribution to the cause was worth way more but obviously 1% is an industry standard).

The work became increasingly more demanding, although they knew I had other things to do and I was part-time, I was asked to work more than what was normal and almost reached working full-time helping them out (which was stupid of me, I was sacrificing time that I could be doing other things). The paycut I took also from my previous part-time gig was about 40% which is almost half. The cause of the startup also started changing increasingly and although at the start I was keen to have the paycut etc it felt like I didn't belong anymore (thats important for others wanting to work at a startup to know. The idea is not gonna remain the same as it is especially with business people driving research all the time).

The only positive was that I got some more experience on as a fullstack than before as I had to work a bit more on aws and backend systems and also was using "newish" tech.

My honest opinion and advice to anyone that is willing to try out working for a startup is:

Don't compromise your salary and well-being.

Startups will offer you options which is usually crap unless you are a co-creator. If you are taking a paycut but you support and like the cause of that startup then ask for a bigger %. Realise that most likely the startup is not gonna vest or sell and generally think of your options as a gamble.

Its most likely that the chances of you making real money out of your options is the same as you winning the lottery. If you are asked to work hard and stupid hours, then reconsider your well-being and ask yourself if its worth it.

Also look at the composition of that startup. For me personally it was stupid thinking that 2 business guys having the biggest % in the company would ever work for a tech startup. They contributed in writing long essays and doing research all the time, but at the end they couldn't attract more engineers by paying shit salaries and giving out 0.2-1% in options. The product failed because it couldn't be delivered on time due to having less people working on it than it initially required, and because those business people in order to justify their own % to the company were going on heavy research and constantly deciding shift changes on the product completely out of the blue just because they had nothing else to work on. (we were supposed to release within the 1st year which would be a year ahead of our competition. We released after 2 years which gave competition the lead of releasing before us and a much better product)

All in all - don't sacrifice your salary, thats how you feed yourself and your family and someone elses weird-ass dream is not gonna make you silly money out of the blue. And also remember that working should be taking some part of your day, but you also have one life and working your ass off for someone elses shitty dream aint worth it.


Thank you for your detailed take here. I'd like to nuance this a bit to a more general rule.

Every person taking equity needs to justify their value now

This means that a setup with two "business people" founders need to justify their worth immediately. Not with promises of future sales. Not with vague research.

Worthy ways to prove their worth could be raising a giant amount of funding, or putting their own money into the startup as a sign of skin-in-the-game, or purchase orders standing ready to purchase the product once it is complete, or paid PoCs. Or serious track record of delivery/wins.

If you find a setup where engineers are taking all the initial risk while "business founders" stay on the sidelines waiting for a product to be built until they start to work -- run away. Think about it this way -- they have all the upside (they can choose later to work or to flee) while you have all the risk (you invested your pay-cut for vague promises of future work.)


> I would never dream today of starting a very technical company because every major will poach your talent (happened to me), invest in your competitors or attempt to acquire you (some people don't want to be acquired).

Damn, this is exactly what I want to do. Computer vision too.

Do you have any advice other than "don't"?

Would basing the company on the East coast near a tier-1 research university help with talent?

Could you have strong software engineers support the research roles? Does that pattern work effectively?

Another thing I really want to do is offer a 4-day work week with the promise of sabbaticals and/or remote work. That might not be attractive to everyone, but it's something that would speak to me and that I would want in addition to equity and salary.

Are you still interested in computer vision? Want to chat sometime?


>Another thing I really want to do is offer a 4-day work week with the promise of sabbaticals and/or remote work. That might not be attractive to everyone, but it's something that would speak to me and that I would want in addition to equity and salary.

I think this would be a very strong advantage in the hiring market (assuming you can raise money from investors who're okay with it).

I'm not your target market (I'm just an in-demand software engineer who happens to be learning ML, not a top computer vision researcher), but this is something I'd be willing to accept substantially lower comp for.

Unfortunately most startups seem to require even higher work output than big tech.


Well, that's his big bet isn't it. There are a lot of studies that claim 4 day work week will keep productivity more or less the same.

The catch here is this will potentially enable you to hire those 10x people. Even at reduced productivity, 80% of 10x is more than double productivity for 100% of 3-4x people, and perhaps this work environment will foster other people to increase their productivity as well.

With the right people and product, I see this as the ultimate weapon against big tech, most of which will have shareholders that will act a lot more conservatively when it comes to risks compared to startups.

This is not something big tech will be able to accommodate in the current macro-economic environment, no board will approve basically a 20% salary bump to all employees and while risking a potential drop in productivity.


Just an anecdotal data point, but some places have a vibrant tech scene despite paying jack shit. Salt Lake City, where I live, is one of them.

FAANG don't have offices here and don't offer remote positions, so no one is competing with them. As a result senior developers are getting like $130k or something, and seem to be happy with that.

Some people (myself included) don't want to move anywhere else even for $500k. So it seems like a nice little arbitrage.


Indeed, I think $130k might go a lot further in Salt Lake City than $500k elsewhere


If your savings rate is 0, maybe


Suggestion: put your email in your ‘about’ field so someone can remedy that :)


Haha, yeah. I'll be waiting a while for that Director of Shitposting position to open up :)


lanstein is right. Or mail me or lanstein.


Happy to chat, first initial + last name at google.

I think the answer is, know exactly how you want to exit before you start and plan for that. Realize also that is 180 degrees polar opposite of how the major VC's want you to approach it - so if you wanted institutional money from Sequoia etc... they won't invest if they know that is the case. There are a lot of good reasons why they take that approach, power law and all.

The reality is, your best case scenario is most likely an acquisition. Which might be exactly what you want, and if so absolutely go for it, but you need to really understand how and why and when the companies you are targeting do their acquisitions. This is incredibly hard to do if you haven't gone through multiple acquisition Due Diligence processes before, but I know of people who have repeatedly done this, so it can be done.

As to the other points, there are too many variables to say whether those are good ideas or not, totally depends on what you're trying to do.


My first startup used computer vision to extract tables from PDFs. We had great engineers but my co-founder and I didn't know enough about ML back then to design a proper feedback loop.

My advice is to find a technical co-founder who has built and scaled a CV system at a larger tech company, but who is looking for a new challenge. There are a lot of annoying problems that can be solved with CV as long as you create a way for users to help you get labeled data.


So there are actually three tech revolutions going on in parallel:

1) Kuberentes 2) Microservices. 3) AI

All of them are based on open source, and all of them are permissionless (I.e. the startup does not need permission from a big company, e.g. an app store owner).

They also erode the build-in advantages of big tech:

1) Kubernetes erode cloud lock-in on compute/storage. 2) AI is best serve on the edge.

I would say that everything today is up for grab.


Kubernetes is a solution worse than the problem.

Microservices are unix pipes but slower.

AI is linear algebra that costs x1000 because of the brand name.

There is no revolution in software. We are just building crud as high and as fast as we can because the quality of developers tends to zero as the number of developers increases.


> Kubernetes is a solution worse than the problem.

Not if you're a 1,000+ engineer org with an SOA.

> Microservices are unix pipes but slower.

Humans are way more expensive than the machines running our code. You can always spend more on spinning up additional instances. In reality the overhead isn't that bad. The principles of immutable stateless deploys free up so much mental energy when it comes to thinking about how to get your code out and not break things that it more than pays for itself.

> AI is linear algebra that costs x1000 because of the brand name.

Tell that to my real time voice conversion system I just wrote. There's a lot of new magic happening right now.

> There is no revolution in software.

I'm on a fucking phone responding from hundreds of miles away. We're launching satellites that beam internet.

> We are just building crud

You can't speak for everyone here.

Are you in adtech or a social spyware company? Maybe don't work like that then.

Find meaningful work that speaks to you.

> quality of developers tends to zero as the number of developers increases.

I work with brilliant people.


>Not if you're a 1,000+ engineer org with an SOA.

That's the problem. With a sane simple architecture instead of 40 years of crap on top of crap you wouldn't need thousands of engineers to spin up instances.

>In reality the overhead isn't that bad.

Over 1e2 times if the solution is in software, over 1e5 times if it's an fpga. Around 1e8 if you do it in silicon. You make the savings from not hiring the 1000s of engineers to deploy your bloated horror.

>The principles of immutable stateless deploys

Has nothing to do with k8s. Nixos and Guix are two systems that are as close to functional as possible and they sure as hell aren't 'stateless', even though they come closer than any of the sexy trending tech.

>Tell that to my real time voice conversion system I just wrote.

Thank you project librevox for proving a near infinite training corpus, thank you nvidia for gpus to do linear algebra 1e5 more efficiently than you can on a cpu.

>I'm on a fucking phone responding from hundreds of miles away. We're launching satellites that beam internet.

Like everything else you listed there this is a hardware improvement. A Casio watch from the 90s had the same order of magnitude computational capability as the first generation IMPs. Good luck getting it connected to the internet using any software you could write for it.


> 40 years of crap on top of crap

It's all new.

> wouldn't need thousands of engineers to spin up instances

If thousands of engineers had to worry about deploys, that'd be a problem. The deploy team is small. K8S makes this dead simple.

> Over 1e2 times if the solution is in software

That's ridiculous. Where did you get those figures?

> 1e5 times if it's an fpga. Around 1e8 if you do it in silicon

If you're writing code for FGPAs or burning it to silicon, you're far removed from application server development. That would move at a glacial pace.

> bloated horror

Our containers are thin.

> Has nothing to do with k8s.

You're just hating on k8s at this point.

> Like everything else you listed there this is a hardware improvement.

Kubernetes. :P

Honestly there's been a metric ton of software improvements. Literally everywhere.

Git, modern kernels, Rust, Paxos (popularized in the 90s), LLVM, modern game engines, tmux, Wikis, bittorrent, blockchain, protobufs, gRPC, Bazel, Redis, modern PL idioms, futures, TOTP, U2F, Markdown, RSS/Atom, so many algorithms, seam carving...


> > 40 years of crap on top of crap

> It's all new.

Now I’m tempted to reply, “No wonder that 1000+ engineers can pile up crap that fast” :)


>> Kubernetes is a solution worse than the problem.

> Not if you're a 1,000+ engineer org with an SOA.

The fact that most FAANGs (Amazon especially) developed their own systems that are not Kubernetes, and often much simpler, should make you think. Many don't even use containers - by design.

(Source: direct experience)


Amazon didn't have the kernel expertise to develop kernel features required for containers like Google did, and had massive sunk costs in their bespoke hacky solution (Apollo environments).


