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Benefits matter, or why I won't work for your Y Combinator startup (mhalligan.com)
550 points by angryasian on March 20, 2013 | hide | past | favorite | 353 comments

From a UK perspective - this post is nuts! I've worked with a few London based startups (and interviewed for several).

Holiday 28 days minimum - as per law https://www.gov.uk/holiday-entitlement-rights/entitlement

Rarely offered health care but - for all its flaws - our National Health Service is pretty good.

Shares - yup, they're almost always going to be worthless.

Pension - every company has offered me at least 5% matched pension - some more. The Government is mandating that even small employers will have to put you in a pension scheme soon - which is good.

"Soft" benefits like gym membership / conferences / etc depend very much on how confident the business is in itself. If it can afford them, it likely will - because they know that people can get them at mega-corps.

Pay - ah, there's the kicker. Yes, most startups try to save on the salary costs. Usually they get a pretty rude awakening when they try to hire someone with more than 5 minutes' experience. So they try to make it better with "up-titling". I could have been "Global Head of X" at a company barely looking at sales outside the city.

Joining a start-up is fun. But, like a pyramid scheme, you've got to get in early if you want to reap the share bonanza benefits.

I do wonder why the UK scene doesn't seem quite so vibrant - especially as healthcare costs (which I understand to be the biggest burden in the US) are essentially nil.

Things the UK lacks:

A culture that promotes self-actualization and risk-taking at the expense of your family or future family.


Centralized (location) and relatively easy to access angel money. Don't talk to me about the VC in London, nobody cares. It's an insider's club. I can walk out the door today and start bumping my side project for seed money (Mountain View). I can't do that in London.

Strong culture of entrepreneurship in alumni organizations (Stanford LOVES this stuff)

Lots of high quality incubators besides YC (my last startup I served as CTO at incubated at StartX)


You're not going to get me to move to the UK unless there's an aggressive visa program and seed money involved.

> Don't talk to me about the VC in London, nobody cares. It's an insider's club. I can walk out the door today and start bumping my side project for seed money (Mountain View). I can't do that in London.

Silicon Valley VC money is a tiny speck compared to the money flowing through the capital markets of The City. So that begs the question: why is it harder to just walk out the door and round up seed money in London?

Rich money managers are not good angel investors. Slow to act, risk averse, no value add.

London has plenty of rich people, but they're usually old money heirs, or Russians/Middle-Easterners/etc. who didn't make money from tech, or people who work in the City. Not people who got rich by being employee 1-500 at Google, Yahoo, eBay, etc.

The City doesn't understand tech. Never has.

(Frankly, UK banks are obsessed with property, which is one of the things that holds back the UK economy: small business lending in the UK is throttled by growth in house prices because the only reliable way for small business startups to raise seed capital is by mortgaging their personal property. Hence a stop-go economy which lurches between over-expansion and contraction as the property market goes from boom to bust.)

I do wonder why the UK scene doesn't seem quite so vibrant

You just go through a list of state-required benefits or drains on individual risk taking and then you wonder at why the startup scene isn't quite so vibrant?

Risk taking requires the ability to... uh... take risks.

AFAIK Israel has more startups per capita than any other country in the world, but the legally mandated benefits are very similar to those in the UK (with slightly less vacation time).

Actually, I think some form of social safety net is supportive of very entrepreneurs. From personal experience, the only people I know who quit their job to work full time on a startup had significant savings from previous jobs. Also it's quite common in Israel to start working on your startup while getting unemployment benefits.

The difference between the UK startup scene & SF has nothing to do with benefits & everything to do with investor culture IMO.

>Pension - every company has offered me at least 5% matched pension - some more. The Government is mandating that even small employers will have to put you in a pension scheme soon - which is good.

Not really. Accounting for pensions requires the ability to project economic and biological conditions 20-40 years into the future. Humans aren't capable of this yet, and it results in dealing with fudged numbers (see the myriad pension funding crises around the world).

Another problem with pensions is that they are unaffordable. If they were affordable then you would see private companies offering annuities for sale, for as cheap as what pension actuaries "project" the cost to be. But it's far, far more expensive to buy yourself an annuity, because of tighter regulations in the private insurance market.

Finally, there is no reason to tie up your future with one employer, or the employer's future with old employees. If you want a pension, fine, demand $5,000 cash so you can buy yourself an annuity. But why someone would trust an anonymous person 20 years in the future with their compensation is beyond me. Your pension money can be gambled with, get lost due to corruption, or because it's all invested in the same funds in public companies, required government bailouts of private markets (see 2008 stock market crash).

edent was talking about DC pensions and not DB so DC is afordable.

And the Uk has some nice tax breaks for pensions tax relief at your highest rate of tax plus over $20k capita gains tax allowance per year. and you can shelter £12k every year from tax in ISA's

Even the basic share save is very tax efficient I know people who made $50k from a sing years share save at a big uk company - and thats the one everyone from the lowest clerical assistant gets.

Aren't the salaries in the UK horrendously low? The March Who is Hiring had a job in the UK with a 22-24K salary range. Source: https://news.ycombinator.com/item?id=5305245

Salaries in the UK are lower than the Bay Area, but I wouldn't say they're "horrendously low". I can see why that ad would make you think that, though: it really is absurdly low for London, but I don't think it's representative.

Sadly, in Dickensian Britain, a .Net developer is worth the princely sum of £1 a day, while a Python/Django expert can at best hope for £600 a year!

http://i.imgur.com/3Aw8oop.png (genuine screenshot from the Independent, a British newspaper)

On the flip side, I've seen insane (from a US standpoint) rules on vesting at UK startups, like "the company gets all your options back if you leave."

Don't know if this is SOP or not.

I can't name the company, but this isn't limited to the UK. It's found in other countries too. Maybe there's too much history/tradition/peer-pressure/competition in the States for this kind of arrangement to fly.

I'd immediately bolt for the door if someone demanded such a structure on me.

Smaller Norwegian companies which offer shares to employees often have a "if you quit within 5 years, the company is allowed to buy all your shares back at the price they were when you received them" clause, or something similar. Obviously you'll only get sub-par or naïve people with such a policy.

You will probably find that some companies tries that regardless of where they are located. I doubt it is unique for any specific country.

imo I assign ownership of such policies to the founder(s) specifically rather than the nebulous concept of "companies".

Good point.

Depends on the scheme. I was even allowed to vest mine early when I left BT and latterly Reed Elsevier - I even get to pump another 6 months into the Elsevier one. My options at 4.10 REL is currently 7.65

What you don't get is the insane tax liability on worthless shares which the USA has. In the UK you only pay tax on a gain -after subtracting your Capital Gains allowance

> especially as healthcare costs (which I understand to be the biggest burden in the US) are essentially nil

They're not nil, that expense just isn't optional (taxes). It's the risk of an individual to find himself with no health care that's essentially nil.

The UK will be in recession in < 1 year.

Oh. My. God. Get me to the UK now.

The problem here I think is the disparity between being the last cofounder (15-30% equity before dilution typically) and being the first employee (1-2%) vs working for a more established company. If you compare the compensation for being an early employee in such a startup with working for an established company (eg Google, Facebook) then I think you'll find the employee of the latter will be better off in the long term 95% of the time and by a significant margin (disclaimer: I work for Google).

Now some people and some ideas can genuinely attract people to work for peanuts. I remember hearing about Square, then valued at $40m with their first round of funding (IIRC) and thinking "man I'd give anything to work for them" given the idea and the track record (Jack Dorsey basically).

The problem I think is that many startups think they have this kind of cachet just because they worked for Facebook in 2006. Social proof counts for something but it doesn't make you a great entrepreneur. Being a great entrepreneur makes you a great entrepreneur and that means running some kind of company that had some kind of impact (and, ideally, some significant exit).

Startups aren't for financial security. They are for the frontiermen who are hoping to strike it rich in the gold rush. Most don't but some do.

To the OP: you make very valid points and given your circumstances and preferences (and mine FWIW), I agree: working for an established company will give you a far better expected financial outcome at lower risk.

EDIT: I should clarify that there are of course non-financial reasons to work for a small startup. Less bureaucracy, it can be exciting, variety of work, degree of impact and so on.

A lot of people are willing to make those tradeoffs and sacrifice some financial return for the privilege. This isn't unique to the startup world. Games programmers, for example, typically get paid crap (until you get to be the lead developer on a big title and get a % of the revenue, etc).

All of this is simply supply and demand.

That all being said, living without health insurance in the US is incredibly risky. Generally only large employers have the clout to negotiate good plans with providers for reasonable premiums.

The other stuff (extra PTO, conferences especially, etc) are more luxuries than necessities but they do of course contribute to the overall financial outcome.

> Startups aren't for financial security. They are for the frontiermen who are hoping to strike it rich in the gold rush. Most don't but some do.

I think you mean "Founding a startup is for the frontiermen..." Being an employee is not. Being an employee is a losing proposition far more often than the 95% you cited.

It's a losing proposition, financially speaking. But it sure is a lot more fun and satisfying working at a startup than a large corporation.

Although there aren't tangible or financial benefits for working at a startup, there are definitely benefits that a large company simply can't provide, like experience and independence. For someone in their early 20's straight out of college, those benefits can outweigh the financial benefits of a big company.

It's a losing proposition, financially speaking. But it sure is a lot more fun and satisfying working at a startup than a large corporation.

Maybe. However, I think most us know people that love working for Apple, Facebook, Microsoft, Google, et al.

Frankly, I think your independence claim is overstated—financial support is crucial. Shigeru Miyamoto emphasized this perspective in a 2012 New Yorker profile: “There’s a big difference between the money you receive personally from the company and the money you can use in your job.”


There’re many reasons to found a startup, very few to work for one.

There’re many reasons to found a startup, very few to work for one.

There are good startups out there. I'm almost notorious for startup-bashing because so many of them have awful cultures, but there are decent small/new companies out there. You'll probably have to look outside of VC-istan. VC-istan seems to appeal to the Clueless (see: MacLeod hierarchy) young who will jump at the chance to work "at a startup!" without discrimination.

I know someone who's actually looking at building a startup without equity. He will hold 100% of the stock, at least at first. Variable pay will be profit-sharing. He wants this company to last 20+ years without acquisition, so instead of putting the focus on a future cash-out, he wants people to be rewarded continually for good work.

I think that, as a young engineer, you also have to ask yourself why you want to work at a start-up. Is it to get rich? In that case you should be working somewhere that can teach you the ropes on your way to launching your own start-up (and even then you might be better served working somewhere you can get some domain expertise to separate you from all the fresh college grads). Is it to learn a lot and get a lot of responsibility? In that case you might consider small engineering firms that have moved out of the start-up stage and have real revenues coming in and can offer market salaries and full benefits. You won't get meaningful equity at a place like this, but you won't get that at most start-ups either. If you want to get in on the ground level of a growing organization, consider companies that aren't going the usual angel/VC route. I worked at a "out of the founder's basement" start-up that had some cost-plus contracts, and so could offer market salaries and benefits immediately. Again, no real equity in a situation like that, but on the flip side you know you'll still have a job in a year. And don't overlook working at a big faceless corporation just because it's not cool. Big organizations have the resources to actually train you, they have internal tracks for your career progression, they offer pretty good job security, etc.

