This article isn’t about if you should join a startup vs. a big company. It’s about if you should join a startup vs. a FAANG company, which offers outrageous compensation & benefits. From that perspective, FAANG is the obvious choice 99% of the time.
The more and apt comparison would be if you should work at a startup vs. a corporate job at a HP or Qualcomm. At those type of companies, compensation is not competitive (they often off-shore), benefits are tight, and the work is not interesting. It could very well be argued that a startup, even with high probability of failure, would be more fulfilling.
I'm part of a mentoring group for recent college grads. One of our biggest challenges is that much of the conversation on HN, Twitter, Blind, and other sites assumes that FAANG admission is guaranteed.
This becomes a major struggle for juniors when they realize that there aren't any FAANG offices in their location. Many others apply to FAANG but don't receive offers, which is devastating if every HN comment, medium article, and Tweet they read revolves around getting into FAANG.
It's a strange situation to have to console junior engineers about their "paltry" $130K compensation at comfortable 9-5 jobs in low cost of living cities.
I have to remind a lot of people that the FAANG interview acceptance rate is very, very small. This idea that everyone can call up FAANg and get a $200K+ job in their city is not helpful to anyone but top candidates in a few select cities.
I fully agree that the fervor around FAANG is unhealthy. However, if you are just at the start if your career, that is the best time to move to wherever the jobs you are interested in are, rather than restricting yourself to what is available near where you currently are. There will be folks that have obligations preventing that, but most recent college grads should have little holding them from moving.
This comment is a good summary of the problem I was describing: It's easy to say that anyone who can get a FAANG job should get a FAANG job, but if circumstances don't line up, what else? That's where many students draw a blank, because all of the advice they've consumed revolves around FAANG job offers that may not arrive.
Statistically, more people are rejected than accepted by FAANG companies. A lot of my mentoring time is spent helping students figure out what's next when their primary FAANG plan doesn't (or can't) work out.
That is because a lot of people don't realize that we are not all based in the bay area and in fact in majority of the countries you have to scrape for 100 bucks after college with no skills and no name university. I am not being negative here, but its just the fact that privilege (even geographical) makes up for a lot in this case...
The number of successful top tech companies keeps growing. The winner-takes-all reality of our current tech business environment means that the job market is:
1. These top companies that pay very well and offer excellent career growth prospects.
2. Everything else below.
So the real answer is "keep working at your fallback option until you can finally graduate to one of the lucrative positions at the top of the pyramid".
That's the real, no-BS best course for the employees themselves. For companies below that top, that is horrible situation because it means all their employees (and especially their best) are temps just waiting for their real shot elsewhere. However, it is also the reality: most employees do leave for that golden top-tech offer that pays them x2+ their current comp with no risk.
Non-top companies don't really help the situation much themselves; as we all know having FAANG on your resume is the surest way to get interviews, offers, and career upgrades everywhere outside of FAANG as well.
So, the "top-tech or bust" attitude will continue.
Companies below the top can pay competitive rates, of deal with their employees wanting to go to the top. this is a natural consequence of market economies
I work at a company that doesn’t offer a total compensation package competitive with a FAANG, but still definitely very healthy, and we do lose many straight-outta-college candidates all the time who are demanding base pay of $200k+ because “that’s what I’d get if I worked for Google.” After denying that, unfortunately, some candidates insinuate that being offered $1.x * 10^5 for an entry-level position is a shrewd ploy to brazenly take advantage of their valuable skills at low cost.
> After denying that, unfortunately, some candidates insinuate that being offered $1.x * 10^5 for an entry-level position is a shrewd ploy to brazenly take advantage of their valuable skills at low cost.
There are no absolute anchors in the compensation market, it's all relative.
Once enough companies pay $200k for entry-level, then anyone paying $130k is underpaying, regardless of how "big" that number looks to you, or how much lower it was 5-10 years ago.
Why are we implicitly criticizing young engineers for trying to maximize their value in the market? C-level execs reject multi-million offers all the time if they can get a better one. There's no room for moral outrage here at the "snooty young devs scoffing at $130k pay", this is just market economics.
Also, these young engineers are keenly aware of the huge impact that a starting comp of $200k will have on their future comp, career prospects, etc. This is just a reality and we shouldn't disparage our fellow engineers for responding to it.
I think it’s perfectly reasonable to want to maximize your pay, and I don’t give anyone flak for that. I don’t think anyone has to settle for less if they have opportunities to get more. (Mind you, 95% of the time, when people say they could get more, they don’t actually have another offer in hand, they just posit the existence of it based off of what they’ve heard.)
But I’d prefer engineers simply reject the offer as opposed to insinuating they’re somehow being swindled. It’s ridiculous, especially given all the context.
It’s rich to discuss market economics, because there’s probably fewer than 100 companies, all located in the bay or NYC, and all rather prestigious, that pay the mad money being discussed. By and large, the majority of the market does not pay this much money, and the majority of software engineers could only dream of $200k base salary for an entry-level position. Pretty frequently, it is “snooty young devs scoffing”, especially when they have zero other offers in hand, and no prospects of getting them.
> (Mind you, 95% of the time, when people say they could get more, they don’t actually have another offer in hand, they just posit the existence of it based off of what they’ve heard.)
If they keep doing that, they'll only hurt themselves.
> But I’d prefer engineers simply reject the offer as opposed to insinuating they’re somehow being swindled.
How often do they "insinuate" that?
I'd chalk it up to bitterness: "Blind told me to expect a $200k offers, 10 of the best students in my graduation year got such offers, and I'm just as good as they are, why do I keep getting these lowball offers, the world is so unfair, these companies are so unfair trying to exploit me!"
> It’s rich to discuss market economics, because there’s probably fewer than 100 companies, all located in the bay or NYC, and all rather prestigious, that pay the mad money being discussed.
Nah, FAANG pays about the same in Seattle as they do in the Bay/NYC, and only slightly less in satellite offices.
> Pretty frequently, it is “snooty young devs scoffing”, especially when they have zero other offers in hand, and no prospects of getting them.
If that's the case, then they're only hurting themselves and prolonging their search. Eventually they'll have to settle for one of these position they scoff at.
ironically google pay is competitively low when youre at that tier. having worked there and other places google pays the least out of top tier companies. (no im not considering amazon or msft as the same level)
I believe you. I was shocked by how low Amazon offered for a senior-ish position. I walked away from it. Went to a medium-sized high-growth pre-IPO company with Facebook+ comp. FAANG is overrated.
They also know that the money/prestige they start making at the beginning of their career can vastly change their trajectory in economic terms. I would argue that the chance of making $500k/yr 10 years into their career will be vastly different if someone goes to FAANG vs a Microsoft temp role.
This is a well-known phenomenon around subjective well-being. It plays out in very interesting ways, for example, most millionaires don’t view themselves as wealthy.
People untrained in escaping these dark thought patterns usually aren’t as happy as they could be.
It's not necessarily "dark" in the sense that human beings are programmed to always look for betterment for a reason. If human beings didn't have this drive to always do better and get more, we definitely wouldn't have the highly developed modern society that we have nowadays, with broadly speaking the best living conditions in history.
Of course there are people who argue that the hunter-gatherers might well have been happier in some aspects, but the point is even they didn't think differently: A tribe living in an area with abundant resources might still always dream of greener pastures.
One should definitely learn to strike a balance between wanting more and enjoying what they have, though my point is that to totally label such thoughts "dark" doesn't sound fair to me. If human beings lose this drive altogether, we'd be in for very dangerous times with nobody having the ambition to strive and improve anything.
E.g. being raised in a culture of gratitude, where the next generation is trained to find and appreciate the small things of life. It takes time and has to be incorporated into the rhythm of life.
There are other aspects that you need to take into consideration: bureaucracy, the enforced-by-law company values(last year I got an offer which seemed really appealing until I saw the contract and some of those clauses), the endless "open a jira ticket" for every little thing such as rebooting a development server or whatever(which ends up being a 2 day task with hours of explanations as opposed to ssh; sudo rebbot), the endless and pointless meetings which are filled with "we should" coming from people who love taking credit when something is going right but will toss the blame to anyone they can when they aren't. Not to mention absurd expenses for "business trips" which are pointless in the vast majority of cases. I've been to several of these and they were all a waste of money and time: seriously, fly 20 people across the world just so they can listen to 3 days of "we should" lectures, there goes a ton of money which could have been spent on something useful like training or even a few small bonuses for the people that have worked their asses off. I've worked in such environments for many many years and the idea of ending up in such a place again terrifies me(I certainly started appreciating the absence of all that crap, though I never really knew how much all that truly bothered me until I ran away from it).
My point is, if you decide to go with a FAANG, you will get the quirky benefits and traits but at the expense of having to throttle yourself much below your capacity and dealing with a ton of frustration coming from the corporate side of things.
Most tech startups seem to model their hiring practices and organization around FAANG companies (technical screens, OKRs, Agile, reliability teams, etc.) so I think the comparison is actually more interesting if you leave out the "normal" jobs. Since a lot of the skills are transferrable, you're more likely to have the option of either rather than one or the other.
The reason tech tends to compare vs FANG is that the "canonical" startup is founded by a Stanford or Harvard graduate and hires friends/employees exclusively from Stanford, Harvard, Carnegie Mellon, and MIT. This was certainly the case for the tech focused breakouts in the last few decades (FB, Google, Dropbox, Palantir, Stripe).
Given these are the example startups, every one of those employees more or less had a FANG offer as a backup.
Ding Ding Ding! And here’s the quote from the article:
> contrast, if you were to take a job at a tier 1 tech firm, such as Facebook or Google, as a high-quality engineer your salary can be $200-400k with an additional $100-250K in equity.
Even then, I don't think lumping all "startups" in one basket is fair. A friend of mine joined Snowflake (and rejected some FAANG offers) when it had ~40 engineers, i.e. when it could still well be called a "startup". He can literally retire after his options are fully vested, just 4 years after he joined (barring some catastrophic event to Snowflake withinin a couple of years' time horizon). AFAIK aiming for late-stage startups has been a common strategy for people trying to strike gold. Maybe it's less valid nowadays? But it doesn't seem to make sense to me to say that working for a startup is 99% of the time worse than working for FAANG. "Overrated" it could be, and many startups, especially early-stage ones, suffer from a huge amount of uncertainty for people aiming for the liquidity event, which they may well underestimate. But I can't imagine anybody, by working at FAANG, getting the amount of money he is now projected to get.
Another interesting (and non-US-centric) factor for me is the flexibility a startup can offer in terms of your work and compensation, especially in an era where going remote seems to be an unstoppable trend. If the company is willing to pay all employees the same amount of salary, regardless of where they live in the world, it could be a no brainer for somebody not living in the US to work for such a startup. The salary they get can easily exceed Google L4 total pay (e.g. in the UK and in Germany, not to mention in most other countries). Of course, many companies such as GitLab aggressively adjust their salary according to where you work from, but I've seen more and more companies that don't. It will be very interesting to see how the market sorts itself out in a few years' time: Seems to me the proliferation of remote work could result in US salary and remote salary meeting somewhere in the middle.
The job of an outsourced position and senior+ IC role in top tech firms are fundamentally different. You can't survive just be churning through ticket backlogs. Sometimes you are expect to come up with initiatives, gather support and resources, deliver said initiatives that have a measurable impact to a global company without much guidance or help from your boss; at higher IC tracks, the kind of initiatives you lead can have meaningful impact to a whole sector.
These expectations, in a more traditional company, is normally reserved for positions much higher up in the org chart.
No, what they are saying is that people present a false dilemma where your options to work are either at a FAANG or at a startup.
Most people work at non-FAANG companies. If you're going to do a write-up on relative merits of working at a startup vs a larger company things are going to lean heavily in favor of the FAANG because the overall risk to compensation is much more favorable.
But if you compare a startup to a more standard tech company then each side will have more pros and cons.
No, and I don't think that's the parent is suggesting that. They are saying if you are looking for a challenging, highly rewarding role, FAANG is a better fit than startups.
As much as I agree with everything said in this article I wouldn't trade my years at a start up for anything. Both financially and emotionally it was awesome. I didn't get rich, and I worked way too much, but it was awesome. I loved the constant change and chaos. I learned so much, way more than I would've in any other type or work place. I made great friends too. It was as bad as the article, but it was way waaaay better too.
This is relatable. It's incredibly satisfying building new things rather than maintaining decades old cruft, regardless of the paycheck, hours and stability.
Also the joy of working in small nimble teams and the freedom to experiment with new technologies. Like everything in life these things are a tradeoff.
I will give you the other perspective. I get paid double what I’ve made at startups, for 35 hours a week, no overtime, no on call, and clear expectations of what success looks like for both myself and my team. I get six weeks of PTO (real weeks, not “unlimited”), 4 months off if we have another kid, and significant bonuses, while being fully remote. This is at what you’d call an “enterprise”.
I am happy to keep existing lines of businesses in maintenance mode for the above comp. My work is just work, I find satisfaction outside of it. My comp and work life balance affords me the ability to indulge my curiosity and academic endeavors outside of work while also providing high quality of life to my family.
As a friend once taught me, “Money and wealth are options, and options are freedom.”
Umm, I do enjoy the things you mentioned (building new stuff, experiment with new tech) but I love doing that on my free time, without pressure, deadlines and bosses.
At work, though, I love: boring stuff I can deal with easily, long epics that end up in features that are barely used (so, no big deal with critical bugs, also no need to be on call). At work I can be done in 4h and call it a day (which gives me TON of free time to experiment with new tech, keep my cv up to date and even fantasize with making my side projects profitable).
I often think about leaving my job for an enterprise role and doing exactly what you describe. After working for years in the professional services space I am confident I could do that job in a few hours per day and spend the rest on other more exciting things.
I value my experience in startups because you learn so much in a short period of time. Meanwhile, in a recent enterprise gig, I had to participate in weeks of debate and upfront planning to add three non-interesting CRUD endpoints to a service.
Everybody’s got to make their bones somehow. The problem comes when you think you have to keep making them. Then you just get exploited your whole career.
>I didn't get rich, and I worked way too much, but it was awesome. I loved the constant change and chaos. I learned so much, way more than I would've in any other type or work place.
How are startups different from average joe soft with 20ppl?
What is success? The article assumes for the most part that success is mainly monetary, and further it makes the classic mistake of comparing success monetarily to companies like Facebook. Success is different depending on many factors. For example, if a person needs or likes guidance and structure, a startup is likely not a good fit, especially when they are inexperienced. There are some good points about the strong community in startups and how it can be used to encourage excessive work hours and lower pay. However, that same community feeling and sense of purpose is what I remember fondest from working at startups. In addition, startups give you access to other capable and driven people that you might create a startup of your own with … much less likely at a large company full of risk-averse employees who work on a small piece of the company’s “mission”.
What personality type are you? The author likely comes from a structured, religious background and prefers the “certainty” of a corporate environment. Some of us were raised by hippies with little or no religion and high structure. People like that are miserable in highly structured environments in which gaining a sense of the “mission” is impossible.
The main point here is that career decisions are highly personal and one person’s hell is another person’s heaven.
> The author likely comes from a structured, religious background and prefers the “certainty” of a corporate environment.
I'm a practicing Catholic and have worked either as a freelancer or a startup founder for >90% of my career. Not sure how you're drawing that conclusion but plenty of my peers are religious in a traditional sense and work in startups.
It's a thing that engineers (particularly software, hardware guys aren't as rude) really have to watch.
Given the tendency for programmers to be that edgy libertarian atheist guy, it's easy to be unthinkingly rude to a coworker who is of a churchly persuasion.
To that end, Jordan Peterson's lectures on the Bible did me personally a great service in bridging the gap between these seemingly opposed worldviews. JP is considered by many to be a Christian apologist and has done a incredible work in describing a completely rational and sympathetic view of Christianity. I can't recommend highly enough his lectures freely available on Youtube. Having listened to most of them, he completely dispelled from me a variety of common athiest notions and revealed them to be the thoughtless propaganda that they are..
For example, it is commonly understood that religion and science are always opposed. However, it's rarely ever mentioned that Christian theologians for centuries consistently modified their belief structure to reflect reality as their understanding of reality improved. In other words, quite often if there was a seeming contradiction between doctrine and observable fact, the doctrine was changed, as opposed to ignoring the observable fact.
Obviously there are exceptions to this, like the Inquisition, or other dark periods through history. Religion is not without it's faults, but that is true of any principle around which people organize. The important part, for the materialist, objectivist, or athiest; is recognizing the organizing principles as being somehow useful to people prior to the refinement of the scientific method. I assume that those people gained real material value, and to dispose of what those people believed without extracting and maintaining that value is simply destructive.
But why not just let religious people be religious? I don't understand why I have to watch some lectures just so I can let people believe in whatever they want.
Like it or not Western civilization is permeated with Christian mores. As practiced in the West, large chunks of law, philosophy, and science all have historical roots in Christian culture. You can choose whether or not to understand how the cultural, socio-economic and political environment affects you and your beliefs and the beliefs of those around you. You can "let" people be whatever they want, but you cannot occur in a vacuum and would presumably stand to gain from learning how much of what you may consider crazy and irrational was in-fact based in psychological and physiological reality that is just as relevant today as it ever was.
I'm sorry but your interpretation of Jordan Peterson is completely untrue. Jordan Peterson does an incredible work sanitizing his fundamentalist beliefs through a veneer of rationality. But once you start unpacking the layers of what at first seem to be logical conclusions flowing from one to the other to understand the foundations that lead to the rest of his belief system (rather than the abstract questions he asks), you find the typical moralistic, regressive point of view you find in most Christians.
I understand and respect the value JP provides to lost lonely young men who are struggling to find purpose in a hostile online world. Raging with hormones, and finding it difficult to sympathise with women and minorities, and a world who tells them that they have privilege and they need to acknowledge and help others more. JP is as valuable to them as Religion is to a starving subsistence farmer in the middle ages who is abused by his feudal lord, and has no hope of a better life for himself or his family. Hope is important.
But for the life of me I don't understand JP's appeal to the male HN crowd - wealthy, well-educated tech-savvy yuppies who have upward mobility, critical reasoning, and lots of leisure time.
