For a lot of them that's just not the primary goal. Honestly, I expect the next big success stories to break from this pattern of the silicon valley sickness of trying to grow a company at all costs by conning VC firms until they've got enough users and then sell the company or get another round of funding to try and figure out the whole "revenue" thing later.
I think some old school thinking of more organic growth of a good idea with immediate revenue will see a resurgence.
While I understand your sentiment, there is a 2015 Dan Luu article which goes into far more depth saying basically the same thing: https://danluu.com/startup-tradeoffs/
I can see you just started writing on this blog so I don't want to discourage you, but I was struck by the formatting of your notes page and this post being so similar to Dan's along with the topic and content of this post. Keep writing but I would maybe suggest something with more of an original spin.
It wasn't mentioned specifically, but I assume this post was written as a general response to "Working for Microsoft cost me $200 million" [1], which has been at the top of HN for most of the day.
Thanks for the comment - this was more in response to the recent article as mentioned by seattle_spring but thanks for sharing Dan’s writing, will take a read. In terms of the similar design, I actually optimized for the least amount of HTML / CSS necessary to put readable text on a page, I guess resulting in a similar look.
I've always thought this problem to be overstated. It doesn't make financial sense to work for a startup, but the upside is that you get to work on something you care about (and even the startup salaries aren't that bad in the grand scheme).
> the upside is that you get to work on something you care about
As a counter example, I found this is far more true at big companies, where you can switch teams until you find one that fits your interest, then at a startup where you are expected to work on basic infra that the company doesn't handle.
For the data/ML related jobs that I was looking for and the industry is moving towards, big companies have tons of valuable data that startups could only dream of acquiring.
I don't think Dan Luu has some sort of eminent domain over this topic -- I've seen literally hundreds of similar posts, most long preceding and covering the same topic. It's a pretty common decision for people in this field to face, and lots of people have lots of takes.
Not to mention that his post format isn't remotely like DanLuu's. It reminds me more of old Philip Greenspun.
Not that "basic text" is some sort of copyright or something.
There are a bunch of things that “good” startups can do (and ARE doing in my experience) to make early stage equity worth it. For example, instead of a 90 day limit after leaving the company to choose to exercise options, many good startups are now offering ten years.
Your odds of making money are much better with a young-ish but publicly traded company than with a startup. Even if a startup is successful, you won't see much money unless you were one of the founders or early investors. There's a million ways the stock options that early employees get can be made worthless (or worth-little).
I have BEEN one of the founders, and still didn't make any money off the ultimate sale. There are far too many games with share classes, VC-funded bridge loans, and preferred investor incentives. The only way to win is to not play the game.
>> Equity agreements should not be intentionally confusing or designed to screw over employees.
You should feel lucky if confusing is the problem. I think the bigger problem usually is -- you often cant see the cap table. If you cant see the cap table and the preferred overhang, there is no way to realistically understand where you stand in the scheme of things. Confusing can be overcome with some search, but "opaque" cannot be.
There’s a fine line between bravery and stupidity.
I can say as someone older than they were at the time that there was an element of wishful thinking about many of the founders I worked with, and even more so for some that I met in passing.
Charismatic people who are deluding themselves just bring others along for the ride. They may not even know they’re being dishonest. People who have a way with words can be sucked in by their own words just as much as others can.
As I was reading "Downsides to working at a tech giant" it occurred to me that the alternative to working for a tech giant is not necessarily a start-up: I would probably work for myself — freelance.
So, in fact the two articles can both be right. ;-)
You can also work in tech, for a company, but for something that is neither a giant nor a startup. There's plenty of such jobs out there. In fact, the majority of tech jobs probably fit that category
They can be right even if your two options are either a startup or a tech giant. They have their downsides as does every job, even freelance.
I like being freelance but getting the motivation in those first couple of weeks was pretty hard. I also found it tougher to sell my services because I never really had to do it before. Probably some other stuff I can't think of off the top of my head? I don't think any type of work is perfect although I'd go for freelance any day of the week.
I was a software engineer who learned to start a company right off the pages of the site you're looking at right now, Hacker News. It was here where I learned to start a startup.
I later worked for Y Combinator as a partner helping founders make products and services. The best ones made something that touches millions of people now.
While there is a lot of zero sum thinking in startupland and finance/capitalism in general, you have to remember that this is probably the most GROWTH mindset industry in the world. Where else can you, with just your hands and a laptop on the Internet, create something a billion people use?
I'm not saying that is the norm. But when it works, it's still remarkable.
And it can start with you, and everyone reading this.
> Where else can you, with just your hands and a laptop on the Internet, create something a billion people use?
Serious question: how many software companies have something that a billion people have used?
It's a pretty special industry, for sure. But the odds of it happening are basically zero. I see how selling the dream makes for a good story for young and hungry startup founders to passionately change the world and (cynically) end up as a failed bet in someone else's portfolio.
But it's a bit disingenuous to make it sound like it's commonplace.
No disrespect but I think what the people use the product for should be mentioned ... in addition to the number of people using the product. The world has a lot of problems right now. I know there’s some VC in those areas but, well, look at what we talk about.
Touch 20 lives as a teacher and enrich those individuals, or 20 million lives by helping them order groceries over the internet.
> I was a software engineer who learned to start a company right off the pages of the site you're looking at right now, Hacker News. It was here where I learned to start a startup.
Keep in mind that if you look back on the things that made you excited to go into startups into 2006 or whenever, probably none of them are true anymore. E.g. the main reason people were excited back then is that there was a huge arbitrage opportunity to take every business that already existed as either brick-and-mortar or web 1.0, and reimagine it using AJAX and web 2.0 design language. In retrospect there were a bunch of other favorable macro trends coalescing at the same time also, but regardless none of these arbitrage opportunities exist any longer.
Workers cooperatives are too risky, the liability in case of default is not limited in all legislations that i'm aware. There are successful cooperatives in most countries but those are the exception not the norm.
It's always simpler, safer and more wise to incorporate.
> Written by a VC trying to get engineers to join the startups he's invested in.
Actually for most of the piece he was pretty straightforward about making sure you get equity if you want to get paid upon company success.
What has changed is that genuine equity in startups isn't being offered as readily as it was ~15 years ago (and it is notable that the missed opportunity he describes is that far in the past).
I wrote that other article and agree with what the original author here has written. Startups need to do a lot more to a/ solve the real problems of their customers and users, and b/ treat their employees and ecosystem better.
Also - outside of the bay (I live in Chicago) you actually make more money working for a startup (at least I do) than for a larger company (as a senior engineer with a lot of early stage experience). I think it might be the nature of the market here.
There is a lot of capital out there, what needs to happen is the number of startups shrink and the well funded ones pay more money - even more than google or FB pay. Simple as that! If you are sad that you can’t get a professional team on a $1mil seed, I have absolutely no empathy for you because I’m an employee and this is the free market.
Now, if you really want to make it more enticing, some things that would move the needle for me other than comparable salaries (although more cash is #1):
- Larger equity that automatically ups if it will be diluted, and the moment any shares vest I can sell them in the private market.
- Transparent cap table.
- If the founders take cash off the table, I can as well, and no preference for founders.
- 10 years after leaving to exercise my shares. I don’t want to have a 3 month trigger that handcuffs me to prevent a giant cap gains bill on “paper money” when the fair market value is way higher.
- Reasonable working hours.
- Flexible work from home policy.
But overall, go raise more and start offering more cash, because I assume 95% of startups are total failures.
It's VCs' and founders' fault for always diluting employees on the big exits. If they want to gain back trust we need iron-clad poison-pill provisions that prevent employees from getting screwed out of their equity.
Yes you will probably make more at an established company, but your rate of growth can be much higher at a startup.
I worked at a large tech company for 3 years before joining a startup, and learned more in the first month at the startup than the full 3 years at the large tech company. I was able to design and implement a service in a matter of days, whereas at the large tech company those 3 days would easily spent convincing people that the service is needed in the first place. Direct exposure to customers also is really interesting and changes you as an engineer.
It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.
I've had kind of the opposite experience. At the startup we were really sluggish it was hard to learn anything because we were jumping into any possible business opportunity before even thinking about ROI because money was always tight. 80% of the time was wasted supporting clients and fixing bugs that were due to the fact that the product was shipped too early.
I think the biggest difference is money. A well funded startup might be a boon but a struggling one will be a bane.
There are lots of startups that aren't doing it right. The best thing someone working at one of those startups can do is probably quit and go someplace else.
I think systemically one thing we need to do is help people make better decisions about where they spend their time. Especially for people who are good builders, they happen to also be the best people who can decide for themselves whether something is actually going to work.
The difference is whether you see learning to do meaningful things on a shoestring budget to be itself a useful skill.
Boeing won't care if you save the project $5k by spending a week of your time coming up with a clever workaround. The week was more important than the $5k. Same for a high level role generally. But not getting work done for a week because your boss won't approve a $500 purchase... that would be frustrating and get old fast.
On the other hand, it seems like a savvy engineer could work that into a story to tell a Boeing interviewer about how they took the initiative to think outside the box and develop a solution that saved the day when the team was under a time constraint.
Sometimes the people who are best at "working stories up for interviewers" don't always feel the need for there to be any truth behind those stories...
If they solved a time constraint by being clever and working hard then clearly Boeing would care about that, I agree.
Saving $$ per unit and saving $$ total are so different. If all you're doing is saving $500 total, I wouldn't even care in most cases... but if you managed to use clever techniques to save $0.30 off the manufacturing cost for a toy that gets sold in the millions...
I most strongly agree with the ethical part of the article, in any event. I'm sick of companies trying to take advantage of their employees, it's just sad and gross to see it done by startups that could be better than big companies in at least this one way. But instead they take it even further somehow because their finances are far more opaque. I don't think it should be up to noblesse oblige to determine whether distribution of profits and salaries are fair, it should be assumed to be the rule even if there may be exceptions.
It's a sad day when you look at employment agreements from Intel and a shiny startup and find that Intel is more up front and transparent about how things will work and what you'll get paid.
I think the course of events in the USA in the decades since the 50s has essentially answered the question of what happens if you leave it up to the most fortunate to decide how to treat the least fortunate.
I find that saving developer time or large amounts of money can be rewarded well in my position at a FAANG, you just need to save an amount commensurate to the opportunity cost.
"...save an amount commensurate to the opportunity cost."
Which can be a hell of a lot more than you expect. Like, don't bother spending two weeks to cut the CPU use of a service in half, if the service only uses 1k CPUs to begin with.
> Boeing won't care if you save the project $5k by spending a week of your time coming up with a clever workaround.
I'm confused what you're getting at here. $5k/week is $260k/y (or a bit less counting vacations and holidays) and the fully-loaded cost of an engineer at a startup is typically more than that. Then consider how high opportunity costs typically are at startups, and I expect most startups would view your spending a week to avoid a one-time $5k expense to be a bad tradeoff.
Yes, but a week of delays costs the company like Boeing a lot more than just your salary, and they have deadlines to meet and other teams that need your project done.
I agree, most startups would view spending a week to avoid a one time $5k expense to be worth it for several years at least. That's why I'm saying the experiences are different.
If you're reading a judgment into my comment, there is none, I think doing super constrained engineering is super fun and an awesome skill to have. But I have also worked places that have the attitude of time being vastly more valuable than cash, and respect that both approaches are reasonable. Just different. But worst is when you're cash constrained to the point where even your clever workaround isn't possible to implement, even though it costs 10x less and is mission critical.
Ah, sorry, I misread you. Fair enough, raise to the level you feel is reasonable for your field. I just picked a number that I think is about right for people like me that don't code much.
I am also thinking more "angel+bootstrap+grant" funded startups rather than people already past a Series A; if there's 10 employees with a decent runway the calculation changes a lot versus 3 people getting something off the ground. I think the latter is more typical of a startup for the first several years.
this has been my startup experience, too. Chasing any customer even if we had to make a lot of changes and try to support antiquated versions of things for our software to work for them. It rarely paid off. Actually, it never paid off.