How's he doing with that offer? Is he at least paying market salary?

He hasn't started it yet. He's bootstrapping. He plans on paying market to slightly above, and being generous with annual bonuses (the profit-sharing).

Wall Street gets a bad rap for its bonuses, and there are some cultural problems with it, but it's a better mechanism for compensation than what VC-istan uses. Also, I think that Wall Street culture is less horrible than VC-istan. On Wall Street, some people get butthurt about their bonuses, but you don't have teams of 15 programmers where every single one is trying to become VP/Eng and get a real slice.

I've read a lot of your writing and agree with some of it.

Bootstrapping is attractive, but it's very hard to do. Also, as misguided as employee equity grants might be, it has become the standard for compensation in SV; that a company doesn't offer some token ownership definitely will make it harder to hire.

I think it really boils down to, if you want to take part in "VC-istan" as a founder/employee, move to SF, if not, go somewhere else, because it's just too hard to hire/hold down an office/live in SF on bootstrapping.

The 2009 post by Mark Sussman, "Is it Time for You to Earn or Learn?" comes to mind (I think it was recently reposted to HN)

[1] http://www.bothsidesofthetable.com/2009/11/04/is-it-time-for...

It sounds like being an employee at a stereotypical startup is like being a native bearer in an African expedition movie from the fifties.

> working for an established company will give you a far better expected financial outcome at lower risk.

Tiny, tiny nit: that final phrase is redundant. Calculating an expected financial outcome includes the risk.

Agree with everything you're saying.

The risk also needs to be considered separately, though. For example, which of these is better compensation?



Each year, there is a 0.1% chance that you will be paid $1 billion.

Simple math tells us that the second one has a 10x higher expected financial outcome. But few people would actually consider that to be better compensation. Lower risk is better, to an extent that can outweigh a higher expected financial outcome.

If you get both a better expected outcome and lower risk, that's two benefits, not just one.

I think once you take into account our relatively short biological lifespans (and the subsets of them in which we are healthy and fit to do whatever we like even shorter), the second option just doesn't make any sense for most people. There is value in having $100k now.

However the expected value may be that much, you are not "rolled" for that outcome. You have one life not a distribution of lives.

I'm not sure if it's safety, or a knowledge that risk assessment also has to take into account the risk that your assessment is wrong. How can anyone make a prediction of any 0.1% chance? The accuracy of the information going into combines in all sorts of horrible ways, and not likely to your advantage. There's no hypothetical in which that chance would make sense, in which it would be calculable and accurate, so instead we intuitively mark it as simply foolishly optimistic belief.

Plus, if you really did have solid odds, you could sell those odds, i.e., have someone invest in you.

I'm sorry, but there is a 0% chance that an employee will be paid $1 billion. An employee is just a hired hand and has zero control and zero information about how money is being distributed. Once that kind of money is on the table, there would certainly be some way for people controlling the company to change that outcome, so an employee will never see that kind of money. And it will be done. Just business. Nothing personal.

That sort of thing is called a "hypothetical". It's not intended to be a realistic scenario.

Well that's the whole point - the realistic numbers are more like a choice where you (A) receive $100k now; or (B) receive a 1% chance of 5 million; where the (B) option is worse in all aspects, both higher risk and lower expected value.

It's not redundant. It's true that you use risk in calculating an expected financial outcome, but that doesn't mean that a better expected financial outcome has lower risk. You can have a better expected financial outcome at higher risk, in which case it may be a worse option if you have lower risk tolerance, despite the better expected financial outcome!

I clicked through to his LinkedIn resume (always on the look out for solid DevOps types).

I think it is great that Michael understands exactly what he wants in terms of a compensation package. And for a variety of reasons, its pretty clear that a "startup" isn't going to meet those needs. So he's currently "Contractor at Self-Employed" which is also fine because you really do have a lot of flexibility as a contractor that you don't have as a rank-and-file employee at BigCo.

But the anger and the hurt, that is not healthy.

The impression that rant leaves me with is that Michael feels he brings great value to the organization, and wants to be compensated commensurately with that value. And yet nobody has agreed to his terms. It may be they can't (reading his list is a lot of capital to invest in a single employee), it may be they disagree about value, or it may be they have structural issues around it (managing the expectations of other employees, Etc.) The "shut up and pay me what I'm worth" mantra is not a healthy internal dialog, it instantly makes you enemies with the very person you're trying to be friends with, the guy with the job. Worse it focuses your effort on the wrong question.

Lets use a very simple analogy for how this can go wrong. Lets say you own a bicycle, and one of the tires has a slow leak. You go into an "inflation" store and the sales guy has really nice compressors, they've got pressure values that are accurate to within 1/10th PSI, they have valves to deliver exactly the right amount of inflation, large multi-gallon storage tanks to deliver air efficiently and on time, and valves, a most wondrous universal valving system that pretty much guarantees you will never have a tire that this thing can't inflate. All for the low low price of $899. And the bike rider says, "I really just need a hand pump, I'm prepared to pay $25 for it..."

Now is our consumer some ignorant boob that can't see the value of a truly fine tire inflation apparatus? No. And the sales guy shouldn't get mad if the customer isn't willing to over pay so much to achieve their goal of keeping a leaky tire from going flat.

The key is that it isn't that the tire inflator isn't "worth" the money, its that the problem isn't worth the inflater's price. It would work, but the extra cost doesn't bring extra value.

So Michael's rant might be he cannot find a company yet that has the size problems that he can solve. No doubt there are such companies, but the larger the problem size, the harder it is to connect with the person who is looking.

Some folks take the path of being 'under employed' to get at least some benefits while they seek out the right spot, some start their own thing, but yelling at the YC founders and insinuating that their goal in life is to fleece their employees in the pursuit of their own success does Michael a disservice.

>> reading his list is a lot of capital to invest in a single employee

That single employee with his background represents millions of dollars per year in revenue, he should be asking for more and you should get a clue.

Did you read his rant? He's currently self employed and interviewing. I am not unsympathetic to his cause, or his angst. But I don't understand your assertion that he should be asking for even more compensation than he is, how does asking for even more salary helps him out here, could you say more about that? What exactly would be different if I were "more clued" ?

If I were him, I would quickly delete his post. That post is likely to give pause to many potential employers.

For what it's worth, I have 18 years experience, and I'm working very, very happily for a YC 09 company. I'm fairly old school in my thinking, and I've been through the Bust, so I've seen perks come and go. I just want a fair salary, good colleagues, a boss that cares, and interesting and challenging work. Perks are nice, but I don't feel entitled to any.

Actually, the first perk in my career that I have completely head-over-heels loved is our ZeroCater lunch service. I really look forward to lunch every single day.

From my reading of the article it says he's actually got an offer on the table from another company, who have done the right thing. It might give pause to many potential employers, but those aren't the employers that he wants anyway.

Based on how he's valuing his PTO, he's valuing his time at either $328, $218, or $447 per diem.

I hope he's not valuing his PTO based on the salary he's getting.

I'm a 24 year old with no college degree and I currently cost about $800 per day on contract. (Not hypothetical, billing at that rate right now.) I'd rather make twice as much money consulting, pick my own damn healthcare plan, go to whatever conferences I want without asking^H^H^H^H^H^Hbegging, and stash that much more money towards runway.

I just left a YC company myself. I would only work for a YC company because it was time for me to learn, it no longer is.

It's time for me to earn, so I'll contract until I get a business rolling.

If you approach working at a YC company like a piker, you're going to be disappointed. It's an opportunity to build up a network and learn how startups work so that you can eventually do your own thing. (IMHO anyway)

Employee equity is consistently pathetic. Not worth it.

It also doesn't seem like he's asking for what he wants. Does he not know how to negotiate? Tell the YC founders what you want.

People are really bad at getting what they want unless it's offered to them on a silver platter.

Edit: The whole post, frankly, seems like an advertisement for his irrationality with regards to the expected value of perks.

As a contractor, if you're taking in 800 dollars a day, and buying your own health insurance, you are not taking in 800 dollars a day. In fact, your take home pay is probably less than his (at least on the high-end of the per-diem).

1. You're paying a higher marginal tax rate on your earnings than he is on his salary. Self-employment tax is a real bitch.

2. If you're buying your own health insurance, the benefits you get for the price are undoubtable lower than the benefits he gets with his (paid for) package, or you're paying through the nose. "Group plans" are generally better, and cheaper, than individual plans.

3. Should something terrible happen to you, or should you fail to find work for awhile, you are not eligible for unemployment.

I see lots of folks swear by "being a contractor" when they're young, only to start searching for a salaried position after a few bad experiences.

When I took over my company, the absolute first thing I did was switch every "contractor" to a full-time employee. It's better for both parties.

I've been contracting for a long time, I know the risks and it's not just about the money. It's about the self ownership.

Of course it's better for the company, they want the ability to coerce the employee and hold their livelihood/healthcare hostage.

With my arrangement, I keep the same healthcare plan no matter who I'm working for or what I'm doing.


You can basically always keep your health insurance. You just have to pay a higher premium than your employer paid for it. They aren't "holding your health care hostage", they're given you a benefit of being a part of a group; a risk pool insurance companies are willing to give discounted rates to. Get fired, or quit? Just call the insurance company and ask what it'd cost to keep your coverage as is. There's generally ALWAYS an individual plan available with the exact same benefit levels.

Health insurance used to be a hostage game due primarily to pre-existing conditions. That's becoming less of an issue thanks to new laws (and if you were employable, was never much of an issue anyway).

However, I did not mean "just" insurance. Contractor arrangements are terrible for both the contractor and the company, in the long run.

I didn't mean just insurance either.

Independence and the ability to come and go as I please is more valuable to me than whatever risk/reward calculation you're working with in your head.

Eh. Personally, I was a contractor for a long time, and I realized that the whole "independent" thing was total BS.

1. I was never independent. I had a "client", or a "contractor", I was obligated to fulfill. I only got paid if I did so, and I only got more contract jobs if I did a good job.

2. When one contract was over, I had to run out and find another one. While doing so, I was making exactly nothing. If I timed things right, I'd go from one contract to another, but that's not always possible, so I'd have a week or so of dead time where I should have been making money, but didn't.

3. If I was sick, there wasn't a team of structure in place to deal with it. I was sick. I didn't get paid. It sucked. Often it meant I had to do double-shift days to make up the lost time.

4. There was absolutely no "reward". There was just a steady, sometimes unsteady, stream of money, which worked out to about what I'd make salaried somewhere after I factor in everything.

5. As a salaried employee, I was still completely free to quit. No one could "make" me stay at a job I hated. And there aren't many (if any) legal ramifications of doing so. However, as a contractor, I might have a legal obligation (literally a contract), and the client had a completely valid way to sue me if I broke contract by not completing the work. Some clients demanded real contracts for long-term projects, and that absolutely sucked.

6. Founder spend payroll? Great. Contract abruptly ended. Scramble to find more work, no idea when I'll get paid for the money they already owe.