Jordan Peterson:
* opposes same-sex marriage because it is "backed by cultural marxists" and represents "an assault on traditional modes of being" [1]
* opposes same-sex adoption because "the nuclear family is the smallest vialbe human unit: mother, father, child, and if you fragment it below that you end up paying" [2]
* does not believe that men and women can work together in the same workplace, and directly blames women for sexual harassment they endure if they utilize makeup and high heels because they're sexually provocative [3]
* believes that it is impossible to produce Art without God [4]
[3] He doesn't say this that men and women shouldn't work together: He says "he doesn't know", and "we'll see" (if they can). But the second part he confirms directly to his interviewer. https://www.youtube.com/watch?v=yqn6YoMFiI0
Putting this in a separate comment from my JP one:
> Christian theologians for centuries consistently modified their belief structure to reflect reality as their understanding of reality improved.
That is also laundering the history of religious persecution. Christian theologians embrace scientific consensus hundreds of years after the scientific community does, persecuting, ostracizing, torturing (mentally and physically) thousands of people until then.
> Religion is not without it's faults, but that is true of any principle around which people organize.
That depends on the principle doesn't it.
For example if you take "humanism", then the principle is that human beings are the most important thing that matters, every human being has value, and maximizing humanity's long term happiness and liberty is the key to a successful society.
On the other hand if you take theology, then generally, the religions that the vast majority of the world follows are based around 2 key concepts:
1) An omniscient deity whose wishes and directives must be obeyed implicitly
2) An after life that is offered as a reward to the righteous followers.
#1 introduces an inherent power structure. Once you accept that some entities are "greater" than the other, it inherently follows to apply the same to the "kingdom of men". Every power imbalance throughout history from Lords to Kings to Slave Masters was justified based on a delegation of hierarchical authority deemed justifiable from religion.
This continues to this day amongst Conservatives whose original purpose was to maintain aristocratic power structures after the dissolution of monarchies, and now perpetuate historical inequalities under the guise of individualistic authority (i.e. no imposition on generational wealth and power imbalances through taxes or any other socialist policies)
#2 incentivizes obedience and behaviour. It also creates INFINITELY permanent stakes (a 50-100 year lifetime vs an infinity of reward or an infinity of punishment) which incentivizes the desire to convert others to the cause. After all if you believed that your beliefs would bring you SALVATION would you not need to/want to spread this message to others? Logically, yes. But what happens if those do not believe the message or worse force you to question YOUR OWN conviction and faith?
Well it turns out the problem with a faith-based belief system is it doesn't hold up well to logical scrutiny and humans aren't great at being flexible in these situation. You can either collapse and give up or lash out at the person who is making a mockery of your beliefs. Hence, the Inquisition, and every "dark" part of Religion throughout history, that is not actually a part of it, but the complete whole. It's not an aberration, it's the default status quo. It's not a bug, it's a feature.
> The main point here is that career decisions are highly personal and one person’s hell is another person’s heaven.
This. From "depends on person" perspective I fully agree with you, from monetary perspective I agree with the author.
After years of working for startups, now success for me means, financially independent to work on whatever I enjoy doing, not some OKR, KPI set by person who already achieved their success story.
Haven't reached my success. I was hesitant to do leetcode and join FAANG companies 10-15 years ago, worked for bunch of startups as an employee and contractor, all failed, financially I still depend on big boss, and even can be laid off if layoff season starts again.
FAANG are not only more stable, but total compensation for 10 years can easily beat 1B$ exit startups, assuming you get 0.1% of equity there
>>> The author likely comes from a structured, religious background
>How on God's green Earth did you jump to that conclusion?
The author wrote: "From the ages of 19-21, I spent my time as a missionary for the Church of Jesus Christ of Latter-Day Saints, popularly known as the Mormon church. I worked 12 hours a day for two years straight with only Christmas and Mother’s Day off. [...] For this job, I was paid a total of 0 dollars."
It seems reasonable to assume that non-religious people wouldn't do that for $0 pay.
That’s interesting, I remember taking a negotiations course at MIT, and the professor noted that when she was teaching Mormons, they had ridiculously high social and human capital compared to most of their urban peers, especially because of the travel to other countries in many cases.
Just one example. The Mormon mission program is quite possibly the best sales training program in the world. If you can go door to door in a country that isn't your own, in a second language, selling religion then enterprise SaaS is really a breeze. (Note I am not Mormon)
Selling eternal salvation to the poor will always be easier than selling another support tool to a procurement person spending someone else's money and probably with one eye on a new job.
There is/was a significant Mormon contingent in the Ruby community, all the way up to Matz.
I've worked with a lot of Mormons in tech. You may have too and not realized it. In my experience, they tend to not put an emphasis on it, it's a more private thing.
Their support system and rigid structure is unparalleled for such a large scale in the US. Their funding church is very wealthy, and the discipline churns out people that are very effective in high growth industries, which is just a convenient side effect relevant right now.
Yeah sounds like OP has a chip on their shoulder and is projecting.
I wouldn’t trade my years at a startup for anything but they can be run by tyrants in a fiefdom just as much as a VP runs an org, sometimes more so as they have no one they report to.
Not sure why this is downvoted but I completely agree. The sweet spot for new grads might be a medium sized "startup" with a few hundred engineers. By that point the comp+benefits should be sorted out and it'll be less of a madhouse, but it's still a bit understaffed so you can take on some interesting responsibility.
> However, that same community feeling and sense of purpose is what I remember fondest from working at startups. In addition, startups give you access to other capable and driven people that you might create a startup of your own with
Depends a lot on the specific startup and specific big company. The 50-person startup I worked at right out of college never really found product-market fit, and tried many things, and the product I worked on (and deeply enjoyed working on technically) was always a second-class product to the business. And we were selling B2B software, so I was never motivated by wanting to change the world, just by wanting to ship some cool software.
I get that same motivation at my current 1500-person employer, where I work on developer tools; I get to work on interesting technical problems, and the fruits of my work go to help people in, frankly, the same industry as most of our customers at the startup. I'm a little more involved in what out internal customers actually do and therefore find it more motivating to help them, though the work they do, per se, isn't interesting to me. And there are plenty of driven, passionate, and friendly people around who care about the same problems I care about, and it's much easier to find a few of those people and make a community when I've got orders of magnitude more people to try to work with.
It highly depends on the startups, not on people personalities. There are good startups where your work will be appreciated, you will bond with everyone, become friends through the difficulties and hopefully enjoy and celebrate the successes. And there are startups where you will see chaos, poor management, bad attitude to employees, pointing fingers and engineers leaving every couple years. Even startup-oriented personalities cannot stand such workplaces.
I've been working in startups for 10 years (my whole career so far) because I was optimising for learning, not financial return. I made the bet that startups would be the fastest way to learn (breadth of tasks, workload, exposure to more senior people etc) and I am allergic to larger company bureaucracy.
This is mostly accurate but it misses one essential point. And so do many of the responses here. One of the reasons to work at a startup is to get a lot of responsibility for something interesting to you, the sort of thing that wouldn't come your way outside of a startup, for a long time, or maybe ever. The point in the article that comes closest to identifying this regards "calling", but that's not the same thing.
I am 64, and worked in many startups, from 1988 through 2013. My main criteria for evaulating a startup were interesting work, and potential financial reward. I would also try to avoid companies whose business model didn't make sense to me. This worked out pretty well. I started out on an academic path, went to an industrial research lab in the 80s, and this led me to the startup world, where some ideas in software research were used as the basis of innovative products. I wasn't comfortable as a pure academic, and I loved writing software, so this was the right path for me.
At each new company, my thought was: if the business fails, at least I've had fun and worked on interesting software. And this often worked out very well:
- Startup 1: The company was building an innovative product, really a new category of software. I was given responsibility for one huge part of it, and this was my first job ever in which I was being paid to create software (as opposed to research). The company had a modest IPO. Nice payout. In my last couple of years, I started a new project which was rejected by the company. But this led to ...
- Startup 2: I took a summer off, built software based on my ideas, and merged with a startup that had complementary ideas. We needed each other. So much fun. This company was acquired toward the end of the dotcom bubble. Nice payout.
- Startup 3: Post bubble explosion, my choices were a consumer startup or interesting tech at a non-startup. I chose the consumer startup. Pretty dull, although fascinating from a sociological point of view. I left when I got bored and tech startups were happening again. Minor payout a few years later when they were acquired.
- Startup 4: My favorite. Fascinating project, three key pieces, I built one of them. I also really enjoyed building the tools to support the development and troubleshooting work. Acquired by a huge company. Nice payout.
- Startup 5: Really interesting idea. I loved the idea so much that I missed the fact it should have been a feature of a product, not a product by itself. Oops.
Startup 1: joined as the first employee pretty much straight out of school. Talked to potential customers, worked on the product and overall learned lot about startups. Modest low exit some years after I left. No payout. (Europe, so not common to have equity back in the day).
Startup 2: joined the founding team of a gaming startup. The company flopped. Built and learned a lot.
Startup 3: started my own company, moved to US, raised funding etc. Learned a lot, we had to shut it down after couple of years as failed to grow the business and didn't see a way to pivot. Returned remaining funds to the investors.
Startup 4: joined another startup. One of the first 20 employees. Build a lot, learned lot. Exercised the stock when I left. The company IPOd 6 years later. $50M payout. I had early exercised some stock so some of it was federally tax free under QSBS.
Startup 5: Joined pre-IPO FAANG, got a decent salary. Learned a lot of about politics and presenting to execs. Honed my own craft and skills on the company time. $3M payout from RSU which more than half went to taxes as ordinary income.
Anyway, been lucky with two of my last companies, but I would say the earlier startups gave me skills and confidence to operate in the level I needed.
I think FAANG is nice place to make $1-2M over some years but it’s unlikely to make $10M or more.
In all my jobs there were some crunch times every now and them, but I never worked 100 hours or over the weekend consistently. After being a founder I did realize that you don’t have to work that hard for other companies.
Startup outcomes are uncertain but you can definitely affect them by choosing the right companies. If anything else, you will learn a lot likely. Time moves faster in startups, so few years in a startup might be like 5 years at FAANG, and you actually learn to build things instead of sit in meetings.
Why did you join #5? You were already independently wealthy, was the position that much fun? (My secret fear: once one has enough money, is there really nothing better to do than get another job?)
I'd like to know the answer to this as well. I'm not sure what I would do if I were to become financially independent before "retirement age", but it certainly wouldn't be getting a job at a BigCo. Really curious to hear the motivations behind it.
I probably could have skipped my 5th startup, but psychologically, I couldn't see myself as retired. Startup #4 was, for a time, the most stressful job I've ever had. My part was distributed, and I was dealing with all the gotchas that entails, and these gotchas were being uncovered at a high rate, thanks to a stellar system testing guy.
And then, suddenly, the last serious distribution bug was solved, and the system was working, rock solid. And I glided, through the acquisition, and then for a couple of years with our new corporate parent. Interesting new development stopped, and it was all about maintaining a working system. They knew they couldn't keep people there with interesting work, so they threw money at us. And it worked for a lot of people. Me too, for a while, until startup #5 came along, and it was really interesting. So I left.
But #5 was poorly conceived, and had other difficulties, and it burned me out after a few years. A really deep burnout -- I was angry all the time, and couldn't get myself to focus on work. I figured that 25 years of startups was enough, I was able to retire, so I did.
I do sometimes struggle to keep myself occupied. I've done a couple of minor software projects, but it is difficult to motivate myself to do something that has already been done, and that nobody really needs. I have also found it difficult to motivate myself to get into new (to me) areas, e.g. machine learning. There is some amount of depression going on, for sure.
I did consider going back to BigCo, but: I really enjoy having the freedom to travel where and when I want, the lack of stress, and all the other obvious benefits of not working. But the major reason is this: If I am bored and don't know how to fill my time, that is a fundamental problem. Doing some random task for BigCo doesn't fix that problem, it masks it. I need to figure out what it is I want to do.
I did find one fun project: I decided that I really needed something that didn't involve sitting in front of a keyboard. So I decided to build a sailboat. Having no experience with woodworking, I opted for a kit that includes pre-cut wooden pieces, and it's up to me to glue, and sand, and varnish, and paint. Sort of like building a model, like when I was a kid, but on a bigger scale. Surprisingly difficult, for me at least.
Worth noting that this is an exceptional track record - 4 of 5 startups with a paying acquisition. Great story, but it’s not likely the normal result of doing 5 startups :)
It's a nice comment with an interesting point of view, but the "range of experience" is somewhat limited by the fact that their first four startup experiences ended in four "nice payouts", which is an amazing and atypical track record.
I think this is a really good article, but I think that one of the things it misses is that a huge reason the math works out so badly for startup employees is because founders and VCs take the lion's share of the gains.
I mean, in my experience at startups, founders typically own around 40% of the equity. The option pool for all other employees is around 10-20%.
Now, I certainly believe startup founders deserve far more equity than anyone else, but this highlights that the risk/reward trade-off really only makes sense for founders. I mean, what founders risk in terms of opportunity costs and lower wages is usually only slightly more than very early stage employees, but their reward is ~10-30x. The reward, in rare cases, may also make sense for C level hires at proven startups that are already growing like gangbusters, because they'll get a ton of equity. For rank-and-file, though, the issue is that even if the startup hits it usually becomes more like a nice bonus than life defining wealth.
From my own household/wife I have a person who's worked her ass off for a hugely incompetent CEO who has a majority stake. When I say ass off I mean 12-14 hours a day even on weekends. A promise of unlimited holidays and then coercing all employees to work during government mandated holidays and now he's trying to scam her out of her less than 1% options by coercing her to write a maternity leave policy that would make sure she doesn't get to vest. This is a sequoia invested company.
I don't think this company has even 10% of equity allocated for all the other employees. No way it's that much. She's sacrificed her own health, the health of her child and her personal relationships for someone who's coerced a bunch of people who are to scared to talk to a lawyer into a bunch of labour law violations.
When I myself interview with startups and they try to sell me on their BS vision fantasies, I tell them that I'm not available 24/7. I'm not on call duty either and if they have issues with that I'm happy to use my experience to help them transform/automate their business into a situation where they are more efficient and don't need to burn out their employees. Some people respect this as a sign of experience and others, especially the valley considers this not aligning with their "values".
This is exploitation plain and simple. They cheat their employees into thinking taking abuse is acceptable, because that's what you have to do to change the world. If anything such people change the world for the worse if you ask me.
EDIT: also, due to the lack of experience it's clear that some of the directions actually come top down from whatever VC is involved in it.
It's funny how often I got rejected after saying that I am not 24/7 available and that I believe that, if someone needs to have this kind of availability, it means that something in the company is not working and needs to be fixed. The words they used in the rejections were always something like: "we feel like you are not willing to put enough skin in the game" or "everyone else sees the opportunity here is is willing to work their asses off, why are you different?" It's specially funny to hear all this after the CEO has basically told me that they are planning for an exit in a couple of years, and being someone who has seems this first hand a few times., it usually means everyone works til the point of burn out and, in the end, the CEO gets handsomely while everyone else has a regular Wednesday.
> if someone needs to have this kind of availability, it means that something in the company is not working and needs to be fixed.
The crazy thing is, they think they can just throw manhours at bad planning and somehow make it work.
You can literally plan well, have a good life and still come out ahead of these chaotic organizations that make everybody run in circles out of pure panic.
I have seen this so often in film projects: people believe by exploiting themselves, their crew and their cast they somehow "extract" more value and magically make it work. And that one one the point, relexad, but well-planned project will always achieve better results. Because oh wonder: crews and casts that are not overworked and that use their maximum potential where it matters instead of spreading it out over the whole project will always produce better results.
I read a book by a consultant who said he could immediately gauge how well a factory was operating by looking at how relaxed the average workers were. The most efficient factories almost looked like nothing was happening, because they had a smooth and efficient process and knew how to calmly handle emergencies.
And what is true for the factory is also true for a film set.
The thing many dont realize is: If you have a good plan and follow it, you will very often have more freedom to try out new things than when your planning is chaotic or non-existent — because then literally every step is made out of fear, out of panic, to avoid pain or because other decisions froced you into something.
I say this because startups would argue about creativity and all that, but having worked aomw time both in art school and on film sets I can guarantee that the qell prepared always have more freedom than those who just try to figure things out as they go.
Thinking it is somehow more honorable to plan badly, throw peoples lifetime at the thing and getting a somewhat okayish result is really problematic in my eyes. Romantizing things that could have been solved by realistic (or even pessimistic) planning is not cool, it just shows me that you have no experience.
Your discounting of the budget factor among many others is brave. Many hardworking directors with high expectations have very different priorities, some which are simply big distractions from producing a quality production. This “be relaxed and chill to make a good film” idea is delusional, but its not necessarily wrong as much as it is just nonsense. And the ability to merely plan and execute plans, regardless how good they are, depends tremendously and straightforwardly on budget.
> This “be relaxed and chill to make a good film” idea is delusional
I studied film. I directed films and I was on more films sets than I wish I would have been. While this is certainly uncommon (especially in low budget productions), it is definitly not delusional. Quite the opposite, as I already argued.
I don't like having to be on call 24/7 either and would prefer to work on a team that has 24/7 ops, so the devs don't have to do that. However, in the case of a startup where the devs also do ops, what is the option? I don't understand the part where you said that this means something in the company is not working and needs to be fixed if devs need to be on call. What happens if something goes wrong with an environment and an auto restart doesn't fix the issue? I am curious because I'd like to have a better answer for potential startup opportunities that won't spend money on a 24/7 ops team and ask this of their devs.
The option is to compensate for it on top of extra salary to the point where you get enough volunteers for rotation, and/or hire for it.
I had a side gig that very explicitly was being hired to be the guy that gets woken up by PagerDuty. They paid me about an extra $1k/month purely for having my phone on in addition to what they paid me for the time I spent dealing with actual issues. Even then $1k/month was only enough because most of the other work I did for them was explicitly to improve site availability so I could ensure the platform was resilient enough that I rarely got woken up. In effect my hourly rate for being woken up probably translated to $2k-$3k/hour, with it sometimes going half a year between being woken up, before suddenly a bad release might cost me sleep a few nights in a row.