They didn't adopt Kubernetes because it didn't exist at the time. The original paper came out, what, four years ago?

These companies had deployment needs that weren't at the time met by off the shelf open source software.


> They didn't adopt Kubernetes because it didn't exist at the time. The original paper came out, what, four years ago?

That's not what I wrote.

I wrote that the systems they came up with are much, much less bloated and provide very comparable features - if not better.


> Kubernetes is a solution worse than the problem.

I disagree. Maybe it's because we haven't gone "full Kubernetes" where every cronjob is now a Kubernetes cronjob, or what have you, but for all the complexity we've had to overcome, we've seen substantial benefits.

For example, autoscaling instances of my data pipeline apps based on Kafka lag.

Was it complex? Yes. We had to expose Kafka topic lag as a metric to Prometheus, then configure the k8s metrics server that HPAs (Horizontal Pod Autoscalers) use to scale to pull that in from Prometheus using k8s-prometheus-adapter as a custom metric, then set reasonable scaling limits in the data pipeline apps HPAs.

Was it worth it? Fuck yes. We no longer have to worry about data arriving out of time at our data warehouse, because the scaling we've configured (in YAML, god rest its dirty soul) ensures that our data will always arrive at the data warehouse within 5 minutes, which is ideal for a near real time reporting product that greatly enables our end users.

Is Kubernetes worth it? For us, definitely. For anyone else? Really depends on your use case, don't cargo cult this shit.


How much data do your "data pipeline apps" process with Kafka, Kubernetes and probably other K-named things?


Several terabytes a day, but it varies, hence why I love the auto-scaling.


That's 10tb = 10000gb = 10000/24/60/60 = .11gb/s. My 2015 desktop could handle that.

Where do you work? I'd like to pitch my radical idea of edge consolidated cloud computing.


"Big data" frameworks are very good at throwing a lot of hardware at problems. See eg the classic big data vs laptop treatment: http://www.frankmcsherry.org/graph/scalability/cost/2015/01/...


The inevitable comment lol. I'm sure it could. To clarify, when the app scales, it's pods (container instances) that are scaled, not necessarily machines,that is managed separately by k8s. Depending on how much of the cluster is currently being used.

Yep, we could handle it easily on one machine, if we gave it unfettered access to all the resource, but our throughput varies during the time of day, so dedicating a machine to it to handle the peak throughput wouldn't make financial sense at 3am at night. So it's far simpler to scale pods with known resource usage as needed.

It also helps prevent issues when throughput suddenly doubles because of a business decision that you're left out of the loop on.

So autoscaling pods is ideal for our use case.


Were talking about $5k of hardware to meet your needs 20 times over with the new threadrippers.

Is your aws bill really under $500 a month?


On AWS you would be paying for many other things besides elastic CPU power. CPU and bandwidth is infamously expensive there. (But I don't think AWS was mentioned anywhere in this thread...)


You don’t need kubernetes to do it, any cloud provider has api that will make it possible. Kube main point is declarative model, which comes with a big price (like sql had). Yaml - is error prone way to achieve anything.

Will see if history repeats itself and we will see be imperative systems.


Well, arguably that's true in the webcrap space. The HTML->CSS->JS->Webasm line of development really is crap on top of crap. Trying to fix the design problems of one layer by putting another layer on top of it only sort of works. It gets worse over time. "The mold seeps through the wallpaper" (a comment I usually make about C++ collection classes trying, but only partially succeeding, to hide the problems of C arrays).

I was doing "microservices" on QNX using MsgSend/MsgReceive for hard real time over 15 years ago. It doesn't have to suck; the mainstream is just using the wrong tools for doing it fast. The QNX people managed to shoot themselves in the foot by going closed-source -> open source -> closed source -> open source -> closed source, after which their developer community was fed up.

Machine learning is not linear algebra. It's nonlinear. That's what makes it useful.


> Well, arguably that's true in the webcrap space. (...) crap on top of crap

Not that you're wrong per say, but personally, I think you should take a look at the HN guidelines. Like don't be snarky, and don't post shallow dismissals.

Just categorizing the arguably most popular way of building software as "crap" doesn't seem like thoughtful or curious conversation.


> The HTML->CSS->JS->Webasm line of development really is crap on top of crap.

I completely get the hate for modern web, but in this case I think it's unrelated. The whole Kubernetes/microservice world exists basically to serve JSON and similar protocols. Maybe rarely some static HTML.

For HTML->CSS->JS->Webasm stuff it is more fashionable to compile at build time and service as static assets. That's the polar opposite of Kubernetes/microservices.


“ AI is linear algebra that costs x1000 because of the brand name.”

This doesn’t even make sense because it can be said about anything involving numerical work on a computer and it’s still roughly true. Also because all of the libraries are free anyway.


>AI is linear algebra that costs x1000 because of the brand name.

Sure, but we've learnt to apply linear algebra to achieving things we could only dream of 10 (or even 5) years ago.


Current AI is still mostly trash of the high school level project quality, linear algebra taken to the absolute possible level of insanity.


I'm pretty sure that no high school project can beat the world's best Go player.


^the account name that posted this comment is the single most honest thing i have seen on the internet today. well done!


I like that username... :D


> Some kinds of startups are effectively impossible to build given current structural constraints on financing them

There are a lot of things that are impossible to raise money for, that are possible to bootstrap. If you're willing to work on something for 5 or 6 years without getting paid, there are lots of opportunities that open up that have high barrier to entry because they essentially can't be copied by venture backed companies.


Very few people can afford to bootstrap 5-6 years, that is a privileged position, most viable startups will never be executed if that is the filter. Some startups require many man-years of engineering effort before they can produce an MVP, so after 5-6 years they may have no material traction. Furthermore, startups have a shelf-life beyond which they become borderline un-investable solely by virtue of age. There are always exceptions but I would not want to count on being an exception among exceptions.

Some startups may be amenable to slow bootstrap, but the ones that have this very high wage cost tend not to be those types startups. I love these kinds of hardcore tech startups and believe they are extraordinarily valuable, it is the kind of company I would start, but I am also very realistic about the economics of building a team that can execute within those constraints.


If you do 4 - 6 months of consulting per year then it's very doable, assuming you're a developer.


That means you are spending even less time on your startup. I've been there and done that. And despite eventually raising $20+M in VC (I was extremely lucky), it was a horrible idea that I've never repeated since (raising subsequent VC). The failure modes associated with this are well understood and nearly impossible to avoid.

Short version: you can either generate project revenue or product revenue. You build a fundamentally different company to do either, so if you spend a significant portion of your time in project mode, the time you spend in product mode is usually moot. Consulting companies are project companies, through and through. The widely regarded truism that project companies cannot be transformed into product companies exists for a reason.

I'd love for this to not be the case but I've lived it so many times that I thoroughly understand the reality of it.


> The widely regarded truism that project companies cannot be transformed into product companies exists for a reason.

A lot of the best SaaS companies have actually come from consulting businesses that were productized. C.f.: https://startupsocials.wistia.com/medias/e6ttk04b9e?fbclid=I...

I think this strategy has a bad reputation because it usually fails, but what people forget is that startups usually fail anyway.


Have you written about this phenomenon more extensively elsewhere? Would to love to read about it in detail.


If you'd like to share, I'm interested in the types.....


Imma say, a lot of these ones: https://www.indiehackers.com/products


I would just look at successful bootstrapped startups that didn't have traction for 4+ years after the last pivot. E.g. Global Relay, Mailchimp, Bubble.is, ProfitWell, etc. And I wouldn't count something like Kickstartr, which took seven years to launch but only because the founder was non-technical.


DuckDuckGo


> Some types of software startups can't be built without a team of engineers where the market-clearing wages are typically more like $500k-1M.

What types of software startups have these constraints?

And, as suggested in sibling comments, could building a highly technical founding team (e.g. bootstrapping) be a viable alternative to hiring with high wages? There ought to be a sizable subset of highly skilled engineers who have achieved financial independence and would enjoy tackling a challenging problem in a startup.


> There ought to be a sizable subset of highly skilled engineers who have achieved financial independence and would enjoy tackling a challenging problem in a startup.

The flip side of this equation is that those same engineers can tackle pretty much any challenging problem they choose, while continuing to take home those massive paycheques from a big tech firm.

Big tech operates in almost every part of industry simultaneously - want to work on Blockchain? AI? VR? Shipping and logistics? Silicon design? Drones? A valued engineer at a FAANG can switch between all of those at will without ever even interviewing.


> those same engineers can tackle pretty much any challenging problem they choose, while continuing to take home those massive paycheques from a big tech firm.

but usually not in the way they see it. There's enormous value in having freedom to do things the way you want, without being restricted by corporate culture and/or engineering conventions of a Big Co.


But not all engineers want to work at FAANG, there are some that are entrepreneurial at heart and would love to work on their own idea as a founder/co-founder.


Why do those engineers even need a cofounder? Why should they share a big chunk of equity with someone without the skills needed to launch?


Being a solo founder can be very lonely


> at will

Is it that easy to switch departments/focus? I thought internal transfers, while easier than interviews, were not trivial.


Internal transfers are close to mandatory in many cases. Veterans are strongly encouraged to move every 2-3 years to cross-polinate engineering knowledge and culture.

For someone at a senior level (Amazon SDE III/Facebook IC5), an internal transfer is at most a perfunctory whiteboard session, and often just a conversation - you already have passed an interview loop to get into the company, after all, and have an easily-verifiable track record thereafter.


> Some kinds of startups are effectively impossible to build given current structural constraints on financing them

I generally agree with this, except I would change "impossible" to "exceptionally hard." You're right that a lot of startups innovating on deep tech need to hire people who would earn $500k+ elsewhere, and that a typical startup can't afford that.

However, very exceptional founders can often raise unusually large rounds early on. I.e. some founders can raise a $10m or $20m "seed" round at inception, which allows them to afford to pay $500k salaries. It's the top 1% or 0.1% founders within their fields, but it is possible.

(Source: I'm a VC)


Most startups I see pay at 50% discount to wages compared to top public companies not 20%


Imagine Steve Jobs having to pay Steve Wozniak. The trick of the startup is that the key engineers are the founders.

Startups are not a place for an MBA to get engineers for free but a place for engineers to make bank if their egghead managers in their corporations don't get going with an interesting business idea of which they know that it is a missed opportunity.


Thank you for so succinctly responding. I'm going to expand a bit and ask the GP (rhetorically) - if you want 500k-1M engineers (R&D I'm presuming) to work for you, what are you bringing to a table?