> were due to the fact that the product was shipped too early.
Can you explain more about this? The mantra is generally ship early and iterate fast.
How come the tech team was spending 80% in a bugs rat race?
The earlier statement of "80% of the time was wasted supporting clients" seems perfect? i.e. what else should you be doing other than supporting clients who are willing to pay with features and bug fixes?
Initially the startup was a service company which later pivoted into customer medical product. Previous contracts were upheld, while new were piling on even after pivot. Note that this is in France, a lot of funding comes from 'collaboration' contracts between laboratories and companies, often including up to 5 different entities. All this means that you are stuck in a whirlpool of quarterly meetings. With a tiny team if your product needs even very little support for each client it piles up. On top of that this was a medical, connected, product, people have different expectations for devices with a stamp on them.
So now you have a team with about 2.5 collaboration projects per engineer, who are at the same time the tech support and SREs. With several new products in a pipeline. All of it wrapped in a bow of medical certification.
One think that startups should have in my opinion is focus. If you have enough funding to go for a moonshot drop everything else and go for it. Don't spend too much time hedging because you will never get to the goal. If it doesn't work out, too bad, but at least do everything you can to get there. Especially when cash strapped.
Working for startups I usually hit the ceiling pretty fast. Not enough time for formal learning, because of fires or hundreds of menial tasks, and on-the-job learning is just not enough after a year or so.
> 80% of the time was wasted supporting clients and fixing bugs that were due to the fact that the product was shipped too early.
There are a lot of valuable lessons to be learnt here about product planning and dev process, but if you didn't make any attempts to fix the issues you mentioned, you probably didn't learn very much.
Yes, I think it's possible that you learn faster at startup. But it is ridiculous to say that you "learned more in the first month at the startup than the full 3 years at the large tech company."
This just makes me think that either you are exaggerating a lot, or you were highly unproductive at the big company than most people.
In either cases, I end up not being able to take your comment seriously.
I believe him as someone who has worked both ends in many places over the years.
At a big company you are given a slice and you really have to push to get anything more. I've had the experience where no work is assigned because approving anything takes time and once the work comes it is extremely easy to finish immediately because you have sat through weeks of meetings reexplaining everything to different groups get approval to change a form.
At one startup by the end of the day I was already learning four different languages/tools.
Now I imagine places like fangs would be amazing places to learn. If you ever work in healthcare most of your day will be explaining why this is a small change / very safe and you learn very little.
1 month vs 3 years might be inflated a bit for learning, but then again it might fit.
At a startup you might get core technologies going in a month, while at a big tech company the timescale might be closer to years.
I worked at a startup and the focus was on the work. I got to make decisions on what to work with, what technologies to adopt, and then I had to get them running. I worked on core technologies.
At a large company you rarely get to do this. You usually have large systems in production, have very large teams, and get to work on an established code base adding a feature or fixing something.
An interesting exercise at a large company might be to look at the version control checkins from the beginnging. The features at the beginning of the log probably went in a lot faster from fewer contributors.
Depends on the company. "Big company" isn't one company, or one position. I absolutely believe it. At the big company I worked for, it took weeks just to get all your accounts enabled. Releases were planned months in advance. At every startup I worked at, I personally deployed our software more in the first week than the big company's ops team deployed our software in all the years I was there. You learn a lot from that. Not so much from waiting for the ops team to find time in their schedule for you.
I worked at big companies for the first 15yrs of my career. And startups for the past 5yrs.
Firstly, startups have been an absolute delight. I very carefully chose the company and hence my boss and my co-workers and love working with every engineer on the team. It is a pleasure coming into work each day and I often cant leave because I'm excited about my work.
I have a lot of authority over what I build a much of it is "close to the metal" rather than some side system. I get to see the whole slice of cake from conception all the way to sales and client implementations and participate in all of it. At small companies, as an Engineer, I learned how to build a successful product and learned all the steps from inception to sales and production.
At every big company I was at, there was more specialization and lots of process. Process was necessary at that size. There was also a great deal of inter-departmental politics and incentives were usually not aligned at big companies, sometimes incentives across departments were even orthogonal. I spent 30% of my time on process and communication at big companies and it went to 80%+ once I was a senior executive. I made a lot of money there, but I think it was to compensate for having to deal with the inner workings of a big company (and being able to be effective at it.)
At big companies, I learned how to turn the gears of organizations and learn how to make globe-spanning change effectively.
To be fair, I took a big pay-cut to come to a startup as an Engineer. I'm happy with the choice. I dont think there is any silver bullet out there, but it is important to understand what you get with each choice. It is also important to make that choice with full intent and not be fooled or brow-beaten by anyone.
Briefly to begin, I'm going to read the above extremely uncharitably, not in an effort to besmirch aeternum but instead to try and tear down some terrible guidelines about life choices that I've seen going around.
Here follows my translation of the advice above:
> Yes you will probably make more at an established company, but your rate of growth can be much higher at a startup.
You'd personally benefit more from working at an established company, but if you work for a startup you'll be trained on the cheap and then an established company can reap more profits from you.
> I worked at a large tech company for 3 years before joining a startup, and learned more in the first month at the startup than the full 3 years at the large tech company.
The comfort of a large tech company is nothing compared to the stress filled life of working at a startup, having to constantly innovate on your toes and learn your own ways will push you to develop faster - but if you hit a wall you're truly hooped.
> I was able to design and implement a service in a matter of days, whereas at the large tech company those 3 days would easily spent convincing people that the service is needed in the first place.
I saw a need and dedicated some days of labour to filling that need, because it was a valid need I was praised, if it hadn't sold I'd be chewed out for wasting time - and there is no guidance on which needs might be helpful or not... Within a startup you'll be expected to do user surveys and then market your new product even though no time is formally afforded for either.
> Direct exposure to customers also is really interesting and changes you as an engineer.
I assume when you decided to become a software dev you really meant UX designer? If your perfect world is being given a task to do and doing it accurately to a high level of perfection then have fun trying to quickly adapt your highly designed system to literally contradictory client requests coming from the same customer.
> It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.
Losing your shirt trying to make your day job not collapse and then being excluded from any of the benefits when your company goes public is character building.
It sounds like you shouldn’t go to a startup. I’ve done a mix of both (from #1 hire out of 2 total engineers all the way to a Fortune 25). Across the board, I’ve found the smaller the better (more enjoyable, more learning, more energy, more urgency, better colleagues).
Yeah, there’s no formal time laid out to do step X in the course of development. There’s the chance that you won’t make payroll someday.
It’s definitely not for everyone, but when you get a good team together on a good project, it’s fantastically energizing.
I'd rather educate the population on the pitfalls of startups so that people going into them are less naive and so that the experience of working there can be more enjoyable and fairly compensated.
I have really enjoyed working at small companies as well - not two person startups working on hopes and dreams, but companies under a year old that are struggling to stablize their offering of a product that they know there is a market for. Startups can be lots of fun, they can also be a grind trying to keep up with shifting customer requests - especially if you find yourself with a single dominant customer that knows they can push you around. Start ups can buy you an island or you could make 60k a year for three years and then be let go immediately prior to an IPO. There is an immense amount of risk there and I'd like to see some shifts in startup culture to provide a bit more assurances since the experience can vary wildly.
Maybe employees at small companies need to be guaranteed (i.e. by the government) a portion of that company for their work, maybe work days need to have a hard limit on them - maybe there just needs to be more VC funding sloshing around and given away in small doses - 200k to twenty companies will produce a lot more success than 4m to a single company.
What problems do we see that are evidence that government intervention is needed or would be helpful?
I see a lot of people very much willingly freely entering into contracts that are beneficial overall for society. That many startups fail and few result in king’s ransom payouts for employees who put up no money to form the company seems ok and preferable to an environment where government has a heavy role in picking startups, regulating work, or otherwise mucking things up.
If a couple of my buddies and I want to work together and want to work as hard as humanly possible at it, why ought that be disallowed?
In my experience it’s the team more than the size/lifecycle of the firm. I’ve worked on teams hitting on all cylinders in large and small companies. Similarly I’ve had bad teams in those environments and all sizes in between.
"No guardrail environment" is a great way to put it.
I've worked in a large corp IT department and for start ups.
I'd say the most value in working for a start up comes from being in the core group of founders and first employees. After that point, my perception is that it's more of a toss up - if you're going to be a rank and file junior developer on the periphery of the decisions that shape the company, an established company could in many cases be a better choice.
I'd even take the position that if you are able/willing to work hard and grow fast, a start-up (or more precisely a high paying, high growth unicorn) will likely pay more than an established company - because you can grow faster and become more valuable (and thus compensated) in a higher-growth environment where the only limit is yourself.
> It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.
There's a thin line between growth through mistakes and learning bad habits (because of lack of training and no colleagues with experience).
I think it depends on the big company. With aws or on-prem cloud native tech, there is a lot of freedom and responsibility given to individual engineers to build services and applications in an autonomous fashion. This goes for everyone, including folks with a year of two out of college.
I have seen no limit to what an individual engineer can accomplish at my big company as long as they have the desire and ambition.
You can be compensated in other ways, but often I've found much of the work at startups can be no more interesting than their Big N counterparts. It might not even be faster paced. Your career growth might also be similar. In theory, for startups, you sacrifice pay for other facets. The reality is quite different.
The work might be similar but you're paid 50-75% of your peers. That was my experience in startup land, at least. Few good challenges or career growth and half of what I felt like I was worth. Completely personal anecdote, but I felt I was sold some half truth, where I was promised career growth, interesting problems and flexibility, but got nothing that I couldn't have found at many Big N companies.
To be fair it’s mostly been the VCs learning how to extract more value and forcing that on the companies.
The VCs have naturally gotten better at what they do, which is bring returns to their LPs. The consequence is that they get more value from exits than they used to which comes at the expense of the employees and founders.
It’s worth mentioning that this post is focused on USA and (unsurprisingly) highlights Bay Area.
I’m sure the points exposed apply there but there are many other places in the USA and the rest of the world where this doesn’t apply and you can find good talent without needing to offer an exorbitant paycheck.
Frequently in the UK I'm seeing options that are clawed back if you leave the company at any point. EMI options that can only be exercised under certain conditions such as an exit.
I've been out of startups for a few years now, but it always struck me that there is plenty of room in the cap table for employees, if founders and VCs realize they have to cut back.
If founders and VCs gave a third to half of their companies to employees, instead of crushingly small option pools, this math would almost certainly shift. And the returns wouldn't be much worse for founders or VCs.
The reason they don’t is because they already gave 50% to the investors. And it isn’t uncommon for companies with $30M or $1B exits for the founders to get nothing. I heard about a company recently where the company sold for $40M and the founders only owned 4% after years of raises. I doubt the founders got anything. Most of the time these companies are having trouble scaling sales.
That’s why I included investors. One could imagine a regime change where, given the market for talent, both founders and investors realize the need to carve out more for hiring equity, and value companies accordingly, especially in the BS early rounds where it’s not based upon any real financial metrics.
Captable slots for early employees range anywhere from 5 to 40% (collectively, not individually), depending on who the partners are and what the company does it might make sense to join a start-up. But it's better to be a founder and if you are risk averse then it is better to work for a big company with long term viability.
This definitely isn't one size fits all and there are a lot of people that will happily try to sell you on their version of the story because 'it worked for them'.
I think the questions/issues around this topic don’t really make sense:
A. Why are we comparing an employee situation at a FAANG company with what should be a co-founder situation? If someone is an engineer that can make something happen at a startup, they should probably be a co-founder rather than an employee.
B. Why are tech center startups trying to hire coders of a certain skill level that will be incredibly expensive due to local competition? If a startup is looking for skilled coders to implement the vision of the co-founding engineers that can make things happen, then there are plenty of remote coders in non-tech-center areas that will do a bang up job for a reasonable price. Note that many of these remote coders don’t want to or cannot come to a tech center. I assume that this is an issue because many/most startups are not good at hiring, on-boarding, managing people, managing remote workers, etc.
