Startup jobs with low salary and negligible equity, what gives?
Hi HN,
I am a developer in my 30s with over a decade of experience. Being on a lookout for a new job, I have been researching lots of jobs lately (since I don't mind moving, been looking in most parts of the US). I am divided at the moment between finding a startup job or finding a rather drab big corp job with good money.
I noticed some rather unsettling job adverts in the past while. Some pre series-A startups in the valley offering like $90k in salary for an experienced developer and 0.05% equity. I am just trying to understand who are their target candidates that they expect to join for such an offer (not to mention crazy working hours)?
I have a small family with SO not working. So, I'd be at best manage to make ends meet at that kinda salary in SF, plus the equity is negligible, and the work hours... seriously, am I missing something here? Who would take these deals? And then I often find popular posts on HN where founders are giving out about how tough it is to get good engineers!
143 comments
[ 2.9 ms ] story [ 187 ms ] threadCan you imagine pitching this sort of 'perks' to professionals in science, medicine, or engineering?
[follow up from another HN link ;)]:
"... to provide for their care and feeding. It is probably no accident that the relationship between dogs and their owners mirrors the attachment relationship between parents and their children, behaviorally and physiologically."
If startups aren't willing to provide the means they don't deserve good engineers.
People that are insecure about what they bring to the table.
Pre series-A the risks are still huge and the stock should be priced accordingly. Say the founders think a pre series-A company is worth $2M and they offer 0.05% equity you could enter negotiations asking for 1% more if you feel like it (and walk away if it goes below 75% of your counter opening bid) if you can defend the position that there is still a 95% chance that the company won't make it unless they have you on board.
Otherwise price the stock at 0 and ask for a market conform salary.
They'll move. An offer is just an opening move, nothing more.
Absolutely false. I hear VPs all the time speak about trying to "close a candidate" during negotiations, like a car sale. If you are a tough negotiator you will only earn their respect.
Not negotiating just makes you look like you don't understand business and shouldn't be trusted with any business decisions.
If the equity is important, then it should have some chance of producing fuck-you-money at liquidation. 0.05% is only fuck-you-money if there's a Google IPO size liquidation and there's been no dilution ($11,500,000 @ $23billion). That ain't significantly more likely to happen to a software developer than a chef.
That seems highly optimistic.
This seems to be a common pattern in finance, where one party tries to shed all their risk cheaply.
They're fine with us all having worthless stock together.
What I am getting at is that taking equity means getting a lawyer to oversee the business terms. Going into business with someone who doesn't value the long term success of those with whom they are in business is a bad idea in my opinion. It's better to hang out with people I trust.
This can turn out to be worth more than either the stock or your salary but that's a long game and one with even less guarantees.
Still, I'm pretty sure that very few people that were on board with one of the bigger SV successes of the last 2 decades are going to complain about their pay-day, whereas for everybody whose company did not make it it hardly matters how much stock they got. And that's really where these founders miss the boat: they should be happy to share a sizable chunk of what is essentially worth nothing. They are essentially already busy with their exits when they should be building a company and that alone is a good reason to avoid those companies.
Shares that signify that the owners want a person to help run the company are different than shares as a form of payment. There's nothing wrong with either so long as everyone understands which it is. If it's compensation, then it's mostly a distraction from evaluating the job offer. The ringside seat to a rocket-ship ride comes with or without shares.
...
Startup founders are trying to go (even more) lean and cheap out on salaries, relying either on inexperienced new grads, the insecure, or on a "rah rah go team, the company is priority #1" culture of self-sacrifice. Don't play into it.
The article tries to explain how equity dilution (for both founders and employees) pans out. It is worth a read.
[1] http://avc.com/2010/10/employee-equity-dilution/
Here's the math I do:
share of company * realistic potential valuation * chance of hitting it * expected dilution.
chance of hitting it ~= 3% expected dilution = 50%
So using your example:
0.0005 * 1B * 0.03 * 0.5 = $7500
When it's all said and done, most of these startups will settle for a few offshore contractors or hire remote people who live in cheaper parts of the country where $90K goes a lot further.
The tried and true "solution" to this problem is to import a number of H1b visa holders from other countries who are willing to work for the lower salaries and accept the lifestyle choices that it imposes in the Bay Area. For many of them, $90K in the Valley is still an upgrade from where they are coming from.