Being a contractor doesn't make you free or independent in any way that a salaried employee isn't.

The only way it works out is if you turn yourself into a business, and hire other people. That's basically what I did, and even now, I'm not really independent. I have employees/clients counting on me.

The only real "independence" comes from wealth that isn't generated or dependent on labor.

I prefer working with clients to having a boss. I prefer having customers to having a client. You're always answerable to someone or something, even if it's begging daddy to refill that trust fund.

I add 2 months of runway for each week I work. Not exactly a big deal.

>Often it meant I had to do double-shift days to make up the lost time.

I'm starting to develop a picture of you under-billing, if you felt obligated to do so.

>There was absolutely no "reward"

Can we just get to the part where we recognize we value different things and move on?

>As a salaried employee, I was still completely free to quit.

Except for the part where if you're the type of person to prefer working on 5, 10, or 15 different things a year as opposed to one thing for 5 years, you're penalized as an employee because you'll be seen as a job hopper. It does real palpable damage to your career as a salaried employee to quit a job.

>Being a contractor doesn't make you free or independent in any way that a salaried employee isn't.

That's plainly false.

This was always a waste of time, but now it's an expensive waste of time.

Troll somebody else who hasn't drunk your kool-aid.

I'm not trolling. I'm literally talking about my experiences as a contractor and the conclusions I've reached.

> I prefer working with clients to having a boss. I prefer having customers to having a client.

To me, it was just trading one noun for another.

> I'm starting to develop a picture of you under-billing, if you felt obligated to do so.

Projects have deadlines. This isn't a matter of under-billing, it's the fact of life.

> Except for the part where if you're the type of person to prefer working on 5, 10, or 15 different things a year as opposed to one thing for 5 years, you're penalized as an employee because you'll be seen as a job hopper.

Not really. Go work for an agency that does lots of different things. I own a digital agency, and we build lots and lots of different things every week. My creatives/engineers can jump on stuff they're interested in (we actually encourage that).

If you feel like you're more "free" as a contractor, great. Personally, I found I thought that until I realized it was nonsense.

can you really 'come and go as you please' if you are a contractor, or even if you are working on your own thing?

I do.

how long have you been contracting/how many clients have you had? imo, working for client is way, way worse (in terms of how rewarding and interesting the work is, and work flexibility) than working for a company. but hey, if you enjoy it...

There are plenty of things that are worse about working with a client but I find they bother me less than other people.

There are things that are better too.

Asserting your independence and keeping a distance is a good place to start there. Don't be another employee.

Stoicism helps.

> That's becoming less of an issue thanks to new laws

Not until 1 Jan 2014, unfortunately.

I've been contracting for a long time

You know, I had a similar career path and was also contracting at 24 with several years of experience under my belt. I get what you say because I've worked freelance most of my life, and do care bout self-ownership. On the other hand, my view of what constitutes 'a long time' has shifted substantially since I was your age (I'm 42 now). In this market, I don't think you need to worry about being held hostage; maybe it's a proxy for something else that's bugging you that you haven't identified yet.

> I've been contracting for a long time

Didn't you just say you are 24?


I'd call 4 out of 6 years working self-employed a long time for a 24 year old.

Your snark isn't appreciated.

4 years is not a long time in any career. 4 years might be a long time to hold your breath or take a shower. But so far as working goes 4 years is a pittance. It may seem long since youre 24 and thats fine I suppose. I'm 27, so not much older than you, and I'm really not trying to condescend. Try to think with some perspective. Also, try to be less sensitive.

When you try to take the high moral ground while doing the same thing you're deriding, it severely undermines your point.

A long time for a 24 year old, yes.

How long did you contract for before you quit and decided it was somehow easier to found your own company?

On and off for the better part of a decade.

And let me be clear, "founding my own company" wasn't "easier". It was infinitely harder, though ultimately more rewarding for me.

I'm contracting specifically so that I can allocate time flexibly in order to found my own company.

You're essentially scorning me for taking my own path towards what you did.

Baffling hypocrisy.

I'm not scorning you, whatsoever. I was just discussing why I came to the conclusion that being a contractor makes one no more or less "free" than being salaried, in practical terms anyway.

Another way of looking at it is that he's trading ~$500 per day for less risk. You're in a position to soak risk, and he isn't. It doesn't make either of you irrational.

That's a fair statement, but I'm trying to fight a different sort of risk than going without a paycheck.

Care to elaborate?

I value independence and eventual ramen profitability far, far higher than the average person. A life spent working for other people instead of customers or fans is a huge risk and I'm running from it.

Just FYI, insurance premiums can skyrocket one you get older or develop serious health issues (and such health issues really can come suddenly -- autoimmune diseases, etc).

I think you've built a wonderful position for yourself, but I'd urge you to be mindful of thepotential pitfalls in the future.

A lot of the health insurance risk is changing in 2014, though, so it's actually viable to have lower coverage insurance now and plan to upgrade IFF a major medical condition happens. (yes, this makes no sense from an insurance market perspective for the insurers)

I presume this is one of the provisions in the Obama administration health care act (something along the lines of accepting people with previous known medical conditions, iirc).

I'm not too knowledgeable on the exact scenarios and how much more (if any) such people with serious medical issues would pay, but I agree with you that this is something to be cognizant of.

You sure? Since 2014 is when no one can get denied and everyone has to have healthcare, I think there's some uncertainty in the market. If the system gets too many expensive cases, and not enough payees, premiums could skyrocket.

cool story bro'

I know the point you're making, but let me make clearer the point I'm making:

He thinks he's doing himself a favor and getting what he's "worth", but that doesn't seem to be the case.

Ah, agreed - congrats on getting out of the rat race and properly compensated yourself

This entire thesis is a red herring. I doubt we've ever had a conversation with a startup about what sort of benefits they should offer. Since the startups in a position to hire lots of people will presumably have raised money from later stage investors, if anyone is giving them advice about this, it would probably be them.

FWIW, if anyone did ask my advice about what benefits to offer, I'd tell them to err on the side of generosity. I certainly tell them to err on that side with equity grants.

Interesting you say this, because when I was an employee at a YC company, I was told that YC partners thought I was overpaid (while making "below market" and working lots of overtime and heavily contributing, and basically using my necessity as leverage to negotiate what partners thought was an 'overpaid' salary). NOTE: I am very grateful for my time there, but I wanted to point this out.

I have no idea who you are or what company you worked for, but a lot of things are blamed on "investors" that are actually management's own detested ideas. It's a somewhat dishonest negotiation tactic: It's Not Up To Me.

It's unfair that YC is being singled out here. These are genuine VC-istan issues, not limited to YC startups.

All of the YC founders I know are great, but sample size is small.

I would have assumed that a deep conversation on hiring would be part of the YC program, as it is indeed non-trivial yet essential, but from this post and re-reading the "What happens at Y Combinator" page, it appears that YC is mostly geared towards getting founders funding. There just isn't enough time in the day to convey everything.

It's not so much that we don't have time as that hiring is not the startups' focus at the early stage where we spend most time with them. We mostly talk about what to build and how to get users.

You do skew quite young in your choice of founder, though don't you?

I didn't see anything in the article state that you guys were explicitly advising founders to do these things. One of the first things the OP says is:

"YC seems to be a cult which is quite adept at turning college students into millionaires while creating billions of dollars of wealth for Venture Capitalists."

So the outcomes he's referring to may just be a direct result of the level of prior business experience amongst people you accept into the program.

I'd argue that being less generous with benefits is a good filter for hiring candidates that are genuinely interested in what the startup's doing (which is crucial in early employees) rather than somebody who's just looking for another job, like the author.

Edit: To clarify, there is huge difference between offering no benefits and offering fewer benefits than a large company. I'm not advocating treating employees like crap. I'm saying that there is a potential benefit to startups who don't try to compete on monetary benefits. Startups should provide as many benefits as possible, but not worry about competing with the financial packages that a large company can provide.

Also, if you disagree, please give your reasoning below. Downvoting to show disagreement just seems lazy.

This is a good point, so why not just come out and say it!

I see a lot about how these start-ups state "competitive salary, great compensation, etc."

Instead, just say, "hey, we will pay you crap but come work for us anyway because you believe in our idea."

Somehow, I don't think that would get traction, when its put that way.

You might want to add "... and you think we are cool personalities and you want us to get rich of the back of your labor." :)

I call BS. Sure, you could spin it that way. You could also spin it the other way: a startup that doesn't offer benefits doesn't care about making their employees' lives easier, and thus not offering benefits is a negative signal to potential employees.

Just because a startup doesn't offer lots of monetary benefits doesn't mean it doesn't respect its employees. Generally, the advantage of a startup is that you get far greater independence and autonomy than in a large corporation. You have to personally weigh what matters to you more: money or independence. My point was that startups should favor employees who want independence more than money because as it has been said above, being an employee at a startup is a losing proposition. At least the startup will have optimized for hiring people that are ok with that.

You just pointed out why your argument fails - it's a poor indicator. A company that doesn't offer lots of benefits may or may not respect its employees. Likewise an employee willing to accept a below-market offer may or may not be committed to the vision.

>Likewise an employee willing to accept a below-market offer may or may not be committed to the vision.

What vision? I thought we are all professionals working for the money.

It seems bleeding edge capitalism forgets the "free market" and "egoism turns out for the best" and resorts to idealism and religious-like "visions" for the company -- in order to have fools work for less than they could.

>Uh, I'm not sure why you're responding to me as my point was that offering below market salaries to try and get "good" employees is a stupid idea.

Hi, I wasn't answering to your comment as it is, just got inspiration from your "vision" quote (something that one hears often repeated from startup guys).

>That said, most people don't work solely for money and I'm sure you don't either. If they did, then everyone would want to work on Wall Street.

Sure (I also care for the work environment, tech involved etc), but that doesn't mean I work for some "vision" or that I even believe that 99% of startups even have a vision worthy of mention.

Uh, I'm not sure why you're responding to me as my point was that offering below market salaries to try and get "good" employees is a stupid idea.

That said, most people don't work solely for money and I'm sure you don't either. If they did, then everyone would want to work on Wall Street.

What does money have to do with independence? Can't you richly reward autonomous engineers? Are you suggesting there is an inverse correlation between independence and benefits? Are you suggesting there is a mutually exclusive zero-sum relationship between attention paid to benefits and attention paid to independence? All of these are unfounded assumptions.

I didn't claim that money and independence are mutually exclusive (though I can see how that may have been interpreted). Instead, I made 2 assumptions.

1. Startups don't have as much money as a large corporation.

2. You, as an engineer, have more autonomy at a startup than a large corporation.

The reason I would choose to work at a startup over a corporation is because I value my autonomy, even if it means making less money than I would if I took a job at a large company. When I am a 45 year old father, my priorities will probably change. There's nothing wrong with that.

The question at hand is, should startups try to compete with large corporations on benefit packages? Benefits are important to feeling welcome and appreciated at work. At no point have I claimed otherwise.