But having felt the stress of this on a full-time basis in the past, without that kind of compensation, I don't think it's cost-effective to have your dev team serve this role vs. having a few people on retainer to at least triage and try the obvious things. You're going to pay for it with staff that do not get proper rest (even when the phone doesn't go off it'll be there at the back of your head).
I think you're basically right. At the end of the day, if the servers catch fire, you probably need to call the responsible developers for help getting things back on track.
The real questions then are how is the work divided, what does escalation look like, what steps are taken to reduce incidents outside of office hours, what's being done to allow for urgent maintenance to wait until office hours, etc, and also like how well is that all working, and where is the leadership in this?
I worked somewhere with not great answers to a lot of these questions, but it was okish because the cofounders were waking up with all the pages and hoping on to fix things too, and I had a mediocre experience with a dedicated ops team at a previous job that I didn't want to repeat. Eventually, as the team got bigger, we made a lot of things better, including on call responsibilities.
Hire for it? Don't coerce your employees into doing something you you don't want to pay for?
What most people don't think of is that when you're on 24/7 duty your salary is less than half of what it should be.
Halfway decent enterprises will reimburse you for off-hour duty usually at multiple times your normal rate plus a minimum pay. Or just hire someone in a different timezone.
The reality is though, most people don't need panic calls from their CEO at midnight and the company would still do perfectly fine without it. There really is no excuse for this.
Sure, but then the lesson to take away from this is that the company in question apparently isn't offering enough to make that job worthwhile, and that's not the fault of the people turning them down.
When the company phrases their rejection as "we don't think you're committed enough to do this", that's when things smell off to me. They're hiring for a specific role, they should act like it.
As an analogy, if you hire me to build software, and then slip in that you expect me to spend 10 extra hours a week doing cold sales calls, I might turn down your job because I don't want to do sales, I'm an engineer. And the problem at that point isn't my commitment to the company, the problem is that the company hasn't figured out it needs to make the sales tasks part of the job description.
How do interviews get to this point? How does a company get to the point where you're talking to the CEO, they're laying out their exit strategies, and the job requirements still haven't been made clear?
> "we feel like you are not willing to put enough skin in the game" or "everyone else sees the opportunity here is is willing to work their asses off, why are you different?"
Those quotes say to me that the owners are viewing this as a question of "loyalty" or moral obligation, not as a normal part of a job negotiation. A good test: if the CEO feels offended that you ask for more compensation in exchange for being online 24x7, then this isn't about trying to hire a specific role, it's about their ego/entitlement.
You could be right and it could well be the case, but we don't know really. We are only aware that the GP turned them down, but it's quite possible they had the position filled.
One person wearing many hats is rather typical in small companies and early stage startups. Being asked to do extra is not something insulting per se, as long as you compensated accordingly, either with more hard money or (a lot more) equity.
It is a non-starter proposition to many, which should be respected. But it's not something borderline criminal.
> How does a company get to the point where you're talking to the CEO, they're laying out their exit strategies, and the job requirements still haven't been made clear?
Look, if we're still talking about a startup it could well be the interviewer is the CEO, the guy who brought you coffee is CFO and you're interviewing for CTO/dev/ops/support in one :)
Where I work, being on call means being able to respond to a call by being at your laptop, with a reliable internet connection within 10 minutes - and able to keep working for as long as may be needed.
That means no stopping at the gym on the way home, no going into the city to see a show, no lengthy car journeys, no getting drunk, no going on dates, no evening classes, no school plays, no sport that takes you more than a block away from home, no taking your kids to the park to feed the ducks.
The idea you could have people be on call constantly sounds crazy to me.
They say “skin in the game” but they mean “skin in the machine”.
These sorts of word games work on young naive people, especially young men. Maybe we need to broadly educate people that this sort of exploitation is not okay...
Funny how those same companies never are willing to pay you for that 24/7 availability. I'd be happy to do that, if they paid me for it, and not with bullshit options.
There's a difference between being on call 24/7 and actually being called frequently.
I consider myself on call 24/7 and tell my team this but in 3 years have never been woken up, nor have I had to wake someone else up. One day it will happen but once in 3+ years is perfectly reasonable.
I’ve never had these abuses working for a startup. I feel like you have to push back against things instead of just going with it. Or choose the position better because they sound like bad jobs regardless of the type of business. That’s what I can’t help thinking when I hear that because I’ve now worked for 5 different startups and while there was some crunch time occasionally the majority by far was an 8 hour day and then I was out, even for one of the companies when I was the 4th engineer. And they just closed another 20 million round recently.
I really don’t think people do enough due diligence about where they should work plain and simple. Work is a mutual contract where you want to try to extract as much value from your employer while negotiating to the point they’ll still hire you. And a lot of the negotiation is figuring out if it’s a good job anyway and walking away to another option if you get the sense it’s not a good from either a financial, time or social perspective.
We either need agents who will negotiate on the employees behave or some kind of training that is part of a 4 year degree. Negotiations and finances are hard - this is why some people are good at selling and some are not. Engineers are usually good at their primary job and usually not that good at defending against other social engineering tactics founders use
edit: don’t want to blame founders, they also need to preserve their equity for future employees but there has to be a better balance
There's certainly some selection bias on these sorts of threads, but I agree with you that it's important for individuals to take as much responsibility as they can for the outcome they expect.
That means vetting a company before joining it, pushing back during negotiations and being willing to walk away, giving necessary feedback to your coworkers regardless of their title, and personally practicing the style of leadership you expect from others.
It takes a team of people though, and if the team isn't solid then you need to either try to fix it or walk away. A good team will build individuals up and support them rather than wear down and exploit them.
I just passed the 5 year mark at my current company. When I joined there were about 30 people, and now it's probably around 400. I took 4 days off this week, but on Friday afternoon I popped into the old "office", which are some portable buildings on a cattle ranch. It turned out to be the once-every-few-years junk cleanup day, and the CEO, possibly a billionaire on paper at this point, was limping around with leather gloves and a sore back, and all he had to talk about was the recent ultrasound of his first baby, and how proud he is of how the company has grown since the last cleanup day.
> I feel like you have to push back against things instead of just going with it.
In a bad startup you typically can’t ‘push back’ meaningfully. If the management doesn’t understand how to treat people well, people pushing back won’t educate them, and employees have to get work done to justify their presence rather than fighting battles all the time.
If you're a decent engineer you'll find work in a few weeks and any other startup will be happy to have you.
Unfortunately for non engineers I understand that may be more difficult and for those starting out too. So matter of perspective definitely since engineers aren't the only employees at a startup, but I would hope with due dilligence that is caught while you're interviewing.
I don't know how that follows, you're not going to necessarily escape terrible bosses just by going to an established org. If that's the thought you'll have quite the rude awakening.
Everything you just said is true of working at a big co as well.
Plenty of people at big cos have bad bosses, plenty get over worked. Plenty feel they have no input etc etc, this is a human organizational and work issue that is true of both small startup and big org.
I've listened to my mother gripe about some of the biggest financial companies in the world from various positions all the way to fairly senior management for the last 20 years with everything that has been said here. The only solution she had was to jump to another company after investing sometimes up to 5 years of her time in places like that.
> you're not going to necessarily escape terrible bosses just by going to an established org
No, but you will be paid more over time and switching jobs won’t cost you deferred payment in terms of vesting.
If you can land a startup job with the same salary and benefits as a bigco, then by all means do so. This is more about the poor value of deferred compensation.
> In a bad startup you typically can’t ‘push back’ meaningfully. If the management doesn’t understand how to treat people well, people pushing back won’t educate them, and employees have to get work done to justify their presence rather than fighting battles all the time.
Is what started our sub thread here, I didn't believe we've been talking financials. If we have been, then in base salary I guess I still disagree, but yeah at least with RSUs it's hard to beat. That said I've interviewed for startups where the base salary for an IC position was like 230k+, they're rarer, founded by exceptional past founders who raised ridiculous sized rounds, and all just as rare as a job at a FAANG so I don't know, is the real problem that all 85th percentile and below of all jobs pay like shit or treat people poorly?
Our sub-thread is in the context of the overall posting, which is about what a bad deal it is to work at startups. The entire point is about the risk not being worth the financial reward. Our sub-thread is discussing one aspect of that.
They're not all that bad. I've worked in a horrible startup before and they absolutely forced everyone to work harder with longer hours instead of working smarter. We had a few ~12-16 hour deploys that started after a full work day where the entire engineering department was required to stay and the oncall was brutal 2 week long slogs because no effort was allowed to be put into actually fixing stuff.
But on the other hand, I've also been at ok jobs that were pretty great companies and the one I currently work at is absolutely amazing and it's a joy to work at. The pay has been pretty awesome as well.
Larger companies in my experience can be soul crushingly beaurocratic and the slower pace means your skillet grows more slowly (no big tech companies in the valley, just some large public companies after startup acquisitions).
It's just anecdotal from my experience and I'm not really sure how big of a haystack the amazing startup needles are in but they are out there. Work is work, but you spend a huge portion of your life at work, if you can enjoy it thoroughly, you can live a happier life.
If you're saying not all startups are bad, I completely agree with you, but we're talking about a specific kind here. I've worked at some really challenging startups where I also did overtime during deploys(I did get to charge the hours though) in which I learned a lot. AND THEN we actually worked on reducing those issues for the future.
They didn't actually make that part of the job either. I could have rejected if I wanted to. And there was never a vision alignment talk with miniscule equity with an unwritten agreement of doing anything that was asked otherwise I'd kiss my equity goodbye.
EDIT: I can't believe I have to clarify this. Most of the startups that would fit my above description don't market themselves as startups to begin with. I.e. they don't think their distinguishing feature is to be a startup with equity.
Thank you for sharing. As a worker passionate about labor rights, I believe sharing these stories is an important step in raising awareness to what happens when we waive our labor rights.
In a just society these kind of labor violations would be as criminal as a bank robbery. There would be prison time involved and the victims would be paid, both for the value of the work that was stolen from them, plus compensation for the crime committed.
If so, it's voluntary exploitation. She can quit on Monday. Don't give 2 weeks notice if you feel the situation is abusive.
You'll lose a paycheck, but you always have to be prepared for that when at startups. Mainly because they die all the time, but also for these kinds of scenarios.
Possibly golden handcuffs (the options are worth much in theory, but cannot be exercised or cashed in until IPO for instance). Another reason why it's often bad to be a normal employee in a startup when it comes to equity. The terms of the options are often against you.
> what founders risk in terms of opportunity costs and lower wages is usually only slightly more than very early stage employees
Maybe this is different for others, but my co-founder and I spent 2 years bootstrapping before we got our first customer. We gave up 2 years of wages and consumed our savings to do this with no assurance of success, and even after that first customer it was another full year before we had any sense of stability.
Years of time and money. I consider that quite a bit more risk than our first employees who got stable income, healthcare, 401k's, etc. on day one.
Stable doesn't really describe early stage startups at all. Just because there is a paycheck doesn't mean there will be one when a big account falls through.
But anyway, I would urge founders to think more about the logarithmic utility of money and whether it makes sense to take 30x+ the gains of early employees. In particular, think of the number that make it all worthwhile and ask if you need to capture all the gains above that, or whether you could be more generous if you hit it out of the park, and if there is a way to write that into your contracts.
Why should leaders and team builders be more “equitable” than what is transactionally afforded by their diligent appreciation of their assets? How is the utility of money not best suited for those who created something from nothing versus those who entered into the tent after it was pitched? Aren’t there gradients of personal ambition being demonstrated between the two parties? If so, wouldn’t society be abler if the leaders were able to do more after having created the opportunity in the first place?
The generosity emerges out of the availability for lending the capital to strangers in society thanks to the successful investment realization.
We're in a thread talking about how equity compensation at startups is generally not sufficient to overcome the pay cut that folks would take from working at a top tier tech company, so even if you come at this from a purely transactional perspective, you may want to be less stingy with equity.
You can do whatever you want of course, but I think people should ask themselves if trying to hold onto all the returns is helping them achieve what they actually want.
> equity compensation at startups is generally not sufficient to overcome the pay cut
... so don't take the job. Everything will naturally sort itself out -- a startup will increase their grants, hire different people, or not hire and fail. :shrug:
This thread sure looks like it's full of people who can't get that well paid job at google, are taking jobs at less demanding employers out of necessity, and are mad about it. Otherwise, we're living through one of the absolutely hottest markets for engineering talent we've ever seen, so getting a new job is always an option if you're worth the money.
As for founder vs employee risk... certainly at my company, every employee except for the founders walked into a six figure cash comp, fully paid health insurance, and a runway that's never fallen below 12 months.
Wealthy folks that can afford to start a company for little/no pay are always imagining some kind of moral superiority. I told a startup boss who tried that out on me e.g. "I'm risking my house too!". I said "you mean your 2nd house. I'm risking my first house. And my family's stability." He had nothing to respond to that.
It definitely is more risk. However when I evaluate startups I'm comparing them against other jobs. Stable income it may be but the runway is short, and depending on the founders it may or not be well communicated. So it is much less stable than a job in a big company. So to me I want a good multiplier.
Many of the payoffs I've seen for startups that did well for early employees put earnings on par with what I've done at a large company without the startup risk. And that's for the ones that do very well which is a low chance.
So in the end I personally would get a lot more stress and a lot less income to usually being equal in a great case.
So generally it doesn't seem that worth the risk, low control, and probably low payoff.
I'd actually be more likely to join a startup in some years when I'm financially at a retirement or FIRE point. But then it's like, working for a founder on their idea, and maybe the pressure to hold out for 5-10 years there for the actual payout.
Really depends on the job market though. If the startup goes belly up but you were making good money in the interim and you can quickly find a new job, it's not much risk.
A founder who eats in to savings and goes unpaid for two years is on an entirely different level of risk profile.
But yes, if your primary concern is job security, in general you should not be working for a startup, regardless of how many points you get.
I'm not arguing that it isn't more risky for the founder. I'm saying that the payoff potential that remains esp when you look at the pool of startups, is almost never worth it compared to a job at a bigco, even at the top end.
Eg this is me explaining why I wouldn't work at a startup as I shoulder more risk and very very low chance at a payoff better than I could get at a bigco, and worse case you spend 5 more years at the big co and you can be getting into founder level payoffs.
At that point why even take a risk if there isn't a reward if you are a strong engineer. The only thing that makes sense to me is to be a founder, or go work a stable high paying job if you're able to.
This pay structure greatly limits access to very experienced employees for a startup.
I think the key thing missing from your analysis is that some (most?) people aren't optimizing their careers for minimal risk and maximal pay. There are a great many other factors at play.
I didn't say there wernt, this is a message about my personal pov written while on the phone on the can, not a treatise or full data based coverage of all workers.
Let me guess, you're not a Silicon Valley tech company? In S.V., it usually goes like this:
* A couple of people have an idea, and quit their job (or didn't have a job), build a quick prototype, pitch it. Maybe they spend a couple of months at a startup summer camp like YCombinator
* They raise seed funding or a small first round
* ...and then immediately hire Employee #1 at 1% equity, and it's their job to build the first "real" usable version of the product. Employee #2 follows shortly at <1%.
The risky investment put in by founders often amounts to: "We had to spend a few months grabbing coffee with potential investors"
I think most unicorns actually have a different experience, though, in that the founders often worked on their own for less than 6 months/a year before they got some funding.
I don't have data on this but I would bet a very long lead time before getting funded is actually correlated with a worse likely outcome.
Exactly. Additionally, any of that money that you could have saved during those first two years would have had more time (obviously) for interest to compound than any savings you make today [1], so that "lost interest" needs to be factored into the equation as well.
Everybody involved is taking some fraction of that risk. "No raises until we're profitable", "Here's stock to make up for the lower pay", "Lets cut benefits again to increase our runway" are all tall tales that essentially squeeze cash out of employees with empty promises.
When there's no way it will every even make up for the sacrifices of the employees, all those demands are empty noises. Just a way to fool folks in to making the founder rich. And nobody else.
> Everybody involved is taking some fraction of that risk.
I think that by "that risk" you're talking about "the overall increased risk of investing in a new company". I deliberately use the word investing because that's how employees should think about their participation in a startup: They're usually giving up something now... salary, extra work hours... in exchange for some possible upside in the future, often in the form of stock options.
To state what you're saying another way: A lot of employees do not correctly assess the risks of the investment they're getting into, for example, of not having direct control over the date when a salary increase will occur, or whether that salary would be in the form or cash or shares. In short, employees often invest themselves into investments (i.e. startups) that bring far more risk than they can personally tolerate.
Avoiding startups completely is one solution. Another is to really start thinking like an investor: Personally, I like to consider whether I would be a passive investor in the company (i.e. just write a check)... If not, it's a sign that perhaps the company is not a good addition to my portfolio overall, and I'd be better off taking the cash from another employer and investing in something I do believe in.
(Aside: I've seen some pretty good "rent or buy your home" calculators out there, but never a good "work for a startup or an established company" calculator. If anyone can recommend one please reply.)
It's been repeated again and again, that the supposed equity bait is almost never worth it. Its just a story to string folks along. Since the 2000's, the VCs and founders have learned to squeeze almost every drop out of any equity event, leaving crumbs for everyone else. It's disingenuous to repeat the con story as if that explains everything.
It’s a risk you were capable of taking. People without family they can depend on cannot take these risks. If some of us fall we fall into homelessness, for others their parents just bail them out. The people that risk homelessness do not start startups.
At least with the founders I’ve worked for it’s hard to agree they are owed that much more.
They fund raised. Poorly.
They offered zero direction, touted a big number as potential revenue.
They traveled ostensibly to fund raise, but usually just brought back personal stories of fun.
While we all slogged on “their” vision, which meant rearranging deck chairs to the march of some alpha non-contributor who can brown nose.
It was effectively our company with some entitled assholes name on the paperwork.
I’m guessing there’s many more founders like that, as I’ve had the “fortune” to work for 3 in the past, versus the one I work for now, who knows the problem space, has worked directly on solutions for years, and shows up everyday with new customers chomping at the bit to sign up.
So I feel confident saying: Most founders are idea people with no skills. Just a used car salesmen personality and a richer network.
That’s what Wiener suggests in Uncanny Valley, when she describes the windfall when Microsoft bought the GitHub shares she had the option to buy during her time there.