C. Related to issue B, why play the micro-equity game with coders at all when they should either be co-founders or they (as remote workers) can be paid a satisfactory wage without equity bait?
D. Why is this conversation comparing a job with (relatively speaking) a lot of hierarchy and politics at a FAANG with a job that should have a flat structure and a great deal of autonomy? These jobs cater to two different groups of people — the ones who like the former probably won’t like the latter, and the opposite is true as well. There are subtle sides to this (e.g., do your time at a FAANG to develop a network), but many people who succeed at startups are not folks you want working at a large company — they will go nuts, and they will drive the people around them crazy.
This whole conversation is bizarre to me. I think there are three relatively simple choices:
1. Take a company job if you’re a company person — that is, someone who likes structure and hierarchy. It might not be trendy to admit it, but many/most elite school grads fall into this category.
2. If you prefer things like autonomy, being close to the customer, and being a generalist, then go to a startup. Plan on leaving once it hits a certain size.
3. If you have a plan for an alternate path that includes both, then go for it — specialist work at FAANG, FAANG then startup founder, startup employee then startup founder, etc. Just know what you’re getting into, because it can be awfully tough to walk away from $300k annual comp as a 25 yo.
Most people I’ve known clearly fall into one of these categories barring some sort of life-changing event.
I think another reason that people are wary of joining start ups, is they've realised that:
a) The market is now incredibly saturated, and being an early equity owner in a start up that will be worth billions is very rare now. Gone are the days of a unicorn every month or two.
b) People have noticed the trend of FAANG companies buying up start ups, and that this is the goal of many (most?) start ups today. Reach critical mass, get a good valuation and customer reviews, get bought out by tech giant. If you want to work on the most viable new products, just join a tech giant and work on one of the projects they've acquired. (Or wait till the company is bought and join them if they are still independantly run at which point they're not really a start up anymore)
I didn't mean that a company became a unicorn every month or two, but it seemed that companies were founded quite frequently that later went on to become unicorns.
1) People say you learn a lot more in a startup than in a BigTechCo. I don't think this is true: I've gotten far more skills during BigTechCo stints than at startups. YMMV.
2) A new grad at a startup gets, what, $100k in salary and some equity? If we're talking a three year stint at a startup, you're effectively asking a worker to invest ~$500k in exchange for that hypothetical equity. In the broadest strokes (obviously everything depends on the deal), what kind of equity does an angel get for half a million dollars, and how does it compare to the amount of equity the new grad gets? And it bears pointing out that that new grad equity is subject to all kinds of games and deception. Of course, the usual response is "you just have to be smart enough not to be scammed!" Perhaps, but I know tons of people (including myself) who are apparently just too dumb not to be scammed but are still smart enough to be gainfully employed at a safe job.
I've worked with startup employees who knew 15 technologies - all of them poorly. They had zero best practices because it was go fast 24/7. It was guys right out of school thrown right into the mix so they didn't get the guidance of more senior devs.
I just made a move to a small (~1000 people company) from Google and I feel you. The code quality is terrible, they do not write maintainable/modular code and worse, they do not do design. They suffer from this(there is always another corner case that they did not take into account because they did not communicate well with the customer) but they still do not take any steps towards the right direction.
It's in finance/trading. I only worked for 2 of the FANG where I focused on tiny optimizations of an infrastructure software (where a couple percent improvement would directly result in a promo). I wanted to build something from scratch but did not want to move to a startup (because of the issued mentioned in the post). Now I am designing a new system for this company and I will lead the implementation of the project as well. This is like working for a startup (with all the good and bad sides) except I still make FANG level (even higher) income.
What made you think that Google does design? In my experience, what they do at Google, is talk about the overall idea of what they are going to do, but they never did design, they never analyzed tradeoffs, and they never estimated project costs or long-term implications of the crap they threw at walls, at Google. They just pretended to do design, at Google.
How do you come to $500k? Wouldn't that require that the new grad would be able to get a $266k job at a larger company? That doesn't seem particularly realistic.
Rough numbers, but I'm thinking roughly $200k, $230k, $260k. It's an order of magnitude estimate, take that for what it's worth. If the new grad is instead investing $300k, the calculus remains about the same.
I think it's fair to say that someone who can get that sort of job right out of college probably should. However, I'm not sure that the vast majority of engineers can do that.
When I started at Google my first three full years were $213k, $233k, $287k (https://www.jefftk.com/money). Some of this was stock growth (which is not guaranteed and I was lucky there) but I think this sort of pay is reasonably typical for people who are considering a FAANG offer.
I don't think that had a large effect on my compensation, if any: I joined at L3, which is what most new grads are hired at, and my salary before Google was low enough that I don't think it pushed up my offer at all. I also didn't get offers from multiple places, which is the sort of thing that (a) results in higher offers and (b) is the sort of thing new grads usually do.
But ideally someone hired right out of school would be up for sharing their comp?
Mind sharing what your rent was during those 3 years? The best figure would actually be comp minus taxes and rent.
edit: Oh, I see you were in Boston -- that's a great deal then. I still wouldn't want to work for Google for idealogical reasons, but I can see why the money would attract others. You also had ~9 YEARS of full time experience at that point, which makes it a lot less impressive.
Also, I didn't have ~9 years of full time work when I started at Google, I had 3.5. My first full time programming job started fall 2008, and this was Spring 2012.
If you were making 60k+ through your college "internships," I would put them at the same level as full-time work. My first college internship was $9/hour with no benefits, and it lasted
6 weeks...
Also, donations are discretionary, so you wouldn't count them at all -- you would just count your salary minus your tax rate (not counting deductions, so that the average Joe can get some context).
It’s even worse, because when you leave after 3 years, you have to pay to exercise those options and then pay the taxes on them. And then hope they end up worth something someday.
My experience: engineering at Startup #1 for 2 years, then Google for 3 years, then Startup #2 for 4 years, and now I've been working with seed stage companies as a VC for the last 7 years. The amount I earned as an engineer was highest at Startup #1 (got lucky!), significantly lower at Google, and a little lower than that at Startup #2. Startup #2 is still chugging along, which could eventually make it on par with or a little superior to working at Google.
But money isn't everything. Startup #2 was the place where I learned the most. I was senior enough to be single-handedly responsible for large projects like a distributed search engine and a logging and analytics service. Sure, my search engine was a POS compared to Google's, but at Google I would've worked on a part of a feature of a component of the search engine whereas at a startup I got to build the whole thing from scratch. I'm almost 40 now, and that search engine is still by far the most fun and educational engineering project I've ever worked on.
Aside from learning potential and financial comp, there are other factors like team camaraderie, independence, etc. I keep in touch with way more people from the two small startups than I do with Google colleagues. Google had a good culture, but the startups were much tighter knit.
Finally, I think articles advocating for startups vs. big companies are a little like trying to convert someone to atheism or Christianity with a blog post. It doesn't really work that way. Some people are wired for startups: they love them and spend their careers at small companies and don't understand why big companies are attractive. Other people are more drawn to big companies where the company itself has a huge impact, the teams are well-staffed and have lots of resources, and the employees get higher salaries and lots of other benefits. When these people try working at a startup, they often hate it and quickly go back to another large company.
Neither big nor small companies are objectively the best, but if you factor in personal happiness then often one type of company is the best for you.
I've noticed the same thing in biotech startups. Some people are meant to be part of smaller, bootstrapping companies and others are meant to be part of more established, good business corporations. The most interesting people are the ones who get in early and stick with it, growing along with the company.
The most interesting people are the ones who get in early and stick with it, growing along with the company
It’s pretty rare for this to actually happen in my experience. Generally an early engineer will grow and be ready to take up the role of VP Engineering or even CTO and instead the VC’s will parachute in one of their cronies once the hard work has already been done.
Completely agree. The issue I see is that at that higher levels, opex is more important for success than familiarity with the specific science. So the people who "grew-up" with the company, who would have detailed understanding of the science, would not necessarily have opex skills commensurate with the requirements the larger organization now requires.
> I was senior enough to be single-handedly responsible for large projects like a distributed search engine and a logging and analytics service.
I'm going to be honest, I don't think this is the norm. I worked at a start up for years and never experienced that level of ownership or challenge. We basically built a glorified CRUD with VC money. Good for you! But I don't think this is the case for many? Or maybe it was just me.
One very salient explanation of this that has stuck with me goes something like this:
A fast growing early stage startup is great for learning because you'll often end up with tasks that you're not qualified to do, which forces you to go out of your comfort zone and learn from the inevitable mistakes you'll make along the way, whereas in a large company they usually have plenty of more senior people to take care of the more challenging tasks outside of your current pay grade.
Learning has a way of increasing job satisfaction and giving you opportunities for larger scope in the future. You can get that in big tech too: my first four years out of college, I was fortunate enough to have some incredible teammates who seemed like gods, and they taught and showed me things it would’ve taken me years to learn on my own, if I ever did.
But then I switched teams and stuck around for 5 more years before leaving out of boredom. I joined a startup, and learned far more in that first year than the last five years in Big Tech. In the span of two years I went from not really knowing how SSL worked to being the architect and primary coder for a couple kubernetes deployments with a few dozen services.
The thing about big tech is that you become super specialized. Sometimes that’s fine, like if you’re a kernel hacker earning $$$, but if you join the wrong team then your world just shrinks.
I don’t ever want to go back to working on a tiny piece of something, even if that something has millions of users. Even if nobody exists on purpose, nobody belongs anywhere, and everybody’s gonna die, I still like the feeling that the work I do somehow matters to the people using the product.
So a dev team of less than 10 is probably the sweet spot for me.
That's a very good point. Money isn't everything. Pretending that money is the ultimate goal of life can be off-putting in the startup world and in the American lifestyle in general.
Obsession with money is an easy way to envy, burnout, depression, and loneliness.
My career path has been startup, public tech, startup, public tech, startup.
I got lucky that the public techs both had the largest stock growth in their history while I worked there.
All the money I ever made was at the public companies. I also learned a lot of cool, very specialized skills and got to do a lot of “ohhh so cool” type stuff.
Almost all of the knowledge I learned that allowed me to be successful at the big companies I learned at the startups, and most of the friends I made at work that I still talk to were at startups.
Both environments offer something unique.
I usually tell young people to start at a big company with a well known mentorship program and then quickly move to a startup to learn a bunch of practical skills.
I have a very straightforward suggestion for startups: Focus on the engineers who've put in a decade or more at the big companies.
They are, given the exorbitant salaries, financially set enough to afford the startup risk, and there's a good chance they'd like to see some more agility again.
But 1) you'll need to stop lowballing equity for hires, and 2) you need to get used to the idea that it's not going to be an extension of university life - these people have all better things in their spare time than playing beer pong.
Bonus points: Offer an office instead of cubicle mania.
Bonus bonus points: Make sure you hire a diverse workforce from the get-go.
"To make the situation worse, the very good engineers, the ones who could truly help build a tech company from the ground up from day 1, were getting offers so exorbitant they could not possibly fathom to turn them down."
Ok I have seen this written every now and then.
What does this person look like and how do I become one given a willing to sacrifice everything else?
I can not find a good answer to this question. Everybody seems to have their own opinion.
Eh, I really don’t think this is representative. I’m a self-taught iOS dev who has only ever been self-employed and I just got a $420k / job from a public company. And I’m smart, but not some unfathomable genius.
I think every engineer should at least do some mock interviews on data structures, algos, and system design (there are TONS) of free study resources and then do a round of interviews. You only need one yes.
right, wasn't looking for the company actually, by "where" I meant the location, which I think is NYC based on your handle! Congrats, that's a great gig!
>First, be smart. Very very smart. And be able to demonstrate your smartness at the drop of a hat under stressful conditions.
Sounds like this is not possible without years of exposure to events that force you to this situation. How else would you learn to act like that?