If you are failing to attract these high-end engineers to a low paying job, perhaps it is because they dont see what unique skills the "business person" is bringing to the table to balance the risk.

As an extreme example, I'd guarantee if the "business person" was Elon Musk, people would flock this startup. What high-end Engineers do not want is to give away a lions share of equity in exchange for a pay cut with no real upside, that would make no sense.

The typical procedural founder with "business skills" may have solid business skills, but those can be hired anyway, the business founder needs to demonstrate equal 500k-1M level of skills/background/trackrecord/etc.


> Some kinds of startups are effectively impossible to build given current structural constraints on financing them

what are those startups? asking for a friend


I know a lot of very good people who would take a very substantial (well over 20%) pay cut if being allowed to work (mostly) remotely (+ equity if it's a startup). Especially the senior engineers (like myself) I know really consider taking or did take very early retirement over having to commute any longer.


Why not bring on the early engineers as cofounders with sizeable equity in lieu of market-clearing wages?


Most engineers don't want to be co-founders, and this does not scale well in any case. That role comes with responsibilities that can't be executed by committee and drama/stress that many engineers would just as soon avoid. There is nothing stopping anyone from giving engineers a decent chunk of equity but it doesn't address the core issue of scaling reasonable comp.

A "founder" is not just another name for a very early employee. It is a wildly different experience. I've been both, multiple times.


That’s a title. I’ve never seen an accepted definition of cofounder but mine is anyone pre-money. Someone pre-money is taking a 100% pay cut and often invests their own money.


Cofounders typically get double digit or at least mid-high single digit grants in equity. Whereas employees typically have 1% or less in equity.

If they're this vital to the success of the startup, they should receive equity accordingly.


Cofounders do get equity but don't get paid until funding. Employees get equity and pay. If it's a startup, the employee will get value = equity + (K * market wage) + benefits where K is less than 1. That value should be competitive with the market and key contributors should get more equity but NOT in the range of cofounder because otherwise something doesn't add up.

There is an implicit startup social contract and the OP points out that maybe startups can't outbid the FAANGs for talent now. That may be but I think startups (and the VCs+lawyers who are guiding them) are absolutely pathetic at managing this social contract.

You want equity? Fine. Here's some equity in the form of an RSU (fuck you, Bill Gates) which won't qualify for either 83b or QSBS tax protection. Sure, it may crush the employee with AMT taxes. Yeah, the startup gets a minor tax benefit from this but then expects its employees to bleed for them. This is beyond stupid. This is beyond stupid by the founders, the employee (who knows nothing) and the VC+lawyers (aka the institutional memory of the Valley) who do know something.

It should be part of the startup social contract and best practices to inform and help manage the employees tax situation. Don't use RSUs. Put a gun their head and make them sign and file the 83b. Etc.


How exactly should they do it?


Or, you could go remote - $120-150k is an awesome package for a senior engineer or designer eg. in Czech Republic (where I live).


I think a solution is less hiring at early stages (until you can afford it) and having co-founders hyper-focused on what’s important to the business (the ip) and they build and do the work to get it or the gate.


This. I would even go so far as to say that if you can’t get the founder salaries up to market rate based on MRR you should either bootstrap some more if you’re really into the IP or product...or close the place down before you hire someone under what they should be paid.


Open source technology that requires 500k skills so all can share in cost


Open sourcing does not share the cost of $500k engineers. People using open source typically aren't paying the wages of the people that wrote the code. There is minimal financial upside to contributing to open source for most people.

The challenges that open source faces are closely related to this subject. Many vibrant parts of the software world -- open source, startups, et al -- are essentially dependent on engineers willing to write code for the compensation (direct or indirect) offered. When it no longer makes sense for good engineers to write that code, everyone will suffer from their lack of contributions.


I don't like this "make money on the back of others" philosophy.


Consequently, startups that have this property are effectively un-investable because there is not enough capital available in the early stages to achieve technical viability

Well, this is the class system in action. Investors would rather sit on capital and moan about how they’re unable to spend it, than spend it in a way that would benefit engineers. They will endlessly try to keep that money circulating amongst their own class.

Note: I am not a Corbynista by any means, but there’s no other way to explain all this money with nowhere to go yet wages stagnating.


My experience: engineering at Startup #1 for 2 years, then Google for 3 years, then Startup #2 for 4 years, and now I've been working with seed stage companies as a VC for the last 7 years. The amount I earned as an engineer was highest at Startup #1 (got lucky!), significantly lower at Google, and a little lower than that at Startup #2. Startup #2 is still chugging along, which could eventually make it on par with or a little superior to working at Google.

But money isn't everything. Startup #2 was the place where I learned the most. I was senior enough to be single-handedly responsible for large projects like a distributed search engine and a logging and analytics service. Sure, my search engine was a POS compared to Google's, but at Google I would've worked on a part of a feature of a component of the search engine whereas at a startup I got to build the whole thing from scratch. I'm almost 40 now, and that search engine is still by far the most fun and educational engineering project I've ever worked on.

Aside from learning potential and financial comp, there are other factors like team camaraderie, independence, etc. I keep in touch with way more people from the two small startups than I do with Google colleagues. Google had a good culture, but the startups were much tighter knit.

Finally, I think articles advocating for startups vs. big companies are a little like trying to convert someone to atheism or Christianity with a blog post. It doesn't really work that way. Some people are wired for startups: they love them and spend their careers at small companies and don't understand why big companies are attractive. Other people are more drawn to big companies where the company itself has a huge impact, the teams are well-staffed and have lots of resources, and the employees get higher salaries and lots of other benefits. When these people try working at a startup, they often hate it and quickly go back to another large company.

Neither big nor small companies are objectively the best, but if you factor in personal happiness then often one type of company is the best for you.


Learning has a way of increasing job satisfaction and giving you opportunities for larger scope in the future. You can get that in big tech too: my first four years out of college, I was fortunate enough to have some incredible teammates who seemed like gods, and they taught and showed me things it would’ve taken me years to learn on my own, if I ever did.

But then I switched teams and stuck around for 5 more years before leaving out of boredom. I joined a startup, and learned far more in that first year than the last five years in Big Tech. In the span of two years I went from not really knowing how SSL worked to being the architect and primary coder for a couple kubernetes deployments with a few dozen services.

The thing about big tech is that you become super specialized. Sometimes that’s fine, like if you’re a kernel hacker earning $$$, but if you join the wrong team then your world just shrinks.

I don’t ever want to go back to working on a tiny piece of something, even if that something has millions of users. Even if nobody exists on purpose, nobody belongs anywhere, and everybody’s gonna die, I still like the feeling that the work I do somehow matters to the people using the product.

So a dev team of less than 10 is probably the sweet spot for me.


I've noticed the same thing in biotech startups. Some people are meant to be part of smaller, bootstrapping companies and others are meant to be part of more established, good business corporations. The most interesting people are the ones who get in early and stick with it, growing along with the company.


The most interesting people are the ones who get in early and stick with it, growing along with the company

It’s pretty rare for this to actually happen in my experience. Generally an early engineer will grow and be ready to take up the role of VP Engineering or even CTO and instead the VC’s will parachute in one of their cronies once the hard work has already been done.


Completely agree. The issue I see is that at that higher levels, opex is more important for success than familiarity with the specific science. So the people who "grew-up" with the company, who would have detailed understanding of the science, would not necessarily have opex skills commensurate with the requirements the larger organization now requires.


Here to second the learning opportunities.

One very salient explanation of this that has stuck with me goes something like this:

A fast growing early stage startup is great for learning because you'll often end up with tasks that you're not qualified to do, which forces you to go out of your comfort zone and learn from the inevitable mistakes you'll make along the way, whereas in a large company they usually have plenty of more senior people to take care of the more challenging tasks outside of your current pay grade.


>But money isn't everything.

That's a very good point. Money isn't everything. Pretending that money is the ultimate goal of life can be off-putting in the startup world and in the American lifestyle in general.

Obsession with money is an easy way to envy, burnout, depression, and loneliness.


> I was senior enough to be single-handedly responsible for large projects like a distributed search engine and a logging and analytics service.

I'm going to be honest, I don't think this is the norm. I worked at a start up for years and never experienced that level of ownership or challenge. We basically built a glorified CRUD with VC money. Good for you! But I don't think this is the case for many? Or maybe it was just me.


This is soooo true!


Here's where I've been:

- worked at a startup out of college for 85k max plus significant equity (never amounted to anything). Stayed too long.

- worked at a later-stage startup starting at 120k, peaking at 130k. Got some stock options there (haven't amounted to anything yet)

- took a job at FAANG starting at 400k, plus some stock options. Currently at this job for > 600k base. Plus stock options.

While at FAANG, I created a tool that we open-sourced. I've had several VCs contact me to see if I want to try turning that into a company, but by my math it would be a lot of work for no gain over what my salary already is. I already get paid to work on this OSS thing, but I also get to work on other things - and on the OSS thing it's pretty clear cut what I need to prioritize, since my priority user base works with me at FAANG.

For me, startups have a 0/2 track record of delivering value. Being able to net more than I make as an IC seems pretty unlikely, and trying would be a whole lot of pain and sacrifice. The "faster growth as a founder" idea seems to be conditioned on the assumption that you'll succeed enough to pay yourself more than you make now, and/or be able to exit at an amount that will make up for the opportunity cost of getting paid well in the meantime while having a sane work/life balance. YMMV.


> "faster growth as a founder" idea seems to be conditioned on the assumption that you'll succeed enough to pay yourself more than you make now, and/or be able to exit at an amount that will make up for the opportunity cost of getting paid well in the meantime while having a sane work/life balance....

I posit its even more than that. It's a meme / propaganda by the survivors with their bias and those who hope to follow in their footsteps.

Also what's also interesting is you posted your comment to a throwaway while the others parroting that talking point were happy to reveal themselves at least pseudonomusly.

I'm pretty sure why. You don't want to burn your shot if you want to have another go at the startup thing and have people be able to read you saying you wouldn't be fully committed.

I fully respect that.

The only reason I point it out is to show how Silicon Valley the larger VC ecosystem is an echo chamber around this ethos.

My guess as to why is how would they recruit the next generation without that?


So Nflx.


Yes you will probably make more at an established company, but your rate of growth can be much higher at a startup.

I worked at a large tech company for 3 years before joining a startup, and learned more in the first month at the startup than the full 3 years at the large tech company. I was able to design and implement a service in a matter of days, whereas at the large tech company those 3 days would easily spent convincing people that the service is needed in the first place. Direct exposure to customers also is really interesting and changes you as an engineer.

It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.


