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When I read recently that the average pay for Valley developers was around $100k, I balked.

In the DC area, I don't know of many 'good' developers making less than that, and I'd wager to say that most of them don't possess the core competencies required to work somewhere like Google, for less money. The soft cap around here is closer to $160-170k for a good developer, working for a regular job where you can work 8 hours and go home at the end of it.

Hell, if you're clearable, and do work in security, the cap goes way up.

I'm curious what the age and experience of these developers is... because I'm also in the D.C. area, and of all of my friends who are relatively recent graduates (2004-2007), absolutely none of them are making 160-170k. Some even work for major defense contractors with top secret clearance, and don't make that much money.
So, the general mantra for defense contractors is that fresh college grads are hired to do work for very very cheap rates, and are given workloads that are near impossible to sustain. The churn rate on that sort of position is very high, but the ones that last more than three or so years who are able to negotiate a decent rate will definitely end up with 6-figure salaries.

To put it in perspective, I'm 33, and most of the peers of mine I speak of are loosely similar in age. That said, I had a friend of mine who was hired to the company I was working for at $40k (recent college grad, absolutely zero tech skills, but otherwise hard-charging, motivated and eager to learn) and within a year of my advice, his salary had been chipped up to $85k a year.

A part of it is obviously being able to market yourself personally, and a big part is actually being able to deliver -- a lot of defense / federal work is actually structured such that you can't succeed, so working against that is non-trivial -- but yeah, generally speaking, the money will come.

Long story short, with three years of experience and references (and a good reputation) working in contracting, you should be asking for at least $90k. The real trick in defense contracting though is that you become more marketable the wider your knowledge set, which is counter to almost everywhere else wherein your pay is derived from the depth of your knowledge.

There's a difference between average and high-end:

Washington D.C. Avg Software Engineer salary: 102k http://www.indeed.com/salary/q-Software-Engineer-l-Washingto...

Bay Area Avg Software Engineer salary: 113k http://www.indeed.com/salary/q-Software-Engineer-Bay-Area-l-...

Except none of my friends in the bay area make that little. In fact, few of my friends in their late 20s are making under $200k a year in terms of what they write on their tax returns (total compensation package).

Your experience and the "average" typically are not comparable.

What kinds of companies are paying your friends $200k to write software?
Usually it's not $200k salary, but compensation package. A typical example is: $165k base salary, $25k annual bonus, $40k stock.

Sorry, I won't mention any particular companies, but if you're close to anyone at a major software firm, you should easily be able to find out what it's like.

An unmentioned reason it's hard for startups to hire, is because most startups sound lame. Very few programmers dream about moving to Atlanta to work 12 hours a day at a startup for corporate marketers using Facebook.