Regarding being "smart": How do you define this? For example, I got a CS degree from a second tier Engineering school. But I was a B-/C+ student. Do I meet the criteria for being "smart" or just lazy?
>Second, attend a top tier "name" university like MIT, Stanford or Carnegie Mellon and major in a related discipline.
Is this a hard requirement? What do these schools do that others don't? Is the exposure to other top tier people a necessary requirement from a skills perspective?
>Third, do some side work in your chosen field that can be shown off to prospective employers.
How do you choose a field that leads to the original goal: "the very good engineers, the ones who could truly help build a tech company from the ground up from day 1, were getting offers so exorbitant they could not possibly fathom to turn them down."
Tech is such a diverse field. There are so many paths to take, none of which guarantee I will reach this outcome. I could become a rock star developer having developed tons of apps, but is that the right path? Or will it lead me to a cubicle job?
>Fourth, learn how to present yourself well (for interviews and such).
This seems like just a lot of practice. Maybe even requiring growing up in a very socially active lifestyle. The opposite for people who sacrifice everything to become great at something eg. programming.
Its looking as if you need to be in a narrowly defined path that needs to either be decided when you are born or you adopt very quickly at a young age in order to accomplish all your steps.
Ignoring all the indicators that's been mentioned (acing all interviews, right pedigree, etc.)
- Solid results too show
- Fantastic references
I know a lot of younger guys have these pipe dreams of sacrificing their youth, going to the best university, studying years for interviews, and looking / being the "perfect" candidate come interview time, without actually having built anything of substance.
Sure - you will probably land some sweet positions, but there's no way in hell you'll get hired as a CTO without anything real to show - unless it's a 3-piece student startup.
Yes, there are exceptions. There are young people that land very nice positions, but they're almost always both smart and experienced.
I think the roadmap look pretty boring, but it's what it is. Read, build, analyze, and understand. Have vision, and get good. If someones gonna hire you to design / build / develop their product, then you need to be able to lead and deliver. Hard work, experience, and good networking skills.
>I think the roadmap look pretty boring, but it's what it is. Read, build, analyze, and understand. Have vision, and get good. If someones gonna hire you to design / build / develop their product, then you need to be able to lead and deliver. Hard work, experience, and good networking skills.
This is probably the clearest answer that I have gotten so far so thanks.
However I was hoping for something more exact. I guess there is no perfect path that someone can take.
I think I also asked my question incorrectly seeing the other answers I got.
What I was really looking for was how can I as a 29 year old graduate of a CS program who is currently working as a developer(Doing nothing exciting at a enterprise company) get to that goal(the one mentioned in the original comment). Like what steps should be taken going forward.
It has always been mindboggling to me that startups are still so all in on the Bay Area. Most problems mentioned in the article go away if/when you are willing to staff developers in an area that is not as ridiculous in terms of cost of living as the Bay area. According to StackExchange data, the 50th percentile pay for a Full Stack Developer with a Bachelors degree and 3 years experience (a profile that would seem reasonable for a startup hire) in the Bay area is $140k, whereas in the St Louis and Minneapolis it is $89k. Not sure why for many startups Bay area seems to be the only option. If they staffed their developers in a place like St Louis they'd be able to avoid the SF salaries and still pay in the 75th percentile for the market and the developers would have more purchasing power making $115k in the midwest or Raleigh than they do in the bay area making $145k.
From the perspective of a potential employee, taking a job in a lower paid part of the country seems like a bad idea. You would generally be giving up some quality of life and neither debt nor savings care about cost of living.
Although maybe it would work if some of the second tier cities agreed to pay off the debt and contribute to the savings of people that agree to work there.
Being a developer in St. Louis, the median developer that makes 85k here is not really the kind you’d find at a good Bay Area company. When you look for the good ones, they often have competing remote offers with salaries not that different from the bay: The biggest difference is that nobody gives real, useful, valuable RSUs the way FAANG does. Barring one of those jobs, the trade off is pretty appealing for developers.
The problem for a startup here is money and customers. There is some local money, but in practice, you will be raising from firms in SF or Boston. To do that well, you will be sending a founder on trips a high percentage of their time: Our CEO was out 50 percent of the time this year. It’s OK with three founders or a small team already, but the seed stage is very rough, especially for a solo founder.
There is also the matter of customers. If you are doing B2B for startups, or straight sales to developers, the market isn’t here. Consumer? Any physical bits are not going to grow the fastest here. Do you want to start selling to large masses of people with little time and loss of disposable income? Not the best test market. So you better be doing something that is better done from here. An agriculture startup, with farms across the river, for instance. Still, it will be rare for this to be your ideal location there.
Still, I wish for more startups here, but the negatives are very visible, and we have very few success stories that tell people it’s worth trying.
Well, this assumes that the x %ile in smaller markets is interchangeable with the x %ile in the more expensive ones like SF, Seattle, NYC, Boston. But I know lots of people from cities like St. Louis who live in these much bigger tech cities because if you’re in the higher range in comp. for your years of experience, it’s just a much better deal being in the more expensive city. So I would guess that in these smaller cities, you will miss a lot of the top 10-20% developers
The cities I mentioned (St Louis, Minneapolis, Raleigh) and comparable cities like Austin/Columbus etc are not podunk small towns. They are all major metros that are host to big universities and local colleges and as such producing a large amount of talent. I don't disagree that many devs from these cities move on to bigger cities, but I'd wager that a large majority of college grads from universities in these cities stay there and work for local companies (and them staying there is not a reflection on their talent level but more about the ties to the local community).
Even if I concede to your assertion that a vast majority of the top 10-20% of developers from these cities leave for the big tech centers- most startups are not doing the kind of work that requires their tech team to be made up of "rockstar" top 10-20% developers.
The Bay Area offers software engineers a career growth trajectory that other places simply don't.
That $140k number might be a reasonable 50th percentile for what a junior engineer would make at a startup in the Bay Area, but compensation can increase quite a bit after several years in the industry, especially for engineers who move to large companies which give stock compensation. They will far outpace the earnings growth of engineers elsewhere.
It's much easier to achieve that kind of career trajectory in places with high concentrations of tech companies, e.g. the Bay Area and Seattle.
That makes things look even better for St Louis and Minneapolis type places. Startups in BA can't even hire juniors for $140k while if they pay $100k in St Louis they will have people jumping at a chance.
Now I'm sure the BA people average better but somebody in the top 5% from St Louis is going to be pretty good.
Note: I'm from Auckland, New Zealand and $US 100k would be a very good salary.
Strongly agree with this. I just did about seven weeks of interviewing in NYC for senior iOS roles, at both startups and big tech companies.
To be frank, it was a total shitshow. Especially on the startup side.
Here’s some of the bullshit I faced interviewing at early stage companies before accepting an offer literally 2.5x as high as the (multiple) offers that startups made.
1. Shitty equity: one startup wanted me to be engineer #7 and completely own the mobile app and strategy, which is the single point of interaction for their customers. They offered me 0.1% and spun some story about how much it would be worth when they were worth $800mm. Their last valuation was about $35mm. Even if their numbers were real, I’d still make more at a big tech company in equity alone. They also made it clear they wouldn’t budge.
2. Bad work/life balance: the big tech company where I accepted apparently has no issue with people taking off whatever time they need (avg is about 25 days per year), working normal 40 hour weeks, and working from home if needed. By contrast, the startups felt way more restrictive here.
3. Terrible interview process: almost all these startups had pretty disorganized process. Worse: they did the standard whiteboard algorithms interviews, whereas multiple bigger tech companies had more iOS-specific interview loops. Even worse, the startups tended to have a higher bar for hiring than the bigger tech companies. This one is subjective and could be random or misperception on my part too.
4. Most infuriating of all, all of these startups (except coinbase) had a 60-90 day option exercise window for employees who left before a liquidity window. Let me be clear: fuck you if you think this is fair. IPO might be 7-10 years out and if I stay and add value for anything short of that, you’re going to ask me to take a huge risk to exercise my options (and pay the taxes) on your probably worthless stock, otherwise you’ll just keep it? Fuck you.
The entire thing left a bad taste in my mouth. It’s pretty clear that these founders and investors don’t give much of a fuck about their talent, and watching them get squeezed by big tech companies offering sky high comp fills me with glee.
Be a founder, investor, or big co employee. Fuck being an employee for a startup so they can bleed you dry.
Well, if the only thing you care about is compensation and work/life balance then of course, you should never work at a startup. There can be benefits though, arguably better personal development, a broader view of the entire tech stack, and potentially more personal satisfaction.
Of course, if the difference is 2.5x then it's a no brainer.. I wouldn't take more than a 20-30% cut to work at a startup.
One thing I absolutely agree with you on is the option exercise window. I think it's pretty common in the startup world, but I can't really understand WHY. I mean your options at a startup are already worth less than stocks at a public company, and they still do this shit ? With all the extra risk you'd imagine they'd have to get rid of the liquidity window just so they can compete a bit better with the big guys.
> There can be benefits though, arguably better personal development, a broader view of the entire tech stack, and potentially more personal satisfaction.
There's also:
1. Shitty bosses (this and the following can be found in any kind of company)
2. Being promised one thing and then being screwed over later. How many companies have screwed over their employees of stock options or those holding existing stock?
3. Terrible tech stack / less personal satisfaction -- especially if the startup hires lousy people and value code production over smarts.
4. Management defined engineering -- when managers make important technical decisions instead of engineers. ("We've signed up for service X, please integrate with them regardless of your thoughts on the matter").
The total liquid compensation difference can be huge, when factoring in all the public equity and big company benefits...
Imo we’re not talking 20/30% here, but multiples...
>watching them get squeezed by big tech companies offering sky high comp fills me with glee.
Enjoy your new life as a corporate drone!
Note to the salty drones in the comments below: I started a business that was passively profitable for years and now pretty much just work on what interests me
But it's not your whole life because we're living longer and it's enough money to retire earlier. Suck up the drone life, retire early and spend 50 years with no boss, no customers, just tooling away on whatever you please.
I find big companies to be incredibly frustrating. It is so hard to get anything done. As a result I have gravitated towards startups. I know I have made less money but I love the daily feeling of having an impact.
I think startups are great for junior employees because you learn so much so quickly. Eventually if you want to be successful in startups you need to start your own startup. The payout on 25% ownership at $10M or $20M is not bad and lots more companies can buy that sized company than a billion dollar one.
I'm hopeful that there's a middle ground. The company I chose is on the smaller side (think Dropbox, Snap, Twitter, etc) but still public. My team is even smaller, I'll be one of a handful of iOS devs on the product I work on. But we'll see, it might suck!
I was self-employed for more than a decade and I made $300k - 400k for years. I'm not at all worried about the corporate life. If I don't like it, I'll go do my own thing again, no problem. What I won't do is work for a third of the income and convince myself that I'm one of the cool kids because there's a ping-pong table in my office and my "CEO" made some 30 under 30 list.
2) Ownership over your company’s strategy (e.g. mobile) only if you’re paid highly for doing it (not a bad thing, but many other people exist who would willingly take a pay cut for the ability to have an actual impact on company strategy)
3) A highly organized and logical hiring process and qualification evaluation
4) Custom negotiated options contract outside of industry norms OR BigCo stock that has value today
5) 5 weeks of paid vacation
It definitely sounds like you made the correct decision by choosing BigCo over startup.
> Custom negotiated options contract outside of industry norms
I think you mean the GP wants options within industry norms, which are outside of a failing startup's shoestring budget. On a separate note, what are your thoughts on the glassdoor ratings of Localize?
> 4) Custom negotiated options contract outside of industry norms OR BigCo stock that has value today
The norm is changing. Good startups today generally offer 5-10y exercise windows. [1] This is something Triplebyte started, and they have a guide for how to implement it. [2]
I think the point is more that startups are really overestimating what they're offering, or hoping their employees are too stupid to realize the disparity. So far as I can tell the only thing most startups offer anymore is ownership, lack of large company culture/bureaucracy, and more opportunities to switch roles.