I've had kind of the opposite experience. At the startup we were really sluggish it was hard to learn anything because we were jumping into any possible business opportunity before even thinking about ROI because money was always tight. 80% of the time was wasted supporting clients and fixing bugs that were due to the fact that the product was shipped too early.

I think the biggest difference is money. A well funded startup might be a boon but a struggling one will be a bane.


There are lots of startups that aren't doing it right. The best thing someone working at one of those startups can do is probably quit and go someplace else.

I think systemically one thing we need to do is help people make better decisions about where they spend their time. Especially for people who are good builders, they happen to also be the best people who can decide for themselves whether something is actually going to work.


The difference is whether you see learning to do meaningful things on a shoestring budget to be itself a useful skill.

Boeing won't care if you save the project $5k by spending a week of your time coming up with a clever workaround. The week was more important than the $5k. Same for a high level role generally. But not getting work done for a week because your boss won't approve a $500 purchase... that would be frustrating and get old fast.


> Boeing won't care if you save the project $5k by spending a week of your time coming up with a clever workaround.

I'm confused what you're getting at here. $5k/week is $260k/y (or a bit less counting vacations and holidays) and the fully-loaded cost of an engineer at a startup is typically more than that. Then consider how high opportunity costs typically are at startups, and I expect most startups would view your spending a week to avoid a one-time $5k expense to be a bad tradeoff.


Yes, but a week of delays costs the company like Boeing a lot more than just your salary, and they have deadlines to meet and other teams that need your project done.

I agree, most startups would view spending a week to avoid a one time $5k expense to be worth it for several years at least. That's why I'm saying the experiences are different.

If you're reading a judgment into my comment, there is none, I think doing super constrained engineering is super fun and an awesome skill to have. But I have also worked places that have the attitude of time being vastly more valuable than cash, and respect that both approaches are reasonable. Just different. But worst is when you're cash constrained to the point where even your clever workaround isn't possible to implement, even though it costs 10x less and is mission critical.


> I agree, most startups would view spending a week to avoid a one time $5k expense to be worth it for several years at least

Sorry, what I'm saying above is that I don't agree with that.


Ah, sorry, I misread you. Fair enough, raise to the level you feel is reasonable for your field. I just picked a number that I think is about right for people like me that don't code much.

I am also thinking more "angel+bootstrap+grant" funded startups rather than people already past a Series A; if there's 10 employees with a decent runway the calculation changes a lot versus 3 people getting something off the ground. I think the latter is more typical of a startup for the first several years.


I find that saving developer time or large amounts of money can be rewarded well in my position at a FAANG, you just need to save an amount commensurate to the opportunity cost.


"...save an amount commensurate to the opportunity cost."

Which can be a hell of a lot more than you expect. Like, don't bother spending two weeks to cut the CPU use of a service in half, if the service only uses 1k CPUs to begin with.


On the other hand, it seems like a savvy engineer could work that into a story to tell a Boeing interviewer about how they took the initiative to think outside the box and develop a solution that saved the day when the team was under a time constraint.


If they solved a time constraint by being clever and working hard then clearly Boeing would care about that, I agree.

Saving $$ per unit and saving $$ total are so different. If all you're doing is saving $500 total, I wouldn't even care in most cases... but if you managed to use clever techniques to save $0.30 off the manufacturing cost for a toy that gets sold in the millions...

I most strongly agree with the ethical part of the article, in any event. I'm sick of companies trying to take advantage of their employees, it's just sad and gross to see it done by startups that could be better than big companies in at least this one way. But instead they take it even further somehow because their finances are far more opaque. I don't think it should be up to noblesse oblige to determine whether distribution of profits and salaries are fair, it should be assumed to be the rule even if there may be exceptions.

It's a sad day when you look at employment agreements from Intel and a shiny startup and find that Intel is more up front and transparent about how things will work and what you'll get paid.


>noblesse oblige

I think the course of events in the USA in the decades since the 50s has essentially answered the question of what happens if you leave it up to the most fortunate to decide how to treat the least fortunate.


Sometimes the people who are best at "working stories up for interviewers" don't always feel the need for there to be any truth behind those stories...


Working for startups I usually hit the ceiling pretty fast. Not enough time for formal learning, because of fires or hundreds of menial tasks, and on-the-job learning is just not enough after a year or so.

Anyone stuck in this situation?


> were due to the fact that the product was shipped too early.

Can you explain more about this? The mantra is generally ship early and iterate fast.

How come the tech team was spending 80% in a bugs rat race?

The earlier statement of "80% of the time was wasted supporting clients" seems perfect? i.e. what else should you be doing other than supporting clients who are willing to pay with features and bug fixes?

Feel like I'm missing something.


Right, they ship a product with bugs, and than spend all of the time in fire drills instead of core functionality.

Nobody wants to pay for bug fixes.

Do more QA and avoid making your customers part of the QA team.


Initially the startup was a service company which later pivoted into customer medical product. Previous contracts were upheld, while new were piling on even after pivot. Note that this is in France, a lot of funding comes from 'collaboration' contracts between laboratories and companies, often including up to 5 different entities. All this means that you are stuck in a whirlpool of quarterly meetings. With a tiny team if your product needs even very little support for each client it piles up. On top of that this was a medical, connected, product, people have different expectations for devices with a stamp on them.

So now you have a team with about 2.5 collaboration projects per engineer, who are at the same time the tech support and SREs. With several new products in a pipeline. All of it wrapped in a bow of medical certification.

One think that startups should have in my opinion is focus. If you have enough funding to go for a moonshot drop everything else and go for it. Don't spend too much time hedging because you will never get to the goal. If it doesn't work out, too bad, but at least do everything you can to get there. Especially when cash strapped.


Could be a hardware product. Shipping hardware early is a nightmare.


> 80% of the time was wasted supporting clients and fixing bugs that were due to the fact that the product was shipped too early.

There are a lot of valuable lessons to be learnt here about product planning and dev process, but if you didn't make any attempts to fix the issues you mentioned, you probably didn't learn very much.


this has been my startup experience, too. Chasing any customer even if we had to make a lot of changes and try to support antiquated versions of things for our software to work for them. It rarely paid off. Actually, it never paid off.


I worked at big companies for the first 15yrs of my career. And startups for the past 5yrs.

Firstly, startups have been an absolute delight. I very carefully chose the company and hence my boss and my co-workers and love working with every engineer on the team. It is a pleasure coming into work each day and I often cant leave because I'm excited about my work.

I have a lot of authority over what I build a much of it is "close to the metal" rather than some side system. I get to see the whole slice of cake from conception all the way to sales and client implementations and participate in all of it. At small companies, as an Engineer, I learned how to build a successful product and learned all the steps from inception to sales and production.

At every big company I was at, there was more specialization and lots of process. Process was necessary at that size. There was also a great deal of inter-departmental politics and incentives were usually not aligned at big companies, sometimes incentives across departments were even orthogonal. I spent 30% of my time on process and communication at big companies and it went to 80%+ once I was a senior executive. I made a lot of money there, but I think it was to compensate for having to deal with the inner workings of a big company (and being able to be effective at it.)

At big companies, I learned how to turn the gears of organizations and learn how to make globe-spanning change effectively.

To be fair, I took a big pay-cut to come to a startup as an Engineer. I'm happy with the choice. I dont think there is any silver bullet out there, but it is important to understand what you get with each choice. It is also important to make that choice with full intent and not be fooled or brow-beaten by anyone.


Too bad I work for a living and paying bills, I don't work so I can "growth". That is just good old self-improvement brainwash to exploit labor

I have hobbies, I have a family, I invest in culture, I enjoy free time, that is actual growth.


Yes, I think it's possible that you learn faster at startup. But it is ridiculous to say that you "learned more in the first month at the startup than the full 3 years at the large tech company."

This just makes me think that either you are exaggerating a lot, or you were highly unproductive at the big company than most people.

In either cases, I end up not being able to take your comment seriously.


I believe him as someone who has worked both ends in many places over the years.

At a big company you are given a slice and you really have to push to get anything more. I've had the experience where no work is assigned because approving anything takes time and once the work comes it is extremely easy to finish immediately because you have sat through weeks of meetings reexplaining everything to different groups get approval to change a form.

At one startup by the end of the day I was already learning four different languages/tools.

Now I imagine places like fangs would be amazing places to learn. If you ever work in healthcare most of your day will be explaining why this is a small change / very safe and you learn very little.


1 month vs 3 years might be inflated a bit for learning, but then again it might fit.

At a startup you might get core technologies going in a month, while at a big tech company the timescale might be closer to years.

I worked at a startup and the focus was on the work. I got to make decisions on what to work with, what technologies to adopt, and then I had to get them running. I worked on core technologies.

At a large company you rarely get to do this. You usually have large systems in production, have very large teams, and get to work on an established code base adding a feature or fixing something.

An interesting exercise at a large company might be to look at the version control checkins from the beginnging. The features at the beginning of the log probably went in a lot faster from fewer contributors.


Depends on the company. "Big company" isn't one company, or one position. I absolutely believe it. At the big company I worked for, it took weeks just to get all your accounts enabled. Releases were planned months in advance. At every startup I worked at, I personally deployed our software more in the first week than the big company's ops team deployed our software in all the years I was there. You learn a lot from that. Not so much from waiting for the ops team to find time in their schedule for you.


Briefly to begin, I'm going to read the above extremely uncharitably, not in an effort to besmirch aeternum but instead to try and tear down some terrible guidelines about life choices that I've seen going around.

Here follows my translation of the advice above:

> Yes you will probably make more at an established company, but your rate of growth can be much higher at a startup.

You'd personally benefit more from working at an established company, but if you work for a startup you'll be trained on the cheap and then an established company can reap more profits from you.

> I worked at a large tech company for 3 years before joining a startup, and learned more in the first month at the startup than the full 3 years at the large tech company.

The comfort of a large tech company is nothing compared to the stress filled life of working at a startup, having to constantly innovate on your toes and learn your own ways will push you to develop faster - but if you hit a wall you're truly hooped.

> I was able to design and implement a service in a matter of days, whereas at the large tech company those 3 days would easily spent convincing people that the service is needed in the first place.

I saw a need and dedicated some days of labour to filling that need, because it was a valid need I was praised, if it hadn't sold I'd be chewed out for wasting time - and there is no guidance on which needs might be helpful or not... Within a startup you'll be expected to do user surveys and then market your new product even though no time is formally afforded for either.

> Direct exposure to customers also is really interesting and changes you as an engineer.