For those of us with a decade or more of experience, it's best to focus on the post Series A startups that have the money to pay. However, many of these jobs involve cleaning up code written by those inexperienced folks who accepted less pay in the early days.
Also, keep in mind that if it's difficult to hire at "market rate", that tends to be a signal that market rate is too low. Suppressing wage growth is, in the long term, not really all that different from lowering wages (suppose that there is no wage growth for 10 years - "market rate" remains the same - in an inflationary economy, this means wages are much lower in real terms). This is why some people are now proposing a wage requirement considerably higher than market rate for H1Bs, to ensure that the process doesn't suppress the wage growth needed to make the field attractive to talented people.
1) It is basically never enforced 2) The people rubber stamping the applications don't have a clue about the person, the job, or the title
What happens is employers pigeon hole developers into less experienced roles with lower pay grades according to the BLS (the source of data employers must use to justify the wage)
For instance you can take a person with 10 years experience and either say she is a 'Level 1 Web Developer' at 52k in SF, OR you can say she is a 'Level 4 Software Developers, Systems Software' at 134k in SF. Which would you chose as an employer? And these are extremes, you can play somewhere in the middle depending on your comfort.
http://www.flcdatacenter.com/OesWizardStep2.aspx?stateName=C... and then I selected the BLS region as SF and you can see all of the occupations they define which sound similar and are described similarly, but have wildly different pay scales.
EDIT: I'm reading the prevailing wage guidance document now[0] and employers can actually provide their own wage data surveys to determine prevailing wage. Wow!
[0] http://www.flcdatacenter.com/download/NPWHC_Guidance_Revised...
https://www.youtube.com/watch?v=m8BDpqekENQ
1. The definition of an "experienced" developer is subjective and varies widely. Startups with younger management may (incorrectly or not) apply senior labels to candidates with fewer years of experience and lower compensation expectations.
2. Anecdotally, I have seen startups in SF/NY take advantage of the lower earning expectations of candidates who are relocating into those metros and aren't prepared for the sharply different cost of living. There are places in the US where $90K goes much further and is a more competitive offering, especially for those who are willing to take less cash for the opportunity to work on something exciting.
3. "Developer" is a huge category. Some technical skills are far more scarce than others.
In terms of equity, since you mentioned that you are the breadwinner for your family, why are you sweating the equity? A lot of folks here will no doubt suggest that you negotiate for more equity, but equity won't pay your bills. If cash is your biggest concern, negotiating around equity is pointless.
It sounds like you want a very early-stage startup job with BigCo-like pay, meaningful equity and reasonable hours. For the most part, this is a dream.
.5% equity, especially when it will end up being diluted, is a fool's game.
At most early-stage startups, there is no money on the table. If you want to maximize your earnings, focusing your job search on pre-Series A startups is a horrible waste of time.
The OP seems to be asking for startup excitement, reasonable hours, high salary and meaningful equity. At a pre-Series A startup, you might be able to find two of the four.
> .5% equity, especially when it will end up being diluted, is a fool's game.
Rhetorical exercise:
1. What's .5% of $0?
2. What's 2% of $0?
3. What's 10% of $0?
Equity at early-stage startups is a fool's game.
Additionally, you are not factoring in liquidation preferences. Rhetorical question: what's 10% of $10 million when your investors put in $5 million and have a 2x liquidation preference?
If the strike price is a concern, it could probably be negotiated down. I had the impression the they have generally gone down anyway.
Please ask a qualified accountant about Section 409A of the tax code and what happens if you're granted stock options at less than fair market value.
But 0.05% equity? Seriously, that's insulting. Don't these morons want their employees to be motivated? Isn't that the point of equity?
Here's the problem - almost all silicon valley hiring, compensation, equity, and work conditions are now viewed in the context of an absolute insistence from employers that there is a critical shortage of software engineers (remarkably, a claim that is made with absolutely no data on compensation, equity, work conditions, and long term career opportunities offered relative to the jobs available to highly educated and hard working people in other segments of the economy).
So you say that the idea of a well paid job with substantial equity in an early stage startup is a dream, but to a lot of us watching this, it seems like the people being outrageously unrealistic are the ones trying to hire talented programmers for ludicrously low wages and equity. The difference is, I'm not going to congress claiming someone owes me a job on the terms I've decided are fair. But these employers seem to think that if they can't hire under their conditions (in this case, in a company that may be gone in 6 months, at a salary far too low to support a family with a child, with equity too low to be worth much under almost any outcome other than a few shoot-the-moon scenarios), congress needs to get involved in increasing the number of programmers available for hire.