It wasn’t life-defining, plus she noticed that many other employees didn’t have enough savings to actually exercise.
The way it should happen with a liquidity event is that you simultaneously exercise your options and sell them, pay off the taxes and bank what's left over.
Savings should only come into it if you're leaving before the liquidity event.
But that is a large problem today, because you have no idea when, if ever, the liquidity event is going to happen. There are companies that spend a whole lot of time private, and if said company is going well, it's going to be growing so fast that in 4 years, it might be unrecognizable. Even if you love the job you joined, you might hate the equivalent a few years later, and you probably still don't have a liquidity event.
Quite a few years ago, a well known company was sending offers where the exercise cost of the shares was around $200k, plus whatever fun you'd have with AMT at exercise time. The company still hasn't seen an IPO, and I know quite a few people that didn't exercise their entire allocation just because it was just way too expensive for something illiquid... and that was with a company that was going (and still is!) going very well. Today you'll find companies that went for a decade without a liquidity event, and where a whole lot of options that were well in the money went back to the company, unused.
Options would be far more worthwhile if there was a standing offer to, on departure, sell the options back to the company at departure time, but we all know this isn't how it works. So you end up in situations when two people join a company and leave at the same time, and their savings separate their final outcomes by 8 figures, because one could buy the shares and wait the necessary X years for the liquidity event, when someone else couldn't.
That’s kind of how it worked out when we sold our company. All the transactions happened simultaneously so the only real payments was the net of it all.
Both business and tax lawyers where involved to set up that whole process.
> Savings should only come into it if you're leaving before the liquidity event.
Which is another way some startups screw people. If the company is not willing to budge on the "standard" 90-day exercise window, there shouldn't be any negotiation. Just walk away.
There are two types of options, NSO and ISO. You want ISO as an employee because it's better for taxes, but that has a 90-day exercise window set by the IRS. You can push for yourself paying higher taxes in exchange for more flexibility, but it's a tradeoff.
Zach Holman one of the first github employees didn't get to exercise any of his options for the aforementioned reasons. When they tell you to throw your life away to believe in the vision, nobody tells that 24 y/o to get a lawyer to understand what that actually means.
He compiled a list of startups with sane exercise windows:
At the bottom of that link: “It's worth noting that Andreessen Horowitz has come out in strong favor of the 90 day window. If you feel strongly about extended exercise windows, it might be worth considering whether a16z portfolio companies are a good fit for you.” with a link to https://a16z.com/2016/06/23/options-timing/
The a16z link is astonishingly self-serving. Their top line solution was: “One existing solution to the ‘dead equity’ problem has been — and still can be — to make exceptions where appropriate for certain exiting employees. In fact, employers make exceptions all the time for certain employees, depending on their contribution to the company, critical skill set, and so on.” Riiiiiiight - asking nicely for a handout when you are quitting is a great strategy!!
And I would love to know how they come to this conclusion “In our model, we estimate that moving from the current 90-day window to a 10-year window will cost the average remaining employee as much as 80% in incremental dilution.” - just, wow.
I guess it’s still a question of borrowing money for a speculative investment, you just get a significant discount that makes profit more likely.
Depending on your indebtedness (outstanding student loans, mortgages) savings and current earnings a bank could still refuse to lend you enough money, if at all
If you’re making a high enough salary to be getting enough options that you can’t afford to exercise them, you’re making enough to borrow about $100k.
I had no trouble getting an uncollateralized loan at a reasonable rate for $75k; and I had $100k in student debt, a $500k mortgage and little else in the way of assets. And when I say “no trouble” I mean I applied for the loan, was approved 30 minutes later and had the money in my bank account within 2 hours. That loan is paid off now, but if your income is high enough banks will lend you money on that alone (I was making an equivalent salary to a principal developer at the time).
If you’ve ever taken any risk with credit and failed or simply had a disruption in income anytime in the last 10 years prior you would have been denied.
Its nice everything worked out for you, that has nothing to do with your ability to perceive a simple solution available to you.
The only risk is that one exercises the options, but by the time one sells the shares (which they got as the result of exercising options), the price of the stock falls below the strike price. To avoid this risk, do a quick sell after exercise. This makes risk minimal; in case of bigger companies effectively zero.
Bigger risk comes in if someone wants to do an exercise and hold to sell much later, which can bring tax advantages. But this is a different game entirely. In the case of employee with little spare cash (to the tune of borrowing money for the exercise), not doing exercise and sell is really leaving money on the table. My 2c.
You missed the point that many people with good finances are denied credit. They cant get a $75,000 loan. Thats the only point I was making. The person provided no insight whatsoever and was unable to see that their experience is different.
One thing I learned during the dot-bomb era is think hard about holding too much of your company's stock and, especially, think really hard about exercising options and then not selling. Fortunately the stock drifted back up a ways over time and then my former company was acquired for a nice spike. So between that and tax loss offsets, I didn't do that bad. But I've been careful since. (Of course, more recently, I'd have been better off holding more for longer but I can't really complain.)
If it's to exercise at the close of a deal, the acquirer could also setup a loan too. I had options which were subject to revesting (lame, but worked out ok), and the acquirer fronted the money to exercise everything that wasn't already exercised and then took payments automatically when the chunks vested. Because of the strike prices we had, it didn't feel very risky.
Regular startup employees borrowing and buying their stock options is far riskier than them borrowing to do options trading in publicly traded stock markets because they have very little information about their company's future prospects.
What goes on between the founders, board, current investors and likely future investors is likely known to very few amongst them, if at all.
Even if you believe strongly in the product and know the market-fit is bang on, you don't know if the option is currently priced correctly.
> what founders risk in terms of opportunity costs and lower wages is usually only slightly more than very early stage employees
Excellent point. And there can also be huge differences in non-monetary value that make the opportunity cost more worthwhile for founders.
If the startup fizzles, but the founders were spending most of their time getting startup founder experience, and building their professional network and personal brand, then the opportunity cost would probably be well-spent, despite the fizzle.
Of course, worthwhile experience value can definitely happen for junior non-founder ICs.
Worthwhile experience value can happen for already-experienced non-founder developers who can get experience/keyword in some very marketable thing they couldn't pick up on their own. (For example, the necessary capital expenditure means they couldn't get experience with Quantum Deep Learning Transhuman Interfacing from their kitchen table. Or they need a team of full-time collaborators to together accomplish something they couldn't do by just organizing hobbyists on an open source project.)
* Startup doesn't outright fail, but gets acquihired...
* Founders gets executive positions with bonus on top of bonus. Their resume has taken a huge leap forward, and if they stay at the acquiring company for just one year, they'll amass enough cash to take another couple of years off to try another startup.
* Employees get regular salary, and some small bonus to make it "worth it". They may as well have never done the startup, because it's an overall net-negative.
Oh, and the employees still have to individually interview at the company, and several won't make the cut.
> what founders risk in terms of opportunity costs and lower wages is usually only slightly more than very early stage employees
Very early stage employees (before VCs get involved and impose the 10-20% option pool that you allude to) tend to get an outsized offering. (and, to me, a pre-VC employee sounds an awful lot like a co-founder, unless they're not committed heart-and-soul the way the founder is.)
You might not be aware of the risks that a founder experiences versus a pre-VC employee. These risks are substantial. Many are not even quantifiable. Everyone likes to joke about rewarding failure, but the reality is that the reputational risk is very high.
If you are instead talking about post-VC very early employees, there is an even wilder difference in the risk that those employees shoulder by taking a job with a VC-backed company compared to the founders.
Let's face it; working for and/or founding a startup is really, really tough and possibly even hazardous to your health. It's not for everyone. In fact, it's really not for almost anyone. But it's one of the few shots at winning a lottery where you can actually change the rules of the game while you're playing it.
> I mean, what founders risk in terms of opportunity costs and lower wages is usually only slightly more than very early stage employees, but their reward is ~10-30x.
A first employee is, by another definition, someone to whom a professional investor would not give money.
You're being downvoted, but as the author of the post you responded to, I don't really disagree. I've been an early employee and have learned I don't have the temperament or skills to be a founder.
My primary argument is just that if founders and VCs don't loosen their purse strings, though, they will find employees are wising up about wealth distribution in a startup and will see they have better options elsewhere, as this article suggests.
> I don't have the temperament or skills to be a founder
If only everyone were as mature and introspective.
> are wising up about wealth distribution... will see they have better options elsewhere
Truthfully, all those people will discover is that the distribution of educational pedigrees - the real predictor of "better options elsewhere" - is far stickier, nepotistic and unfair than a 9 percentage point difference in equity.
Also it's impossible for me to tell whether my below market base salary startup offer from a seed/series A startup is at market or not. Especially the equity bit, is 1% equity enough for the second employee(and engineer)? Especially when I am taking a 50% cut on base salary in addition to losing some very real liquid stocks.
If you are the second employee (first engineer) at a tech startup with a solo founder company, most likely you can get more than this. Nobody will give you more than what they have to unless you educate yourself and negotiate on your own behalf.
You are taking the same risks as the founder and you being there is directly helping the founder raise funds and hire other engineers. Don't under-value yourself.
Your previous total comp was base + public/liquid stocks. You should compute the growth in valuation of those liquid stocks (if it was similar to FAANG stocks, its growth would have been 50%+) plus the return on investment of your savings. Add that to your total comp.
For your startup comp to beat this total comp, given your 1% stocks, compute backwards the valuation your startup has to achieve. Does it look feasible or too crazy? How long will it take?
Do market research to understand how much revenue and profits a public company in similar sector does to achieve that valuation and how much capital investment and tech innovation is needed to get to that. Ask questions to your founder boss, meet their investors to understand their thinking.
Very important to consider what happens if you quit before it got there. If you have to pay to exercise options, or your options get bought back by the founder at a discounted valuation etc. (some startups have started doing "stock appreciation rights" which are somewhat unfair) understand those for what they really are and factor that into your calculation. Understand how cap tables, dilutions, liquidation etc works and factor the risks into your calculation.
Finally, remember that founders get fired/replaced; your direct boss is going to be someone else very shortly (especially if the company grows fast) etc. so don't go by verbal promises. If you are looking to make millions, invest time and energy to understand and negotiate your employment contracts properly.
In this particular scenario I'd be the second employee, not counting the two founders as employees.
I did similar math as you said and I didn't find the numbers fair. I figured how much would I be losing per year at the current valuation and my pay cut seemed more than what the investors got for the last round.
I wish there was more public information about startup salaries at various stages of employment, while the company is still a tiny company. Finding information about FANG salaries is so easy but startup salaries is tough.
Yeah, something to consider is that FAANG salaries are an outlier. There is a bimodal distribution in tech salaries. Outside of tier 1 unicorns, no one comes close to FAANG salary. So when evaluating your options, using FAANG salaries as a comparison might not be the most fair benchmark. For example if you work in biotech, even as a programmer, you are probably looking at a salary about half of what a FAANG will pay. This holds true for a lot of other industries.
In general, I agree though. Early employees should either be compensated better or given more equity. In many cases, they have a more direct influence on the product than the founders, because the founders are focused on fundraising, sales, and hiring. And they also can have an outsized impact on company culture. If it was up to me, the first few hires would be getting 2-5% depending on experience, and I would even consider giving them a title of co-founder.
But negotiations are based on BATNA, and most of the better engineers you actually want to hire can also get hired at FANG. So even if 'FANG is an outlier', it doesn't matter because they set the standard. You have to be willing to do things that FANG is not, like real remote, employees that cannot immigrate (ex: no degree in developing nation) or no leet coding.
You can quit and go get another job any second of any day with zero consequences.
You have zero financial responsibility or obligations to the investors.
You have zero responsibilities and obligations to clients/customers.
You have zero obligations to financial institutions (banks, loans).
You have zero or little reputation on the line in the industry being addressed. In fact, in most cases competitors will gladly hire you because you have valuable industry-specific experience and training.
I could go on. I see a bunch of comments on this thread painting founders as greedy bastards. All I can say is: I hope you can one day wear those shoes and actually understand reality.
That said, yes, there’s a startup culture that works people to death and often offers dubious outcomes. I really don’t like that at all. In technology some things are very hard. If you don’t work hard it is often impossible to achieve anything of note. I don’t have a problem with that. I am no stranger to 18 hour days, 7 days a week. I get it. A company can’t operate like that forever. If it does, there’s something wrong with it.
As a founder my standard mode of operation is simple: If I am awake, I am working. There’s no way I will demand or request such a thing from anyone else. I am the one whose all-in, not those who work for me.
NOTE: Don’t work for less than you are worth. Option are neat, they could be worth zero or a few million. More often than not they are worth zero. Get fair pay for your work. Assume options are worthless.
Founder has all the control - Employee has none. So employee takes more risk.
Founder has all the information. Employee wouldn't even know, if the stock was diluted twice. Or if the company is going to seize to exist next day. Employee is in the fog - so employee has more risk.
Employee risks with her reputation. A nut case founder can consider employee a traitor for leaving the company and give bad references to future employers.
Employee has responsibility and obligations as well.
Don't get me wrong. A cutting edge startup can be amazing. But it is a lot of risk for everyone involved.
It reminds me of a story. Back about thirty years ago I bought a used surface mount assembly line from this guy who dealt exclusively in used manufacturing equipment. He was much older than me, a father figure, if you will. He was interested in what I was doing in my little startup. We got into a conversation while we setup the assembly line. I talked to him about some of the challenges I was facing. At one point he stopped, thought about it for a while and told me: A business is like a living breathing beast that has a mind of its own. If you think you can train, mold it or control it, you are likely to be wrong. The business tells you what you are going to do every day. The business pushes and pulls you around. The best you can hope for it so generally guide the zig-zag path in the direction you want to go and hold on. It's like sailing in a storm. You are not in control of the sailboat, the ocean is.
Fonder is in control? Ha. Very funny.
> Employee has none. So employee takes more risk.
I am not sure how to say this. Here it goes again: The employee can pick up and go any microsecond of any day. At least in the US. Nobody can force anyone to work under any conditions. That's control. That is having 100% control.
> A nut case founder can consider employee a traitor for leaving the company and give bad references to future employers.
I don't know where you are from. In the US that would be one of the worst mistakes a founder, company, executive or manager could make. Depending on circumstances the resulting lawsuit could yield millions of dollars for the ex employee. Nobody does that (unless they are suicidal).
How many employees would work for no salary but only equity? Disregard whether they have the material affordances to be able to do so.
Simply put, by necessity the founders have inherited more uncertainty with their life outcome than a salaried worker, regardless of the transience of the work agreement.
The OP's question was about how to do that and my entire response was to that question.
> Assume options are worthless.
That's bad advise for senior engineers with relevant experience. No startup I know can afford to offer cash compensation that matches the cash+stock comp from previous employment. Startup stocks have value – you just have to get better at figuring out its risk adjusted value and consider it for that worth.
Without having done any accounting I'd be willing to bet that the vast majority of startup options end-up being worthless. This is a simple logical conclusion from the fact that most businesses fail. So, no, I disagree, don't work for less than you are worth and, yes, assume startup options are worthless.
What ends-up happening is that the sexy startup culture sucks in young people with little life experience who haven't seen enough to be skeptical enough about these things. And, yes, under that context, if things go wrong, the end result is that they feel used and abused. You never hear complaints from anyone who worked super hard at a successful startup that made it and the early employees did very well.
I had a pretty ugly business failure back in 2008. Every single one of my employees went off and got jobs. Some of them were snatched-up by competitors. One of them was my director of sales. When he came onboard he knew nothing about the business at all. Nothing about the technology. No contacts in the industry. I worked with him one-on-on and taught him everything, even how to sell the products. In fact, he didn't even have sales experience, in his prior job he was in marketing and I gave him a shot in sales. The value of that education cannot be understated. Of course competitors grabbed him as soon as they could. He went on to have a (and continues to have) a great career in that industry.
While my employees went off to grab new jobs pretty much without delay in income, I couldn't simply abandon ship. As this evolved I took out a second mortgage on my home and filled credit cards to keep everyone employed as long as possible. We had the potential for sales that would pull the company out of the dive the 2008 economic implosion caused. When those fell through I told everyone I had nothing left to give, go find a job.
Could I go find a job? No way. I was trapped by my own business until the bitter end. I had obligations. I couldn't just walk away. When millions of dollars are on the line, doing so is professional suicide.
So, no, not even close. People who think employees have the same risk as founders have no clue what they are talking about. As is always the case, most of these comments tend to come from people who watch from the outside and think they understand reality.
As my wife likes to say "No, your Google search isn't equivalent to my medical degree".
Or, as Mark Twain said: "A man holding a cat by the tail learns something he can learn in no other way".
If you haven't held the cat by the tail you have no idea.
Back of the envelope: IIRC, the article indicates that there is a 1% chance of $1B. 1% chance of 1% of $1B is worth $100,000; if $100K is greater than what you're giving up then it is worth it.
Two confounding factors: time and partial payouts. What if it takes 20 years to pay out? How does the range of possible payouts and probabilities change the valuation? That's where you establish your margin of safety and start making conservative assumptions.
Also that 1% would keep on diluting before the money would actually become liquid. I figured that the 1% would be 0.35% if the company had IPO'd in say 8 years. At a 1B valuation, I'd net 3Million before taxes, while the company would have gone from 6M to $1B in valuation. This didn't seem fair and I said no to this offer.
I'd have no financial regrets at the $1B valuation, but I'd if they make it to $10B/$100B.
that’s up to you to decide isn’t it? what i mean is, there’s no correct answer. 1% is a baseline (minimum) offer. many think it’s fair. at this early stage there is high variance. i think 3-5% is fair. this early you are an absolutely critical hire. I personally don’t want to work for a founder that’s stingy and going for bare minimum.
otoh first second third employee jobs don’t come along every day. turn in down and you may never see an offer this early, ever again.
I think what's also missing from the equation here is the fact that part of the reason which startup compensation is not competitive is because FAANG salaries have been set in such a way to attract talent which might otherwise go to startups.
How true to do suspect the following hypothesis is: FAANG overpays for top talent they do not need purely to keep it out of the hands of startups and competitors who do have a present concrete need for the top-shelf talent pool?