I assume when you decided to become a software dev you really meant UX designer? If your perfect world is being given a task to do and doing it accurately to a high level of perfection then have fun trying to quickly adapt your highly designed system to literally contradictory client requests coming from the same customer.

> It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.

Losing your shirt trying to make your day job not collapse and then being excluded from any of the benefits when your company goes public is character building.


It sounds like you shouldn’t go to a startup. I’ve done a mix of both (from #1 hire out of 2 total engineers all the way to a Fortune 25). Across the board, I’ve found the smaller the better (more enjoyable, more learning, more energy, more urgency, better colleagues).

Yeah, there’s no formal time laid out to do step X in the course of development. There’s the chance that you won’t make payroll someday.

It’s definitely not for everyone, but when you get a good team together on a good project, it’s fantastically energizing.


I'd rather educate the population on the pitfalls of startups so that people going into them are less naive and so that the experience of working there can be more enjoyable and fairly compensated.

I have really enjoyed working at small companies as well - not two person startups working on hopes and dreams, but companies under a year old that are struggling to stablize their offering of a product that they know there is a market for. Startups can be lots of fun, they can also be a grind trying to keep up with shifting customer requests - especially if you find yourself with a single dominant customer that knows they can push you around. Start ups can buy you an island or you could make 60k a year for three years and then be let go immediately prior to an IPO. There is an immense amount of risk there and I'd like to see some shifts in startup culture to provide a bit more assurances since the experience can vary wildly.

Maybe employees at small companies need to be guaranteed (i.e. by the government) a portion of that company for their work, maybe work days need to have a hard limit on them - maybe there just needs to be more VC funding sloshing around and given away in small doses - 200k to twenty companies will produce a lot more success than 4m to a single company.


What problems do we see that are evidence that government intervention is needed or would be helpful?

I see a lot of people very much willingly freely entering into contracts that are beneficial overall for society. That many startups fail and few result in king’s ransom payouts for employees who put up no money to form the company seems ok and preferable to an environment where government has a heavy role in picking startups, regulating work, or otherwise mucking things up.

If a couple of my buddies and I want to work together and want to work as hard as humanly possible at it, why ought that be disallowed?


The implication of it being you and your buddies being that you won't get shafted if it goes well or shafted more than is reasonable if it doesn't.


In my experience it’s the team more than the size/lifecycle of the firm. I’ve worked on teams hitting on all cylinders in large and small companies. Similarly I’ve had bad teams in those environments and all sizes in between.


> If your perfect world is being given a task to do and doing it accurately to a high level of perfection

I think it should be obvious if that is what you desire start-ups are not for you. Whoever hired you failed at their job.


"No guardrail environment" is a great way to put it.

I've worked in a large corp IT department and for start ups.

I'd say the most value in working for a start up comes from being in the core group of founders and first employees. After that point, my perception is that it's more of a toss up - if you're going to be a rank and file junior developer on the periphery of the decisions that shape the company, an established company could in many cases be a better choice.


I think it depends on the big company. With aws or on-prem cloud native tech, there is a lot of freedom and responsibility given to individual engineers to build services and applications in an autonomous fashion. This goes for everyone, including folks with a year of two out of college.

I have seen no limit to what an individual engineer can accomplish at my big company as long as they have the desire and ambition.


I'd even take the position that if you are able/willing to work hard and grow fast, a start-up (or more precisely a high paying, high growth unicorn) will likely pay more than an established company - because you can grow faster and become more valuable (and thus compensated) in a higher-growth environment where the only limit is yourself.


> It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.

There's a thin line between growth through mistakes and learning bad habits (because of lack of training and no colleagues with experience).


I've been out of startups for a few years now, but it always struck me that there is plenty of room in the cap table for employees, if founders and VCs realize they have to cut back.

If founders and VCs gave a third to half of their companies to employees, instead of crushingly small option pools, this math would almost certainly shift. And the returns wouldn't be much worse for founders or VCs.


The reason they don’t is because they already gave 50% to the investors. And it isn’t uncommon for companies with $30M or $1B exits for the founders to get nothing. I heard about a company recently where the company sold for $40M and the founders only owned 4% after years of raises. I doubt the founders got anything. Most of the time these companies are having trouble scaling sales.


That’s why I included investors. One could imagine a regime change where, given the market for talent, both founders and investors realize the need to carve out more for hiring equity, and value companies accordingly, especially in the BS early rounds where it’s not based upon any real financial metrics.


It has always been mindboggling to me that startups are still so all in on the Bay Area. Most problems mentioned in the article go away if/when you are willing to staff developers in an area that is not as ridiculous in terms of cost of living as the Bay area. According to StackExchange data, the 50th percentile pay for a Full Stack Developer with a Bachelors degree and 3 years experience (a profile that would seem reasonable for a startup hire) in the Bay area is $140k, whereas in the St Louis and Minneapolis it is $89k. Not sure why for many startups Bay area seems to be the only option. If they staffed their developers in a place like St Louis they'd be able to avoid the SF salaries and still pay in the 75th percentile for the market and the developers would have more purchasing power making $115k in the midwest or Raleigh than they do in the bay area making $145k.


Being a developer in St. Louis, the median developer that makes 85k here is not really the kind you’d find at a good Bay Area company. When you look for the good ones, they often have competing remote offers with salaries not that different from the bay: The biggest difference is that nobody gives real, useful, valuable RSUs the way FAANG does. Barring one of those jobs, the trade off is pretty appealing for developers.

The problem for a startup here is money and customers. There is some local money, but in practice, you will be raising from firms in SF or Boston. To do that well, you will be sending a founder on trips a high percentage of their time: Our CEO was out 50 percent of the time this year. It’s OK with three founders or a small team already, but the seed stage is very rough, especially for a solo founder.

There is also the matter of customers. If you are doing B2B for startups, or straight sales to developers, the market isn’t here. Consumer? Any physical bits are not going to grow the fastest here. Do you want to start selling to large masses of people with little time and loss of disposable income? Not the best test market. So you better be doing something that is better done from here. An agriculture startup, with farms across the river, for instance. Still, it will be rare for this to be your ideal location there.

Still, I wish for more startups here, but the negatives are very visible, and we have very few success stories that tell people it’s worth trying.


The Bay Area offers software engineers a career growth trajectory that other places simply don't.

That $140k number might be a reasonable 50th percentile for what a junior engineer would make at a startup in the Bay Area, but compensation can increase quite a bit after several years in the industry, especially for engineers who move to large companies which give stock compensation. They will far outpace the earnings growth of engineers elsewhere.

It's much easier to achieve that kind of career trajectory in places with high concentrations of tech companies, e.g. the Bay Area and Seattle.


That makes things look even better for St Louis and Minneapolis type places. Startups in BA can't even hire juniors for $140k while if they pay $100k in St Louis they will have people jumping at a chance.

Now I'm sure the BA people average better but somebody in the top 5% from St Louis is going to be pretty good.

Note: I'm from Auckland, New Zealand and $US 100k would be a very good salary.


Well, this assumes that the x %ile in smaller markets is interchangeable with the x %ile in the more expensive ones like SF, Seattle, NYC, Boston. But I know lots of people from cities like St. Louis who live in these much bigger tech cities because if you’re in the higher range in comp. for your years of experience, it’s just a much better deal being in the more expensive city. So I would guess that in these smaller cities, you will miss a lot of the top 10-20% developers


The cities I mentioned (St Louis, Minneapolis, Raleigh) and comparable cities like Austin/Columbus etc are not podunk small towns. They are all major metros that are host to big universities and local colleges and as such producing a large amount of talent. I don't disagree that many devs from these cities move on to bigger cities, but I'd wager that a large majority of college grads from universities in these cities stay there and work for local companies (and them staying there is not a reflection on their talent level but more about the ties to the local community).

Even if I concede to your assertion that a vast majority of the top 10-20% of developers from these cities leave for the big tech centers- most startups are not doing the kind of work that requires their tech team to be made up of "rockstar" top 10-20% developers.


From the perspective of a potential employee, taking a job in a lower paid part of the country seems like a bad idea. You would generally be giving up some quality of life and neither debt nor savings care about cost of living.

Although maybe it would work if some of the second tier cities agreed to pay off the debt and contribute to the savings of people that agree to work there.


There is a lot of capital out there, what needs to happen is the number of startups shrink and the well funded ones pay more money - even more than google or FB pay. Simple as that! If you are sad that you can’t get a professional team on a $1mil seed, I have absolutely no empathy for you because I’m an employee and this is the free market.

Now, if you really want to make it more enticing, some things that would move the needle for me other than comparable salaries (although more cash is #1):

- Larger equity that automatically ups if it will be diluted, and the moment any shares vest I can sell them in the private market.

- Transparent cap table.

- If the founders take cash off the table, I can as well, and no preference for founders.

- 10 years after leaving to exercise my shares. I don’t want to have a 3 month trigger that handcuffs me to prevent a giant cap gains bill on “paper money” when the fair market value is way higher.

- Reasonable working hours.

- Flexible work from home policy.

But overall, go raise more and start offering more cash, because I assume 95% of startups are total failures.


I've said this before and I'll say it again. Never accept a lower salary in exchange for equity. Salary is your market rate for providing labor. Equity is what you get for taking on the risk of being out of a job sooner than later.

So with that in mind, if the equity and bonuses in BigTechCo are a sure deal, then it may be worth negotiating for more when you join a startup.

Don't sell yourself short.


I worked at software startups in the Boston area from 1988 through 2013, so perhaps my comments are not relevant to this day and age. But what I read in that note sounded awfully familiar.

In the mid 90s, Microsoft was buying up talent left and right, in whatever area they wanted to go into. My field is databases, and I developed expertise in the integration of query languages with programming languages. I got an obscenely lucrative offer from Microsoft, and decided to turn it down. It was a dumb decision, financially, but actually worked out fine on that front. However, I'm sure that Microsoft enticed many promising software developers to work for them instead of startups. (A few names do come to mind.)

This problem was completely solvable then, and the same technique would work now. The problem is that VCs don't want to solve it. They want software developers cheap. They give miniscule amounts of equity, and bias the terms so that those tiny stock option grants almost never pay off very well, (e.g. liquidation preferences). Except, perhaps, for the chief architect, and one or two very senior developers, we are viewed as disposable, interchangeable cogs.

There are great reasons to work for a startup, other than equity. I am very happy with my 25 years doing just that. But equity is definitely a factor. Contrary to what they would have you believe, VCs are extremely risk-averse, certainly compared to the developers who are sacrificing the best years of their lives for their companies and the chance of a financial win.