My sole claim has been that if I had to make a tradeoff between certain benefits (that don't necessarily impact me as a young recent college graduate) and increased autonomy, I will pick autonomy. This is why startups optimize for recruiting younger developers. If a young developer thinks an idea is cool and believes in it, she will work her ass off. A 45 year old father, on the other hand, has other priorities. To reiterate, there is nothing wrong with that! But if a startup cannot afford to support such an experienced programmer (startups can't offer competitive salary, job safety, 401k, etc), it's better for the 45yo father to consider that before hand, rather than get burned later.

If the startup had offered him the same benefits and salary as the large company, he may have accepted the startup's offer. The startup could then go out of business in 2 months, and he'd be screwed. A young college graduate would have far more flexibility to bounce back and find another job, simply because the younger developer has fewer responsibilities.

A startup should offer as many benefits as it can. But the reality is that most startups simply cannot provide the same benefits as a large company, and I think that's ok. It's really not as evil as the author makes it seem because startups are targeting a different demographic than him.

If a startup's lack of benefits aren't acceptable to you, then you probably also shouldn't be taking the many other risks involved with doing a startup.

If your startup is well funded you should offer these benefits. You should want to reward the people who work so hard for you.

These benefits also make an employees life easier, giving them more time to spend on your precious startup.

There are other ways to weed out the "another job" candidates.

These are not "another job" candidates. These are A grade candidates who are not desparate enough to take any lame offer they get (unlike recent grads with little experience).

When someone in the valley says "there is a shortage of talent", what they really mean is... there is a shortage of "talent willing to work for a pathetic salary".

Taking away benefits to see which candidates are the "hungriest" seems lazy - and unethical - to me. It's not easy to source good candidates, but it seems completely backwards to find the best, most driven candidates possible through a method that, in the end, deprives them of something you could easily deliver.

I've worked with companies who have a 1-month "escape hatch" on-boarding plan, wherein either the employer or employee can terminate the agreement no-harm-no-foul if expectations are not aligned. This is obviously more of a social agreement, as most companies use at-will employment contracts. This way, you can still treat your employees right.

It's funny, really. Coming from an OH&S perspective, you want good OH&S not just because it's nice, but because losing a worker is expensive - rehiring, retraining, refamiliarising (it always takes a new employee time to learn the ropes). Scrooging people on basic benefits seems to be in the same bucket as scrooging them on OH&S - saves money in the short term but is overall more costly.

Why concentrate on benefits. Being less generous with everything is a good filter for hiring candidates that are genuinely interested in what the startup's doing! Pay your employees poorly, and you're guaranteed to only get the ones who really believe in your company. You're virtually guaranteed success, right?

If you take any comment to its absolute extreme, it will stop making sense. If you consider my comment from the more reasonable stance that startups have limited resources compared to large companies and come with extra risks for employees, the fewer benefits can be valuable for dissuading people who might not otherwise be good culture fits.

For example, a 45 year old father who might be screwed if the startup shuts down 2 months later probably should not be applying to startups. However, a young recent college grad will have a much easier time bouncing back if the startup shuts down, simply because she has fewer responsibilities than the father. As a result, a lot of those benefits that the father is looking for are also less important to the recent college grad.

Of course, the startup should give the best possible benefits it can afford. But I don't see anything wrong with the startup focusing its limited resources on finding the employees that are better fits.

Funny, I didn't think that was even remotely an extreme. An extreme here would be something like, "Charge people money to work at your company, that way you only get the most extremely dedicated." Simply paying less salary in addition to giving fewer benefits seems like an extremely minor extension.

There's nothing wrong with paying less because your resources are better placed elsewhere. I just don't buy the idea that paying less gets you better candidates. Sure, it might filter, a little bit, for people who really care about your business. But it's also going to filter, a lot, for people who can't get better jobs elsewhere.

This is exactly what's wrong with many tech startups and what makes caricatures of them. You're view is to be a stingy miser and just believe that you will be filtering out those that want to exchange work for money (what a horrible idea in a capitalist economy). So you get the kids that do understand what equity means or what "vesting" means or "at will" employment means that are excited, they burn off a couple years of their 20s not realizing that even if this supposed great idea was successful that they basically get nothing anyway, and you're arguing that is the proper way to be? It's hard to argue the economics of that for your favor .. but you can see how unsustainable that would be if all the founders felt the way you did and the works ... gasp .. actually figured this out. I think there have been a few events in history that have occurred during such realizations ... something about October? ... :)

Health insurance is non-negotiable and shouldn't have an employee contribution. The rest of the benefits are more negotiable. 401k becomes important in your 30s when you start realizing that you're not going to be young forever. Conference budget is a nice-to-have but conferences shouldn't come out of your vacation-- that's a fuck-you if they do.

Regarding compensation: the total package should be enough that people don't worry about money. Ever. If you're doing your job, you may not make them rich but you pay enough that people aren't worried about daily living expenses.

The issue here-- why benefits are so important-- is that VC-istan startups are in such a state where the concerns of a 45-year-old with kids are seen as freaky and unusual. There's a very large talent pool that's being overlooked.

"There's no shortage of smart, hardworking engineers. There's a shortage of smart, hardworking engineers willing to work for very little money." ~ David "Pardo" Keppel

God, you reminded me of a start-up where the independently wealthy CEO kept on bitching out loud in the office, three years after the fact, about early-round employees that demanded health insurance (but were willing to work for peanuts).

Lost of large companies have employee contributions. No-premium health insurance is not a standard benefit outside of a few technology companies.

I don't think it's fair to bunch all 400+ Y Combinator companies together like this. You'll probably find good and bad benefits packages with the same frequency across all small startups. Y Combinator certainly does not get their hands dirty in the operational, HR, or recruitment strategies of their funded companies; that's really up to the founders.

Perhaps what you want to say is that you don't like the benefits packages that startups with young founders provide, because they don't understand what a more senior engineer expects on that side of the compensation equation. That might be more fair.

Best response I've seen. Right on the money

From the Author's bio:

"I'm just this guy who used to enjoy tech, now I would rather build bicycles. I still work in the tech industry, for the money, but I no longer call myself a "technologist"."

So points well made that a guy with children, in mid-career, and without much of a passion for the field he's working in finds a Y-Combinator offer to be less compelling than a more traditional package.

But I'm not sure what the takeaway should be for Y-Combinator companies.

I'm sure you could come up with a whole list of why it's compelling to join a Y-Combinator startup, the one that strikes me is that providing great value to a Y-Combinator start-up puts you in a great position to leverage your own attention from PG and crew.

So at some level the lesson here feels like how can Y-Combinator recruiters (or CEO recruiters) minimize distractions from candidates that ultimately don't want the job you're offering?

The answer is to highlight the tangible benefits of being part of a Y-Combinator startup while candidly addressing what "you're not" so the wrong candidates don't waste their time, or yours.

Listen, I know that once we turn forty we're all put out to pasture in the Great Programmer Iceberg and left to fend for ourselves but:

I think the takeaway is, you're not building something sustainable if you can't attract people with kids. Kids are a very natural and common lifecycle event for people over the age of 25.

In terms of dollars and cents, the notion that you're building a team of "world class talent" that doesn't include anyone over the age of 30 is silly.

Not that the vast majority of startups need world class talent, but that's neither her nor there.

This is so well stated. It's something I (age 34, married, no kid(s) (yet)) think about a lot. I live and work in a city (San Francisco) and in an industry (web developer) where being 10 years older than the median age of my neighbors and colleagues feels like a liability. I feel like I've just figured a few important things out and I'm already past my prime.

Not to mention the huge and underserved market for people with kids, grandkids etc. Now I like startup culture or I wouldn't have been on HN so long, but in all the excitement and hipness of disrupting things, it's easy to forget that there's a large number of people who are not interested in that attitude, but want products that help to stabilize or enhance their life.

Marketing to these people is basically selling to the tortoise rather than the hare [1], and success in doing so probably means building that attitude from the inside out.Tortoises aren't very exciting to look at, but there are a lot of them and they are pretty successful in evolutionary terms. So don't grudge them their lettuce.


> "I'm just this guy who used to enjoy tech, now I would rather build bicycles. I still work in the tech industry, for the money, but I no longer call myself a "technologist"."

Actually, I love that. If our company was a little further along and I could afford to hire him I'd make an approach.

I don't think tech is the be-all and end-all of things, it's a tool we use. I prefer to have a techie who is able to feel the tactile quality in the process of bicycle building (bespoke frame-building through to just getting your hands dirty piecing components together) as I'd hope such an eye would course through everything that person did.

If he's a tech guy with 20 years experience, and that eye for a quality build and the aesthetic utility in a bicycle, then I'd be keen to see whether his work reflects it.

Companies go through phases, and the beg, borrow and steal... and poor package and renumeration... is the first phase and we should all seek to get beyond that quickly.

A business should be sustainable. To me that means that the costs of the business should be able to be fully met and not externalised: a good package for good people is part of that. As soon as it's possible to, that should be in place... because if we're not building a sustainable business then what are we doing?

> I don't think tech is the be-all and end-all of things

Absolutely agreed. I just wrote about this recently[1], arguing that to be the best programmer, you really need to do something else as a specialty, and have programming simply as your trade. Programming is a value enhancer on another skill, and (in my opinion) is less value if it's the only thing you can offer. Effectively, your skill caps out at some point, and to continue increasing your impact you need to draw on something else too.

[1] http://www.drtomallen.com/1/post/2013/03/more-than-a-program...

That's easier said than done. Programming is such a hard and specialized field, that very few people can be fully competent at it and have another field of business expertise. There are two general paths to that:

1. Study CS in school, get employed as a programmer in an unrelated industry and attempt to absorb industry knowledge from your coworkers outside the IT department (easier to do at a small company). Industry knowledge will inform your code projects and put them in context, but your job is still to write code and not to participate in business decisions.

2. Study business admin or econ in school, get employed in marketing or operations, and attempt to learn programming on the side. You can use programming skills to write personal automation scripts and maybe some internal productivity apps to share with your colleagues, but will not be asked or trusted to work on any production codebase as that is not part of your job description, and they already hired dedicated programmers to do that. You do not have a lot of time to work on coding anyway, because you have other responsibilities.

Things can get more fuzzy at a small company where people tend to wear more hats. But at most big companies, job descriptions are pretty specialized, and programming either is your job or it isn't.

For what its worth I think you're creating a false dichotomy here. I literally studied Econ in undergrad and quickly landed at a telco as a dev. My 'on the side' self education of programming landed me a software engineer role because the analytics that came with my non-traditional developer skills made for good problem solving cred. 8 years later, I'm wearing architecture/analysis/developer hats on a daily basis with a senior title.

The point is this comment serves as a microcosm of this thread; a faceoff between stereotypes of a boring, big company with benefits and sexy startup with lottery ticket potential. The truth, as usual, is somewhere in between. There really is work, even outside of the Valley, that solves real (fun!) problems with real compensation. To assume only two paths to whatever personal definition of success in this field is limiting your options.

"That's easier said than done. Programming is such a hard and specialized field, that very few people can be fully competent at it and have another field of business expertise."

I find it telling that both of your paths include school. Life is a better teacher than school will ever be; the person you're describing may be hard to find straight out of college, but after a few more years of life, they will tend to broaden their horizons (and have hobbies that don't include programming).