Yes, that looks wrong. Equity should be 10X more (0.5%). Whether it's a good deal for your situation or not is a different discussion, but at least that would be more in line with typical deals.
What the 0.05% equity package indicates is that the founders probably have an unrealistic expectation about how much their venture is worth at this stage. I've seen this a few times in naïve, young (23-25 years old) first-time founders that don't have significant amounts of experience working in start-ups and/or technology in general. This trivial amount of equity is a huge red flag, not only because its present value is negligible (guess what the risk-adjusted rate of return is on a start-up run by first-time founders?), but because it indicates that the work environment will likely be unpleasant (hellish hours, frequently changing requirements, no clear vision -- common in companies run by first-time founders).
Also, keep in mind: if these founders are foolish / naïve enough to think they'll be able to hire a credible, valuable engineer with this package (they won't), they're also likely foolish / naïve to get screwed by their investors. Founders are only at the bottom-middle of the start-up hierarchy: VCs are above them and LPs are above them.
http://www.quora.com/How-can-you-inspire-programmers-to-work...
Many startup CEOs would like you to believe they are the only ones doing interesting work, but there are plenty of larger organisations that are still fun to work for, and more likely to value you as an employee.
While you are right, you make it sound like $90K is underpaid for someone right out of college. $90K is pretty good for a promising kid with a fresh degree but no real experience. More than fair; they are unlikely to get much more at a real company. It's kinda silly for someone with 10+ years experience, but those 10+ years are worth something.
It depends on the school. For my friends going into software out of college, 90k was towards the bottom end (the top end was more like 200k).
Of the people I know, $130K+ is a reasonable salary, with some experience under your belt. Out of college, you are looking at $80-$85K cash (maybe $90K if you convert stock and other bits to cash) I do know a small handful of technical people who can pull off $200K plus, but they are experienced and staggeringly good, and have proved that they are staggeringly good. It's not something that your regular programmer can expect.
Using my definitions, it's impossible for it to be normal to be underpaid. You are only underpaid if you are getting less than the normal wage.
Some people use 'underpaid' to mean something that has to do with the cost of living, and some people use 'normal' to mean "correct" - but that makes for a very different sort of conversation.
Your opinion of how much value a software developer creates is irrelevant, except to the extent that it influences wages you are willing to pay to others, or wages you are willing to accept, and only that matters to the extent that there is demand for you and/or how many developers you can hire.
In the real world, median starting salary doesn't even break 70K, much less 85K, according to salary.com, even in silicon valley.
http://swz.salary.com/SalaryWizard/Software-Developer-I-Sala...
My point, with this thread, is that while yes, there does exist a group of developers who make bank right out the gate and continue to do so throughout their career, for most of us? most of us are median. For most of us, $200K+ a year is purest of fantasy. And $85K right out of school is not bad at all.
Or to the extent that the capitalist class can collude (with the help of useful idiots who have bought into the narrative) to avoid paying a wage representative of the value created.
Markets with imperfect information are set by the ones with the most information, and that's not the worker. The results are unsurprising.
> In the real world, median starting salary doesn't even break 70K, much less 85K, according to salary.com, even in silicon valley.
That's great. I live in the real world and I made $85K coming out of college, in Boston, at a decent-not-great company in 2010.
In this industry, "median" is fairly terrible.
This idea that your wage has much to do with the value you create, well, it's what I believed at your age, too. It's a fun thing to believe when you make more than anyone else you know who is your age. It certainly made me feel valued.
But the idea that what you get paid has very much to do with the value of what you produce is obviously silly, unless you have a definition of value that makes one person working at a hedge fund worth ten civil engineers.
If we're going with economic models, what you are paid has everything to do with supply and demand for people with your skill. The "value" you produce has something to do with demand, but in this case, value is measured in such a way that one hedge fund analyst is worth ten civil engineers, so it doesn't really map to how a normal person thinks of 'value' - and even then? well, there's always the supply side of things to consider. If other people are able and willing to do your job for less money...
>In this industry, "median" is fairly terrible.