I believe this post does a very good job of bringing the elephant in the room into the discussion. The current structure of equity compensation for early-stage startup companies is simply not enticing enough to get people to choose that over the salary and predictable path of BigTechCos. I love working in startups and even I, when presented with the choice, pad the salary knowing that throughout the funding rounds, if the startup is lucky, any fractional percent that I have will be so diluted that I'm likely to walk away with nothing to show for the work I put in beside the cash I opted for, hopefully, some new connections and some learnings. While some of the more successful startups can compete with those companies on base salary it is just not enough necessarily to convince the top talent that you are the right move for their career. That said there are ways to improve this such as the increased transparency OP wrote about in their post. We should also give more equity to early employees and have favorable terms around vesting for these employees and better timing around the loss of options after leaving a company. Of course this negatively impacts founder equity and potentially investors as well. But to me, worrying about that negative impact to founders and investors comes off as short sighted on part of the investors and founders. Ensuring your early employees will be taken care of means they'll work harder for your company and this will increase the chance you'll survive long enough to see an event that makes anyone a return on their investment. The numbers are so overwhelmingly stacked against startups that worrying about the couple million less you'll have because you gave out 1-1.5% equity to your early employees is really silly, very much chicken before the egg. Instead we currently have the weird known but unspoken fact that your early employees will likely get nothing in a liquidity event while still asking them to put their all into your company which is unethical at best and downright manipulative and harmful at worst. So yeah startups are in a weird place. This doesn't even touch on companies that just stay private forever which is another issue all together.


The tricks that companies have used to dilute engineers' equity and to have different classes of stock are coming back to bite those companies.


To be fair it’s mostly been the VCs learning how to extract more value and forcing that on the companies.

The VCs have naturally gotten better at what they do, which is bring returns to their LPs. The consequence is that they get more value from exits than they used to which comes at the expense of the employees and founders.


The founders agree to those terms though


They don’t really have a choice if they want funding. Also that’s why the terms are usually good for founders and it employees.


1) People say you learn a lot more in a startup than in a BigTechCo. I don't think this is true: I've gotten far more skills during BigTechCo stints than at startups. YMMV.

2) A new grad at a startup gets, what, $100k in salary and some equity? If we're talking a three year stint at a startup, you're effectively asking a worker to invest ~$500k in exchange for that hypothetical equity. In the broadest strokes (obviously everything depends on the deal), what kind of equity does an angel get for half a million dollars, and how does it compare to the amount of equity the new grad gets? And it bears pointing out that that new grad equity is subject to all kinds of games and deception. Of course, the usual response is "you just have to be smart enough not to be scammed!" Perhaps, but I know tons of people (including myself) who are apparently just too dumb not to be scammed but are still smart enough to be gainfully employed at a safe job.


I've worked with startup employees who knew 15 technologies - all of them poorly. They had zero best practices because it was go fast 24/7. It was guys right out of school thrown right into the mix so they didn't get the guidance of more senior devs.


I just made a move to a small (~1000 people company) from Google and I feel you. The code quality is terrible, they do not write maintainable/modular code and worse, they do not do design. They suffer from this(there is always another corner case that they did not take into account because they did not communicate well with the customer) but they still do not take any steps towards the right direction.


What made you think that Google does design? In my experience, what they do at Google, is talk about the overall idea of what they are going to do, but they never did design, they never analyzed tradeoffs, and they never estimated project costs or long-term implications of the crap they threw at walls, at Google. They just pretended to do design, at Google.


What sector is the small company? Why did you decide to move there from google?


It's in finance/trading. I only worked for 2 of the FANG where I focused on tiny optimizations of an infrastructure software (where a couple percent improvement would directly result in a promo). I wanted to build something from scratch but did not want to move to a startup (because of the issued mentioned in the post). Now I am designing a new system for this company and I will lead the implementation of the project as well. This is like working for a startup (with all the good and bad sides) except I still make FANG level (even higher) income.


It’s even worse, because when you leave after 3 years, you have to pay to exercise those options and then pay the taxes on them. And then hope they end up worth something someday.

Fuck that.


How do you come to $500k? Wouldn't that require that the new grad would be able to get a $266k job at a larger company? That doesn't seem particularly realistic.


Rough numbers, but I'm thinking roughly $200k, $230k, $260k. It's an order of magnitude estimate, take that for what it's worth. If the new grad is instead investing $300k, the calculus remains about the same.


I think it's fair to say that someone who can get that sort of job right out of college probably should. However, I'm not sure that the vast majority of engineers can do that.


When I started at Google my first three full years were $213k, $233k, $287k (https://www.jefftk.com/money). Some of this was stock growth (which is not guaranteed and I was lucky there) but I think this sort of pay is reasonably typical for people who are considering a FAANG offer.


You didn't join straight out of school.


Whoops, thanks! I'd missed that!

I don't think that had a large effect on my compensation, if any: I joined at L3, which is what most new grads are hired at, and my salary before Google was low enough that I don't think it pushed up my offer at all. I also didn't get offers from multiple places, which is the sort of thing that (a) results in higher offers and (b) is the sort of thing new grads usually do.

But ideally someone hired right out of school would be up for sharing their comp?


Mind sharing what your rent was during those 3 years? The best figure would actually be comp minus taxes and rent.

edit: Oh, I see you were in Boston -- that's a great deal then. I still wouldn't want to work for Google for idealogical reasons, but I can see why the money would attract others. You also had ~9 YEARS of full time experience at that point, which makes it a lot less impressive.


I'm in Boston, and our rent was about $1100/month for a couple. Rents are higher now (https://www.jefftk.com/p/boston-rents-over-time) and we have kids now.

Taxes would be higher but we donate 50% of our income (https://www.jefftk.com/donations) so I'm not sure how you'd count that?

Also, I didn't have ~9 years of full time work when I started at Google, I had 3.5. My first full time programming job started fall 2008, and this was Spring 2012.


If you were making 60k+ through your college "internships," I would put them at the same level as full-time work. My first college internship was $9/hour with no benefits, and it lasted 6 weeks...

Also, donations are discretionary, so you wouldn't count them at all -- you would just count your salary minus your tax rate (not counting deductions, so that the average Joe can get some context).


If you look back at https://www.jefftk.com/money you'll see I wasn't earning more than $12/hr until my first programming job in fall 2008.


He had 3.5 years of experience and those salaries are from 2012-2015. Skilled new grads can pull more than that nowadays.


Perhaps there is overlap between the person who can successfully create and grow a company, and someone who can get that job out of college.


Yeah $300k is probably more accurate for 3 years.


You can be compensated in other ways, but often I've found much of the work at startups can be no more interesting than their Big N counterparts. It might not even be faster paced. Your career growth might also be similar. In theory, for startups, you sacrifice pay for other facets. The reality is quite different.

The work might be similar but you're paid 50-75% of your peers. That was my experience in startup land, at least. Few good challenges or career growth and half of what I felt like I was worth. Completely personal anecdote, but I felt I was sold some half truth, where I was promised career growth, interesting problems and flexibility, but got nothing that I couldn't have found at many Big N companies.


> I think startups’ best bet is to make the most of the variables they can control outside of money and perks (if you lack the appropriate resources). This means being transparent and honest with candidates about all risks involved when joining a startup and factoring all this into the amount of equity they offer which should be something considerable.

Even if the original founders have the best intentions, large equity up front is unlikely to give you a big payday.

Since, in the traditional VC model the drive is to move toward bigger rounds (A, B, C, etc) and investors get paid back first.

So even if you do start with 10%, you'll probably only end up with a low % percent after 3-4 rounds.

The important thing to note is that this whole thing bamboozles our brains because of unicorn survivor bias. We feel like unicorns and $100m dollar companies are the norm but nothing could be further from the truth.

The chance of being part of unicorn is about 0.006% last I checked. The chance of being part of a $100m+ company is in low single digits (of all startups).

If it ends up just making a few million revenue investors will drop it (because not 10x enough) and you're 2-3% will be worth very little.

If ends up stagnating at $5m for a few years investors will drop it (because not 10x enough).

The overwhelmingly most likely outcome of you getting a large chunk like 10% up front is, when all is said and done, after 5-7 years you'll walk away with a few hundred thousand (before tax) if you are lucky.

In my case I was on founding team. Started out with 10% equity. Co. is now 7 years old. After a merger (diluted by 40%), $10m investment (diluted more), $4m strategic investment (diluted more), then investors taking money off the table first for an exit event - I stand to make $100k if we sell at $20m and $600k if we sell at $40m (currently valued at $20mish and has been for 2 years). That's pre tax.


Ditto to that, and add that this can happen at a larger scale even if you happen to find yourself working for one of those lucky unicorns, where late-stage VC will swoop in, inflate the valuation, and dilute the hell out of everybody holding ordinary shares.


Ouch. Being an senior engineer at a FAANG would give you 800k in RSUs over 4 years (initial grant + refreshers), a staff engineer position 1.5M... considering almost 8 years of work, that's probably at least 1.5-3M in RSUs (without considering stock appreciation, which can easily be quite significant).


"To make the situation worse, the very good engineers, the ones who could truly help build a tech company from the ground up from day 1, were getting offers so exorbitant they could not possibly fathom to turn them down."

Ok I have seen this written every now and then.

What does this person look like and how do I become one given a willing to sacrifice everything else?

I can not find a good answer to this question. Everybody seems to have their own opinion.


First, be smart. Very very smart. And be able to demonstrate your smartness at the drop of a hat under stressful conditions.

Second, attend a top tier "name" university like MIT, Stanford or Carnegie Mellon and major in a related discipline.

Third, do some side work in your chosen field that can be shown off to prospective employers.

Fourth, learn how to present yourself well (for interviews and such).

That's generally speaking, of course. Exceptions exist.


Eh, I really don’t think this is representative. I’m a self-taught iOS dev who has only ever been self-employed and I just got a $420k / job from a public company. And I’m smart, but not some unfathomable genius.

I think every engineer should at least do some mock interviews on data structures, algos, and system design (there are TONS) of free study resources and then do a round of interviews. You only need one yes.


Congrats dude! All salary or salary and equity?


$220k cash, $200k equity (or whatever it’s worth in 12 months!)


where is this? also, how many years of experience?


Not going to disclose the company. Smaller public tech company. 10+ yoe.


right, wasn't looking for the company actually, by "where" I meant the location, which I think is NYC based on your handle! Congrats, that's a great gig!


Ah yes, NYC. Thanks! I seriously couldn't be more excited :)


>First, be smart. Very very smart. And be able to demonstrate your smartness at the drop of a hat under stressful conditions.