Equity is basically always monopoly, you generally can't even evaluate its value because no one will show you the cap table. Highly profitable startups still regularly manage to deliver a pittance to early employees on exit. Even if the exit does deliver oftentimes the yearly compensations disparity is so large that if they'd just stayed at BigCo and invested the bulk of their earnings they would have earned as much or more. This is all while working significantly more hours per year.
The list of upsides is really small relative to the risk. If startups want talent the industry norms are going to have to change.
I've always thought that the shitty startup practices when it comes to equity is due to insufficient competition for talent. Looks like this is about to change, since startups now obviously struggle to get the best people.
Not showing the relevant details of the cap table is ridiculous, companies that do this are banking on a pool of candidates that are either morons or don't care what they're paid.
Imagine the following situation: You're in a foreign market, and a vendor tries to sell you a fancy-looking machine. You know he's legally bound not to lie, so you ask what the machine is worth. He says "it's worth 2 billion Magic Moneys!!" but refuses to give you any information that would help you suss out whether that's 20 cents or 20 million dollars.
From your comment, it sounds like maybe you're one of the founders I was talking about.
1) Fair compensation, yes.
2) It's unfair to ask someone to have the responsibility for the success of a huge part of your business without making sure they have significant upside if they succeed.
3) Yes, I want a logical hiring process. The horror.
4) Fair. Not "custom negotiated", just fair. The fact that the industry norm is to fuck over your employees should fill you with shame, not be an excuse you hide behind to do the same thing.
5) I doubt I'll take that much, but I like that the company understands that they'll get the best work from employees who are taking care of themselves and their families.
If you're representative of a typical NYC founder, then yes, I'm glad I didn't join a startup.
So your startup's hiring pool is people who hate safety, vacation, favorable contract terms, and logical processes, but love taking on extra responsibility for no pay? Seems like a small pool, and explains why hiring is so hard these days.
> Fuck being an employee for a startup so they can bleed you dry.
Could not agree more, and this is my stance which I will happily share with anyone who cares to listen. I was first employee (and only engineer) at a startup which dangled 'equity' in front of me but didn't deliver. Contract was so full of gotchas that the path to me seeing some sort of actual payoff was astronomically unlikely.
90 day exercise windows upon leaving or even getting sick and being forced to leave. Liquiditation preferences for VC shareholdings. No way to sell your options on a secondary market. Permission of the board required to actually exercise them. Half a dozen clauses that allowed the board to revoke your options at any point in time. Basically, they want you to give your fucking life to them for 5-10 years with only a contract not worth the paper it's written on as an incentive.
Between the shitty equity terms and the fact I was building a damn tech company to make someone other than myself rich, I told them to go fuck themselves and took a job at Google for over 3x times the pay. I have no regrets. Being an early employee at a startup is a complete waste of time and I still beat myself up for being so naive. Sharing this so other people don't make the same mistake.
Liquidation preferences for investors putting actual cash into a business exist for a reason. Suppose I have a company idea, maybe an early prototype and manage to raise $2MM at $10MM post-money valuation. The investors have a 20% stake for their investment.
If I decide the next day, “Nah, it’s not going to work; let’s close the company and distribute the assets to the shareholders,” it would be manifestly unfair for the 80% shareholders to take $1.6MM of the $2MM in the bank and give the VCs back the $400K that represents their 20% stake in the bank account.
Liquidation preferences ensure that the first $2MM that comes out goes to them.
Imagine you have an engineer who could be working at BigTechCo; she works at your company a year, and then that raise you specify happens. Engineer continues to work there for three more years. Company amounts to little, acquired for $2MM, engineer gets nothing.
Of course, everyone is disappointed. But it's still unfair for that engineer who gave up half a million dollars or more to work at the startup to get nothing. You might say that the engineer should be aware that they agreed to a way of structuring equity that means it's likely they'll get screwed. Fair enough! But all of this discussion is meant to make readers aware that, yes, the industry standard practice is to screw over the people who have the most skin in the game.
Why is it unfair? The engineer was part of a team that collectively destroyed economic value. What is the fair portion of bonus on top of salary that they should be rewarded with for that performance?
By all means understand it; I’ll never argue against that, but I find liquidation preferences quite reasonable.
The VCs are also part of the team that collectively destroyed economic value. They can't simultaneously claim credit for every success and disavow every failure.
We have a lemon socialism banking system. Obama made certain that 100% of bankers wiped out in 2007 paid NO PRICE for their recklessness; he prosecuted NO ONE.
It's not a reward. The engineer's work is a commodity they are selling to the company. Partly for wages and partly in exchange for equity. That is a real investment they are losing just like the VC's if things go bust.
Really that sums up the american dream, completely. Get rich by screwing the people whose hard labor built your enterprise, often based on "borrowed" software (Example: Microsoft 'borrowed' a source listing of a basic interpreter written at DEC.) It happens every day in the USA, and it's why conservatives love it so much.
> Suppose I have a company idea, maybe an early prototype and manage to raise $2MM at $10MM post-money valuation. The investors have a 20% stake for their investment.
The rich technically have less personal risk -- that's because, well, they're rich. GP arguably took more personal risk, took less pay, and created the machinery that made the company profitable.
If you want to say that the original $2M is paid out before anyone else is, that's fine, especially in a sinking ship.
If you mean to say that on a %1000 increase of company valuation, GP should not get his share because, well, he didn't fund $2M dollars -- that's _utter_ bullshit. And arguing that VC's should get preferential treatment so they can directly screw over the people who directly provided the growth is the stupidest argument I've heard for this clause.
I think the point the OP is trying to make is that the structure that you described, while great in protecting investors, seems pretty unfair when the startups do succeed. So while recouping the intitial investment preferentially sounds great, it shouldn’t be extended as far as giving the 20% investors the lions share of a successful exit before the people that actually built value.
The liquidity preferences could certainly be structured in a fairer fashion. Just because it’s currently structured this way doesn’t mean that it needs to be always or that it’s a great model ( it’s not unless you’re a VC, which is basically the point).
Imagine if you had a very deal-term savvy crew of engineer hires. They then proceed claim that "the compensation cut we have taken by working here directly offsets cash you would otherwise have to spend/raise. This should count as a capital investment and should therefore entitle us to 1x preference just like for the other investors have."
It's silly to automatically assume that "investor" or "capitalist" is someone rich. Chances are, the VC get their money from banks and pension funds who, in the end, invest money of people who earn much less than an average startup employee.
I don't have statistics, but I believe the more common scenario is that the company gets acquired, and the return on investment is not the 10x or 1000x or 1000000x the VCs hoped for, so they recoup their original investment. Leaving the engineers with options worth nothing.
I view liquidation preferences as VCs offloading risk to employees because they can.
IMO, it doesn’t happen in part because the liquidation preferences are present. If they weren’t there, a great many startup founders would find their highest expected value play to be to close up, distribute the funds, and go back to working for someone else. Maybe not the day after funding, but 3, 6, or 18 months in. “This isn’t working out, but I can cash out from the cash left in the bank.”
Just like the “declare strategic bankruptcy a few months before graduation” doesn’t happen much because student loans aren’t discharged in bankruptcy.
Both moves would “break the game” in a very similar way and so are blocked.
You have a point. However, it would be very easy to distinguish between this scenario, and a sale of the company. VCs don't make this distinction. They could.
> a great many startup founders would find their highest expected value play to be to close up, distribute the funds, and go back to working for someone else
This is absolutely correct and it SPEAKS VOLUMES about the reality of the startup world, even apart from this discussion on liquidation preferences. I'd recommend anyone looking at working for a startup to consider the above and then consider the fact that as an employee they'd be in an even worse position than those founders before turning down that far more lucrative offer from BigTechCo.
None of this logic applies to equity granted to employees, which are already subject to vesting. The argument you're making is actually for founder vesting, which is a separate issue.
No, it is not manifest. Investors should ideally not invest in companies that are not "Going Concerns"[1][2]. If the company fails, all investors (including employees who invest with their time and energy) should bear the losses. The increased risk is what usually justifies the outsized returns.
As an employee (who’s also investing actual money, i.e. the higher salary I’m not making elsewhere, as well as labour & time) I also want “liquidation preferences” - 500k per year of working, vested monthly, senior to investor’s preferences - and it’s only fair, as I’m both investing and risking much more!
Then they should compensate commensurate. As it is, I suspect that many are a market for lemons. Primarily the "seniors" who would take these jobs are the ones that can't get hired at 2x - 3x the comp, or (I suspect much more commonly) think they can't. I'm going to do my part to try and make sure more engineers know that they have options beyond working for shitty startups that dangle worthless equity in front of them.
This. You can be average or mediocre at a big company as there are lots of places to hide. There is nowhere to hide at a startup, in addition, a single hire can make or break a startup. More then anything a startup is just a collection of talent. Unlike a big company which might have physical assets, IP and other valuables. A startup is really just a pool of talent. So if there isn't any, well it wasn't going to work.
There are definitely startups that offer better equity terms - the last one I was at offered ten years to exercise after leaving. I hope the trend continues.
Pinterest started that around 2014 if memory serves and it became quite popular for startups to follow suit but recently less so and I’ve even seen some roll-backs; ultimately many startup employees don’t understand equity and don’t optimize for it.
Lyft also gave 7 years equity exercise terms starting around 2013, and it was part of the reason for having the IPO when it did, was because some of the early equity holders were getting near to seeing their shares expire.
Sorry that was your experience. Just so everyone else reading this does not get the wrong idea, not all startups are like this. Many are, many are not. 10-year exercise windows are becoming more common. Flexible remote work is also more common (in fact, startup I'm at now as co-founder, we let people work from wherever the hell they want... while my friends at large tech co's have to work out of an office, even if they are allowed to WFH like once or twice a week). And we work hard but let people take as much time off as they need, whether that's vacation or just a day or half day here or there to deal with some family thing.
If you're reading this, please know that not all startups will "bleed you dry". And on the other hand, many big tech co's will!
Number #4 is the law. However it is possible to convert an ISO to a NSO which doesn't have the 90-day restriction but has different tax implications. Some companies have started doing this, but I don't know how common it is.
Is there any way I can contact you? My email is in my profile.
I'm working on something to make the interview process and the offer piece a lot more transparent. I've been part of terrible interview/offer loops too, and the problem aggravates me to no end.
It seems to me that most companies start to gain a tedious/conventional/corporate atmosphere once they get to more than, I don't know exactly, somewhere in 100-400 employees. At that point the company has acquired, in addition to those who care purely about building companies and building software and building hardware and physical processes, a middle layer of conventional auxiliary staff, and nice though everybody may be, the company just becomes a standard corporate office environment. Many people (especially those who have enjoyed academic environments) strongly don't like such atmospheres, and for those many people this is a pretty strong incentive to work at small companies.
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[ 3.6 ms ] story [ 332 ms ] threadhttps://news.ycombinator.com/item?id=21709724
https://news.ycombinator.com/item?id=21641864
https://news.ycombinator.com/item?id=21645117
a larger question is : why can't startups make money
I think some old school thinking of more organic growth of a good idea with immediate revenue will see a resurgence.
I can see you just started writing on this blog so I don't want to discourage you, but I was struck by the formatting of your notes page and this post being so similar to Dan's along with the topic and content of this post. Keep writing but I would maybe suggest something with more of an original spin.
[1] https://blog.garrytan.com/working-for-microsoft-cost-me-200-...
As a counter example, I found this is far more true at big companies, where you can switch teams until you find one that fits your interest, then at a startup where you are expected to work on basic infra that the company doesn't handle. For the data/ML related jobs that I was looking for and the industry is moving towards, big companies have tons of valuable data that startups could only dream of acquiring.
At small companies, you have more control. That's in the high-growth handbook. :)
Not to mention that his post format isn't remotely like DanLuu's. It reminds me more of old Philip Greenspun.
Not that "basic text" is some sort of copyright or something.