I don't know to what extent that's an explicit strategy, but I would find it plausible to imagine that FAANG could spend a lot less on engineering - both in terms of salaries and head count - to keep their current velocity on product development, but they see a strategic interest in controlling that talent pool which they have an opportunity to exploit via capital advantage.
The other side of this is mentioned in the OP - at scale, if you get top talent for $$$ and can squeeze 1% more revenue out of your products, it's still worth your time.
This seems to inherently assume a strong correlation between "talented" and "risk-averse". A startup is potentially far more valuable than working at a FAANG, especially so if you are a founder. So, why ever work for anything other than your own company?
And, even if the "talent" takes a job at FAANG, what stops them from having a 2-year turnover rate where they make some money and then go risk starting their own company, and if that fails then just go back to making a steady paycheck?
The FAANG strategy for hiring talent seems to be something along the lines of: "Sure, not all talent will be risk-averse, but a (large) percentage of talent will be, and we can grab those risk-averse talented people with higher-salaries than smaller companies."
In other words: if you are not a founder, relatively high-equity early employee, or a FAANG employee then you are game-theoretically either second-tier talent, really hate FAANG companies, and/or you are not actually aiming high enough.
Bingo. As a senior engineer, I get startup offers at the Staff-Principal levels, and even those grant no more than 0.1-0.5% equity at most, on top of ~$180-200k salary.
That simply isn't competitive with big established companies like FAANG that offer me $400k+, far better career growth prospects, and far lower risk.
For most startups, the equity will be worthless, and the whole company will either shut down or get acquired, which means you won't have a straightforward career path no matter how hard you work and how many impressive accomplishments you achieve. Meanwhile your friends over at FAANG will be earning twice as much and climbing the promotion ladder simply for doing a good job.
Finally, let's not forget the abhorrent tax treatment that screws you, especially as a senior engineer: while your options will likely end up worthless, you'll have to pay tax for them as if they're worth their weight in gold. That puts a whole new level of risk on the already bad and risky deal of working at startups.
It's beyond me how that tax treatment was allowed to continue given how bad it is for startups, and how much it advantages big established companies that are already deep in anti-trust territory, though I guess that could also be the answer to why it's still the rule.
Not sure where you live, but in the US, options are typically granted with a strike price equal to the latest 409A valuation, which makes the grant neutral from a tax standpoint.
I don't see a world where you have to pay lots of taxes for worthless options, unless someone really screwed-up (i.e. messed up the 409 Safe Harbor election etc...)
Now... if you exercise the option, that is a different story. At least in theory you would only exercise if things went well and the stock went up vs the strike, which makes sense why one would have to pay taxes then.
> Now... if you exercise the option, that is a different story.
You exercise if you leave, and startup IPOs can take many years, and most startups don't have a compelling options package for you after the first 4 years anyway.
So a senior engineer who got their full 4 year equity and wants to leave, which is the most typical scenario, will indeed have to exercise and get hit by the tax bill.
You only be hit by a tax bill if you chose to exercise the option, which only make sense if the stock is worth more than the strike. If you are "given" something that is worth more than $1, the IRS will want a piece of it.
If you worked at a startup (not a small business), the most likely outcomes after 4 years is either 1) Company went bust, 2) Company grew.
The option protects you from the not having to pay anything if scenario #1 happens. If scenario #2 happens, then you should be happy: you have an option to pay X for something that is usually worth multiples of X after 4 years.
I actually think the IRS is being nice not to tax the at-the-money option grant. They essentially assume zero time value, which would be quite high for a startup given the high volatility and the potentially long term for the option.
Startup engineers are often young and do not have much savings.
Options are a cost, often in the 5 to 6 figures range to exercise. If you exercise at time of hire, your cost can be significant for something that will probably perform less than putting it into bitcoin as far as expected value goes. If you count exercise cost as part of the 'salary', then startup salary is even worse than it usually is.
When you leave, the options expire away typically after 90 days. If you exercise, even if they are ISOs, AMT tax can easily make the exercise cost 6 figures anyway. Most engineers in their mid 20s do not have 6 figures in savings unless they already worked at FANG for the first 4 or 5 years of their career. You have to choose, do i put most of my savings into something that will probably go nowhere? Most do not and lose out on the significant compensation they would of at FANG. It's a system that favors the already wealthy and young adults with wealthy parents.
Companies actively try to prevent giving liquidity to employees through restrictive clauses. The best case scenario is an employee that works hard and then forfeits their equity due to the above math. The company has a financial incentive to screw employees over and seduce them with unlikely projections of life changing wealth.
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On the other hand, founders have stock at the start, valued at $0. Even if they have a vesting schedule, they can pre-exercise for no cost. Since it's extremely unlikely that they will sell in the first year, all of their income from that stock in the future will be taxed at LTCG rates. Since the average employee can't afford to pre-exercise (or they get RSUs), they pay at income tax rates, so if they do get lucky, they've compressed 4-8 years of equity compensation in one year, which means they pay %25-%35 more in income tax alone. Employees are often subject to 6 month lockups after IPO, which means if it drops, they have to pay tax on a value that is much higher than they can liquidate with the stock they actually have.
Founders often get special liquidity access that employees don't, in secret, during funding rounds. VCs do this to align the founder's interests with theirs, which is going for an outlier $10B IPO vs. liquidate at $300 million at series B, because if the founder has %20, that is a life changing $60 million, taxed at LTCG rates, that makes you an ultra high net worth individual, but is basically a failure from the VCs perspective.
> If you worked at a startup (not a small business), the most likely outcomes after 4 years is either 1) Company went bust, 2) Company grew.
Right, so the bottom line is this:
After 4 years working at the startup, unless it already went bust, you will typically want to exercise, and then you'll get hit by a big tax bill for purchasing a security which is still very likely to end up at zero.
It's a risk no matter how you look at it. Unless you happen to work at a startup that became a unicorn, which is very rare, you will end up paying good money for something that may be entirely worthless.
So in the best case scenario, you take a risk for an upside that may put your comp around the same level as what you'd get for simply working for FAANG. Worst case, you pay a big tax bill that drops your comp even farther below what your friends at FAANG are making, which is already going to be twice or more to begin with.
Surely you see the problem here, especially for risk-averse engineers.
You don't _have_ to exercise if you leave. That part is totally optional - in fact, the company will probably be quite happy for you to leave without exercising.
The original complaint was about paying taxes when you are granted options, which is not a thing.
The fact that one would receive significantly less salary compensation vs FAANG has nothing to do with taxes or startups really, it's just plain and bad decision making. If one is going to get a salary cut, one should make a rough analysis valuing the options/stocks adjusted for the few scenarios and compare.
Plus, 95%+ of Engineers (senior or not) don't get into FAANG, so the generalization is not appropriate.
In practice, most people assume the value the equity and options to zero, and always assume it is cherry on top. If you value the stock at zero and get a massive pay cut, then it's just a bad decision.
No need to throw the baby out with the bath water.
> which makes the grant neutral from a tax standpoint.
Technically, it also makes the grant neutral from the value perspective. They’re giving you something worth $X, and asking you to pay $X for it. Why exactly should you value it more than $0 then? Maybe for the optionality, but ATM option just isn’t worth that much...
My humble recommendation: If the company has a valuation or is close to one, ask them to add the necessary money for early exercising to your signing bonus, which is usually pennies on the dollar for them. Then do it the moment you get your options converted to stock.
In that way you minimize any tax risks and at the same time you test how much the company is interested in you and values their employees.
I'm curious - where do you pay tax on options before they have been exercised?? Every country whose tax system I'm familiar with treats receiving an option as a tax neutral event, but exercising them is taxed as per the country's capital gains legislation.
1. Usually there is no liquid market, so for lack of a better term, the valuation is made up.
2. Related to point one, with no liquid market, there is no option to sell the options the raise the money to pay the taxes.
3. There are often restrictions (e.g. lockup periods) that legally restrict you for selling from a specific period. You are forced to take on the risk that the stock doesn't crash, often with much less info or freedom than investors and execs.
In fact, in the US, normally startup options are ISOs (incentive stock options) so theoretically they are NOT taxed on exercise. The issue is that AMT (google it) actually nullifies that ISO tax benefit in most instances, and AMT only has stuck around because Congress can not function to deliver reasonable tax policy.
The main issue with option is the lack of liquidity.
One may have to put down quite a bit of cash down in order to exercise, and that is a problem, even if in practice, it is usually good value for the option holder.
But most people either 1) do not have a lot of cash on hand, or 2) do not have the appetite to tie their hard-earned cash to anything illiquid-that-maybe-could-go-to-zero.
Exercising options is a form of income in theory. In practice these stocks very often go to zero, or a value lower than what you paid to exercise them.
This is why I’ve found a balance. I like to work at a startup, but they get the amount of hours they invest in me. Typically that means I get to spend much of my day enjoying fitness/outdoor activities but still get the potential for a nice bonus if the equity amounts to anything.
I’ll never again work obscene hours without obscene compensation. Even with the compensation I’m highly unlikely to do it.
Very true. The system overweights the rewards to the founder. And anyone can be a founder if they are willing to take more risk and go without getting paid.
I've been an early engineer (first 3) at a startup. I didn't stick around long enough to vest for reasons, but in hindsight, it wouldn't have been worth it financially even if I had. They eventually got acquired by a big brand name Silicon Valley company after 4-5 years for an undisclosed amount. My 0.4% plus salary wouldn't even break $200k/year in total unless the company sold for a fair amount above $100M.
Later in my career, I have had offers at seed stage companies. The compensations were marginally better than the one described above, but most still needed to 10-15x in value over 4 years just so the annualized comp would match the base annual comp at various series C/D companies I also had offers at.
Given the risk, often poor culture, rampant inexperience in leadership, and long hours, the upside is only worth it as an early employee if the company is a unicorn. And every founder says their company will be a unicorn...
After starting a few (failed) companies myself, I've come to adopt the mindset that the total equity allocated to the founding team (pre-seed + seed + maybe series A) should be around 20-25%. Everyone after should get 15-20%. In the event of a $100M exit, there should be no scenario in which the founders/investors walk away with a win financially, but the early employees do not. The early employees took the same risk and secured that win, and thus should be rewarded accordingly.
At the end of the day it is a lot harder to come up with an idea, find market traction, convince people to invest in you than it is to become the third employee.
Additionally, a 100M exit isn't always a win. It depends on how much money was invested / spent to get there as well.
I agree; founders should have substantially more equity than any one early employee. But its not just about which is harder to start as (founder or early employee), but also the time/energy/emotion invested over years to bring the company to a successful scenario. Being a third employee is still pretty hard if you are working 60-80hrs/week for years and making major life sacrifices.
And you're right; $100M exit isn't always a win. That was a somewhat arbitrary milestone I used to do quick math.
Hard work unfortunately only has marginal value in this economy. The real money is in being able to get other people to invest in you. The idea even matters less than your ability to convince investors.
Startup employees are often quite screwed from a promises made perspective.
10+ years ago part of the allure of tech startups was they really “got” what made technologists jobs fulfilling. Back then companies had management that had no idea how to build high quality software. There was lots of waterfall like process and TPS report style bureacracy.
Fast forward to the present. FAANG companies dominate the economy. They pay well, offer upside in actual stock, AND most crucially: they do a better job giving more fulfilling tech work than most startup
Who wants to work at a startup where management likely sucks? They might have no real track record building good tech or empowering great technologists.
You’d rather have your 40 hr / week FAANG job doing what you love, spend time with your kids and family, where you know the balance of risks means you’ll likely end up in a position of upper middle class life (if not outright wealthy...)
The current stereotype among my circle in FAANG is that they move slowly and you’re more likely to be working on something dreadfully boring and also have few opportunities to branch out. That’s what keeps a lot of people going to startups though I agree with the OP the financial and work life arrangement gets less and less ideal.
More anecdotal experience, but I agree. Most people I know doing FAANG only “don’t hate” the work, but love the pay and benefits, and the fact that laying low rewards them. Quizzically, previously politically active friends have turned quite quiet about their beliefs and morals as soon as they started earning a fat paycheck from Facebook.
For a lot of people, vast amounts of money really is the most attractive aspect of a job.
On excitement: As a software engineer you get to choose the team (out of 100s) you join after completing bootcamp. Unless you intentionally choose something boring I just don’t see this being the norm! You are also free, and often encouraged, to switch teams every few years.
On velocity: This may be more subjective but as someone who has worked at 2 startups and founded another I’ve not noticed too much difference in pace. It’s been a very fulfilling experience for me.
I agree that the math is very poor for early employees. I went through the best case scenario and it still wasn't worth it.
I joined a startup just after their series A. I was offered what they said was a lot of equity (1/2000 of the company). I ended up with the best case scenario: it grew like crazy and 8 years later went public at a multi-billion dollar valuation. My shares had gone up more than 100x.
My payout was good, but financially not worth it. The company raised a bunch along the way (I stopped counting after series G) so I got diluted a fair bit. I also took a lower than market salary for the time I spent there (which was of course justified by the fact the company was growing so fast and people were jumping to hop on a rocket ship).
I ended up with low 7 figures, which, yes, is amazing, but I actually would have had more at any FAANG company during that same period.
So who really got paid? The founders and the executive team (no matter when they joined). It was a good experience, but startups, financially, are not a great move.
This article is responding to the romantic version of the startup story that was popular 10-15 years ago, in the early heyday of YC and HN. In that sense it is 10 years out of date.
There has been since at least one major wave, which was characterized by disillusionment and cynicism about startups ("just buy a lottery ticket", "startup equity isn't worth the paper it's printed on", etc.). This became standard fare on HN and until recently was probably the dominant view.
That has become old hat in its own right—you can tell that such a wave is in its later stages when the comments become predictable, and then compensate for that by getting snarkier. When information gets worn out through repetition, comments have to add in extra spice to get interesting again—though not necessarily the good form of 'interesting'.
It's too soon to tell but I think we might be at the beginning of another wave now—a more balanced weighing of pros and cons. Many comments in this thread are good examples of that.
There's another dynamic too, which I've not yet seen anyone comment on: these waves are staggered geographically. This became obvious to me when looking at the geography of HN comments (judging by IP geolocation). These waves don't get started and then subside in lockstep all over the world—rather, they exist in different stages in different locations. It took years for the romantic story to make its way to certain locations, and those places are now in the early stages of the cynical wave. Other parts of the world are still in the crest of the romantic phase. This creates unfortunate misunderstandings where someone in one of those areas posts an enthusiastic startup story, of the kind that was popular on HN in say 2008, and then gets blasted with flames by people in locations where the cynical wave is strong.
I hope I'm guessing correctly that the next wave is more balanced and nuanced, because I think we need to look beyond "startups: yay or nay" to asking when they make sense, when they don't, and what changes the ecosystem could make to make them make more sense...if that makes sense.
This is an interesting take, and largely correct, but you describe these "waves" as if they are some literary or artistic trends that just play themselves out, and not takes on a very real situation, which is what they really are.
Yes, the 2nd wave of cynicism is now well-established, the comments are predictable and preaching-to-the-choir.
However, has it become any less correct or accepted? This isn't literature or art where folks will become disenchanted with a take purely because it has become cliche.
IMHO the answer is "no". This take has indeed become so established, that it is now simply taken for granted, as the foundation for discussion on sites like Blind.
Everyone understands that startups now provide less value to their employees than top tech companies (FAANG etc), the startup culture in the US is doing nothing to address this (senior engineers are still getting crumbs of equity, your total compensation at a startup will still be far lower than FAANG, there is effectively zero concern for providing the long-term career growth you'd get in top tech, etc), so nobody takes startups seriously as an option unless they are among the handful of well-known unicorns.
Everyone is targeting top tech ("FAANG") and pre-IPO unicorns and that's it.
It's widely accepted that you'd look at any non-unicorn non-pre-IPO startups only as a fallback option after completely failing to get an offer from any of the above. Even then, you'd constantly try to ascend to the real winning options, and any call from a FAANG recruiter will take you away from the startup role you had to settle for.
I believe startup culture can change that, but it will take much effort and actual sacrifice (e.g. reserving more equity for employees). Until then, startups will remain a strictly less desirable option, and just because everyone now knows and agrees on this take doesn't make it any less true. I anything, it's becoming more entrenched and harder to change.
I agree with you except I don't think it's that binary. There's a lot of hiring going on at YC startups, so "everyone now knows and agrees on this take" is a considerable overstatement.
Here's where I do agree: (1) the impact of FAANG compensation is enormous, to such an extent that a lot of people (including on HN) simply refuse to believe what they hear about it, because it breaks their model of the world—even though those things are often true; (2) startups need to adjust to this. I've felt for years that the equity shift that took place from investors to founders needs to be followed up with a comparable shift in favor of early employees.
On the other hand: while this shift has been happening somewhat, it's surprising to me that it hasn't taken deeper hold yet, which makes me wonder what I'm missing. I would have thought, and it sounds like you think so too, that startups have little choice but to make this shift quickly or die from starvation for top talent. It's not playing out that way. Startups continue to thrive, even though there haven't been massive structural changes yet. (I'm looking at it through YC-colored glasses, which is a privileged position, but not one that's so dissociated from the larger ecosystem as to change this point.) It may not be thriving to the extent that FAANG is, with some exceptions—but that's because nothing is.
> There's a lot of hiring going on at YC startups, so "everyone now knows and agrees on this take" is a considerable overstatement.
Consider this sentence in my response:
"It's widely accepted that you'd look at any non-unicorn non-pre-IPO startups only as a fallback option after completely failing to get an offer from any of the above."
Only a minority of engineers can secure employment at top-tech and pre-IPO unicorns. The rest will have to settle. My claim isn't that companies below the top won't be able to hire at all, but rather that they will have to settle for engineers:
1. Who couldn't get hired at top tech or pre-IPO unicorns which are universally seen as better options.
2. Who would leave if they can get a shot at these better options.
> (2) startups need to adjust to this. I've felt for years that the equity shift that took place from investors to founders needs to be followed up with a comparable shift in favor of early employees.
Yeah, I agree. When I get startup offers these days, the equity portion is so small that I just ignore it.
So when I get the startup offer, I hear "$200k base + <some equity number I just ignore>", while FAANGs are offering me $400k of cold, hard cash. The startup simply don't have a chance.