Compare it, say, to aerospace. I know guys who have masters degrees from places like MIT working at the local defense contractors. Some of these people are better programmers than I am They can't come within 30% of my salary, and I'm a mediocre sysadmin who barely graduated from one of the worst high schools in California.
And yeah, I mentioned civil engineers; the people who design physical infrastructure. Roads, bridges, sewer and water systems. They make even less; even with advanced degrees and experience, they are lucky to make half what I do.
I mean, yeah. there are other job types that make more money than people who build and support web applications. But compared to, really, everyone but the top-ends of finance, legal, management and medical, we have it pretty good.
People whine about making only $100k/yr and having to pay bay area housing prices. What do you think it's like for the people that clean your bathrooms? that make your food?
We have it pretty good. I mean, I'm not saying that you shouldn't try to get more, or that it wouldn't be great to get paid more, I'd certainly enjoy a bigger house and a nicer car, and maybe a driver... but sometimes you need to sit back and recognize that even if you aren't in the 1%, well, life in the top quintile isn't bad at all.
I don't want the poor guy's cookie. I want the rich guy to actually spread it frigging around so we can moor compensation to value created--to the poor guy, the civil engineer, and to me. But instead, the rich guy and his rich guy friends collaborate to keep the rest of us in a position to keep working for them and to never, ever, ever get within arm's reach of real success ourselves (unless you want to play the roulette game of startups, where you'll enrich them long before you see a dime).
But clearly I'm just an ingrate.
Yeah. I think you use "Evil" lightly. I mean, I do too, but that's mostly because I live a sheltered and comfortable life, much like you probably do. Seriously, listen to yourself. You are calling me "Evil" for saying "Hey, perhaps you should count your blessings"
I mean, I understand the people who think I'm evil if I don't give the homeless guy a buck; I don't really agree with them, but I can see their point. I don't see your point.
>I don't want the poor guy's cookie. I want the rich guy to actually spread it frigging around so we can moor compensation to value created--to the poor guy, the civil engineer, and to me. But instead, the rich guy and his rich guy friends collaborate to keep the rest of us in a position to keep working for them
I'm not saying you are wrong... But what are you gonna do about it? I don't think you are going to find very many people in our income tax bracket who are willing to risk all for a few more bucks.
More to the point, popular action is going to target us - look at where income tax brackets top out. To most people, at that point? you are rich. I mean, I'd like it if they stretched it out further, and eliminated the capital gains loophole, but to your average voter, I'm one of the rich fucks who ought to get soaked.
> and to never, ever, ever get within arm's reach of real success ourselves
what is real success to you, if not this? I can live pretty comfortably for a year off of three months pay.
My point, here, is that you can spend your time and effort and emotional energy railing that other people are in some ways unfairly slightly better off than you are, or you can focus on, you know, living your life.
I think the other side of the market is isomorphic to this: any publicly available list of jobs is disproportionately filled with positions which qualified talent has seen, evaluated, and rejected as unsuitable.
[+] Citation: http://www.joelonsoftware.com/articles/FindingGreatDeveloper...
Don't go through the front door. At most, use publicly listed job ads as a form of research. Never assume they represent all the jobs that are actually available to you.
There is no substitute for actually talking to people and getting to know them. Make your own wishlist of companies you'd like to work for. People running startups who are even minimally competent know they need to network a lot, so they're easy to find and network with.
I wholeheartedly agree with checking out 'other' doors, but it definitely doesn't hurt to at least start with the front door.
They are so big that they have HR policies and anyone you are likely to know well enough to give a heads up on a job at either company is not high up enough to shirk the formal HR process. Small companies are very very different.
I'm not bragging about this, because it really wasn't difficult to do. I didn't go to school with them, and with one exception I met them all after they had joined their companies.
Cold-emailing influential people, or introducing yourself to them at meetups, or any one of the myriad other ways to meet people applies in this situation.
Just be genuine, and network with them long before you'd ever want to call in a favor, this way you actually have a relationship with them. It also helps if you share something in common and actually have something to talk about, and if you want to connect with them for the sake of having smart colleagues, not just influential friends.
I really respect Joel Spolsky's accomplishments (I've mentioned him recently in my own comments), but I found the blog post you cited wrong at best and offensive at worst. It perpetuates one of the most frustrating things I experienced while job hunting: the stigma of unemployment.
Even though I voluntarily left my last position, companies looked at my candidacy very skeptically. Things I was told by companies:
- "To be honest, we think you're an entrepreneur just looking to make enough runway to move on to the next thing."