The takeaway is that YC companies need to offer more equity, if they hope to attract people like the OP. At the end of the day, most YC companies don't have money to fund the salary and benefits packages the OP wants. This is expected for startups, the idea is that you get paid in equity instead of cash/benefits. Given more equity, the OP could sacrifice some savings to pay for the benefits he wants (clipper card, health insurance for his daughter, health club membership, etc.), with the idea that the expected value of his stock would pay for these benefits in the long run.

It seems pretty clear that he feels YC companies are not offering enough equity to make this tradeoff worthwhile. Thus, the only practical solution for YC companies to attract talent like the author is to provide more equity.

YC companies need to offer more equity

If they don't have a seat on the board, they have no reason to trust that their equity will not be diluted into dust.

I guess the point of his post is the YC companies are only attractive to some one below 25 years of age with no family to care about. That would mean the YC companies are all looking for the few talented below 25 yr old people.

The additional advantage of this age group being that they generally have no experience with salary negotiations or normal work-life balance. In fact, if they're coming out of a top CS program, they are probably used to bonkers work-life balance, which is exactly what a startup will demand of them.

"But I'm not sure what the takeaway should be for Y-Combinator companies."

It seems like a core assertion of the article (and in the comments) is that being a YC company means very little to anyone other than the founders.

Honest question: A few years out, how much does it matter to employees? Do they get to go the clubhouse? What's in it for them, other than a hope that their paychecks will come more reliably?

For founders, YC, fuck yeah--but I don't think for employees the value prop is there compared with having actual awesome compensation.

Actually I'd be interested in hearing about these so called "tangible" benefits of being an employee (not a founder) at a YC funded start-up vs working at any other company, all else being equal (your quality of prior work, strength of your references etc.) ?

Personally, a potential hire's having been at a yc vs a non-yc company has no bearing on my decision either way.

I'm about 40 years old. I have two kids. I'm not sure that I would ever have called myself a 'technologist' - but I love programming and I love technology - maybe even more than I did when I was 20.

But the point of the article is that working for a YC startup isn't in ANYONE's interest. You don't get the security of a large established company, but you also don't get any of the equity that the founders get. And there are plenty of medium-to-large size companies that have well-established business models that are great places to work, have awesome technology, and are solving difficult problems. Working for a startup without equity has no up-side and plenty of down-side.

Unless the YC startup is doing something you really believe in - and I don't just mean 'cool tech' - I mean something that you can feel good about having participated in 10 years from now, something that made you or the world better - insist on equity. Otherwise you're being exploited.

Here's what a good benefits package looks like from a company who cares about attracting senior employees, and not just college kids:

- Agreement to pay for 3 conferences per year(Surge, Velocity, and ChefConf), an $18k/year benefit - $2500/year FSA, Employer funded - 401k, 5% match. (II end up with $24,750/year in my 401K plan) - Full health insurance for myself and my daughter, no Premium - Health club membership - $150/month Clipper card budget - 30 days of PTO, a $9,840/year benefit

I work in the Portland area and have had the opportunity to work at some pretty great companies around here but there is no way to get much other than the 401k benefit (and even then a 5% match may not happen) and maybe the health club membership.

Health insurance will sometimes cover yourself but once you add a spouse and/or kids it's going to cost the company a lot more so there is going to be a premium. I currently work downtown and my company covers my parking (which isn't cheap) but others haven't.

I don't know about the Bay area but there is no way you'd get 30 days of PTO from anywhere here, I've never heard of that even from a non-profit I interviewed with once.

I've worked for 3 startups in Portland that offered those benefits.

I now work remotely for a Fortune 100 that gives me a major portion of those benefits, plus a higher salary.

It can be done, my Portland-based comrade. I'll buy you a beer sometime if you like.

I can see one or two of those things being covered but even 30 days of PTO? That's 6 weeks per year that you won't be in the office. Portland (OR), USA, right? Not Portland, Spain/France/Norway? :P

Correct. Two of the three had no specified rules besides "take some", but I took a lot. Work got done, nobody cared.

I'm guessing that's 30 days total PTO. Something like:

10 vacation days 10 holidays (Christmas, etc.) 5 sick days

That's 25 days; 30 is a bit more than usual but I'd believe it.

Now, if that's what he means by 30 PTO days, I'm dubious about only 15 PTO days at the startup.

I always advise folks who are looking to work for a startup to value their stock at $0. Will you be happy and enjoy the work you are doing for the salary and benefits alone?

I agree; as a new grad I don't think about the money (it's all good!) but more so the experience- Will I learn from these people? Will it make me a better engineer?

The two most important factors IMO: the tech and the team.

If you fail to do the right 83b thing for your circumstances they can be worth even less than $0.

There's some awfully strange stuff in this particular post, though I generally agree that startups tend to lowball people on offers.

For instance:

> I turned them down because they were preparing to make me a below-market offer in exchange for what I expected to be an insulting amount of equity, and a non-existant benefits package.

There are three possible answers to an offer: yes, no, counter. It's really odd to focus this much on salary + benefits without even taking the time to counter. We're not-entirely-dissimilar from the YC company he was describing, and the simple truth is that we lack many on paper benefits because we haven't taken the time to formalize many of them. Which means there's lots of leeway to ask for stuff. There's no strict "3 conferences per year" but I'm pretty sure everyone in the company goes to any conference they want to (including Velocity, and ChefConf ... you might see them there).

> The YCombinator company probably didn't care enough to have their lawyer draw up the paperwork so that their employees can execute on their stock options from the first day to avoid AMT.

Really? I'm pretty sure the standard docs nearly all YC companies use are pretty solid, and they'll usually even have their lawyers help with an 83b election. There's a lot of math and snark based on a "probably" that's probably wrong.

> Both companies offer the same, worthless stock options of 0.50% of the company, before an expected dilution.

If they just raised at a $40mm valuation, 0.5% equity is literally worth $200k to them right now (in the sense that they could exchanged another 0.5% of the company for $200k). If they're anything like us, they don't want to give up equity anyway. We would happily give a higher salary with no equity to new hires.

Equity is really a chance to trade some salary for a large check if things go incredibly well. It's not the rational choice at early employee levels, but it's a chance to get a little of the risk/reward action. The reality is that higher equity levels (ie: founder levels) come with a huge amount of risk, which often isn't feasible for people that can pull large salaries.

If they just raised at a $40mm valuation, 0.5% equity is literally worth $200k to them right now

True for a stock grant, but these are stock options.

The strike price on options is usually really low relative to fund raising valuations. It's not vastly different than an equity grant, at least in the cases where it matters (ie: good ones). I think everyone would prefer to just give actual equity, but the tax implications are pretty terrible for the recipient.

If the strike price isn't the current valuation, that's technically a taxable event. Probably no one will care because there is no liquid market to prove the valuation.

He makes a pretty good argument really. You don't run a successful business with the mindset of 'i shouldn't be entitled', i have no idea why an employee shouldnt have the same mindset. Capitalism, your supposed to go after every tangible benefit possible, and minimize every cost possible.

How folks plan to run a business that way and yet feel its 'entitlement' for an employee to do the same thing is weird to me.

Everyone wants capitalism to apply to their inflows and not to their outflows.

> Though they brag about their "Unlimited Vacation" (today's buzzword), they offered only 15 days of PTO, standard for any professional job in the United States.

Has anyone ever tried to take advantage of "Unlimited Vacation" at an early startup? I mean, sincerely tried to invoke that contractual promise as a way to take 3+ weeks consecutively?

I work for Braintree. We aren't early-stage anymore, but we really mean it when we say no vacation policy. Personally, I'm going to Europe for 3 1/2 weeks in June (in which I will do no work, but I might go to a conference at the end). I also took time off for Christmas and Thanksgiving.

No vacation policies are meaningful with the right company culture.

Not me personally but an engineer at my current startup is taking 5 weeks off but the typical "Unlimited Vacation" also mentions as long as you get your work done. So they will be taking 5 weeks off traveling the world, but they are still getting work done (not the typical hours by any means, but getting what needs to be done accomplished).

5 weeks travelling and doing work = 0 weeks vacation. It is really great, it is flextime+great office+telecommuting which are all nice things; but it's apples-and-oranges compared to a vacation.

I mean, all the psych research says that it takes at least 4+ days until people really get work off their mind, and the work-mindset starts a few days before returning. So vacations start to be effective at a minimum of 2 consecutive, uninterrupted weeks (coincidentally a legal requirement in a bunch of countries). If you're taking vacation in small blocks or continue to think about work on vacation, then you and the company lose the working days spent, but aren't getting the expected recovery/productivity/burnout-prevention/etc benefits for which vacations are actually implemented.

Agreed. Working from the beach in Thailand and getting all your work done is no different than working from your house in Oakland and getting all your work done which is no different from working at the coffee shop across the street from work and getting all your work done.

Classifying any of these as "employee is out taking vacation time" is a giant spin.

Can you reference any studies? If this is true, I've been doing it all wrong...

they will be taking 5 weeks off traveling the world, but they are still getting work done

That's not vacation, that's telecommuting.

As a CEO/Founder running a business that is revenue-sensitive, my developer-side completely agrees with the "FYPM" attitude of OP.

Every story I see about the supposed "tech talent crunch" makes me wince at the fact that the average web developer salary is about the same from when I started my company five years ago to now. If there's really a shortage, the makers ought to be getting paid: in dollars, not kool aid.

This isn't even to mention the "glory deficit" that goes with being an employee. With today's incubator explosion, any decent technologist can own 50%+ of their own company. If they're going to work for yours, you'd better pay them. And spend more time glorifying those who want to work as a team, rather than those that chase the CEO/Founder glory (a common blog post written by CEOs, Founders and VCs).

It's really not (only) that "benefits matter," but that this kind of comprehensive yet simple calculus is missing when most people consider a startup gig.

Whenever I lost or was on the verge of losing an employee to a startup, it was pretty convincing to walk them through what "hey, you get a whole percent of the company!" really means, even in a nine figure acquisition... and then compare that totally-at-risk, totally unlikely result (as the OP does) to the much better, and not-at-risk, salary + bonus from Large Company.

Difference is of course when you pick that lottery winner and 1% post-dilution is actually something. And that's what everyone's playing, right?

The takeaway from this is if you want to build a startup run by adults (gray neckbeards), these are their concerns. Forget the foosball and lunches, focus on healthcare for families and gym memberships.

It's not 1995 anymore. Now there ARE candidates who have been there and done that. It's clearly better to have employees with startup experience who don't operate always in crisis mode.

I totally agree. Have seen the same in Germany, with both US and German startups, both in Hamburg and Berlin. They talk all the time how cool is to work in nice locations in the city have a great Mac and being part of something great. I have always visited such an interviews, because wanted to be a part of these startup environment. However getting 30% less salary and no real benefits, except for talking to hipsters all day long, has never been the purpose of my life.

Just curious on the part where he says that the stock is most likely worthless. Are there any hard numbers on the average outcome of YC startups, and startups in general?