Sounds like this is not possible without years of exposure to events that force you to this situation. How else would you learn to act like that?

Regarding being "smart": How do you define this? For example, I got a CS degree from a second tier Engineering school. But I was a B-/C+ student. Do I meet the criteria for being "smart" or just lazy?

>Second, attend a top tier "name" university like MIT, Stanford or Carnegie Mellon and major in a related discipline.

Is this a hard requirement? What do these schools do that others don't? Is the exposure to other top tier people a necessary requirement from a skills perspective?

>Third, do some side work in your chosen field that can be shown off to prospective employers.

How do you choose a field that leads to the original goal: "the very good engineers, the ones who could truly help build a tech company from the ground up from day 1, were getting offers so exorbitant they could not possibly fathom to turn them down."

Tech is such a diverse field. There are so many paths to take, none of which guarantee I will reach this outcome. I could become a rock star developer having developed tons of apps, but is that the right path? Or will it lead me to a cubicle job?

>Fourth, learn how to present yourself well (for interviews and such).

This seems like just a lot of practice. Maybe even requiring growing up in a very socially active lifestyle. The opposite for people who sacrifice everything to become great at something eg. programming.

Its looking as if you need to be in a narrowly defined path that needs to either be decided when you are born or you adopt very quickly at a young age in order to accomplish all your steps.


This seems to only guarantee the ‘get hired for an exorbitant amount’ part. How about getting the startup off the ground by yourself?


Ignoring all the indicators that's been mentioned (acing all interviews, right pedigree, etc.)

- Solid results too show - Fantastic references

I know a lot of younger guys have these pipe dreams of sacrificing their youth, going to the best university, studying years for interviews, and looking / being the "perfect" candidate come interview time, without actually having built anything of substance.

Sure - you will probably land some sweet positions, but there's no way in hell you'll get hired as a CTO without anything real to show - unless it's a 3-piece student startup.

Yes, there are exceptions. There are young people that land very nice positions, but they're almost always both smart and experienced.

I think the roadmap look pretty boring, but it's what it is. Read, build, analyze, and understand. Have vision, and get good. If someones gonna hire you to design / build / develop their product, then you need to be able to lead and deliver. Hard work, experience, and good networking skills.


>I think the roadmap look pretty boring, but it's what it is. Read, build, analyze, and understand. Have vision, and get good. If someones gonna hire you to design / build / develop their product, then you need to be able to lead and deliver. Hard work, experience, and good networking skills.

This is probably the clearest answer that I have gotten so far so thanks.

However I was hoping for something more exact. I guess there is no perfect path that someone can take.

I think I also asked my question incorrectly seeing the other answers I got.

What I was really looking for was how can I as a 29 year old graduate of a CS program who is currently working as a developer(Doing nothing exciting at a enterprise company) get to that goal(the one mentioned in the original comment). Like what steps should be taken going forward.


I don't know if it's universal, but everyone I know that gets offers like this tend to solve the higher level problem.


The people I've seen that fit the bill, tend to have a really strong knowledge base and are quickly able to understand the relevant code base/systems.

They're then able to easily debug/optimize the system and know how to implement features in the best/simplest/most scalable way almost immediately.


I love how the article ranked right above this one is titled "Downsides to working at a tech giant".


I wrote that other article and agree with what the original author here has written. Startups need to do a lot more to a/ solve the real problems of their customers and users, and b/ treat their employees and ecosystem better.


LOL, I noticed as well.

As I was reading "Downsides to working at a tech giant" it occurred to me that the alternative to working for a tech giant is not necessarily a start-up: I would probably work for myself — freelance.

So, in fact the two articles can both be right. ;-)


You can also work in tech, for a company, but for something that is neither a giant nor a startup. There's plenty of such jobs out there. In fact, the majority of tech jobs probably fit that category


They can be right even if your two options are either a startup or a tech giant. They have their downsides as does every job, even freelance.

I like being freelance but getting the motivation in those first couple of weeks was pretty hard. I also found it tougher to sell my services because I never really had to do it before. Probably some other stuff I can't think of off the top of my head? I don't think any type of work is perfect although I'd go for freelance any day of the week.


Written by a VC trying to get engineers to join the startups he's invested in.


> Written by a VC trying to get engineers to join the startups he's invested in.

Actually for most of the piece he was pretty straightforward about making sure you get equity if you want to get paid upon company success.

What has changed is that genuine equity in startups isn't being offered as readily as it was ~15 years ago (and it is notable that the missed opportunity he describes is that far in the past).


For a VC, scraping off net innovation minus startup-wages is a win. It's a lose for the employees, of course.


I was a software engineer who learned to start a company right off the pages of the site you're looking at right now, Hacker News. It was here where I learned to start a startup.

I later worked for Y Combinator as a partner helping founders make products and services. The best ones made something that touches millions of people now.

While there is a lot of zero sum thinking in startupland and finance/capitalism in general, you have to remember that this is probably the most GROWTH mindset industry in the world. Where else can you, with just your hands and a laptop on the Internet, create something a billion people use?

I'm not saying that is the norm. But when it works, it's still remarkable.

And it can start with you, and everyone reading this.


> I was a software engineer who learned to start a company right off the pages of the site you're looking at right now, Hacker News. It was here where I learned to start a startup.

Keep in mind that if you look back on the things that made you excited to go into startups into 2006 or whenever, probably none of them are true anymore. E.g. the main reason people were excited back then is that there was a huge arbitrage opportunity to take every business that already existed as either brick-and-mortar or web 1.0, and reimagine it using AJAX and web 2.0 design language. In retrospect there were a bunch of other favorable macro trends coalescing at the same time also, but regardless none of these arbitrage opportunities exist any longer.


> Where else can you, with just your hands and a laptop on the Internet, create something a billion people use?

Serious question: how many software companies have something that a billion people have used?

It's a pretty special industry, for sure. But the odds of it happening are basically zero. I see how selling the dream makes for a good story for young and hungry startup founders to passionately change the world and (cynically) end up as a failed bet in someone else's portfolio.

But it's a bit disingenuous to make it sound like it's commonplace.


From what little I've seen of this guy, he really doesn't come off as a genuine person at all.


> Where else can you, with just your hands and a laptop on the Internet, create something a billion people use?

At the large tech companies, with a lot less risk and higher salaries.


> Where else can you, with just your hands and a laptop on the Internet, create something a billion people use?

At companies that already have a billion users?


No disrespect but I think what the people use the product for should be mentioned ... in addition to the number of people using the product. The world has a lot of problems right now. I know there’s some VC in those areas but, well, look at what we talk about.

Touch 20 lives as a teacher and enrich those individuals, or 20 million lives by helping them order groceries over the internet.


What’s a more democratic funding model to spread net innovation? Something like an employee owned company?


The technical term is a coop, like REI.


Workers cooperatives are too risky, the liability in case of default is not limited in all legislations that i'm aware. There are successful cooperatives in most countries but those are the exception not the norm.

It's always simpler, safer and more wise to incorporate.


Why can't the shares be given to employees? Why do the shares need to be owned by investors?


Sounds like this could be a potential avenue for innovation.


> Equity agreements should not be intentionally confusing or designed to screw over employees.

Totally agree with this. Unfortunately I think there might be about 5 startups left if this idea were widely implemented.


There are a bunch of things that “good” startups can do (and ARE doing in my experience) to make early stage equity worth it. For example, instead of a 90 day limit after leaving the company to choose to exercise options, many good startups are now offering ten years.


>> Equity agreements should not be intentionally confusing or designed to screw over employees.

You should feel lucky if confusing is the problem. I think the bigger problem usually is -- you often cant see the cap table. If you cant see the cap table and the preferred overhang, there is no way to realistically understand where you stand in the scheme of things. Confusing can be overcome with some search, but "opaque" cannot be.


Your odds of making money are much better with a young-ish but publicly traded company than with a startup. Even if a startup is successful, you won't see much money unless you were one of the founders or early investors. There's a million ways the stock options that early employees get can be made worthless (or worth-little).


I have BEEN one of the founders, and still didn't make any money off the ultimate sale. There are far too many games with share classes, VC-funded bridge loans, and preferred investor incentives. The only way to win is to not play the game.


There’s a fine line between bravery and stupidity.

I can say as someone older than they were at the time that there was an element of wishful thinking about many of the founders I worked with, and even more so for some that I met in passing.

Charismatic people who are deluding themselves just bring others along for the ride. They may not even know they’re being dishonest. People who have a way with words can be sucked in by their own words just as much as others can.


There were a few recent Ask HNs on the subject:

https://news.ycombinator.com/item?id=21709724

https://news.ycombinator.com/item?id=21641864

https://news.ycombinator.com/item?id=21645117

a larger question is : why can't startups make money


For a lot of them that's just not the primary goal. Honestly, I expect the next big success stories to break from this pattern of the silicon valley sickness of trying to grow a company at all costs by conning VC firms until they've got enough users and then sell the company or get another round of funding to try and figure out the whole "revenue" thing later.

I think some old school thinking of more organic growth of a good idea with immediate revenue will see a resurgence.


It seems like start-ups could catch up, at least somewhat, by offering more stock. Right now founders are still ending up with an order of magnitude or more stock than the first few employees.

There are certainly situations where that makes sense but if the founders are adding extreme value compared to the first few employees perhaps they should only end up with twice as much stock. That would free up a lot of equity for early employees.


> if the founders are adding extreme value compared to the first few employees perhaps they should only end up with twice as much stock

Why would this be the case? If they’re adding relatively extreme value, why should they only get 2x the equity?


I think another reason that people are wary of joining start ups, is they've realised that:

a) The market is now incredibly saturated, and being an early equity owner in a start up that will be worth billions is very rare now. Gone are the days of a unicorn every month or two.

b) People have noticed the trend of FAANG companies buying up start ups, and that this is the goal of many (most?) start ups today. Reach critical mass, get a good valuation and customer reviews, get bought out by tech giant. If you want to work on the most viable new products, just join a tech giant and work on one of the projects they've acquired. (Or wait till the company is bought and join them if they are still independantly run at which point they're not really a start up anymore)


> Gone are the days of a unicorn every month or two.

My friend, I've been building software professionally for big companies and small since 2001.

There were never days where there was a unicorn every month or two.


I didn't mean that a company became a unicorn every month or two, but it seemed that companies were founded quite frequently that later went on to become unicorns.


The problem is getting paid in common stock. A pay cut is money that, instead of making, the employee is investing in the early-stage startup. That's no different than the money the investor is putting in.