- "Well, we're really impressed with you and you have the technical chops, but we're concerned that you like to think on a higher level and might tire of the daily nitty gritty." (Not true, and basically the same as above.)
- "You did well on your coding interview, but we've got enough candidates in our local area that we've decided to restrict our search to it." (i.e. relocation jitters. Not coincidentally, when I finally found a position, it was in my city.)
There are also people who are competent programmers, but come from strange backgrounds, like the music major-turned-coder who posted the other day. I, personally, am almost entirely self taught, haven't worked with other engineers and have only coded on my own projects (you can see my github if you want). People making hiring decisions are scared for their own jobs: they don't want to be the guy who hires the guy who never had a "real" coding job before. If it doesn't work out, I can see where that would come back on them pretty hard. (Conversely, having worked at Google or Apple is a major bonus for the opposite reason.)
Oh, and plenty of people underperform in on-the-spot coding interviews. Some people are affected much more strongly than others by anxiety. It goes both ways. I've read hiring managers on here gripe that they hired someone who interviewed well but sucked in reality. And my guess is it goes the other way, too.
So I find his assertion that people actively looking for work aren't the ones you want to hire incredibly naive, elitist and just plain wrong.
The stigma is real and you can't fight it on those terms. But you've got other qualities that people want, and you can "win" those interviews if you can get that point across. Make your resume scream "rock star coder".
Also, working on code in a team is very different from working on personal projects alone. It adds in a whole bunch of things that aren't necessary on personal projects. You don't just need to know how to use a VCS but how to use it in a way that won't cause headaches for your coworkers. You need to know how to write code that people other than you can read and maintain it. In many cases you may be responsible for drawing out requirements from users. You need to communicate effectively with the rest of the team. None of these skills are exercised or put on display by your typical github repo.
So, personally, I can see why someone would be very hesitant to hire a self-taught programmer with no experience. If someone has a degree and a little job experience, you know they at least know enough to pass their courses and survive in a team environment. With the unknown guy, you need to do some very rigorous testing to make sure you're not getting a dud. A lot of companies might not have the resources to do that.
In trying to put my thoughts into words here, I found it easier to whip up some pie graphs instead.
http://www.fivedogit.com/2015/the-problem-with-technical-hir...
Damn! I forgot to include "Do you have exp with the company's stack?". Oh well. That's more about getting the interview in the first place, so I guess it's ok.
The problem is not "Turing-complete" (roughly, "can express arbitrarily complex stuff"), but "context-free" (roughly, "you can parse without considering what you've seen so far").
For instance, Brainfuck is Turing-complete (in the "Turing tarpit" sense) but really easy to turn into tokens (in fact, an informal approach may not even distinguish between "+" and "the token 'increment'"). Even realistic languages like C can be parsed without using anything much more advanced than regexes (you need some ugly kludges to support typedefs, and you should pretty much ignore newlines; one would typically use something more like yacc, but that's still not a very sophisticated tool.)
On the other hand, XML or HTML (which are not Turing-complete, and, informally, "not that expressive") are pretty much impossible to usefully parse without extensively considering context - <a><b /><c /><d /></a> gives and <e><d /></e> are "very different <d />'s".
I don't know XScript, but regexes may be a completely viable approach. In fact, if your current approach works, it's likely good enough - it requires some theoretical background to express why you can't parse HTML with regexes, but you'll run into lots of trouble if you try (leading to stuff like http://stackoverflow.com/questions/1732348/regex-match-open-...). Of course, there's value in finding out your approach won't work before you've spent weeks of effort. ;-)
"As long as we're on opposite sides of the negotiating table, I am going to do my best to get a fair share of possible upside from your company, and a decent salary. When we conclude this negotiation fairly, we'll be on the same side of the table and working towards the same goals."
"Now, I want half a percent and $110K."
Keep in mind that your BATNA (best alternative to a negotiated agreement) is to say, "No thanks. Good luck." They need to hire somebody: time is money at their stage of business. You don't need to jump into their job.
But don't have this conversation at all unless you think their business idea is worth five years of your life.
Yes, this is one of your best sources of leverage, as long as you can take your time and be picky (which you absolutely should be able to do if you're a working programmer).
The longer you keep them talking to you, the better. They can't waste time forever, and their own sunk cost bias works in your favor.