I mean, all else being equal, what is the expected value of 0.5% of the equity of the average startup at stage X these days?

Here are a couple ways that common stock can become worthless: - The most obvious and common, the company fails / does not exit - The company raises money and the investors have liquidation preferences. This means that the investor is guaranteed to make 3 times what they put in when the company is acquired. So, for example, if you raise 10 million dollars and your investors have 3x liquidation preferences, you have to sell the company for over 30 million before common shareholders see any money at all. So in this situation (and it is common), the common stock is essentially worthless.

Even with a 1X multiplier, that preferred stock still has a good chance to give the 1% employee getting the shaft.

Let's say that there are 5 board members, and 3 of them are VC reps. Those VC companies have 50% of the company, with dibs on the first $50 million. Now, it's time to sell the company.

Pretend the company could be worth between $0 million and $100 million. Figure out what the VCs are likely to sell the company for, remembering that they get 100% of the first $50 million and 0% of the next $50 million.

Respectfully, I cannot recall seeing a single YC company which has given up 3X LP at any stage short of an out and out crisis - and I've seen a few (work on the investor side). Hell, short of short-term debt which is clearly a bridge to an acquisition of sorts, you never see those terms. The high level point is valid (LP is there for a reason), but not to the scale you talk about it.

Besides liquidation, companies might just ask for the options back like Zynga did.

AFAIK comprehensive numbers for YC outcomes are not public, but Paul Graham has indicated that returns from YC investments follow a power law distribution, meaning that if you can only get equity in a single YC company (by virtue of being an employee) you have a very small chance of making a ton of money but probably will end up with very little.

It all depends. Dilution is a real killer. You may have 0.5% today, but what about after Series B? Or, heaven forbid, a down-round?

Even if you sustained no dilution, 0.5% of $100M is only $500K. Don't get me wrong, $500K is nice, but by no means is that life-changing money.

Agreed re: dilution - that's the reason I inserted "at stage X" in the original question on expected value.

$500k is life-changing money, but not FU-money. You think that not having to worry about rent and food and medical bills wouldn't change your life?

It isn't even life-changing money. It's most of a house here in Seattle, or a quarter of a house in the valley. That's nice, but not life-changing.

It could well be life-changing, depending on your circumstances and condition.

There are parts of the US where it's a big house and almost enough to retire on, if you're lazy and willing to live cheap. It's definitely a few years of runway, if you've got an idea you want to explore. It's definitely a no-loan college education.

True. It's a couple acres, a nice trailer, and a lifetime of property tax and utilities in Idaho.

Or a decent house in a nice neighborhood and $14k a year indefinitely in the Midwest.

The expected value of 0.5% of the equity in that startup should be 0.5% of the valuation. That said, not everyone has the savings or investments to offset that level of risk. For someone with a "low" risk-tolerance, that value drops dramatically.

Remember risk in our (assumed rational) finance market is as much tied to your ability to have enough liquidity as it is to have a positive outcome.

Pre-exit valuations are the opinions of just one - a few investors though. Hard data from previous exits is a different thing altogether.

In other words, money has a non-linear utility function. People often forget that when reasoning about financial matters.

Median? $0.

Mean? Somewhere in-between $0 and your typical exit.

Really? What hard data are you citing?

I'll repost a previous comment for the benefit of the HN community concerning exactly this situation for start-up employees from https://news.ycombinator.com/item?id=5255362 (great discussion there btw), for those who missed it the first time around (hope that's ok):


Here are a few tips for others startup employees:

1. Take the least amount of stock possible - your startup is statistically unlikely to succeed. It'd be better to bump your salary up $10-20K than to get the stock.

2. Unless it's liquid - it's worthless.

3. Valuations pre-cashflow - are useless. Anybody can value anything at insane levels using just one dollar. I value HN at $1 billion by offering to buy only 1 share of 1 billion in common stock for $1 right now. See the implicit valuation leverage. I took a dollar, then invented the billion.

4. If you work for a "nasty" startup - one which people can consider to be negative long term to one or more parties - expect eventual collapse or flat line growth (Zynga/Groupon).

5. Companies exist to make management, investors and founders rich - they hold the vast majority of the stock - and benefit greatly from path dependence and network effects. You on the other hand don't. Expect to be screwed at any time.

Think of it like this. Managers/founders of most companies are pretty dipshit - how is it that they can own so much more stock? Simple. Be there earlier! Akin to how old money works. Imagine if you were the first person to squat land near what has now become Manhattan. You'd easily be worth hundreds of millions. There is obviously some skill in researching, predicting, working and acquiring land that will soon appreciate in value. But it's not worth nearly that much. Path dependence, luck and network effects do that. See GFC boom and that dumbass cousin who made and almost certainly lost millions in housing to understand how this works out.

Startups really aren't that different to a speculative investment in a house during boom times. Once you understand this - a lot of things start to make a hell of a lot more sense.

6. PG says be relentlessly resourceful. That's useful. But even better is to be relentlessly cynical.

Free t-shirts? Just an easy way to drop your salary and indoctrinate you - scratch that - it's a god damn uniform - freedom be damned! Free food? You took a $30-$40K pay cut to take the damn job - the food isn't worth a tenth of that + you're now working during lunch hours! Free hardware? That's only $2-$4K.

Hackathons? That's just work during your free time - or if it's during work time, it's a startup product you should own, but don't. More days off? Aren't you already working 60+ hours a week today! Culture shit after work? That's just more indoctrination. Gym membership? Only $200-500 - peanuts! Flexible work hours? That just means work more, but do it at times that aren't 9-5. Parental leave? Big companies and Europe have had that for ages.

Oh, and that culture fit crap? That's just discrimination - rebranded! What? You don't like what other late 20s upper-class educated males like? Be gone heathen!

End advice.

Not saying big companies or government jobs are any better. But at the very least you're already cynical about those things and demand to get paid well enough in risk-adjusted terms.

> 1. Take the least amount of stock possible - your startup is statistically unlikely to succeed. It'd be better to bump your salary up $10-20K than to get the stock.

This is a worthwhile suggestion regardless of startup or not. You don't want a large portion of your assets tied up in the company you work for, where a calamitous event can both cause you to lose your job and your savings. Take the cash, invest it in / bet it on something where there is low correlation between the investment performance and your probability of continued employment.

I watched friends who worked at Washington Mutual with tons of WaMu stock see their "retirement" disintegrate in a couple months then getting rewarded with a pink slip. Not even a risky start up. That was a pretty painful.

"Relentlessly cynical", you sound like a great person to hire!

Someone like you shouldn't work for a startup. Go and work for a big company, go poison the atmosphere there. It's just not a good fit on both ends. If they're cheating you so bad, if it's so obviously a bad deal, why do you even care? In your view, startups suck and no one makes a lot of money or learns anything, so you aren't missing much.

Go work at Oracle and be happy with your 401k.

Oh, please. Everyone should be cynical about the work arrangements they get into, because let's face it, the company as a whole doesn't care about you. You are a replaceable resource. If you believe otherwise then you are hopelessly naive.

I remember talking to a friend of mine who had to fire half his workforce in order to give his company six months more runway to succeed- he was absolutely devastated about it. Those coworkers were his friends and allies. He still did it, though. To a certain extent it wasn't even his choice.

I don't think you should get the downvote but I think you're completely off base. The parent makes great points; one of the best comments I've seen on HN in a while. I think these points should be something that anyone looking to join a startup understands. The culture fit as discrimination, t-shirt as indoctrination, the idea of giving up salary for modest are all real negatives in many cases that seem great to many, especially younger people. Not all startups play these games. If you want to work for a startup that does, that's fine, you may have a good reason to, such as a belief it will be a hit or wanting the experience, or what have, but be informed that these things really are tricks and games, whether or not the founders realize they are playing these games or are just "cargo culting" things they read in TC.

Realizing these things does not make you a corporate workaday drone.

Wanting to be compensated for work done is now "poisoning the atmosphere"? Jesus Christ...

Something tells me you like Serfdom too.

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I think the most interesting question raised by this article is, "Why are the smart people graduating from college willing to get shafted by startups?"

Why are schools failing to teach engineers about caring for their own careers? I do not think most business majors would put up with kind of crap. They are all taught to negotiate for salary and to get high earnings early as a basis for later demands. They also understand how stock options work and that 0.5% over a four-year vesting cycle with no protection in the event of acquisition is an atrociously bad deal.

Someone else here mentioned something about joining a startup because it can be a great opportunity to learn. Maybe you can get something out of it other than money that is very valuable. This kind of thinking would appeal to a young kid straight out of college and perhaps not to a 40 year old with kids who wants to buy a house. Different strokes...

Negotiating for salary is useless for a business major who cannot get a job. You are also vastly overestimating their average intellectual capabilities with respect to options vesting rules.

CS graduates have it very good right now, much, much better than business majors.

I think the fear people have in choosing a larger company is that they're going to miss out on working with smart people on interesting problems, having work-ownership, etc. This was my personal fear.

I've worked at 2 early-stage "prestigious enough" startups and now work at a much larger company that offers a much better work-life balance/salary/benefits/etc. What I've found is that contrary to my fears, it does indeed have "smart people, interesting problems to work on", etc. - without the BS you have to deal with at smaller and/or unprofitable startups (bad benefits, hours, etc.). To be fair, it's harder to find larger companies that offer this, and the one I'm at isn't massive, it's no more than 50 people.

Unless invalidated startups begin offering better equity packages (because most can't usually afford to pay market salaries) they are going to see talent leave. It baffles me to think that companies think they can get away with this. And to those engineers who accept below-market salaries and small equity packages I ask you to question why - know that even if you work your *ss off and the product succeeds, your equity payout is probably in the tens of thousands at most - a typical bonus for a lot of entry/mid-level software engineers.

I've always found it amusing how very important $150/month Clipper passes are deemed by devs earning $200K salaries.

Every thing comes down to risk vs reward. Founders risk it all to found companies and rightfully have the greatest reward. Startup employees haven't risked as much but their risk is compensated with appropriate equity the earlier they join and the more risk they take on in the form of lower salary and benefits. YC definitively reduces risk and increases the potential for reward. It's easier for YC companies to raise funding (allowing them to pay market salary and benefits faster) and they have been vetted so we can assume the idea and team have a better shot at success. If you want to work in startups, working for a YC company is a better risk vs reward scenario as compared to a non-YC company. In regards to the post, just ask for more equity in scenario 1. IMHO the first 10 engineers should roughly own all of the "20%" first round option pool and should be able to get the company to an exit, massive profits or the next round. EDIT: last sentence for clarity.

> "Startup employees haven't risked as much but their risk is compensated with appropriate equity the earlier they join and the more risk they take on in the form of lower salary and benefits."

This is the part where we wave our hands and drop a smoke bomb.

You're theoretically right, but it never works out that way. For all intents and purposes, in the current state of the tech economy, there is no inherent risk to working for a startup. If my company went belly-up today I'll bounce off the floor juuuust fine.

Equity at this point is not being given in exchange for the risk of the company failing, it's given as a tool to decrease other forms of compensation.