Employees should get preferred stock in the amount of their pay cut.


I think the questions/issues around this topic don’t really make sense:

A. Why are we comparing an employee situation at a FAANG company with what should be a co-founder situation? If someone is an engineer that can make something happen at a startup, they should probably be a co-founder rather than an employee.

B. Why are tech center startups trying to hire coders of a certain skill level that will be incredibly expensive due to local competition? If a startup is looking for skilled coders to implement the vision of the co-founding engineers that can make things happen, then there are plenty of remote coders in non-tech-center areas that will do a bang up job for a reasonable price. Note that many of these remote coders don’t want to or cannot come to a tech center. I assume that this is an issue because many/most startups are not good at hiring, on-boarding, managing people, managing remote workers, etc.

C. Related to issue B, why play the micro-equity game with coders at all when they should either be co-founders or they (as remote workers) can be paid a satisfactory wage without equity bait?

D. Why is this conversation comparing a job with (relatively speaking) a lot of hierarchy and politics at a FAANG with a job that should have a flat structure and a great deal of autonomy? These jobs cater to two different groups of people — the ones who like the former probably won’t like the latter, and the opposite is true as well. There are subtle sides to this (e.g., do your time at a FAANG to develop a network), but many people who succeed at startups are not folks you want working at a large company — they will go nuts, and they will drive the people around them crazy.

This whole conversation is bizarre to me. I think there are three relatively simple choices:

1. Take a company job if you’re a company person — that is, someone who likes structure and hierarchy. It might not be trendy to admit it, but many/most elite school grads fall into this category.

2. If you prefer things like autonomy, being close to the customer, and being a generalist, then go to a startup. Plan on leaving once it hits a certain size.

3. If you have a plan for an alternate path that includes both, then go for it — specialist work at FAANG, FAANG then startup founder, startup employee then startup founder, etc. Just know what you’re getting into, because it can be awfully tough to walk away from $300k annual comp as a 25 yo.

Most people I’ve known clearly fall into one of these categories barring some sort of life-changing event.


My career path has been startup, public tech, startup, public tech, startup.

I got lucky that the public techs both had the largest stock growth in their history while I worked there.

All the money I ever made was at the public companies. I also learned a lot of cool, very specialized skills and got to do a lot of “ohhh so cool” type stuff.

Almost all of the knowledge I learned that allowed me to be successful at the big companies I learned at the startups, and most of the friends I made at work that I still talk to were at startups.

Both environments offer something unique.

I usually tell young people to start at a big company with a well known mentorship program and then quickly move to a startup to learn a bunch of practical skills.

But YMMV.


I have a very straightforward suggestion for startups: Focus on the engineers who've put in a decade or more at the big companies.

They are, given the exorbitant salaries, financially set enough to afford the startup risk, and there's a good chance they'd like to see some more agility again.

But 1) you'll need to stop lowballing equity for hires, and 2) you need to get used to the idea that it's not going to be an extension of university life - these people have all better things in their spare time than playing beer pong.

Bonus points: Offer an office instead of cubicle mania. Bonus bonus points: Make sure you hire a diverse workforce from the get-go.


I've worked at 3 big tech companies and 3 startups. 2 got bought out, the other is going strong. I made more money off 1 year of bonus at Google than I did with any of the successful startups. It's not because I did anything wrong (I was Eng #1 at one, First iOS Lead at another and Lead for the 3rd) It's because I was building someone else's vision for the promise that that my stock will be worth something. When a company gets bought even if you have a high % when it gets funding, it will be diluted. If the company doesn't do refreshers often enough you will be working long hours for close to free. The charming CEOs will talk about how they plan to change the world, the sleazy ones will tell you they are a sure thing (and what will you do with your millions). That makes no difference, it's just a lottery ticket. You have to decide how much of your career to put on that ticket.

Startups are a wild ride, and a thrill to join, you'll learn a lot, and have a great chance of coming out learning more than you'd learn as a entry level at a big company. Don't for a second think you have the winning lottery ticket, because if your number doesn't come up you'll left with memories and the paper it wasn't written on.

PS I'd argue if you have a group / team, build your own vision. Go big, we have enough insta-wecha-snapple sauce out there. Build something that will have real impact. And if you don't have the Team / Vision / Risk tolerance go somewhere they'll pay you what you are worth. Maybe you'll be even meet some of those you want to build a team for whats next.


Maybe startups should try cities like Pittsburgh, Columbus, Atlanta, Knoxville, etc. Lots of talent that will work for less for the simple reason that the cost of living is not so stupidly high. Hell even SoCal, Portland, Austin, and Chicago are bargains compared to NYC or worse SF.

Problem is that all the capital is in NYC and SF, and they still prefer to invest locally. At this point VCs should just skip the middle man and cut checks directly to landlords and property speculators.


Isn’t this also a function of the limited runway VC’s give to startups. If they 10x’d the amount of funding for seed and series A, startups could afford to hire the best.

It would add a lot more risk, but given the outsized rewards, it would still be profitable for some VC’s.

Otherwise, there will be lots of ideas left un-persued because many experienced engineers will not want themselves or their employees to live (in relative terms) an ascetic lifestyle while perusing their dream.


It's VCs' and founders' fault for always diluting employees on the big exits. If they want to gain back trust we need iron-clad poison-pill provisions that prevent employees from getting screwed out of their equity.


I work at a startup and have for 2 years since graduating college. Its quite hard to gauge my true value. I know that for the area (according to Stackoverflow's salary numbers) it seems competitive, but big N companies are moving in to Culver City which may be changing that.

Since starting, I've seen engineers who can't hack it leave or get fired. I've been the one engineer who has been productive and seen our projects to completion. Our team has gotten stronger over the past 2 years however and I feel that we are in a good position. In this way, I feel that I am valuable, but I have nothing to compare myself to.

Working at a startup I've also learned an extremely broad area of knowledge, much of this completely on my own. I'm often worried that that may hurt me if I apply at a larger company and that hiring managers would question my fit.


It’s worth mentioning that this post is focused on USA and (unsurprisingly) highlights Bay Area.

I’m sure the points exposed apply there but there are many other places in the USA and the rest of the world where this doesn’t apply and you can find good talent without needing to offer an exorbitant paycheck.


How about you just start giving your first engineers a bit more equity?


Well said. Startups can't really compete with MGAFA those days. Not the people, not the resources. For domain like ML, it is hard to imagine what you can realistically achieve outside of working in those companies.


A few years ago I decided to start working for a startup because I wanted to try out the experience. It was a late-stage startup with no VC money and they had good prospects for a possible acquisition.

I did the math and I figured that it might work out for me. 2 years later it turned out that they have been talking about a possible acquisition for the last 3 years, but nothing happened. I also checked the company's public information and it turned out that they weren't that transparent about the shares. I was told that I get 0.5% worth of shares (they refused to tell me the total amount of shares) and what I saw is that it was true: I had 0.5% of the outstanding shares. But in case of an acquisition, they are free to dilute them 5-fold because the authorized shares are 5 times as much as the outstanding ones.

So I decided to join a big company which is paying almost 2 times more right off the bat and I also get additional shares each year. I made a calculation and even if the old company gets acquired I get less money (it is just a rough estimation) than I get at the new company. And that's still a big if. I think that I still started from a much better situation than most of the other folks working for startups. This company produces profit, they have a business model I believe in and there is no VC to please. Most of the startups are in a much worse situation.

I will never work for a startup again.


Captable slots for early employees range anywhere from 5 to 40% (collectively, not individually), depending on who the partners are and what the company does it might make sense to join a start-up. But it's better to be a founder and if you are risk averse then it is better to work for a big company with long term viability.

This definitely isn't one size fits all and there are a lot of people that will happily try to sell you on their version of the story because 'it worked for them'.


It's fun to watch the Bay losing its startup spirit and becoming a land of mega corporates. It might resemble Atlanta in 20-30 years. There are so many other places where joining a startup is the best option you have (excluding remote gigs). I guess most startups will become remote-first and lure people who care either about the team or the problem being solved. Building a startup employer brand will be of paramount importance.


> It might resemble Atlanta in 20-30 years.

Or it might indicate a lower probability of creating another company that produces FAANGM levels of cash flow.


Use your brain, when offered a role, do you like the product ?

Do you believe in it ?

Are they paying you a nice amount of money ?

If you can only answer 1/3 please continue to the purgatory state.


I like this piece and I agree that startups can be great. But the first half of the essay, the hook of the essay, was contingent upon the author declining a $70k check from Thiel and noting that he walked away from $200 million; and the end of the essay suggested that one shouldn't work at a startup for the money (and you really shouldn't, it's unlikely it'll make you much).


Agreed, if you're living in SF or NYC I don't see the point in working at a startup unless you're just really passionate/optimistic about the work/company or are getting some other perks you wouldn't get at a FAANG.

Personally I work for startups, but only because they let me work remotely, something I wouldn't be able to do at any FAANG. I would only go back to an office job to work at a FAANG, since compared to a startup the money, "exit ops", work life balance, and job security are probably going to be way better.

If startups want to be more competitive and have access to more talent, then they'd be wise to open to hiring remote workers. Otherwise they're going to struggle to compete with FAANG type companies. Remote is the one perk that FAANG companies don't offer, and unfortunately probably won't for the foreseeable future short of some serious cultural change.


If the cost of housing was substantially lower, perhaps these great engineers would work for startups that could really use their talent, as they might not care as much to being millionaires so they can afford what's considered a middle class home for their family in most other places besides SF/Bay Area.


It seems to me that most companies start to gain a tedious/conventional/corporate atmosphere once they get to more than, I don't know exactly, somewhere in 100-400 employees. At that point the company has acquired, in addition to those who care purely about building companies and building software and building hardware and physical processes, a middle layer of conventional auxiliary staff, and nice though everybody may be, the company just becomes a standard corporate office environment. Many people (especially those who have enjoyed academic environments) strongly don't like such atmospheres, and for those many people this is a pretty strong incentive to work at small companies.


I have worked at 3 startups for 3 years of my career. At one, I was a founder and seed-venture investor; that one lasted 8 years. It was the only company NOT run by criminals. Total out-of-pocket costs to me (in 2019 dollars) : $45,000 in 2 startups for shares and for options. Total return : $0. Total discount to market salary that I worked for : 33%. In 2 out of 3 startups, the CEOs (1) stole all the money and fled the country, or (2) conned the VCs out of $2.5m and shut down the business the next day after the final funding round (all monies went directly into CEO bank accounts.) Ask me what I think about startups .... Fuck startups.


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