Totally agree with this. Unfortunately I think there might be about 5 startups left if this idea were widely implemented.
You should feel lucky if confusing is the problem. I think the bigger problem usually is -- you often cant see the cap table. If you cant see the cap table and the preferred overhang, there is no way to realistically understand where you stand in the scheme of things. Confusing can be overcome with some search, but "opaque" cannot be.
I can say as someone older than they were at the time that there was an element of wishful thinking about many of the founders I worked with, and even more so for some that I met in passing.
Charismatic people who are deluding themselves just bring others along for the ride. They may not even know they’re being dishonest. People who have a way with words can be sucked in by their own words just as much as others can.
As I was reading "Downsides to working at a tech giant" it occurred to me that the alternative to working for a tech giant is not necessarily a start-up: I would probably work for myself — freelance.
So, in fact the two articles can both be right. ;-)
I like being freelance but getting the motivation in those first couple of weeks was pretty hard. I also found it tougher to sell my services because I never really had to do it before. Probably some other stuff I can't think of off the top of my head? I don't think any type of work is perfect although I'd go for freelance any day of the week.
I later worked for Y Combinator as a partner helping founders make products and services. The best ones made something that touches millions of people now.
While there is a lot of zero sum thinking in startupland and finance/capitalism in general, you have to remember that this is probably the most GROWTH mindset industry in the world. Where else can you, with just your hands and a laptop on the Internet, create something a billion people use?
I'm not saying that is the norm. But when it works, it's still remarkable.
And it can start with you, and everyone reading this.
At the large tech companies, with a lot less risk and higher salaries.
Serious question: how many software companies have something that a billion people have used?
It's a pretty special industry, for sure. But the odds of it happening are basically zero. I see how selling the dream makes for a good story for young and hungry startup founders to passionately change the world and (cynically) end up as a failed bet in someone else's portfolio.
But it's a bit disingenuous to make it sound like it's commonplace.
Touch 20 lives as a teacher and enrich those individuals, or 20 million lives by helping them order groceries over the internet.
At companies that already have a billion users?
Keep in mind that if you look back on the things that made you excited to go into startups into 2006 or whenever, probably none of them are true anymore. E.g. the main reason people were excited back then is that there was a huge arbitrage opportunity to take every business that already existed as either brick-and-mortar or web 1.0, and reimagine it using AJAX and web 2.0 design language. In retrospect there were a bunch of other favorable macro trends coalescing at the same time also, but regardless none of these arbitrage opportunities exist any longer.
It's always simpler, safer and more wise to incorporate.
Actually for most of the piece he was pretty straightforward about making sure you get equity if you want to get paid upon company success.
What has changed is that genuine equity in startups isn't being offered as readily as it was ~15 years ago (and it is notable that the missed opportunity he describes is that far in the past).
Now, if you really want to make it more enticing, some things that would move the needle for me other than comparable salaries (although more cash is #1):
- Larger equity that automatically ups if it will be diluted, and the moment any shares vest I can sell them in the private market.
- Transparent cap table.
- If the founders take cash off the table, I can as well, and no preference for founders.
- 10 years after leaving to exercise my shares. I don’t want to have a 3 month trigger that handcuffs me to prevent a giant cap gains bill on “paper money” when the fair market value is way higher.
- Reasonable working hours.
- Flexible work from home policy.
But overall, go raise more and start offering more cash, because I assume 95% of startups are total failures.
I worked at a large tech company for 3 years before joining a startup, and learned more in the first month at the startup than the full 3 years at the large tech company. I was able to design and implement a service in a matter of days, whereas at the large tech company those 3 days would easily spent convincing people that the service is needed in the first place. Direct exposure to customers also is really interesting and changes you as an engineer.
It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.
I think the biggest difference is money. A well funded startup might be a boon but a struggling one will be a bane.
I think systemically one thing we need to do is help people make better decisions about where they spend their time. Especially for people who are good builders, they happen to also be the best people who can decide for themselves whether something is actually going to work.
Boeing won't care if you save the project $5k by spending a week of your time coming up with a clever workaround. The week was more important than the $5k. Same for a high level role generally. But not getting work done for a week because your boss won't approve a $500 purchase... that would be frustrating and get old fast.
Saving $$ per unit and saving $$ total are so different. If all you're doing is saving $500 total, I wouldn't even care in most cases... but if you managed to use clever techniques to save $0.30 off the manufacturing cost for a toy that gets sold in the millions...
I most strongly agree with the ethical part of the article, in any event. I'm sick of companies trying to take advantage of their employees, it's just sad and gross to see it done by startups that could be better than big companies in at least this one way. But instead they take it even further somehow because their finances are far more opaque. I don't think it should be up to noblesse oblige to determine whether distribution of profits and salaries are fair, it should be assumed to be the rule even if there may be exceptions.
It's a sad day when you look at employment agreements from Intel and a shiny startup and find that Intel is more up front and transparent about how things will work and what you'll get paid.
I think the course of events in the USA in the decades since the 50s has essentially answered the question of what happens if you leave it up to the most fortunate to decide how to treat the least fortunate.
Which can be a hell of a lot more than you expect. Like, don't bother spending two weeks to cut the CPU use of a service in half, if the service only uses 1k CPUs to begin with.
I'm confused what you're getting at here. $5k/week is $260k/y (or a bit less counting vacations and holidays) and the fully-loaded cost of an engineer at a startup is typically more than that. Then consider how high opportunity costs typically are at startups, and I expect most startups would view your spending a week to avoid a one-time $5k expense to be a bad tradeoff.
I agree, most startups would view spending a week to avoid a one time $5k expense to be worth it for several years at least. That's why I'm saying the experiences are different.
If you're reading a judgment into my comment, there is none, I think doing super constrained engineering is super fun and an awesome skill to have. But I have also worked places that have the attitude of time being vastly more valuable than cash, and respect that both approaches are reasonable. Just different. But worst is when you're cash constrained to the point where even your clever workaround isn't possible to implement, even though it costs 10x less and is mission critical.
Sorry, what I'm saying above is that I don't agree with that.
I am also thinking more "angel+bootstrap+grant" funded startups rather than people already past a Series A; if there's 10 employees with a decent runway the calculation changes a lot versus 3 people getting something off the ground. I think the latter is more typical of a startup for the first several years.
Can you explain more about this? The mantra is generally ship early and iterate fast.
How come the tech team was spending 80% in a bugs rat race?
The earlier statement of "80% of the time was wasted supporting clients" seems perfect? i.e. what else should you be doing other than supporting clients who are willing to pay with features and bug fixes?
Feel like I'm missing something.
Nobody wants to pay for bug fixes.
Do more QA and avoid making your customers part of the QA team.
So now you have a team with about 2.5 collaboration projects per engineer, who are at the same time the tech support and SREs. With several new products in a pipeline. All of it wrapped in a bow of medical certification.
One think that startups should have in my opinion is focus. If you have enough funding to go for a moonshot drop everything else and go for it. Don't spend too much time hedging because you will never get to the goal. If it doesn't work out, too bad, but at least do everything you can to get there. Especially when cash strapped.
Anyone stuck in this situation?
There are a lot of valuable lessons to be learnt here about product planning and dev process, but if you didn't make any attempts to fix the issues you mentioned, you probably didn't learn very much.
This just makes me think that either you are exaggerating a lot, or you were highly unproductive at the big company than most people.
In either cases, I end up not being able to take your comment seriously.
At a big company you are given a slice and you really have to push to get anything more. I've had the experience where no work is assigned because approving anything takes time and once the work comes it is extremely easy to finish immediately because you have sat through weeks of meetings reexplaining everything to different groups get approval to change a form.
At one startup by the end of the day I was already learning four different languages/tools.
Now I imagine places like fangs would be amazing places to learn. If you ever work in healthcare most of your day will be explaining why this is a small change / very safe and you learn very little.
At a startup you might get core technologies going in a month, while at a big tech company the timescale might be closer to years.
I worked at a startup and the focus was on the work. I got to make decisions on what to work with, what technologies to adopt, and then I had to get them running. I worked on core technologies.
At a large company you rarely get to do this. You usually have large systems in production, have very large teams, and get to work on an established code base adding a feature or fixing something.
An interesting exercise at a large company might be to look at the version control checkins from the beginnging. The features at the beginning of the log probably went in a lot faster from fewer contributors.
Firstly, startups have been an absolute delight. I very carefully chose the company and hence my boss and my co-workers and love working with every engineer on the team. It is a pleasure coming into work each day and I often cant leave because I'm excited about my work.
I have a lot of authority over what I build a much of it is "close to the metal" rather than some side system. I get to see the whole slice of cake from conception all the way to sales and client implementations and participate in all of it. At small companies, as an Engineer, I learned how to build a successful product and learned all the steps from inception to sales and production.
At every big company I was at, there was more specialization and lots of process. Process was necessary at that size. There was also a great deal of inter-departmental politics and incentives were usually not aligned at big companies, sometimes incentives across departments were even orthogonal. I spent 30% of my time on process and communication at big companies and it went to 80%+ once I was a senior executive. I made a lot of money there, but I think it was to compensate for having to deal with the inner workings of a big company (and being able to be effective at it.)
At big companies, I learned how to turn the gears of organizations and learn how to make globe-spanning change effectively.
To be fair, I took a big pay-cut to come to a startup as an Engineer. I'm happy with the choice. I dont think there is any silver bullet out there, but it is important to understand what you get with each choice. It is also important to make that choice with full intent and not be fooled or brow-beaten by anyone.
Here follows my translation of the advice above:
> Yes you will probably make more at an established company, but your rate of growth can be much higher at a startup.
You'd personally benefit more from working at an established company, but if you work for a startup you'll be trained on the cheap and then an established company can reap more profits from you.
> I worked at a large tech company for 3 years before joining a startup, and learned more in the first month at the startup than the full 3 years at the large tech company.
The comfort of a large tech company is nothing compared to the stress filled life of working at a startup, having to constantly innovate on your toes and learn your own ways will push you to develop faster - but if you hit a wall you're truly hooped.
> I was able to design and implement a service in a matter of days, whereas at the large tech company those 3 days would easily spent convincing people that the service is needed in the first place.
I saw a need and dedicated some days of labour to filling that need, because it was a valid need I was praised, if it hadn't sold I'd be chewed out for wasting time - and there is no guidance on which needs might be helpful or not... Within a startup you'll be expected to do user surveys and then market your new product even though no time is formally afforded for either.
> Direct exposure to customers also is really interesting and changes you as an engineer.
I assume when you decided to become a software dev you really meant UX designer? If your perfect world is being given a task to do and doing it accurately to a high level of perfection then have fun trying to quickly adapt your highly designed system to literally contradictory client requests coming from the same customer.
> It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.
Losing your shirt trying to make your day job not collapse and then being excluded from any of the benefits when your company goes public is character building.
Yeah, there’s no formal time laid out to do step X in the course of development. There’s the chance that you won’t make payroll someday.
It’s definitely not for everyone, but when you get a good team together on a good project, it’s fantastically energizing.
I have really enjoyed working at small companies as well - not two person startups working on hopes and dreams, but companies under a year old that are struggling to stablize their offering of a product that they know there is a market for. Startups can be lots of fun, they can also be a grind trying to keep up with shifting customer requests - especially if you find yourself with a single dominant customer that knows they can push you around. Start ups can buy you an island or you could make 60k a year for three years and then be let go immediately prior to an IPO. There is an immense amount of risk there and I'd like to see some shifts in startup culture to provide a bit more assurances since the experience can vary wildly.
Maybe employees at small companies need to be guaranteed (i.e. by the government) a portion of that company for their work, maybe work days need to have a hard limit on them - maybe there just needs to be more VC funding sloshing around and given away in small doses - 200k to twenty companies will produce a lot more success than 4m to a single company.
I see a lot of people very much willingly freely entering into contracts that are beneficial overall for society. That many startups fail and few result in king’s ransom payouts for employees who put up no money to form the company seems ok and preferable to an environment where government has a heavy role in picking startups, regulating work, or otherwise mucking things up.