> On the other hand: while this shift has been happening somewhat, it's surprising to me that it hasn't taken deeper hold yet, which makes me wonder what I'm missing.
My theory: startups just accepted that they'll have to initially scramble with 2nd tier, overworked staff. This isn't actually new, just the well-worn B-team/A-team strategy of startup staffing: you start out with a small team of B-players willing to take the risk (often for a very small upside) because they have no prayer of a better offer so just paying them market rate is good enough to get them to work hard and sacrifice their WLB. If your business pans out, you are now in the coveted "pre-IPO unicorn" position and can start hiring the A-team to replace your current B-team.
> Startups continue to thrive, even though there haven't been massive structural changes yet.
Indeed, as long as founders and VCs see it this way, then the situation will continue. I suspect the A-team/B-team strategy is just working well-enough for their needs: the B-team gets them a pretty minimal viable product, and by the time they need to deal with the difficult scaling and reliability issues associated with success, that success allows them to hire the FAANG-grade A-team that can actually deal with these.
It's hard for founders and VCs, the hoarders of startup equity, to give it up unless they absolutely have to. There are no clear statistics like "if we gave up X% we can expect Y% better chance of success", and like you said, the current state seems "good enough" and still far from the catastrophic failure mode that would force them to act.
So all that's really happening is that the B-team/A-team paradigm reigns unchallenged, and under that paradigm, it's actually expected and accepted for engineers to see B-team startup positions as fallbacks.
> It may not be thriving to the extent that FAANG is, with some exceptions—but that's because nothing is.
Personally I think there are huge long-term issues with the level of concentrated success that FAANGs are enjoying, but that's a topic for a different conversation.
Thanks for the very interesting comment, and discussion generally!
My understanding, from what YC has been seeing from its Work at a Startup initiative of the last few years (sort of a hiring pool made available to YC startups as a whole) is that there is a population of really good engineers who just don't want to work at a FAANG. That seems to contradict what you're saying to some extent. I mean, I can relate to this a little, because I would find it really hard to drag my ass back to a big company. I never worked for a big tech co, but I did have a stint in the software wing of a big company. Would I squeeze myself back into that sclerosis for 2x my current compensation? Probably not. Would I do it for 10x? Well...at some multiple, one considers anything. But we're talking closer to 2x than 10x in the startup/FAANG dichotomy at present.
The question is how big this population—let's call them "A-team engineers whom externalities tilt to startups rather than FAANG"—really is. Unfortunately, that's not going to be very easy to examine objectively. From everything I've learned moderating HN, it's obvious to me how such a discussion would go: FAANG people will say "they can't be that good or they'd be at a FAANG" and startup people will say "I could totally do that, I just don't want to".
First of all, of course the number of A-team engineers willing to work for half the pay is small.
But staying out of FAANG means more than just 50% less initial total compensation.
FAANGs offer career growth, including pay growth, that simply doesn't exist in startup world. Even if reality won't hit you when you just accepted a $200k startup job when your college friend with the same experience got $400k, it will hit you 4-5 years later, when you're hunting for your next job for $200-250k while that friend is making $500-600k+ because your startup fizzled out or got acquired for peanuts while his FAANG just kept growing and carrying his career up with it.
Or it will hit when you try to get into your next startup and realize that startups are the first to look up to FAANG engineers. That engineers with FAANG experience get all the interviews, and are lavished with the best offers and most senior positions in startup-land. While the only reward you get for staying in startupland is... being considered a B-player.
Finally, let's profile the "FAANG-hating" engineer willing to work for startups for half the pay. As you said, this engineer is sacrificing most of their pay for a work environment in which they feel more comfortable. Is that great for the employer too?
Would that engineer agree to sacrifice other aspects of their comfort, such as WLB, to make the startup succeed?
Of course not. Their equity stake is negligible, they're unaligned with the company's goals. They work there for the fun, and once that fun stops, there are dozens of other startups waiting to hire them at the same (low) comp package.
Startups today don't just underpay - they completely fail to align their senior employees. The combination of minuscule equity stake, no career growth prospects, high risk and constant job-hopping means as a senior engineer you will not be rewarded for good performance. Much as we love to disparage "sclerotic big tech", I've seen more mission alignment there because employees expect ample reward - in pay and long-term promotions.
In fact the typical profile of an "A-team engineer who'd rather work at startups" is someone who spent several years in FAANG, acquired FU money there, and now looking at startup work as fun CoastFIRE if not a harmless retirement hobby that pays a bit of money as well.
On top of all this, let's not forget that even if you're absolutely obsessed with working at a small "non-sclerotic" company, there are still options for you, including unicorns and plenty of small successful shops that aren't startups.
I’m biased because I run a startup and have only ever worked at startups. But I’d say it basically comes down to different strokes.
If you’re in it just for the money AND you have the background and interviewing skills to get a job at a FAANG then you’re better off doing that, you’ll make far more money.
For me though, there’s not many salaries that don’t end in “million” that you could pay me to work at a FAANG. Not only because I mentally couldn’t deal with the people (see Apple’s latest debacle), but because your impact is essentially meaningless. Working on some tiny little fraction of a fraction of a feature means I’d basically have to not give a shit about my job.
At that point you’re just a wage slave. A well paid one, sure.
Additionally, building a successful company is one of the most rewarding things you can do. True American capitalism is a thing of beauty. Taking an idea, building a product, and creating value. Working at a startup is a good first step in building your own.
you’d be just fine at FANG. you are taking horror stories and thinking that is the way things happen at X. Your experience at a big company is mostly dictated by 1) your boss and 2) your team. There are good pockets in the worst places and there are really bad pockets in the best places. The exercise to how you figure this out is left yo the reader.
Regarding impact: you can have an impact at bigCo. It’s just that it’s not something that’s usually visible to the outside world (or sometimes not even internally). Hypothetically: if a change you make or a product you work on helps reduce the power usage of a datacenter or an android phone or a car by 1% you have made a gigantic impact. Even of only 1% of that 1% is your actual work.
You’re not interested in impact. You’re interested in stroking your ego. That’s all good and whatever but at some point you’re gonna realize that you’re gonna die and all your “accomplishments” mean jack shit. I have way more respect for someone that works at Google for example, puts in their time of focused work (even if it’s “only” 20 hours per week), invests in themselves and also invests in their families and is an exemplary mother/father and/or invests in the community they live in than I have respect for someone who “hustles” and works 80 hours per week.
FANG also has many lines of business where each one would be equivalent to a startup sized company. You can have way more impact than you think, on the specific product you work on. You'd be surprised how small many engineering teams are at apple for example, working on discrete products used by hundreds of millions of people.
My understanding is that he was referring to impact on the company. At FANG, there is no single product where your impact has a significant impact on the company as a whole.
Sure you can go to AWS and work on Lambda. And then you can work on a feature of Lambda. It's very likely that the feature is going to have an extremely minimal impact on Amazon as a whole company.
I'd imagine the same is for apple. You can join, go work on a secret feature of a feature on the iPhone, launch it, and then yay. You've now contributed to a feature of a feature of a product with 100s or 1000s of other features.
Wow and a startup employee is different? Not a wage slave? So many more compromises in work quality and delivery get made at a startup vs FAANG. Not building a quality product. Building an MVP that fools a few early adopters to part with their money. Then sell out and cash in (not you; the founders).
Ok not a wage slave, because the wage isn't worth it. To work overtime without compensation or really any hope of compensation, to help somebody else win the lottery. Just a sucker I think.
If you want to make the argument that working for anyone other than yourself is wage slaving I won’t fight you.
The difference to me though is that you typically own (or have the right to own given enough commitment) significantly more of a startup than a FAANG. Granted, your chances of owning anything of value is low, but that’s a risk I’m willing to take over making Bezos and Zuckerberg that much richer. Knowing I’m contributing to their wealth is not something I’d care to live with.
Forgoing the latter is worth not doing the former imo. Again, unless we’re talking millions per year, which 99% of FAANG employees aren’t making. The best one could hope for is high six figures, probably toping out around $800-$900k after 15 years.
As I said though, this only makes sense if your goal is money. I personally don’t value money over other things like mental health and enjoying my work. I know I would have much worse mental health, and hate what I do at a FAANG.
That's 900k per year. Their net worth in 15 years will be 5M or even higher (thanks to stocks growth). That's complete financial freedom at the age of 45.
Almost everything mentioned about startups here has an equivalent trade off at large companies. It’s particularly amusing that he mentions Facebook towards the end as a potential place to work, given the pockets of high stress and long hours that I’ve heard about from folks who have worked there. Most of FAANG is no different. In comparison, most startups that I’ve worked at valued work life balance highly.
Every workplace has trade offs, it’s the nature of the thing. The compensation imbalances at large companies are bad as well, for example, it’s just that the total increase in company income allows for much more competitive packages overall.
Really this is more of a question of: what do you want out of a job and career? If you want to maximize compensation, go for that BigCo job. But that isn’t the only valid thing to maximize for, which the snark about “higher callings” towards the end misses. Higher autonomy, less complex organizational politics, More ownership of big problems, potential for better alignment between your values and the companies mission, etc. etc.
Having been at FB as well as multiple startups that became unicorns, I can tell you the "high stress" at FB is nothing compared to startups. On a whole, FB is a great place to work with very solid WLB.
My theory on the FB comments is because a lot of employees at FB have not worked elsewhere and compare to friends at Google or Microsoft. If you compare FB to startups or even finance, you're working significantly less with less aggressive targets and pressure.
At large companies the culture and expectations are not uniform across business units. Which is why I was careful to specify pockets vs. a global experience.
As far as your experiences, now it is anecdote vs. anecdote, nothing to be disputed there.
Agree, but I've been inside multiple pockets of FB including one that is consistently considered one of the worst. Even if did not compare to startups. Anecdata can be very reliable if you understand the source
Startups are the most efficient organisations in the economy. Because you have to get shit done and can't fuck around. A lot of people love to fuck around and do "fake work". Only output and impact matter. Hard work is "hard", and at startups you can't hide "not working". It sounds pedantic but that's quite the reality, a lot of people just don't know what "work" feels like, and don't want to do it.
working hard does not mean shit. whenever you hear someone saying they want hard workers you should turn around and run.
delivering results is where it’s at. people do this at startups and companies of all sizes. nobody is gonna keep you and pay you if it does not make financial sense.
what happens in the case of a startup is that a lot of corners are cut in order to get something out the door and gain customers/marker share. it’s do or die. but: this corner cutting has its cost that, if successful, you will pay back with interest in the later stages. it’s not good or bad. it just is what it is.
bigger companies have more structure and are better about both optimizing for cost (ie we don’t want to build something that will cost us X now and 100X over the next 5 years) and optimizing for risk (if X leaves or we learn about Y market factor we should be able to keep going without going bankrupt).
the “what work feels like” is some bs. you define what work is for you and diminish other people that just don’t know the feeling. please.
Lol! It is possible to work hard but expend time and effort in the wrong things. Startups, especially if founding teams fo not have deep industry experience, spend a lot of time reinventing the wheel and rediscovering various footguns because they often cannot afford experienced professionals who know better. So there is quite a bit of wasted motion at startups.
There’s all kinds of BS you work on at a startup. Dumb projects to impress some VC to get that next round of funding... or chase something because the charismatic founder or influential investor is dead set on a crazy direction... or the CTO decides this company is their personal tech playground... or tech being overbuilt for scale that doesn’t exist yet... VCs that hold the company to impress their friends instead of actually being invested in the company’s outcomes... politics between competing groups of investors...
It's important for anyone joining a startup to understand that the odds of success are overwhelmingly against you.
For every successful startup we see on here and elsewhere, there are thousands that fail in obscurity, sometimes leaving people in ruins.
Treat options/shares as a literal lottery. Assume your odds of winning are zero when making life choices. Also unless you're a very very early employee, those options/shares are likely to not be worth what you imagine they will be worth even if the company has a successful exit.
Go into it with eyes open and realistic expectations if you choose to try it out.
Yes, even when you win that lotto, it is not as much as you may imagine. I rode the SendGrid/Twilio rocket; engineer 12 at SendGrid. IPO and acquisition later, I’m still a decade out on even thinking of being able to retire or be financially independent. Don’t get me wrong, things are good. But early equity in a multi billion dollar company and I’m still having to work :)
I remember my CEO laughing at me buying my options when they vested. "Well Swader, you'll be able to wipe your as with those at least". Was a great guy, great company and a great bunch of people to work with. But facts are facts. We were successful but in a very competitive field so nothing was guaranteed.
I have always said I wish I had gotten toilet paper instead of options. Because at least I can wipe my ass with toilet paper, and at the start of the pandemic I’d have actually gotten rich.
Next time I’m offered options I’m going to request TP instead and see how they take it haha.
Indeed! You can still have a very rewarding experience in a startup, it's just rarely the "retire young and rich" outcome that I think a lot of people imagine it will be.
As someone else also said, I wouldn't trade my startup years for anything, but it was just a job like any other, when take a macro view of my career.
I don't understand why people list their options value under 'stock' in levels.fyi . I see lots of pre ipo company people give specific value to their options.
This is compellingly well-written but wrong, in my opinion. There's been a steady trickle of articles on the top of Hacker News that make essentially the same argument: your odds of choosing a successful startup are miniscule (2% in this one). I think this does people considering startups a disservice.
The conditional chance of picking a successful company to join is way higher than 2%, or whatever the median success rate of all startups is. In particular, I think really intellectually curious, ambitious, hard-working people can, for the most part, identify each other. This is really different from reading about valuations or what other people think in the news, which leads to a lot more noise. If you meet a bunch of people at the company, you can assess the their caliber for yourself.
While it's not a perfect predictor of success, it's at least the case that such people are usually working on cool, worthy projects. Based on this, it's possible to get conviction on a group before their likely success becomes common knowledge—granted it's getting harder to do this because of how much money is floating around.
To put it another way, there are a handful of companies out there right now at Series A/Series B with a dense accumulation of talent. It's probably a reasonable bet to try and join them before they hit unicorn valuations, when room for growth is smaller. And in these cases, you could be #10-#40 at a relatively de-risked company and have a really great outcome.
On the flip side, if you even remotely enjoy learning and autonomy, working at Google/Apple/Amazon/etc is probably a great way to set yourself up for existential frustration. It's not even a great financial proposition. Even at $500k/yr, it's 20 years—a whole working life—to make it to $10m, the hypothetical number from the article. Even if your first startup doesn't make it after 2-3 years, you can try again a few times and still come out ahead. This is a classic pg argument—I can't remember which essay—but the point of a startup is to compress decades of working life.
Caveat: I happened to join a startup whose success changed my life both financially and in terms of career trajectory. I'm very biased. But this is also why I feel passionately that this article's advice is bad.
> Even at $500k/yr, it's 20 years—a whole working life—to make it to $10m
Just one nitpick here, FAANG companies have 2-5x’d in the last five years so with $250k of equity in this example would have had an actual comp of $750k-1.5m/year which would leave you set-for-life rich in just 5-10 years no matter which one you chose.
If you have access to a FAANG job and are optimizing for expected return you have to ask yourself - is it more likely this billion dollar company doubles in value or a seed stage startup that you have 0.5% of becomes a billion dollar company?
Perhaps, but it's possible to invest in Google via the stock market. I'm not sure it makes sense to bake in the stock market performance of a public company when considering value of their "equity." It seems like you should be using whatever your standard discount rate (S&P 500 or NASDAQ)?
FANG equity packages are an implicit buy option that lasts 4 years. $1 million dollars of options that lasts 4 years is very expensive and very lucrative.
Plus in startup land, your missing that equity half, so you can't take that money and go invest it in google like you could working at FANG.
Reading all these grumpy comments made me think that there's a well.. startup opportunity for a counsel type firm that gives consultations to would be employees and guides them thru the startups minefield for an extra fee. This service would partner with law and accountings firms and terms would be a fixed 500 usd fee for a more or less standard consultation and an offer review, plus 5% of stock options gains should the employee make the bank later. I bet SV and all VCs will hate this firm with passion.
This is india specific, I chase startups which are best bet at implementing govt policy or is it a problem that I am facing.
1. One was recruiting phase as median age of India is low and adds overwhelming number of new workers every day. Google uses it.
2. Second one was a fintech during digital india phase.
3. SAAS with global sales and high scale (rpm)
All three were hard and very fullfilling. I made a lot of money with fintech one and learned a lot on engineering at scale with third one.
In the first one, I made lifelong friends and got to meet important people, attended VC talks and part of decisions like hiring PM as new grad, VC was very involved with CEO about it. Something my salary could not quantify.
If I were to do it again, do it well with patience rather than arrogance and anger against founders.
It also makes a huge difference if the startup is your primary source of income or not. My wife worked for several startups, all of which failed. But since I had a more stable paycheck, it wasn't so bad, and we just treated the extra startup income as a bonus, and had very low expectations on cashing in on the equity.
UBI is not about working on any hobby you want. It’s about redistributing wealth so that people can negotiate for more of the pie since the current system relies on using the cumulative wealth of one’s ancestors to determine their bargaining power.
At least you're candid that it's about taking money from people against their will. Most advocates couch UBI in terms like unleashing individual creativity and things like that.
I’m also candid about my current lifestyle being based on taking things from people against their will.
Their will probably was not to pick strawberries in a foreign nation or clean beers spilled surfaces at 11pm or not being able to breastfeed their infant because they need to go slap hamburgers together for $15 an hour.
I assume not all of those people willingly got drunk and high and got caught engaging in crime in their teens and 20s and willingly threw away their economic opportunities.
Problem is, how do you support this? You must have made a lot of money to both (a) support your family, and (b) pay for the childcare that your wife would have been too busy to help very much with. Either that, or you lived in a low cost of living area and were able to do some kind of price/salary arbitrage. And if the solution was "make a lot of money", then that again makes childcare doubly important, because if you also were focusing on work, then you wouldn't have had much time to raise your kids either. Right?
Ah. I've left out the obvious option: You don't have kids, and don't plan to?
I bring this up not to be snarky but because this feels like a very real Catch-22.
(Deleted weird coda with mythological references and stuff.)
