I think the incentive structure for first 10 employees is completely broken right now. Adjusted for risk and dilution, the risk reward ratio for top 10 needs to be closer to the founders since they are taking almost identical levels of risk. I wish companies would value the stock part of their offer with respect to the valuation that investors have put money in. I never understand the huge disparity between the valuation of companies as understood by investors (in terms of their investing decisions) and as explained to prospective employees. From my point of view it would be good if the Startup clarified what they intend to pay me, put a hard cap on how much of that they can pay me in cash, and then allow me to use the remaining to "buy" stock grants at a valuation that closely resembles what investors have recently invested at.
Ask HN: Pros and cons of working at a startup in 2018?
361–370 of 968 posts
Re: Ask HN: Pros and cons of working at a startup in 2018?
#362Earlier quoted context omitted.
+1 to this. 10 years ago you couldn't make 400K at Google, Facebook, Microsoft, etc. Now you can. Startups made a lot more sense when your opportunity cost was 50-150K per year.
Honest question since I'm not familiar with the area - who is making 400k at Microsoft or Facebook? Not the typical mid-level software engineer, I'd assume. Are these product leads or head engineers making the 400k?
400k is reasonable for total comp after a few years of experience. Note that total comp includes a bunch of stuff that's technically discretionary, like your annual bonus, and a bunch of stuff that's paid out but not really cashable, like meals and health insurance. Your pre-tax cash, sans benefits, is probably closer to $200k.
Re: Ask HN: Pros and cons of working at a startup in 2018?
#363Earlier quoted context omitted.
> Why do founders get over 10x early employees? Because founders take at least 100x the risk of an early employee, and 100x the personal risk and commitment. Founders generally aren't getting paid (at least until revenue or significant funding comes through) and they have 100x the impact that an early employee does on the success of the company. If an early employee doesn't work out, the founders just replace that pe…
"Because founders take at least 100x the risk of an early employee, and 100x the personal risk and commitment." The risk part of this isn't remotely true in many cases,or rather it's offset by so many other benefits accruing to them. Founders generally are drawing at least a small salary and, in this context (YC/VC funded) they are not necessarily risking much if any of their own capital. Moreover they are benefittin…
You have a very narrow view of startups if you think that's how they all operate. Many many companies never raise money. Many founders are unpaid, or just paid the bare minimum legally allowed. And numbers alone do not tell of the significant social and psychological pressures while employees can always quit and go work somewhere elsewhere. Even successful acquisitions don't guarantee riches to founders and that's completely overlooking the fact that many don't find success and are left with nothing.
Re: Ask HN: Pros and cons of working at a startup in 2018?
#364Earlier quoted context omitted.
This. I joined a moderately successful startup (good acquisition where founders made > $1 m) and the rewards were not worth the risks as an early employee. Also, the RSUs are low risk, high rewards at the "usual suspects". Unless you love working on a small team with more autonomy, but without comfortable resources and losing sleep over whether your company will be there next week, I just don't see the attraction of…
> Why do founders get over 10x early employees? Because founders take at least 100x the risk of an early employee, and 100x the personal risk and commitment. Founders generally aren't getting paid (at least until revenue or significant funding comes through) and they have 100x the impact that an early employee does on the success of the company. If an early employee doesn't work out, the founders just replace that pe…
Having a constant ratio of risk without looking at the company is absurd.
Re: Ask HN: Pros and cons of working at a startup in 2018?
#365Earlier quoted context omitted.
At the end of the day, when your company gets sold, and your founder worked on the company for 1-2 years before you did, but they walk away with millions and you walk away with the equivalent of a Camry - I question whether equity is not the solution. In terms of market rate salary, the startup will never match FAANG. Seriously. I'm talking about Sign-on bonus, annual bonus, re-ups, benefits (like a heart-transplant…
> "In terms of market rate salary, the startup will never match FAANG." > "if enough people were educated on how much a bad deal being an early employee was, we could tip the scale a bit." Yes. The reason why startup compensation is much lower are because of perception (people aren't rational) and only a shift in perception will shift the balance. The reason why equity is not the solution is that the default outcome…
> If a funded company (series A, say) is offering you equity as a large part of comp, you have to ask yourself why the VCs don't buy back that equity for the cost of paying market rates for talent.
Because the company wants to align your incentives with its own success, of course. That's the original reason why equity was offered to employees in SV, back in the good old chip-making days.
According to your argument, equity never made sense as a compensation factor. Obviously that's not the case, it has been an important factor in the past, and if enough people wisen up, will probably be so again in the future.
Look, either startups sell equity and pay developers market rate, or they give them more equity to compensate for under-market pay. Otherwise, these startups are underpaying developers, plain and simple, and these developers will prefer to work in companies that compensate them fairly, which this thread's commentary suggests is already happening.
Incidentally, I agree that paying market rate in cash isn't the solution, because startups need harder, more dedicated workers than the average company in the market.
That's exactly why equity is crucial.
Tellingly, startup founders agree when they pitch their startup as "definitely a unicorn, stick around and your options will be worth millions of dollars" to every single candidate. It's just that the equity factor is now only empty promises, because even early employees only get tiny amounts of bottom-preference options.
Re: Ask HN: Pros and cons of working at a startup in 2018?
#366Note: this is my perspective, one as a software engineer who has mostly worked at startups and now currently at a FAANG
Pros:
- Often easier to make lots of impact/move up quicker
- (Potentially) less bureaucracy around decisions
- (Potentially) lots of vacation
Cons: - Typically not as smart coworkers
- Often can get into more dysfunctional situations, whether by process or individuals involved
- Not good managers/engineers also have outside impact. One company I have worked for had half of engineering leave or be laid off in the span of half a year, and most of them were above average engineers (and on the upper half of competence in the company as well).