If a couple of my buddies and I want to work together and want to work as hard as humanly possible at it, why ought that be disallowed?
I think it should be obvious if that is what you desire start-ups are not for you. Whoever hired you failed at their job.
I've worked in a large corp IT department and for start ups.
I'd say the most value in working for a start up comes from being in the core group of founders and first employees. After that point, my perception is that it's more of a toss up - if you're going to be a rank and file junior developer on the periphery of the decisions that shape the company, an established company could in many cases be a better choice.
There's a thin line between growth through mistakes and learning bad habits (because of lack of training and no colleagues with experience).
I have seen no limit to what an individual engineer can accomplish at my big company as long as they have the desire and ambition.
I have hobbies, I have a family, I invest in culture, I enjoy free time, that is actual growth.
The work might be similar but you're paid 50-75% of your peers. That was my experience in startup land, at least. Few good challenges or career growth and half of what I felt like I was worth. Completely personal anecdote, but I felt I was sold some half truth, where I was promised career growth, interesting problems and flexibility, but got nothing that I couldn't have found at many Big N companies.
The VCs have naturally gotten better at what they do, which is bring returns to their LPs. The consequence is that they get more value from exits than they used to which comes at the expense of the employees and founders.
I’m sure the points exposed apply there but there are many other places in the USA and the rest of the world where this doesn’t apply and you can find good talent without needing to offer an exorbitant paycheck.
If founders and VCs gave a third to half of their companies to employees, instead of crushingly small option pools, this math would almost certainly shift. And the returns wouldn't be much worse for founders or VCs.
Do you believe in it ?
Are they paying you a nice amount of money ?
If you can only answer 1/3 please continue to the purgatory state.
This definitely isn't one size fits all and there are a lot of people that will happily try to sell you on their version of the story because 'it worked for them'.
A. Why are we comparing an employee situation at a FAANG company with what should be a co-founder situation? If someone is an engineer that can make something happen at a startup, they should probably be a co-founder rather than an employee.
B. Why are tech center startups trying to hire coders of a certain skill level that will be incredibly expensive due to local competition? If a startup is looking for skilled coders to implement the vision of the co-founding engineers that can make things happen, then there are plenty of remote coders in non-tech-center areas that will do a bang up job for a reasonable price. Note that many of these remote coders don’t want to or cannot come to a tech center. I assume that this is an issue because many/most startups are not good at hiring, on-boarding, managing people, managing remote workers, etc.
C. Related to issue B, why play the micro-equity game with coders at all when they should either be co-founders or they (as remote workers) can be paid a satisfactory wage without equity bait?
D. Why is this conversation comparing a job with (relatively speaking) a lot of hierarchy and politics at a FAANG with a job that should have a flat structure and a great deal of autonomy? These jobs cater to two different groups of people — the ones who like the former probably won’t like the latter, and the opposite is true as well. There are subtle sides to this (e.g., do your time at a FAANG to develop a network), but many people who succeed at startups are not folks you want working at a large company — they will go nuts, and they will drive the people around them crazy.
This whole conversation is bizarre to me. I think there are three relatively simple choices:
1. Take a company job if you’re a company person — that is, someone who likes structure and hierarchy. It might not be trendy to admit it, but many/most elite school grads fall into this category.
2. If you prefer things like autonomy, being close to the customer, and being a generalist, then go to a startup. Plan on leaving once it hits a certain size.
3. If you have a plan for an alternate path that includes both, then go for it — specialist work at FAANG, FAANG then startup founder, startup employee then startup founder, etc. Just know what you’re getting into, because it can be awfully tough to walk away from $300k annual comp as a 25 yo.
Most people I’ve known clearly fall into one of these categories barring some sort of life-changing event.
a) The market is now incredibly saturated, and being an early equity owner in a start up that will be worth billions is very rare now. Gone are the days of a unicorn every month or two.
b) People have noticed the trend of FAANG companies buying up start ups, and that this is the goal of many (most?) start ups today. Reach critical mass, get a good valuation and customer reviews, get bought out by tech giant. If you want to work on the most viable new products, just join a tech giant and work on one of the projects they've acquired. (Or wait till the company is bought and join them if they are still independantly run at which point they're not really a start up anymore)
My friend, I've been building software professionally for big companies and small since 2001.
There were never days where there was a unicorn every month or two.
2) A new grad at a startup gets, what, $100k in salary and some equity? If we're talking a three year stint at a startup, you're effectively asking a worker to invest ~$500k in exchange for that hypothetical equity. In the broadest strokes (obviously everything depends on the deal), what kind of equity does an angel get for half a million dollars, and how does it compare to the amount of equity the new grad gets? And it bears pointing out that that new grad equity is subject to all kinds of games and deception. Of course, the usual response is "you just have to be smart enough not to be scammed!" Perhaps, but I know tons of people (including myself) who are apparently just too dumb not to be scammed but are still smart enough to be gainfully employed at a safe job.
I don't think that had a large effect on my compensation, if any: I joined at L3, which is what most new grads are hired at, and my salary before Google was low enough that I don't think it pushed up my offer at all. I also didn't get offers from multiple places, which is the sort of thing that (a) results in higher offers and (b) is the sort of thing new grads usually do.
But ideally someone hired right out of school would be up for sharing their comp?
edit: Oh, I see you were in Boston -- that's a great deal then. I still wouldn't want to work for Google for idealogical reasons, but I can see why the money would attract others. You also had ~9 YEARS of full time experience at that point, which makes it a lot less impressive.
Taxes would be higher but we donate 50% of our income (https://www.jefftk.com/donations) so I'm not sure how you'd count that?
Also, I didn't have ~9 years of full time work when I started at Google, I had 3.5. My first full time programming job started fall 2008, and this was Spring 2012.
Also, donations are discretionary, so you wouldn't count them at all -- you would just count your salary minus your tax rate (not counting deductions, so that the average Joe can get some context).
Fuck that.
But money isn't everything. Startup #2 was the place where I learned the most. I was senior enough to be single-handedly responsible for large projects like a distributed search engine and a logging and analytics service. Sure, my search engine was a POS compared to Google's, but at Google I would've worked on a part of a feature of a component of the search engine whereas at a startup I got to build the whole thing from scratch. I'm almost 40 now, and that search engine is still by far the most fun and educational engineering project I've ever worked on.
Aside from learning potential and financial comp, there are other factors like team camaraderie, independence, etc. I keep in touch with way more people from the two small startups than I do with Google colleagues. Google had a good culture, but the startups were much tighter knit.
Finally, I think articles advocating for startups vs. big companies are a little like trying to convert someone to atheism or Christianity with a blog post. It doesn't really work that way. Some people are wired for startups: they love them and spend their careers at small companies and don't understand why big companies are attractive. Other people are more drawn to big companies where the company itself has a huge impact, the teams are well-staffed and have lots of resources, and the employees get higher salaries and lots of other benefits. When these people try working at a startup, they often hate it and quickly go back to another large company.
Neither big nor small companies are objectively the best, but if you factor in personal happiness then often one type of company is the best for you.
It’s pretty rare for this to actually happen in my experience. Generally an early engineer will grow and be ready to take up the role of VP Engineering or even CTO and instead the VC’s will parachute in one of their cronies once the hard work has already been done.
I'm going to be honest, I don't think this is the norm. I worked at a start up for years and never experienced that level of ownership or challenge. We basically built a glorified CRUD with VC money. Good for you! But I don't think this is the case for many? Or maybe it was just me.
One very salient explanation of this that has stuck with me goes something like this:
A fast growing early stage startup is great for learning because you'll often end up with tasks that you're not qualified to do, which forces you to go out of your comfort zone and learn from the inevitable mistakes you'll make along the way, whereas in a large company they usually have plenty of more senior people to take care of the more challenging tasks outside of your current pay grade.
But then I switched teams and stuck around for 5 more years before leaving out of boredom. I joined a startup, and learned far more in that first year than the last five years in Big Tech. In the span of two years I went from not really knowing how SSL worked to being the architect and primary coder for a couple kubernetes deployments with a few dozen services.
The thing about big tech is that you become super specialized. Sometimes that’s fine, like if you’re a kernel hacker earning $$$, but if you join the wrong team then your world just shrinks.
I don’t ever want to go back to working on a tiny piece of something, even if that something has millions of users. Even if nobody exists on purpose, nobody belongs anywhere, and everybody’s gonna die, I still like the feeling that the work I do somehow matters to the people using the product.
So a dev team of less than 10 is probably the sweet spot for me.
That's a very good point. Money isn't everything. Pretending that money is the ultimate goal of life can be off-putting in the startup world and in the American lifestyle in general.
Obsession with money is an easy way to envy, burnout, depression, and loneliness.
I got lucky that the public techs both had the largest stock growth in their history while I worked there.
All the money I ever made was at the public companies. I also learned a lot of cool, very specialized skills and got to do a lot of “ohhh so cool” type stuff.
Almost all of the knowledge I learned that allowed me to be successful at the big companies I learned at the startups, and most of the friends I made at work that I still talk to were at startups.
Both environments offer something unique.
I usually tell young people to start at a big company with a well known mentorship program and then quickly move to a startup to learn a bunch of practical skills.
But YMMV.
They are, given the exorbitant salaries, financially set enough to afford the startup risk, and there's a good chance they'd like to see some more agility again.
But 1) you'll need to stop lowballing equity for hires, and 2) you need to get used to the idea that it's not going to be an extension of university life - these people have all better things in their spare time than playing beer pong.
Bonus points: Offer an office instead of cubicle mania. Bonus bonus points: Make sure you hire a diverse workforce from the get-go.
Ok I have seen this written every now and then.
What does this person look like and how do I become one given a willing to sacrifice everything else?
I can not find a good answer to this question. Everybody seems to have their own opinion.
Second, attend a top tier "name" university like MIT, Stanford or Carnegie Mellon and major in a related discipline.
Third, do some side work in your chosen field that can be shown off to prospective employers.
Fourth, learn how to present yourself well (for interviews and such).
That's generally speaking, of course. Exceptions exist.
I think every engineer should at least do some mock interviews on data structures, algos, and system design (there are TONS) of free study resources and then do a round of interviews. You only need one yes.
Sounds like this is not possible without years of exposure to events that force you to this situation. How else would you learn to act like that?
Regarding being "smart": How do you define this? For example, I got a CS degree from a second tier Engineering school. But I was a B-/C+ student. Do I meet the criteria for being "smart" or just lazy?
>Second, attend a top tier "name" university like MIT, Stanford or Carnegie Mellon and major in a related discipline.
Is this a hard requirement? What do these schools do that others don't? Is the exposure to other top tier people a necessary requirement from a skills perspective?
>Third, do some side work in your chosen field that can be shown off to prospective employers.
How do you choose a field that leads to the original goal: "the very good engineers, the ones who could truly help build a tech company from the ground up from day 1, were getting offers so exorbitant they could not possibly fathom to turn them down."
Tech is such a diverse field. There are so many paths to take, none of which guarantee I will reach this outcome. I could become a rock star developer having developed tons of apps, but is that the right path? Or will it lead me to a cubicle job?
>Fourth, learn how to present yourself well (for interviews and such).
This seems like just a lot of practice. Maybe even requiring growing up in a very socially active lifestyle. The opposite for people who sacrifice everything to become great at something eg. programming.
Its looking as if you need to be in a narrowly defined path that needs to either be decided when you are born or you adopt very quickly at a young age in order to accomplish all your steps.
- Solid results too show - Fantastic references
I know a lot of younger guys have these pipe dreams of sacrificing their youth, going to the best university, studying years for interviews, and looking / being the "perfect" candidate come interview time, without actually having built anything of substance.
Sure - you will probably land some sweet positions, but there's no way in hell you'll get hired as a CTO without anything real to show - unless it's a 3-piece student startup.