Why do you assume they have children? Not everyone choose to have children and frankly, that's a great decision. I'm a parent but I subscribe to the feeling that instead of assuming everyone has/wants kids, we should praise people who don't.
I started out assuming they had kids, but I did catch myself:
> Ah. I've left out the obvious option: You don't have kids, and don't plan to?
Yes, that's their business.
My problem isn't with their personal decision per-se. It's that today's myths ("the glorious and independent startup founder") encourage people to make sacrifices that they may not think about until it's too late. I think most people who chase the startup dream will regret it. I also think that there are other people, not founders on average, who benefit from these myths. So they should be treated with suspicion.
Children are a public good that funds everyone's retirement, no matter your political system and the people who don't have kids are basically free riders in the end.
In a libertarian perspective, the young create growth in the market that the ownership old use to fund their retirements, and in a socialist perspective, they create a tax base of income that the government uses to fund the retirements of the old.
On the other hand i think working corporate jobs is also still way overrated (even if it is maybe already rated low). Whenever I think this will be different i want to shoot myself after 1 or 2 months latest, working for a startup just is the lesser evil.
Yeah, I think I'd be utterly "half a bottle of gin a night" miserable working in the average corporate environment. It's hard to put my finger on the precise reason, but that kind of environment just has absolutely zero appeal to me even though I'd be earning a fair bit more.
Money's nice, but not hating your life is nicer. I'd make a rubbish Sisyphus.
_Having_ to work (instead of the privilege of working if you want on whatever you want) is the root of evils.
Startup life isn’t working on what I want, it’s agile firefight every sprint. Corporate life wasn’t working when I wanted, it was plowing through the day unproductive and unmotivated.
Early in my career, I wanted experience with as many parts of the business as possible, I wanted to work on really hard problems and build really cool stuff, and I could take risks.. I was young and perfectly comfortable with a bad work/life balance because I had no other commitments.
At this stage in my career, I value stability and work/life balance much more, and while I am still looking to solve hard problems, it's not at the urgent pace that startups demand, and how I define "hard problem" has changed too.
People work at startups because they want crazy hours and stress. It's fun. You get a bond with your coworkers that you can't get any other way.
If that doesn't appeal to you then yeah you shouldn't work at a startup. But tbh I've never met these mythical people who joined a startup thinking that it was actually a rational financial decision - everyone I know did it because they wanted an intense experience.
Little to argue with on the fundamentals here, but ending up in a place where everyone's winning move is to work for one of five unregulated monopolies is, ahem, a bummer, in a macro sense.
Hard to say which one's the worse place to be, hiding behind massive corporate walls or the ones hiding behind the " break it, apologize later" MO. The latter will not fare well in a corporate environment, unless backed up by managers.
I simply alternative the environments when I get a decent proposal. I have seen successful startups turning into Byzantine corporations pretty fast. Bad things start to not be fixed anymore, instead more manpower with less quality is thrown at the issue, this is one of the tell tale signs that it is time to go if you want to learn something else.
I have found that learning useful things on a job is more important than whether you are in a startup or in an established corporation.
The moment you stop learning and no promotion is in sight, promote yourself, by changing companies if need be.
I joined several startups in SF throughout my journey.
Took me forever to realize that not all levels of hard are the same:
- Working harder than most for 1% was not worth it. Small team comradery dissolved as soon as the company started going under. Sometimes founders screwed you over at the end. Nowadays I sometimes wonder why I worked so hard for other people's companies.
- Working for FAANG pays well, but golden handcuffs are not for everyone.
- Doing your own startup is super hard. Emotional roller coaster. It sucks all the time, until it doesn't.
All of these are hard, but the last one forces you to learn skills you wouldn't have cared for otherwise. Again, not for everyone, but if I had to pick my "level of hard", that would be it.
> sometimes wonder why I worked so hard for other people's companies
I have the same feeling. I'm working at FAANG now but I worked very hard when I was just starting my career for a small manufacturing company to create a e-commerce website. I can't work as hard as those days, I have a back problem and I'm much older now.
Fun story, I worked at as employee #3 or #4 or something at a startup many years ago, and it was fun at first, trying out various product ideas and strategies and pivoting a lot. Then the first serious funding crunch came, and the founder ran out of money to pay us, so we worked for a month without compensation.
Except during this unpaid period the founder took off to Costa Rica to "work on his vacation" while we continued to work in the office with delayed pay. He came from a wealthy background, while I had a young child and a pregnant wife at home and a mortgage to pay.
So he didn't really get it, I think, when I raised a stink. I was offered more stock options and a higher title to retain me (without that title being communicated to anybody else). But a mark was put on me for my whining and my attitude and the founder's attitude toward me took a turn. He pivoted again, and I was either fired or I quit (I was already interviewing elsewhere and had an offer) depending on who you talk to.
Through some hand waving the ability to buy the options disappeared, though I couldn't be bothered.
He built that business up, and a few years later he sold for an OK sum. But the business itself was dubious, I doubt the company that acquired his business kept any talent or tech worth anything and he's now living in Costa Rica. The people I know who worked there and were there from day one certainly didn't get rich.
So yeah, that's when my attitude towards startups in general changed significantly. I used to be very interested and motivated by being early in the process in a company and getting to be technically creative and involved in the decision making and architecture, and I loved the feeling of coding like crazy and really pounding metal on something greenfield. But honestly, it's not worth it when you start to see the kinds of people and egos involved.
So I'm getting older and maybe I'm not the ultimate talent that a startup today would be looking for, but there are plenty of other people like me who've been burned in this game and their advice would most likely be: don't bother. This isn't the 80s or 90s, you're not likely to change the world tech wise, and you're unlikely to get rich out of it, and jobs at FAANGs are soul sucking boredom in many ways, but they'll treat you well.
(FWIW I went from there to a later stage 50-100 person company that was acquired by Google a year later and did OK out of that, but that was a properly managed company run by ethical human beings.)
> acquired by Google a year later and did OK out of that
What does it mean to "do OK" in an acquisition by FAANG a year after you joined? I would assume if you didn't think a liquidity event was coming soon, this would be seen as a windfall (assuming you were retained).
It certainly was not expected, so it was nice. And yes, I'm still there, 9 years on. So I've done well for myself. I'm just saying, it's not like I got rich :-) Thing is, I liked the company before Google bought it. It was just the kind of small->medium sized company I enjoy working at.
Underpaid and overworked. That is what one gets out of startups. I unfortunately seem to be permanently stuck grinding for startups (10+ years). Don't do it to yourself. It isn't worth it.
You can join FAANG and similar. I've had almost nothing but failures on my resume and I was able to interview all the time. It's just about grinding LC and system design - which is really tough and time consuming.
I generally agree, having worked for a number of startups most of the concerns seem valid; however, there is a unique arrangement that has benefited me:
As a Canadian, I can generally make a higher wage working for an American startup than working for anything local. Usually I can expect 1.5x to 2x over the mean local rate for my skills and experience; and since I don't _need_ health benefits and I enjoy guaranteed parental leave and such, it works out quite well.
I'm happy, and the startup is happy because _I'm still paid less than an equivalent American_.
That's interesting. I've just started working for a Canadian startup based in Vancouver and the pay is actually "fair" Canadian market price for someone of my experience level.
Not sure if it's a difference in culture but my small team (a mix of Canadians and Americans) is super respectful of people's personal time. e.g. no texting during after-work hours even with tight and critical deadlines. You're also free to run a personal errand during work as long as you deliver on your tasks at the end of the day. And since it is an interesting work with lots of learning opportunities, a lower pay (compared to an American startup) is a nice trade-off for me if I get a more relaxed work environment. Although I'm sure this is not true of all startups in either country.
I'd love to connect with you and share experiences. Feel free to message me on Discord (Tag in my profile).
Yah there's another aspect to that, too, which is that American startups are in my experience better managed than in Canada and the investment and startup community far better in the US.
After working at a local startup it becomes clear that most of the founders all know each other, went to private school together, etc. etc. it's kinda gross. A bit over a decade ago I worked at one, had a bad experience, and then went to work for a New York HQ'd late stage startup -- higher pay, good management, decent people, decently managed, and was acquired by Google a year later.
I make it very simple. you don't work at a startup to maximize the size of your wallet (at least in the short term). straight up. most startups fail. most startups pay below market. you have to value the equity at 0 at all times till its actually worth something and then it simply is a nice (or very nice) bonus.
you only work for a startup if 2 conditions hold
1) the pay is sufficient for your needs (and this is not just in an immediate sense of making ends meet, but also a long term sense of being able to save for future goals / retirement).
2) the job is something you really want to do and you cannot get that experience elsewhere at a more established company.
i.e. if 2 doesn't hold, why would you take less pay than elsewhere?
if 1 doesn't hold, you are making a bad long term financial decision for yourself, by essentially accumulating an actual or virtual debt (need to makeup retirement contributions or other savings) that you will have to pay back in the future.
the #2 point can lead to earning more money in the long term even if the startup fails (i.e. the personal growth can outweigh experience you'd get elsewhere), but this is far from guaranteed. But even then, you shouldn't put yourself in "debt" to do that.
This reminds me of the recent post linked on HN about "why it's a bad idea to write books."
One thing I think people miss is that founding a startup, or working at an early-stage startup, belongs to a class of financially irrational aspirations that includes other things like rock-star, novelist, actor, and professional athlete. For all these careers, the financial rewards are distributed according to a power law. A few superstars take a massively disproportionate share of rewards while the expected ROI is negative across all aspirants.
I stress "financial" rewards because for many of these pursuits there are intangible rewards that make it worth it even for the "losers". I spent most of my 20s playing in rock bands and legitimately trying, and failing, to "make it". During that time I had a day job, so I was working constantly either at the band or at my day job, and really not doing much else. I wouldn't trade that time in my life for anything, despite the fact that it cost me money both out-of-pocket and in opportunity cost, and only perhaps a few hundred people now remember my band. On the other hand, I had no family to support during that time, and I was willing to live a low-rent bohemian lifestyle.
Early-stage startups are probably the same: the camaraderie, the esprit-de-corps, and the joy of building things are the reward.
It's important to enter into these risky pursuits with your eyes open and understand that the most important rewards you receive won't be financial. If those intangibles aren't important to you, or if the base level of financial security you need is higher than that of a bohemian lifestyle, then you should look for something else.
A friend of mine joined Snowflake (and rejected some FAANG offers) when it had ~40 engineers, i.e. when it could still well be called a "startup". He can literally retire after his options are fully vested, just 4 years after he joined (barring some catastrophic event to Snowflake withinin a couple of years' time horizon). AFAIK aiming for late-stage startups has been a common strategy for people trying to strike gold. Maybe it's less valid nowadays? But it doesn't seem to make sense to me to say that working for a startup is always worse than working for FAANG. "Overrated" it could be, and many startups, especially early-stage ones, suffer from a huge amount of uncertainty for people aiming for the liquidity event, which they may well underestimate. But I can't imagine anybody, by working at FAANG, getting the amount of money he is now projected to get.
Another interesting (and non-US-centric) factor for me is the flexibility a startup can offer in terms of your work and compensation, especially in an era where going remote seems to be an unstoppable trend. If the company is willing to pay all employees the same amount of salary, regardless of where they live in the world, it could be a no brainer for somebody not living in the US to work for such a startup. The salary they get can easily exceed Google L4 total pay (e.g. in the UK and in Germany, not to mention in most other countries). Of course, many companies such as GitLab aggressively adjust their salary according to where you work from, but I've seen more and more companies that don't. It will be very interesting to see how the market sorts itself out in a few years' time: Seems to me the proliferation of remote work could result in US salary and remote salary meeting somewhere in the middle.
I feel like all I hear about is how bad it is and FAANG is now the ideal. A crazy thought for a forum whose parent company’s sole income is generated by creating and funding new startups.
I only ever worked at startups, always one of the first employees. Different projects, from consumer stuff to enterprise computer vision tech. Most of those companies failed. One was a moderate success (~100M valuation), and when a liquidity event came I made a decent chunk of money.
I love small companies, I love the chaos, I love having that bond around some crazy idea that might never work. I love being in the know about how things work and why people buy our product and all of that.
I used to want to work at Google. I have a few friends that do and the common thing I hear is that it is fun at the beginning but then it gets boring. Things move slowly, people are less excited about work and there's a lot of red tape. Not saying that it's inherently bad, it's just a tradeoff. I could see myself being into that kind of work at some point in life.
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One thing that people often miss in these conversations is that if a company is failing it doesn't take a long time to figure it out. If you join a startup and it's tanking or you think the founders are incompetent, you can quit and go try another one. That's more or less what happened to me. I stayed for 2 months at one company, 8 months at another, one company I almost started with some people but quickly realized we'd fail because none of us knew the problem space. Then I worked at a successful startup for 5 years and we all made money.
Another reason to work at a startup is if you ever want to start your own company. Starting a company consists of doing a lot of different things, so it helps if you have some prior experience with them. I learned a ton of random things working at startups, from interacting with lawyers to doing content marketing. I recently started a company and I talk to other founders a lot and I think people who worked at startups before are better prepared compared to people who come out of large companies.
I heard that being an early startup employee is also a great way to fast-track to a leadership/management position, as compared to working at a big corporation. Is there any truth to that?
I think that is true in the case of the growth startup I work at; probably 25% of the leadership started out as early individual contributors, and if things go as expected over the next few weeks, I will be making my first big step toward leadership after just six months at the company.
I never had any internal career growth at other jobs in larger or more established orgs.
I think software engineering as a profession would be a lot better off, and a lot of people would be happier, if more people made sure they got some real variety in their first ten years or so. Work at a startup and at a FAANG (if you can). Work at a company that needs software developers but don't have that as their primary business. You'll be miserable and probably not last long, but it will give you perspective. Work at a hardware company. Try different markets, different technical specialties, different roles, different stages of development. Careers are long. You might be surprised at which combination ends up appealing to you, then you can spend the majority of your career being happier. Between greater ability to focus and all the contacts you made earlier, you'll probably climb higher in the end too.
The interesting point in this that resonated is the elephant in the room that no one is every addressing which is background. For 99% of people FAANG is out of reach... I am talking about globally. In fact that most of the people don't even get the chance to interview there and won't go through gatekeepers is what makes a lot of people go to startups. One of my best professional experiences was randomly joining a company with 0 revenue and going towards series A, opening offices in every continent. Did skills get me there? No... pure luck and wondering around the world searching for better opportunities with no-name school in 3rd world country and random career background where I knew in fact FAANG wouldn't every even spend more than a second on the resume.
We do indeed have better social benefits. But are they really benefits for a SWE in 2021? The social benefits in Europe are great for people with low-mid salaries but as an SWE, I'd rather take a US salary with less social benefits than a European salary.
Benefits for a SWE in the US are probably better so long as you stay one. (My medical benefits are better and cheaper than the universal ones in other countries I’m a citizen of.)
In retirement you might be better too. The US does have a lot of welfare, it’s just mainly targeted at the old and poor.
In my experience startups, equity NOT included, pay worse than big tech companies but better than non-tech companies. So if you can get into big tech companies then that's better financially but if you can't then startups beat the alternative.
I personally work for startups because I prefer building and owning big projects over maintaining someone else's cog in the corporate clocktower.
I'm not interested in working on the "retention" team, or the "console ad integration" team. I want to build the main thing and feel like I make an impact every day I go to work.
It is possible to do that at a larger business but the odds are stacked against me. Google has a history of killing large projects, and the thought of two years work being cancelled by an accountant because it didn't make enough money just sounds draining on a completely different emotional level.
The average engineer at a startup is far more likely to
work on something for two years that ends up being pointless, and canceled, by economics, when the entire startup fails.
Or even if the startup is successful, because no initial MVP survives 10x userbase growth. Every company I've ever worked for was constantly reworking parts of the codebase that were "good enough" 2-3 years ago but aren't anymore.
Are there VC firms that invest labor instead of direct capital? It seems they could have a group of amazing, employed devs ready to hit the ground running, then continue on if the VC firm continues to invest. They could train the next tier of tech talent when the company could pay more competitive salaries, then step back to go to the next investment. This VC firm could give real equity in the firm to the techies, meaning the technologist could also benefit in the upside of whatever unicorns the firm invested in...
I think that this is generally more common in PE (investing with both capital and key labor roles) than VC.
That said, good VCs often have vast formal and informal networks of folks they can tap to work with a specific start up. Whether that talent is reliably good or not is a different issue.
I've worked at several startups. If you are new to stock options, I think that the different ways those options can work and be diluted is the hardest part to grok. Personally, I never had to 'take a haircut in comp' to work at a startup, but I've had bad stock deals.
I would say that each of my startup experiences had some dark times, it wasn't always easy by any measure. At the same time, each of those experiences provided a lot of personal growth and opened other opportunities for me.
I worked at a startup about 10 years ago, and it was probably the most bureaucratic place I’ve ever worked. I was the 3rd employee, but my stock was negligible - incidentally the company wasn’t very transparent about this; When the offer was made they said, we’ll give you 5000 shares which sounded like a decent amount. I asked how many shares were issued and the guy replied just 7 million, but the important thing is how much each share will be worth (still 0). This is in London where this is probably quite common.
The sad thing was it was one of the most interesting places and domains I’ve worked, and if the company launched while I was there, it probably would have been acquired (like all our competitors). The founder was quite innovative but think was scared to launch and had a new idea/approach to market every few months. Eventually I lost faith, and being expected to work late every evening knowing my options were tiny killed all motivation.
As the author said, I calculated the expected value, decided it’s no longer worth it and left. The moment that changed my outlook was when they decided not to approve my leave (I had already booked and didn’t expect any issues since I had mentioned it in conversation a few months before). If I had stayed, I would haven’t enjoyed all the travelling and experiences I’ve had, earning more and working less.
The company is still going, and probably a long way off from having any exit. A few months after I left, some incompetent recruiter tried to hire me for my previous role at a £30k increase in salary.
Having said that, I would definitely join an early stage startup again, if the work was interesting, but would expect at least 1% and decent salary next time.
Most people I know working for a startup as an employee are doing it mainly because that was the job they could get at the time they were looking not because they were deliberately looking to join a startup. Whether it’s financially or emotionally optimal is usually secondary to basic survival or at least not wanting to have to deal with current tech hiring practices longer than one has to.