And it's a shitty trade. Founders know it and experienced employees know it. The only people who are falling for this are the fresh-faced college grads who think 0.1% pre-dilution of your startup will make them rich.

But lots of engineers get convinced to take huge pay cuts in exchange for a pittance in equity, and to forego huge amounts of benefits that are worth real cash.

"Compensated with appropriate equity" is bullshit. If this was standard operating procedure we wouldn't be walking around acting like sub-1% pre-dilution is worth anything whatsoever.

I've been amazed the typical equity for early employees has stayed as low as it has for as long as it has.

I would replace "early employees" with "early engineers". Not sure why, precisely, but it wouldn't surprise me if negotiating prowess played a role.

Companies I've worked for in the past would never dole out more than 1% to engineers, but dropped anywhere from 2-5% on sales / biz-dev / managers. In one case, the engineers had actually been with the company for years and working at half-market wages prior to the non-technical hires.

Engineers/designers are not as good at negotiating than people in sales/biz-dev.

It's going to change.

Well if it's a smoke bomb... let's change it. I agree with you there.

I'm a current founder and my first 10 employees are going to get a hell of a lot more than .5%

Are they going to have anti-dilution protection?

Nobody gets anti-dilution protection. Including founders.

By saying "including founders" you make it seem so fair. After all, if there is any benefit, founders should get it, right?

But, founders obviously cannot have anti-dilution prevention. When a company is founded, by definition the founders have 100% of it, and the only way they can raise money is by diluting.

If two founders and three VC reps are sitting around the board table discussing the next round of funding, if there is heavy dilution it will often include stock grants to all the people sitting around the table to reduce their pain. An employee doesn't have a seat sitting around that table, so he is more likely to be pinched by dilution that the founders or the VCs.

Well it could work if the amount of stock is effectively fixed at creation time. Everyone I've ever talked to who doesn't already know how stock works is very surprised that more stock can be conjured out of nowhere. They always assume that new stock is formed by subdividing the existing stock (splitting) and that investors get shares that used to belong to the founders.

Before working on startups I worked on Wall Street so I can't look objectively at this statement. If that's really true, it's a failure in our education system. Isn't it crazy that to drive a car in this country we need to take a written and practical exam but to invest our life savings we just open an account. Everyone should be forced to study the series 7 material in high school.

I'm not a VC so I can't say I've sat around in the above scenario a million times but I don't think a series B or C involves giving stock grants to founders just to keep their % high and avoid the impact of dilution. (someone correct me if I'm wrong). Every round they get diluted, they've just started out with more. I think the founder advantage might come in to play when a B or C actually liquidates founder shares.

Potentially later stage startups that retain founders as C level executives grant stock but that's a separate distinction I would think.

It's not a matter of course, but if anyone sitting around the board room table has found their investment dwindle away, they will get grants enough to have them stick around.

If you aren't around that board room table, you are SOL.

Heh, well kind of.

I've learned that founders have a much greater risk/reward ratio than employees. The ratio is really not even close. The assumption that founders risk it "all" is a fallacy. The assumption that employees have less risk is also inaccurate. It depends on the situation, sure -- but I know plenty of startups founded by people who can crash and burn and not have their livelihood affected.

As for "risk compensated with appropriate equity", I'd have to say that most early-stage employees get screwed. The only case where early-stage pans out with commensurate reward at the employee level is when a company goes public. Given that most successful exits nowadays are through acquisition, most early employees are simply hosed.

> Given that most successful exits nowadays are through acquisition

Yes. We should also note that IPOs are much more rare than they once were, the entire world economy is flat or failing, and the flurry of $1M/employee acqu-hires from last year by Apple, Google and Facebook was an aberration and not an economic principle that is likely to be repeated, and even then didn't benefit the actual engineers.

The reward upside on yet-another-startup doing the same thing is quite poor.

On the other hand, creating your own business and avoiding VC's entirely is still a good bet compared to these other alternatives. For those who want risk, it's a great way to go. For risk avoiders, there's tons of well compensated employment working for mature and reasonable companies.

What is the value proposition of these startups that have low compensation, completely retarded so-called products, and almost no chance whatsoever of going public? None.

If the risk isn't being compensated, I'm with you on that point. That's Bullshit! But the... "founders have a much greater risk/reward ratio than employees", that is not a fallacy in most cases.

In my own case, I've been working for 18 months with no salary and I don't consider myself unique. Most founders go down the same long long road before they bring on their first employee. I've learned that most employees (if they haven't gone through the process of founding a company) dismiss the amount of risk founders take on to get a company to the point of even being able to make their first hire.

The whole question seems like we should create a standard model for the risk reward and set equity appropriately.

> "dismiss the amount of risk founders take on to get a company to the point of even being able to make their first hire."

I don't think this is really the issue. The issue is that the economics of startups don't really work if you expect below-market salaries to be a thing.

Founders shoulder tremendous risk and (the smart ones) live on starvation-level salaries for months, if not years, before they bring on their first employee. Sure - and they deserve to be compensated appropriately via equity.

Employees, having taken on only minimal risk, don't deserve much equity at all - equity at this point is a bonus and a motivator to act in the company's best interests.

This works great. The problem comes along when we bring in sub-market salaries. The reduction in salary or benefits demands an increase in equity - equity coming directly out of the founders.

And here's where it all falls apart: to make up for below-market compensation, the amount of equity that would be rationally required would mean too little equity to account for founder risk. The numbers simply do not add up.

I agree, the risk vs reward has to be fair and make sense. Below market salary AND very little equity is just plain wrong. You better be curing cancer, going to space or some intangible that makes that sort of equation worthwhile. Most startups don't. Space X comes to mind though :-)

Founders risk it all to found companies and rightfully have the greatest reward. Startup employees haven't risked as much

True(er) a decade or so ago, but definitely not true today. Founders currently, if they're doing it right, risk a bruised ego and a submarket salary for a few years. Employee risk is about the same.

Not true in the least. Maybe for a tiny fraction of founders who can de-risk incredibly fast, get funding or profits and make their first hire. This is not the typical scenario by a long shot.

This argument put forth is part of a tautological one its proponents make.

Some of you may be too young to remember the good old, bad old days of the Cold War, but one thing that was supposed to be anathema to Americans were "planned economies". It was proposed, mostly by corporate types and their supporters, that the US should not be a planned economy, it should be an economy like how the US is run - the majority stockholders of corporations make decisions about capital and production.

What happens when production decisions are not planned? There is a risk capital can be spent to create a product no one wants. Isn't that half the discussion on HN - minimal viable products, agile development, and other methods to try to avoid this? Why do the angels, VCs, and now blessed founders deserve so much money? Because they took on risk.

So the VCs tell us we should avoid planned economies and have an economy with risk - where capital is wasted on products no one wants. Then we're told they deserve all of this money because our economy has so much risk. It's a great tautology if you're willing to swallow it.

Because planned economies worked out so well for soviet bloc. Sorry, the cold war did not create the conditions to 'propose' our capitalism it proved it. Its current form might be flawed (corporate bailouts, uneven distribution of wealth etc) but it's a far better model than planned economies comrade.

Isn't simply being profitable a much better credential than being vetted by YC?

It's not that black and white. But being profitable is definitely a great data point.

I've never understood why startups position themselves this way? If you have 10M in the bank pay your employees what they fucking deserve! In an internet startup your engineers are all you actually have. Ideas are worth nothing.

Living in San Francisco is expensive as fuck. You should do everything to make your employees lives easier so they can concentrate more time to work.

The assumption in the post is: he doesn't really believe in those companies. He only thought the company will go at most 2X of the current valuation and will never have a chance to go IPO itself.

In the start-up world, if you don't think the company is going to grow then what's the point joining the team? It sounds like the author is looking for settling down, a stable income which is more suitable with bigger companies like Google.

It's weird to compare two different kinds of companies. High risk high return, low risk low return always holds. He's looking for something with low risk and of course, he doesn't want to work with any Y Companies. No right or wrong tho, personal choice.

> I'm not going to mention salaries, but I'm a senior engineer with 20 years of experience and can command a pretty good salary.

Why is it everyone is still afraid or committed to upholding this "taboo" about talk regarding salaries? Companies LOVE this. What's fair? Fuck if I know. I don't know what anyone else makes but my close friends, and that's a tiny sampling.

While you're sharing advice, why intentionally spread ignorance? "Fuck you, pay me" you say. But what if my asking price is unbeknownst to me below market for someone of my experience, work ethic, age, and talent? That has an impact on both me AND you. Think about it.

You could have written a post comparing your experience with YC offered salary/benefits to non-YC/non-start up offers.

It could have been good for people job hunting or interested generally at an "inside look" at the market.

There's nothing wrong with looking at all your free market offers and making your choice.

For some reason I can't understand though, you crossed the line into "YC companies owe me better". They don't. They owe you what ever offer they seem reasonable if they took the time you interview you. You owe them consideration of their offer and an answer. That's the dance.

The thought that in the US your health insurance depends on your workplace makes me a little sick inside.

You have to wonder about someone who has interviewed with "about a dozen" YC companies and turned them all down for the same reason.

If the pattern is that obvious, what's he doing going back for interviews 4..12?

In a shock development, apparently YC companies don't slaver over "senior" employees who have stuff like this in their profiles: "I'm just this guy who used to enjoy tech, now I would rather build bicycles. I still work in the tech industry, for the money, but I no longer call myself a "technologist"."

Wow, you can really feel the passion.

Benefits, or lack thereof, is your central point. I'm not quite sure that by comparing a YC-startup to another startup in the same round of funding, especially in the later rounds, it says much about YC or their founders. In fact, I'd argue there is no correlation. When a company has been backed by several investors, the founders don't usually carry a huge weight in deciding the benefits of each of their employees...they most likely listen to their advisors/investors.

If you think a company should offer a higher salary and/or better benefits, then best is to be frank and tell them. Especially since you are experienced and you've been given offers, a simple email or call saying "Hey guys, I think what you're doing is great but there are other companies at the same stage as you giving much better salaries/benefits", I like to think they'd be open to listening and looking to change. A illogical correlation + complaint on HN is not exactly doing yourself or anyone any good.

Font size and contrast matter, or why I won't read your blog post

I found it odd that the individual lines seem to be written your as opposed to paragraphs.

I'm on my phone. In landscape it's readable, but in portrait the lines break weird like an email program wrapped them wrong.

Use lynx :D

In Firefox: View, Page Style, No Style.

I'm a contractor, I work for one of the largest telecom companies in the world. Anyone who has worked for this company knows how well known it is for endless bureaucracy, which is fine, because they pay me even if I cant actually do any work.

I make around to slightly above market rates.

I have no benefits.

I pay for health insurance. I have no paid vacation. I don't get catered lunches. I don't get a foosball table either.

Even though I'm a field service engineer, I don't even have a company vehicle.

I'm a mid-career telecom engineer, I've been doing telecom support and IT Service for 10 years, I would love to find a permanent position, every perm role I have made it into, I've been either downsized or outsourced out of. So I contract. So when I see someone like this bemoaning their very good situation, I can't help but roll my eyes a little.