Yes, there are exceptions. There are young people that land very nice positions, but they're almost always both smart and experienced.
I think the roadmap look pretty boring, but it's what it is. Read, build, analyze, and understand. Have vision, and get good. If someones gonna hire you to design / build / develop their product, then you need to be able to lead and deliver. Hard work, experience, and good networking skills.
This is probably the clearest answer that I have gotten so far so thanks.
However I was hoping for something more exact. I guess there is no perfect path that someone can take.
I think I also asked my question incorrectly seeing the other answers I got.
What I was really looking for was how can I as a 29 year old graduate of a CS program who is currently working as a developer(Doing nothing exciting at a enterprise company) get to that goal(the one mentioned in the original comment). Like what steps should be taken going forward.
They're then able to easily debug/optimize the system and know how to implement features in the best/simplest/most scalable way almost immediately.
Although maybe it would work if some of the second tier cities agreed to pay off the debt and contribute to the savings of people that agree to work there.
The problem for a startup here is money and customers. There is some local money, but in practice, you will be raising from firms in SF or Boston. To do that well, you will be sending a founder on trips a high percentage of their time: Our CEO was out 50 percent of the time this year. It’s OK with three founders or a small team already, but the seed stage is very rough, especially for a solo founder.
There is also the matter of customers. If you are doing B2B for startups, or straight sales to developers, the market isn’t here. Consumer? Any physical bits are not going to grow the fastest here. Do you want to start selling to large masses of people with little time and loss of disposable income? Not the best test market. So you better be doing something that is better done from here. An agriculture startup, with farms across the river, for instance. Still, it will be rare for this to be your ideal location there.
Still, I wish for more startups here, but the negatives are very visible, and we have very few success stories that tell people it’s worth trying.
Even if I concede to your assertion that a vast majority of the top 10-20% of developers from these cities leave for the big tech centers- most startups are not doing the kind of work that requires their tech team to be made up of "rockstar" top 10-20% developers.
That $140k number might be a reasonable 50th percentile for what a junior engineer would make at a startup in the Bay Area, but compensation can increase quite a bit after several years in the industry, especially for engineers who move to large companies which give stock compensation. They will far outpace the earnings growth of engineers elsewhere.
It's much easier to achieve that kind of career trajectory in places with high concentrations of tech companies, e.g. the Bay Area and Seattle.
Now I'm sure the BA people average better but somebody in the top 5% from St Louis is going to be pretty good.
Note: I'm from Auckland, New Zealand and $US 100k would be a very good salary.
To be frank, it was a total shitshow. Especially on the startup side.
Here’s some of the bullshit I faced interviewing at early stage companies before accepting an offer literally 2.5x as high as the (multiple) offers that startups made.
1. Shitty equity: one startup wanted me to be engineer #7 and completely own the mobile app and strategy, which is the single point of interaction for their customers. They offered me 0.1% and spun some story about how much it would be worth when they were worth $800mm. Their last valuation was about $35mm. Even if their numbers were real, I’d still make more at a big tech company in equity alone. They also made it clear they wouldn’t budge.
2. Bad work/life balance: the big tech company where I accepted apparently has no issue with people taking off whatever time they need (avg is about 25 days per year), working normal 40 hour weeks, and working from home if needed. By contrast, the startups felt way more restrictive here.
3. Terrible interview process: almost all these startups had pretty disorganized process. Worse: they did the standard whiteboard algorithms interviews, whereas multiple bigger tech companies had more iOS-specific interview loops. Even worse, the startups tended to have a higher bar for hiring than the bigger tech companies. This one is subjective and could be random or misperception on my part too.
4. Most infuriating of all, all of these startups (except coinbase) had a 60-90 day option exercise window for employees who left before a liquidity window. Let me be clear: fuck you if you think this is fair. IPO might be 7-10 years out and if I stay and add value for anything short of that, you’re going to ask me to take a huge risk to exercise my options (and pay the taxes) on your probably worthless stock, otherwise you’ll just keep it? Fuck you.
The entire thing left a bad taste in my mouth. It’s pretty clear that these founders and investors don’t give much of a fuck about their talent, and watching them get squeezed by big tech companies offering sky high comp fills me with glee.
Be a founder, investor, or big co employee. Fuck being an employee for a startup so they can bleed you dry.
Of course, if the difference is 2.5x then it's a no brainer.. I wouldn't take more than a 20-30% cut to work at a startup.
One thing I absolutely agree with you on is the option exercise window. I think it's pretty common in the startup world, but I can't really understand WHY. I mean your options at a startup are already worth less than stocks at a public company, and they still do this shit ? With all the extra risk you'd imagine they'd have to get rid of the liquidity window just so they can compete a bit better with the big guys.
There's also:
1. Shitty bosses (this and the following can be found in any kind of company)
2. Being promised one thing and then being screwed over later. How many companies have screwed over their employees of stock options or those holding existing stock?
3. Terrible tech stack / less personal satisfaction -- especially if the startup hires lousy people and value code production over smarts.
4. Management defined engineering -- when managers make important technical decisions instead of engineers. ("We've signed up for service X, please integrate with them regardless of your thoughts on the matter").
Enjoy your new life as a corporate drone!
Note to the salty drones in the comments below: I started a business that was passively profitable for years and now pretty much just work on what interests me
Comp and work/life balance smoothes over a lot of negatives inherent in corporate life.
I think startups are great for junior employees because you learn so much so quickly. Eventually if you want to be successful in startups you need to start your own startup. The payout on 25% ownership at $10M or $20M is not bad and lots more companies can buy that sized company than a billion dollar one.
There absolutely is. I'm not sure why so many here seem to think that the only options are: BA startup, FAANG, Fortune 500 megacorp.
1) Safety and predictability in compensation
2) Ownership over your company’s strategy (e.g. mobile) only if you’re paid highly for doing it (not a bad thing, but many other people exist who would willingly take a pay cut for the ability to have an actual impact on company strategy)
3) A highly organized and logical hiring process and qualification evaluation
4) Custom negotiated options contract outside of industry norms OR BigCo stock that has value today
5) 5 weeks of paid vacation
It definitely sounds like you made the correct decision by choosing BigCo over startup.
I think you mean the GP wants options within industry norms, which are outside of a failing startup's shoestring budget. On a separate note, what are your thoughts on the glassdoor ratings of Localize?
https://www.glassdoor.com/Reviews/Localize-Reviews-E1427641....
The norm is changing. Good startups today generally offer 5-10y exercise windows. [1] This is something Triplebyte started, and they have a guide for how to implement it. [2]
[1] https://github.com/holman/extended-exercise-windows
[2] https://triplebyte.com/blog/extending-stock-option-exercise-...
Equity is basically always monopoly, you generally can't even evaluate its value because no one will show you the cap table. Highly profitable startups still regularly manage to deliver a pittance to early employees on exit. Even if the exit does deliver oftentimes the yearly compensations disparity is so large that if they'd just stayed at BigCo and invested the bulk of their earnings they would have earned as much or more. This is all while working significantly more hours per year.
The list of upsides is really small relative to the risk. If startups want talent the industry norms are going to have to change.
Not showing the relevant details of the cap table is ridiculous, companies that do this are banking on a pool of candidates that are either morons or don't care what they're paid.
Imagine the following situation: You're in a foreign market, and a vendor tries to sell you a fancy-looking machine. You know he's legally bound not to lie, so you ask what the machine is worth. He says "it's worth 2 billion Magic Moneys!!" but refuses to give you any information that would help you suss out whether that's 20 cents or 20 million dollars.
1) Fair compensation, yes.
2) It's unfair to ask someone to have the responsibility for the success of a huge part of your business without making sure they have significant upside if they succeed.
3) Yes, I want a logical hiring process. The horror.
4) Fair. Not "custom negotiated", just fair. The fact that the industry norm is to fuck over your employees should fill you with shame, not be an excuse you hide behind to do the same thing.
5) I doubt I'll take that much, but I like that the company understands that they'll get the best work from employees who are taking care of themselves and their families.
If you're representative of a typical NYC founder, then yes, I'm glad I didn't join a startup.
Could not agree more, and this is my stance which I will happily share with anyone who cares to listen. I was first employee (and only engineer) at a startup which dangled 'equity' in front of me but didn't deliver. Contract was so full of gotchas that the path to me seeing some sort of actual payoff was astronomically unlikely.
90 day exercise windows upon leaving or even getting sick and being forced to leave. Liquiditation preferences for VC shareholdings. No way to sell your options on a secondary market. Permission of the board required to actually exercise them. Half a dozen clauses that allowed the board to revoke your options at any point in time. Basically, they want you to give your fucking life to them for 5-10 years with only a contract not worth the paper it's written on as an incentive.
Between the shitty equity terms and the fact I was building a damn tech company to make someone other than myself rich, I told them to go fuck themselves and took a job at Google for over 3x times the pay. I have no regrets. Being an early employee at a startup is a complete waste of time and I still beat myself up for being so naive. Sharing this so other people don't make the same mistake.
If I decide the next day, “Nah, it’s not going to work; let’s close the company and distribute the assets to the shareholders,” it would be manifestly unfair for the 80% shareholders to take $1.6MM of the $2MM in the bank and give the VCs back the $400K that represents their 20% stake in the bank account.
Liquidation preferences ensure that the first $2MM that comes out goes to them.
Of course, everyone is disappointed. But it's still unfair for that engineer who gave up half a million dollars or more to work at the startup to get nothing. You might say that the engineer should be aware that they agreed to a way of structuring equity that means it's likely they'll get screwed. Fair enough! But all of this discussion is meant to make readers aware that, yes, the industry standard practice is to screw over the people who have the most skin in the game.
By all means understand it; I’ll never argue against that, but I find liquidation preferences quite reasonable.
The rich technically have less personal risk -- that's because, well, they're rich. GP arguably took more personal risk, took less pay, and created the machinery that made the company profitable.
If you want to say that the original $2M is paid out before anyone else is, that's fine, especially in a sinking ship.
If you mean to say that on a %1000 increase of company valuation, GP should not get his share because, well, he didn't fund $2M dollars -- that's _utter_ bullshit. And arguing that VC's should get preferential treatment so they can directly screw over the people who directly provided the growth is the stupidest argument I've heard for this clause.
It seems to me that you built and eviscerated a strawman right in front of us.
The liquidity preferences could certainly be structured in a fairer fashion. Just because it’s currently structured this way doesn’t mean that it needs to be always or that it’s a great model ( it’s not unless you’re a VC, which is basically the point).
Would you think this is a legitimate claim?
It's silly to automatically assume that "investor" or "capitalist" is someone rich. Chances are, the VC get their money from banks and pension funds who, in the end, invest money of people who earn much less than an average startup employee.
I don't have statistics, but I believe the more common scenario is that the company gets acquired, and the return on investment is not the 10x or 1000x or 1000000x the VCs hoped for, so they recoup their original investment. Leaving the engineers with options worth nothing.
I view liquidation preferences as VCs offloading risk to employees because they can.
Just like the “declare strategic bankruptcy a few months before graduation” doesn’t happen much because student loans aren’t discharged in bankruptcy.
Both moves would “break the game” in a very similar way and so are blocked.
This is absolutely correct and it SPEAKS VOLUMES about the reality of the startup world, even apart from this discussion on liquidation preferences. I'd recommend anyone looking at working for a startup to consider the above and then consider the fact that as an employee they'd be in an even worse position than those founders before turning down that far more lucrative offer from BigTechCo.
Come up with a different mechanism if you ever want anyone competent to work at your startup.
[1] https://en.wikipedia.org/wiki/Going_concern
[2] https://ssfllp.com/going-concern-rules-company/
If you're reading this, please know that not all startups will "bleed you dry". And on the other hand, many big tech co's will!
To be fair, I was specifically not interested in a remote job. Would rather work in an office.
I'm working on something to make the interview process and the offer piece a lot more transparent. I've been part of terrible interview/offer loops too, and the problem aggravates me to no end.
I'd love to speak with you.