In my experience as a manager I’ve found that the two major motivating factors for most people are stability and vertical mobility, and that most people and organizations favor one at the expense of the other. Startups, especially early stage, are great for those who value the latter. You may not choose the opportunity for “two in the bush” but that’s the compensation some people want.
> Rather than being treated as rare phenomenal outliers, these unicorn companies are a necessity for venture capital funds to be successful. So when a startup takes those venture dollars, they are almost always going for a big exit, or they’ll be pressured by their investors to hyper-growth their way toward one. Extreme risk, extreme reward.
To expand on this: Venture capitalists are incentivized, by the nature of how they invest, to drive companies towards becoming unicorns and attempting the extreme-risk-extreme-reward scenario. If you put $10M towards a company, and it says "Great, we're stable and our employees are happy and productive and we're building the cool thing we wanted to build and we're about to get enough sales to break even" and it doesn't hire or grow, the investors won't see the $10M back for a very long time. That scenario is only slightly financially better than the company shutting down, and in practice, given that the investor needs to keep thinking about the company, being on its board, etc., it's not worth having that distraction.
So even if your company would be successful, if it's VC-funded, it's going to get pushed to be either hyper-successful or to fail.
And even if it's hyper-successful, it will probably experience mission drift. Early employees at Tiny Speck who wanted to build a neat MMORPG are probably very financially happy with Salesforce's acquisition of Slack, but all that remains of Glitch is a 404 page. (Read their shutdown announcement: https://www.glitchthegame.com/closing/) So if you're going into the startup because you're mission-driven instead of profit-driven, remember that the people who decide your mission are ultimately profit-driven.
I have only worked in the startup environment over the last 30 years. I don't miss the big company environment and what I see from my GF (FAANG, plus one F50 brick and mortar) just reinforces that.
But a lot of people choose startup jobs because they read (or saw on TV!) a romanticized version. As described in this article the very things that make it so great aren't the things that most people want...and if you try to blend in too much of the big company thing too early the company doesn't usually make it. It it much more fun to work with people who are really into that environment so anything that steers unhappy people away is better for everyone.
I worked with a guy who had an extreme version of this: his limit was about a dozen people. And looking at his linkedIn he's since worked at some amazing major companies....always at the very beginning. It's just his thing.
I firmly believe that one should never, ever take a pay cut to work at a startup. We've all heard the numbers, 80% of startups fail in the first year, by year 5 it's 90%. If you're taking a pay cut, you're not building savings for the inevitable thin times. When the startup fails, you're going to have a period of zero pay while you look for a new job. How long is that period going to be? If anything, one should be demanding more money.
And this is especially true if the field is one you're excited about working in. You're putting yourself at an emotional disadvantage. You're more likely to put up with missed paychecks because you're supposedly "working your dream job". And when you end up in a bad situation, if you don't have a cushion of cash to fall back on, it could very well sour your view of your "dream".
>When I first started learning about technology companies in college, someone showed me a video of Elon Musk buying a one-million-dollar McClaren supercar after selling his first company. The clip is a classic of startup lore. He states that three years prior he was “sleeping on the office floor,” and now here he is buying one of the world’s most luxurious vehicles.
I know an early employee at Zip2 who told me some amazing Elon Musk stories.
One of the stories relates to the quote aebove.
Elon Musk spent almost all his money on this McClaren - to the point he couldn't even afford the insurance on it.
But, this person claims it was an incredibly smart move - because it allowed Elon to start hanging with other super car owners, who were also the movers & shakers of SV at the time - like Jerry Yang, the CEO of Yahoo.
This network would prove invaluable to everything Elon did after Zip2.
A starving wolf asks a very well-fed dog what he should do to be bulky too. The dog advises him to put himself at the service of a human: the services rendered, he will be spoiled. The wolf then realizes that the dog has a wound where the human puts a leash on it. When he finds out that this injury is from the object depriving him of his freedom, he decides to run away with his freedom and return to the woods.
This animal fable opposes two animals similar in morphology but which have two different lifestyles: one is wild and the other is domestic. This confrontation allows La Fontaine to present two conditions: the insecurity linked to freedom and the comfort linked to servitude.
Onne important point of startups that pay less than established companies is that it is the best way to get into the industry by outsiders. Sure, if you can choose a FAANG or similarly sized company, startups are not a great bet at all.
But FAANG big as they are are a small fraction of the action.
This is a huge one, which won’t work in the best startups, but is a great strategy for someone trying to break in —- leverage a position at a cool tech, bad market fit, middling or even failing startup.
When my Mountain View startup disbanded, most of the team dispersed into Google, Facebook, Salesforce, and other large soon-to-IPO companies. Almost everyone ended up in a better place, and many of us would’ve had a hard time doing so before we joined.
I don't think the author is comparing apple to apples. Instead of contrasting joining startups and joining FAANGs, we should really compare joining top-notch startups with joining FAANGs. That is, just like good companies are scarce, so are good startups. Look back, and we can see that those who join square, pinterest, airbnb, uber (before early 2015), facebook (before its IPO) all did really well. By the way, Netflix circa 2008 was still in a sense a startup, as they were still being threatened by blockbuster and most doubted their streaming initiative and the company had fewer than 150 engineers.
Even those who joined Uber in 2016 or later got something back. Uber's success did give halo to its employees. As a result, many became senior managers or directors or staff engineers in other reputed companies, even though they had started their career only 3 or 4 years before.
The trick to land on a promising startup is taking sunken cost seriously. Switch to a different company decisively and swiftly once you are convinced that the company has a bad leadership. And trust me, there will be many signs. Take Uber after 2016, for instance, you would see 1. Head of HR reported to this hot-head VP, who was the buddy of the CEO; 2. CFO told employees that they RSU hold period was a year instead of 6 months and the reason is for employees' own good; 3. CEO told employees that he didn't want to go IPO simply because he didn't want the employees to check stock price all day. 4. Uber copies pretty much every policy from Amazon yet could execute well and everyone was launching project for promotion and the company had more than 800 services. 5. CEO forced managers to A/B test packages to see how low a package can go to hire people. 6. Company splurged 10s of millions hosting extravagant parties for 4 days straight in Vegas for bogus metrics like total number of trips; 7. HRs used number of people hired as the key metric to boast that Uber was the fastest-growing company.
See? When you see so much distrust from the top, you should just jump ship, and use the halo you get from UBER to land on a different top startup, whatever that is, and rinse (in case you ended up joining WeWork).
If you're good enough to get into Google/Facebook/someone who pays at that level at a good engineering salary level, going to work for a start up is probably a net lose. At least until you're far enough along to do your own startup.
The article is quite comprehensive and well written. There's also a lot of assumptions and false alternatives, like that people work to maximize financial outcome or that there's an equalprobable choice between working for startup or for FAANG.
My opinion is to try working for early stage startups while one is young and idealistic, choosing it by heart, thus maximizing its chances to success. Getting familiar with different techs and stacks. Getting a good networking while
visiting meetups and hackathons. Even if the startup won't fly, it will help to get much more interesting position in established company later.
Many of the things I think I would enjoy about working for a startup are actually the qualities I enjoy about working on a small team. Not at startups retain the small team mentality for long. Not all small teams are at startups.
Plenty of large companies build small teams for new ideas but they too have the problem of often not staying small for long. Empire building is a hell of a drug. But you can often see this coming and I’ve known a couple people who were very good at moving horizontally within a company every few years to avoid most of these sorts of problems.
> Say you have a 2% chance of picking a unicorn and being a member of the founding team. That 2% is honestly way too high for most people, and perhaps a bit low for others, but a good median to anchor on. $10M * 2% = $200K. And realistically you’re only going to get that this tranche of equity every 3-4 years at most, so that’s a risk-adjusted value of $50–$66k.
I didn't understand this math, 2% is the chance of it being a unicorn. 1% of 1B is 10M is the amount you might get if the startup sells for 1B. what does 2% of 10M signify?
$200k is your expected equity payoff if you have a 2% chance that your equity is going to be worth $10M and a 98% chance that it's going to be worthless, which is the simplified model used in that back-of-the-envelope calculation
Great article. One point it kind of touches on but misses is the higher risk of “growing pains” / incompetence in startup land. Leadership, processes (lack there of) etc can all be lacking / poor. Anything from poor strategic judgement to shitting the bed on equity valuation (eg I once joined a “rocket ship” that valued its shares at $50 a piece. I realize of course share price is a function of outstanding shares but given startups want to minimize their share price, it didn’t seem well managed at all)
Sad to see articles like this. Just because startups aren't for you, it doesn't mean it's not for everyone. Consider that all great companies today were startups sometime ago, I consider startups in tech are a majority source of innovation and disruption. Yes joining a startup is risky, and it may not justify the effort if all your focus is the financial return. But some ones will have to do it, make better products or services, and enable others to do even greater things.
I did it, took a lot of risk and it has paid off somewhat.
I chose to work at an early stage startup, in my home country (which is known to be adverse to entrepreneurship), in a very monopolized market, even though I could’ve easily moved abroad and joined a big company.
Despite all the odds it worked out for me financially and I’m proud of what we achieved, but I realize it was basically gambling.
My advice is to take a shot at it if you’re young, but try to aim on ambitious startups so you can balance the slim odds with huge potential upside.
My expectation is that the total compensation i receive from any employer is limited to salary per paycheck, health benefits, maybe retirement matching, and that is it, startup or no.
This makes me think of the composition fallacy[0]. There is another, more specific, term called the "apex fallacy". The idea is that people have a tendency to see only the most successful representatives of a particular group and infer that the group as a whole has an advantage.
The author also fails to mention the stock option trap.
I've seen offers at early state companies like this:
* $150k base (take-home $100k)
* $30k/yr options that expire 3 months after you leave or 10 years.
You have to either set aside 30% of your take-home to invest in a extremely high risk single stock or you're chained to your desk until the company exits.
If you golden handcuff your way to an exit, you better hope the exit happens before the 10 year mark when your options expire.
Startups shouldn’t be romanticized so much, but it can be a good job.
A good startup experience can help you figure out what you really like to work on. In a big company things are already specialized — it’s pretty hard to be a data engineer and move over to the android team. Not impossible, but hard. That’s why people say you go to startups to “learn” — because in our line of work you learn by doing and in a startup you can usually do a lot.
I don’t think you’re doing it right if you’re going to work in a startup out of a desire for enormous riches. The odds are tiny that you’ll end up better off financially than you would working for Google and collecting huge RSUs.
Do it because the startup excites you, and be okay with things if the startup fails and you are out of a job. Because the economics likely won’t work out, you’ll have to derive value in other ways.
My son was part of a >$300M buyout. His half-percent netted him some hundred thousand. Didn't make up for the lower salary at a startup for the couple of years. The schemes VC's and founders use to skim all the fat are legion.
He's now starting his own company, doing something socially useful that he can be proud of. Got a good team and making good progress. Will see MVP in a couple months!
In the best of circumstances working for a startup is akin to playing the lottery. I worked at a startup almost a decade ago and I took (nearly) no equity in exchange for a much higher salary. The startup failed not long after I left.
If you just want the experience of working at a startup, go for it. But don't do it expecting any financial reward beyond of your salary.
If you want to learn a lot, get a sense of startup, have great founders, bootstrapped company then startup is a good idea. Especially at the start of your career.
But if you are late in your career with family, responsibilities and health issues - then startup isn't the best place to work.
I hope - you decide weighing everything and enjoy the process.
I got out from the last startup. Started sleeping better immediately when I knew I was about to sign the termination. Founders wanted to be famous & millionaires and there was no meaning to be found.
The pay wasn't a critical thing in my suffering. Now I'm making a third less and feeling ten times better.
One of the biggest risks for a startup is becoming a consulting firm. Once you do that, you won't be able to scale up. Been there, done that.
That's why the FAANGs are so successful - they have millions of clients, without a single one who could control their destiny.
The best way to value startup equity is based on their last valuation. Then you can quickly compare the offer apples to apples to cash offers. Obviously startups don't like this when you figure out the 50k shares they offer you is only worth $10k a year at current valuation.
If you don't want to work for a startup, then don't.
Many people find value in the experience whether we got paid or not. I'd rather work my ass off for a startup than spend money on an MBA.
I've been a part of five startups. One of them (and the financial collapse) resulted in ruining me financially in 2009, but it was my choice. No one told me to take the job.
Three were mine (two failed, one is in hypothesis mode). The other was with a millionaire and it also failed. I learned to look at things differently because of all of those experiences and my value as a consultant today is because of those experiences.
I know you can get screwed over by sketchy founders and unscrupulous venture capitalists. You should absolutely understand where you stand going in. Stock options are 100% worthless unless you have a startup that succeeds and you have a founder that is honest in their intentions. Even real equity can be diluted, so that's no guarantee.
But there are always cases where the first few hundred employees make a life's worth of wealth in a few years.
I hate these articles bitching about the startup world. If you're gonna bitch, maybe go take a job at a nice safe boring mega-corporation that will maybe just destroy your soul. You'll get paid on time and you'll work 40hr weeks, have PTO, health benefits. If that's what you want, then just go do that.
One of the key issue is that most people do not know or understand how the equity piece works, leaving the door opened for abuse.
It doesn't have to be complicated. Two things to check if one is granted equity or options:
- What is the rough value of the stock when granted? 409A is the tool for that although it is usually quite conservative, which is good for the recipient.
- Do I have the same class of stock as management/founders: ensures no funny business around dilution.
What about ownership? In a startup individuals can and often do take charge of a piece of business, be it technical or marketing or others, but in an existing business you won't have much ownership unless you start from the beginning (i.e. as a startup).
If the whole c level does not work the same hours and the reward is not reasonably near the horizon and the extra time is not compensated, then you are being exploited, will never see a reward materialize and your salary is diluted.
I would love to see more small-ish companies in a niche with a good product, and competent people that are maybe slowly growing, but not on the rocket ship ride. That kind of environment has always felt like a place where you can get good work done.
Exactly! But it could be that a company like that is just really hard to run now. Investment very difficult to get and potential talent eaten up by FAANGs.
Between working for a startup and a corp, I can't say I have massive emotions either way now. I'd definitely suggest working for a startup at one point, but not for too long, while taking care of your physical and emotional state.
It's way easier to build up experience and get your hands on impressive projects than at behemoth corporations. FAANG is not what it's all cracked up to be for 95% of people joining these days
The article is good but it’s missing a big point that equity in startups is tied to risk taken not to contributions.
Many people, including myself, make this mistake the first round at startups. The mistake of believing if you work hard the outcome will be good. I wrote an article a little while back on how this relationship works and how it follows a logarithmic and exponential relationship, risk and equity, and how human minds are terrible at understanding those scales.
Depends if the employee has signed an options agreement and those options have been approved by the board.
At a recent gig I started up a few weeks before an exit. My options had not yet officially been granted by the board. My company granted my equity but they didn't have to.
Stories like this make me glad my company has yet to accept VC money.
We're a five-person legal tech startup and the work environment is far and away the best I've ever experienced. Granted, I've only been a developer in total for four or five years now (including almost three here), but of all the jobs I've had it's the best.
My CTO/supervisor is amazing: smart, funny, likable and with a management style that works for me amazingly well. Mostly hands off, but fully available for deep dives on technical subjects when necessary. At this point I've earned enough trust to be able to just get shit done with minimal oversight, though we do check in daily at least, and keep each other apprised of what we're up to, or interesting things we've come across.
The lack of external forcing agents is probably a win for us at this point. Obviously there's benefits to having a pile of money to burn: we'd probably hire several more developers and really work to hone our product. But for a team with two full-time developers and a really great designer, not to mention extremely smart and talented leadership and sales teams, we're doing great, and ship features at a pace that seems to put to shame similar companies with much larger teams and far more money. Honestly, I have no idea what they're doing with their time.
Still working on that product-market fit though...
The key thing I recommend is to *prioritize who you want to work for* (or have as clients). People who will care about your well-being. Find what they need and try to match your skills.
I had my own startup at some time, and worked for both other people's startups and for big corps. I used to maximize career and CV over quality of life. I was easy prey to assholes/takers/sociopaths. Burned 15 years of my life without much to show. On the upside, I really appreciate now working for good bosses and good leaders. I could easily earn 1.5-2x in a soulless corporate job. But I know my current employer would go out of its way to try to not screw me over while the 2x employer will throw me under the bus the second I stop being useful.
You can study or do research on your spare time. Good bosses will understand if you eventually move on. And some might even help you progress against their convenience.
I’ve worked the whole gamut from FAANG to 1st employee (and founder of a side project startup) and I just don’t know how they compete anymore.
We need innovation and new companies.
But for my own side project I can’t imagine hiring someone. I either are hiring if we become wildly successful or we just get acquired with our founding team and still make an outsized outcome.
I was just musing about how the definition of 'startup' has changed. I've worked in a couple plus a few post-startup small companies, but they always involved a fairly expensive piece of boutique hardware. At best, stock options might mean a decent bonus after a few years and you work as long as they pay you. You take the job because it's interesting and because it's more fun to lay track than to fix it. Using folding tables is always better than dealing with some middle managers three ring binder of yearly performance review.
Seriously, just how many startups in the last ten+ years involve anything but some sort of internet service/social media/advertising software construct with (usually) the hope of selling the company? It all sounds kind of depressing.
Yes, for sure, back in the 90s I fantasized about getting to work for a company like that. Just working on really neat tech, and getting to have some creative input and some technical excitement. I'm sure companies like this exist still, but the term "startup" and the investment around it seems to have been swallowed up into the kinds of things you mention.
Looking around, I've been really blessed by putting together a full career of that very sort of thing.
Some things you have to watch, especially if you are selling domain knowledge as an employee, is that products in a given subindustry will tend to become cheaper/higher volume/lower margin over time, the push for Asian manufacture always becomes a reality, and as companies age they acquire the anchor of supporting and repeating old products.
The more and apt comparison would be if you should work at a startup vs. a corporate job at a HP or Qualcomm. At those type of companies, compensation is not competitive (they often off-shore), benefits are tight, and the work is not interesting. It could very well be argued that a startup, even with high probability of failure, would be more fulfilling.