- Poor management structures and managers really decimate engineering.
- Bad/toxic engineers also wreck havoc.
- Senior engineers can easily make over $300k at a FAANG if they are good. Stock options at startups do not come close to keeping up to pace with top performers, and are pretty much regarded as having no value given a lot of the shenanigans/risks engineers have to put up with to maybe get an exit. Startup compensation would have to change drastically to get many to even think about taking that risk, and as a result, the risk of a startup failing increases due to less competent engineers being hired, which decreases the startup's velocity and increases the startup's likelihood of acquiring damaging technical debt. The worst part about this is that startups try to be demanding over all sorts of random small things in the hiring process, yet don't hold themselves to the same standard when it comes to compensation.
- The big tech companies have special benefits as well, such as employee stock purchasing programs, or paid sabbaticals. They do a better job of compensating for loyalty than startups do.
- Dilution of stock value and the stock value opaqueness in VC-funded companies make engineers skeptical of their value. In addition, the preferential treatment of investors over employees for stock selling/allocation gives a lot of people distaste over the sweat capital dichotomy.
Just some things from my top of mind that I've observed/experienced. After spending about 4 years at startups, I'm not sure I'll ever go back - I was not a low performer either at any company I have worked at. At my last employer, one employee remarked that they would need to hire 3 senior engineers and a manager to replace my technical & managerial output & make up for the decreased output/morale of the team.
Re: Ask HN: Pros and cons of working at a startup in 2018?
#367Earlier quoted context omitted.
What this suggests, capitalistically-speaking, is that there is insufficient supply of developers and the supply that does exist can be most effectively employed by large companies. Is the problem that startups are not an efficient way to use scarce developer resources, because there are too many of them producing too little value? Or is it that the supply of developers is too small? A YC apprenticeship program, with…
There is also the developer !== developer problem. I've worked with terrible developers, developers I'd trust to maybe write a blog for my cat, developers I'd trust on an important system but they all called themselves developers. The old joke used to be "You know what they call the guy with the lowest passing grade in his medical school? Doctor".
I'm excited by projects like http://darklang.com/ that are looking to make basic development more widely accessible, rather than requiring esoteric skilled labor mostly done by people who don't actually have the skills involved. It would be great if the industry got to the point that people coming out of school could be a net positive.
Re: Ask HN: Pros and cons of working at a startup in 2018?
#368Earlier quoted context omitted.
Take that view with a huge grain of salt. Nobody is denying that someone, somewhere is making $400k as a software engineer, but we are talking outlier employees at outlier companies. You’re not getting this as a medium level rank and file engineer, or at a non-FAANG company. This whole “software engineers make $400k” trope seems to have taken on a life of its own. Every time salary comes up here, these guys come out…
FAANG + Microsoft + Uber + Airbnb hire thousands and thousands of engineers in the Valley and Seattle every year. 400K is L5-L6 salary (senior engineer, first level manager). There are a TON of engineers making that money. They are not really outliers, and FAANGMUA is also not really outlier considering Google itself has 80K employees and Amazon and MSFT have over 200K employees.
Excuse me but the median senior software engineer at Microsoft does not make $400k/yr in TC. Same goes for AMZN. There are only a handful of companies that pay $400k/yr for senior software engineers and MSFT ain't one of them (facebook, and google do however). Go checkout Blind if you don't believe. Or ask your friend at MSFT.
And like someone else said, first level managers are more like 250-350k range, not 400k, yes even at G and FB.
Uber and Airbnb don't pay that much either. Sorry I don't count paper money as real money.
Re: Ask HN: Pros and cons of working at a startup in 2018?
#369On the compensation point...
If you are a smart, quantitative person looking to maximize your income, you should go into investment banking, not software engineering. Partners at an investment bank can make $5M a year. You won't make that as an engineer at Google.
Since you're reading this, I'll assume you didn't go into investment banking, but went into engineering, likely because you found it more rewarding. Good job! Life isn't about money.
Now if you're a software engineer looking to maximize your income, go be a senior engineer at Google. You'll make $400k a year (supposedly). But you may find working in a smaller organization to be more rewarding / engaging / exciting. If that's the case, work at a startup.
You won't maximize your earnings potential at a startup. But you'll likely work in a nimble environment, solving interesting problems, and get a lottery ticket (options) to boot.
Re: Ask HN: Pros and cons of working at a startup in 2018?
#370Earlier quoted context omitted.
This. I joined a moderately successful startup (good acquisition where founders made > $1 m) and the rewards were not worth the risks as an early employee. Also, the RSUs are low risk, high rewards at the "usual suspects". Unless you love working on a small team with more autonomy, but without comfortable resources and losing sleep over whether your company will be there next week, I just don't see the attraction of…
> Why do founders get over 10x early employees? Because founders take at least 100x the risk of an early employee, and 100x the personal risk and commitment. Founders generally aren't getting paid (at least until revenue or significant funding comes through) and they have 100x the impact that an early employee does on the success of the company. If an early employee doesn't work out, the founders just replace that pe…
That narrative is completely false.
Initially there is definitely a bit more work//risk, but don't forget that they also get all the benefits associated to it, even early in the life of the startup:
Social//network connection with other entrepreneur that will always give them a fallback job in case the startup fails. They are also seen as brilliant individuals and market themselves so much more then normal employees.