A side question on his net calculation, how did he end up with 63% tax rate? anyone care to elaborate

Just using rough numbers: 33% federal income tax 6.2% on the first 113K for Social Security 1.45% for Medicare 9.3% for CA state income tax Plus any local taxes? Gets to about 50% there.

I know in NYC when the company I was with sold, my total tax rate was 52% on it.

right, i would expect 50% to go to the tax man, unless waiting long enough to get into long term capital gain. His 63% threw me off there, sounds like France!

I am curious about this too. Please elaborate if you know anything about this.

He doesn't sound like he is interested in startups. He has a kid, a big time draw, he says he is going to work 20 hours a week contracting on the side, a big time draw, he wants expensive benefits, a big money draw from the company hurting its runway and making the founders waste time fundraising more often, he gets told he can take unlimited vacation yet decides he'll still hold them to the 15 number, so the extra freedom you get at a smaller younger company isn't even used by him, he says he is saving up for a house, a big distraction from just paying for food and rent, etc..

Someone scrimping and saving every penny and working a side job is not going to grab some hardware that helps them work, or take a cab when they need it to get to an important meeting, or work overnight, etc. they are going to scrimp and save and be less effective and clock out ASAP each day to do their contracting or spend time with their kid.

It doesn't really surprise me that he then considers joining a C round company the same as joining a freshly funded YC company and that he thinks both will just sell to a talent acquisition. And that he doesn't think a smaller earlier company gives him a lot more independence and control over what happens to the company. You can find a lot of founders who definitely will not go for a talent acquisition, which you would do if you are going for a big win. And joining a later round at the same equity means much less upside for the big win. You aren't going to be part of as many big valuation increases. But if you aren't putting a lot into the startup and are spending time on kids, contacting on the side, saving up for a house, I kind of doubt you are going for a big win at your company anyway.

It's OK if you aren't going for a big win, but should you join a startup if you aren't? Should you say joining a startup is a bad idea when you are intentionally making all the choices that make it a bad idea? I don't think he's really in a position to even understand the cost benefits of more cash/benefits vs. more equity and more runway and better startup performance since he doesn't care about the startup's performance, so of course he prefers more cash/benefits.

"That $375k would then be subject to 63% taxes, netting me $138,750, or a 20% down-payment on my piece of the american dream. The other company does the right thing, so I only see a 15% capital gains tax"

A bit of an aside but could someone elaborate on this? Is the OP referring to an 83(b) election? If so, isn't that his responsibility (of course, the company should advise him to do this). Or is this referring to something else?

At any rate, my impression is that there would be California taxes as well on that income, bringing the taxes well above 15%.

I think he is referring to the company letting him purchase his options as they vest, so that the eventual sale of the stock will be of a long-term capital asset, rather than short term and subject to his marginal tax rate.

He's talking about early-exercise stock options vs instalment exercise stock options. Early-exercise let's you exercise the shares from day 1, before they're vested. It starts the clock running on long-term capital gains treatment, so you're more likely to qualify for that lower rate than if you exercise later.

You do have to pay for the shares out of pocket though so it's a risky move - could end up having paid cash for worthless shares, especially in an early stage company.

Yeah I didn't understand that either, unless as the other commenter mentioned they allow you to do a cashless exercise as you vest, however you are still possibly subject to AMT. AFAIK all ISOs are possibly subject to AMT whereas if you convert it to a NSO its just regular income.

Yup, California treats capital gains as regular income, so he gets hit with an additional 13.3%.

The panorama in Spain for many startups:

- 30k/year (minus all the taxes) ~21/23k/y - 28 days for holidays. - No health insurances (free health insurance on the country) - No conferences - No pluses.

Profitable companies: a bit more of money, but not that much: 35K/year.

About shares, as usual: the promise. some of them makes you sign something but to opt those you need to stay around 5 years, wait to be IPO or you can sell the opt to the company for a really stupid price.

With taxes you pay the pension, etc.

How much does a house cost where those startups are?

by house you mean housing for companies or families? A house in Barcelona costs around 200k-500k.

As a transgender women working in the Bay I can say that no 'startup' has ever proven to me that they cared when it comes to benefits. I still have yet to land a job anywhere that doesn't have explicit exclusions for transgendered people in their insurance policies. Yay. I get paid well. Its a good thing too because paying out of pocket for health care is shit even when you make six figures.

" All start-ups today are about supporting advertising in one way or another." Ouch. It must suck to be in an ecosystem where that's true.

I don't think benefits are the main reason to work anywhere -- doing meaningful work and working with great people far exceeds financial benefit, and salary/bonus/equity should dominate fringe benefits. However, why do benefits packages need to be uniform?

I personally hate having "benefits" in my compensation which come out of my salary which I don't really want. Sometimes companies get tax savings (i.e. they can deduct, I can't), but VERY RARELY do they get actual dollar savings (health insurance is one weird case, due to some people being more expensive to insure than they could ever pay, and that risk being spread across a group).

My personal ideal benefits package is: 0) Private office, 24x7 hvac, a door, decent security, locking storage, parking on-site ideally with a guard or gate. Essentially non-negotiable (or, wfh). EV parking would be nice too soon.

1) Max 401k match and maybe even profit sharing (in California, I'd happily take $1 of salary and put it into employer 401k match) -- I think you can get up to 46k/yr max, so 15k personal contribution, 5% salary match, and the rest as profit share up to 46k.

2) FSA, Transportation accounts (fully deductible for employer, and non-taxed). I ended up buying a bunch of air filters and condoms when I had an FSA, and I guess I could find a use for a TSA.

3) As much hardware as I realistically can use ($10-20k/yr -- not just computers, but I'd love to have a budget for a hw lab). Someone recently questioned whether a $4k per developer laptop budget was legitimate, and I seriously question why someone would deny a $1-2k marginal expense on a worker generating >$500k/yr in returns.

4) Conference/books/etc. (time is the big cost for the company there, not the cost) -- and "if you're speaking at a conference related to work, we cover nice travel)

5) Free food/etc. (i.e. RG's "unlimited Seamless"). Bad food is of negative value, since I'll feel obligated to eat it.

6) Decent travel when travel is required. Not first class, but helping you make it less painful -- either letting you do your own bookings (I'm better than any corp travel agent I've used), or doing it for you. Optimize for ff status. I pretty much need a $65/day car vs. a $30/day car (and tend to pay for the upgrade out of pocket when it's not covered), but would in exchange prefer a more complex $300 routed ticket vs. a $500 direct flight, and would stay on starwood points sometimes vs. paying cash.

7) I prefer to keep my health insurance separate from the company, for practical and philosophical reasons. (I pay $118/mo for better coverage than ~any company I've seen). Give me $5k/yr into my HSA instead, and pay any other marginal insurance benefit to me as extra salary or more RAM or something.

8) Use of company resources for personal projects (e.g. hosting a tech user's group, or helping friends launch their own startups by letting them use conference rooms when meeting with people, etc. etc.

I'm curious if people are "picky" like me, or would just prefer a bunch of benefits as a package. There are HR reasons to give everyone the same thing, but IMO one of the advantages of being a small startup is being able to customize packages for people. If I hired someone with sick kids, I'd obviously make sure there were a group health insurance plan for him or her. If I hired someone who was on an H1B or otherwise needed citizenship sponsorship, I'd call in favors with undersecretaries to write letters on his behalf. etc. There's no need for a small company to act like a megacorp.

> I don't think benefits are the main reason to work anywhere -- doing meaningful work and working with great people far exceeds financial benefit

You've got to be kidding me. I mean that's nice. But it's just so idealistic and so outside of the realities of the vast majority of people that live on planet Earth. I just see too much anti-money stuff on HN sometimes. It's as if everyone thinks their startup is changing the world for the better but many times it's just some CRUD based marketing tool or something ... not exactly feeding kids Sudan.

> (I pay $118/mo for better coverage than ~any company I've seen)

I don't know how old you are but that is unlikely to last. If it does, you are in such a minority here that I don't see how that furthers a point (along with the "money's no big thang" deal, it's a very anomalous situation). Just being honest.

FSA got gimped in the past year or so - you can't use it to expense non-prescription items.

Where are you getting your better coverage than at a company? I heard group coverage was insanely difficult to get outside the umbrella of a large risk pool (ie, corporate)...

Most of the times benefits offered are optional - I've never been forced into any benefit at my company. Also the cost for benefits are usually better for larger pools than smaller so some of the not-as-popular options you state would cost the company an inordinate amount if you were the only subscriber.

I'm pretty healthy and single, so when I priced my personal $3500 deductible HSA (+$3500/yr into the HSA, which is like a Roth) vs. any group plans I've found, I ended up with much better coverage and pricing. I think the issue is we have people in multiple states, so it was hard to get good group coverage.

I forgot about FSA reductions (which were already pretty bad when you have both an HSA and FSA). I probably don't have anything useful to spend FSA money on.

I believe companies do not offer ginormous 401k matching because 401k plans can't be too "top-heavy". So for that to work, the less compensated at the company have to contribute a lot.


Other employer contributions. If the plan document permits, the employer can make additional contributions (other than matching contributions) for participants, including participants who choose not to contribute elective deferrals to the 401(k) plan. If the 401(k) plan is top-heavy, the employer may be required to make minimum contributions on behalf of certain employees. In general, a plan is top-heavy if the account balances of key employees exceed 60% of the account balances of all employees. The rules relating to the determination of whether a plan is top-heavy are complex. Please refer to section 1.416-1 of the Income Tax Regulations for the rules describing how to determine whether a plan is top-heavy.

NOTE: I am not an accountant or lawyer.

Yeah. the "Safe Harbor" thing is weird, but it's probably realistic to have $45k/yr in extra compensation for every employee if you're a 5-10 person shop where everyone is a professional (with high compensation). I've seen it work at consultancies where everyone was a partner or otherwise highly compensated, but I've never seen it at a company which had receptionists, etc. (You could probably hire through a temp agency or contractor for things like janitorial/reception/etc. if you wanted to get around this)

Perhaps many of us question whether these startups are doing meaningful work.

Just among YC companies from one public list I saw, I'd consider highly meaningful: Errplane, Microryza, Watsi, Eligible, Plivo, Matterport, PlanGrid, PerVices, Parse, Meteor, Comprehend, DrChrono, Mailgun, Pebble, Upverter, AeroFS, Stripe, Mixpanel, Octopart, ...

(Personal bias: healthcare, developer tools, hard tech -- other people probably have different preferences)

Tesla or SpaceX or Cryptography Research or Flylogic might top these, but any would be better than Wells Fargo, IMO.

>doing meaningful work and working with great people

overall this is true, but its as rare as a finding an employee like the one in the article to accept accept below market rates and less than stellar benefits.

The irony is that all the places I've found where you do meaningful work ALSO pay well. Some of them do just pay high cash comp with minimal benefits, though, and some startups do large equity (1-5%) with less cash comp for a year or so (80k/yr vs. 120-150k).

(The exception was government contracting, where it was >$250k/yr but the most meaningless work, 3 year old broken Dell laptops, and generally horrible.)

> I pay $118/mo for better coverage than ~any company I've seen

Could you please elaborate on this?

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