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Downsides to working at a tech giant

blog.garrytan.com

191–200 of 583 posts

Re: Downsides to working at a tech giant

#191
post #172

The pessimism in this thread really bothers me. I’ve read anecdotes on entrepreneurship being on the decline, but it pains me to read so many negative takes on startups. We’re actively training our young people to avoid taking risks, and it’s going to fuck us — especially if some of those young people have the ambition be early employees at, say, a startup that takes on climate change in a big way. Look — the fact th…

The reason why is the math changed. The gap between startup and tech giant is much larger now than it was in 2010. Also, unless you have insider access and join a very risky angel stage company, the likelihood of getting a good package that makes sense is low, very low. Also public companies have shown to get +3x gains, which can make the math even worse. Example from personal experience that is very lucky in startup…

> The reason why is the math changed. The gap between startup and tech giant is much larger now than it was in 2010. Also, unless you have insider access and join a very risky angel stage company, the likelihood of getting a good package that makes sense is low, very low. Also public companies have shown to get +3x gains, which can make the math even worse.

Unfortunately, nowadays, the only job titles at a startup that offer greater expected value than working at a tech giant are "Founder" and "Co-founder". The fraction-of-a-single-digit-percentage equity packages out there for Employee #1 adjusted for the risk of failure and the risk of getting diluted are often a very low number. And if you're Employee #10? Forget about it! I'd love take another crack at a startup but it only would possibly make risk-adjusted financial sense if I'm the founder.

Re: Downsides to working at a tech giant

#192

The pessimism in this thread really bothers me. I’ve read anecdotes on entrepreneurship being on the decline, but it pains me to read so many negative takes on startups. We’re actively training our young people to avoid taking risks, and it’s going to fuck us — especially if some of those young people have the ambition be early employees at, say, a startup that takes on climate change in a big way. Look — the fact th…

If the pessimism in this thread bothers you, imagine how much your woefully out of touch survivorship bias and bothers everyone else in this thread?

One of the top comments that responds to your post tells you that the math changed. This is true. The fact that neither you nor Garry talk about the concrete specifics of this means that you're either unaware of it, or worse, intentionally sweeping over it.

You really think that what is "actively training our young people to avoid taking risks" is all the "negative takes" on startups? What about the changed exit environment where companies are staying private longer and equity shares are no longer outcompeting public company compensation? Poor or inexistant options for liquidating large holdings of early company equity? Liquidation preferences, dilutions, and founder enrichment allowing grey-hat founders to self-enrich at the expense of their employees? How about the increased ability of large companies to compete with startups and turn their products into mere features? Ballooning student loan debt, rampant social inequality, a collapsing middle class labor market and automation?

You know what I think is actually happening, based on the interviews I've given working at various startups where we lose great candidates to more established companies? I think candidates are getting smarter. If they're smart enough to make outsized impacts at startups, they're smart enough to make outsized impacts at large corporations and make sure they get commensurate compensation. They know that they have better access to a tried and true organizational structure around the software development and revenue line development lifecycle.

A lot of this completely changes if you're the founder. That's probably the one perspective where the ownership structure is so radically different and more advantageous that it's very much worth it over being a mid level manager or executive doing the same thing at a larger company, if you can pull it off. But if you're not a founder at a company any earlier than late series B or C, you're generally taking a proportional risk for a much less proportional reward if you join as an employee -- not just financially, but organizationally and directionally (in career trajectory).

And, if there's one thing I can't stand more than anything, it's when founders wear rose-colored goggles and can't admit this truth. Not implying you're doing this, but I'd advise anyone in danger of this to never drink the kool-aid you sell to the point where your reality-distortion field obscures your inability to see the very real reasons why people make (and remain happy with) these decisions, just because it threatens your life choices and identity.

Re: Downsides to working at a tech giant

#193
Building a network is an important thing... But let's not kid ourselves:

Most startups offer very little % for equity.

And that equity often amounts to next to nothing. Look at Uber or WeWork.

Most founders end up as assholes. Some are great, some care, some what to learn. Learning as a manager/founder is someone else's job. Stress is real. People do shut down from stress.

If you are a founder, that's great.

If you are like first or 2nd employee, and end up as CTO and such, that's great. If you can get a few % equity.

Overall most startups you work at you will make just barely what you'd make at Google or Microsoft (I'm taking post exit). During 2003 engineers didn't have the leverage we do now. Right now a junior engineer can make close to 200k+ in total compensation at a large firm. The work is different, but definitely more money most startups will ever give you.

Re: Downsides to working at a tech giant

#194

Earlier quoted context omitted.

The other big thing messing up startup comp right now are super-high valuations for mid stage companies. When you’re getting options based off an inflated evaluation your upside is low, and the probability your options become worth $0 even if the startup does moderately well (eg if it raises a round at $4b right before you start and goes public for $3b). Doesn’t matter how many options you got, they were pegged to an…

Agreed. People are madly in love with working at companies like Stripe and Airbnb right now, but I'm not convinced the risk is worth it. They're giving out equity as if it's liquid, but it's not. So if I can get $200k per year in equity from Stripe or $200k per year in equity from Google, why exactly would I choose Stripe or Airbnb? Just in the hopes that the $200k will end up worth $400k or $800k? I mean, maybe it w…

In the example where you have equivalent equity packages available at Google and Stripe/Airbnb, I think you're right -- it's hard to see how equity that has an uncertain liquidity horizon is equal in value to Google's, which you will definitely be able to sell in a year. However, I've found that offers from these companies compensate for that -- Stripe/Airbnb will offer more in equity than Google precisely because of the liquidity premium. Then it comes down to, how much of a liquidity premium do you demand as an investor?

Re: Downsides to working at a tech giant

#195
post #185
post #172

Earlier quoted context omitted.

The reason why is the math changed. The gap between startup and tech giant is much larger now than it was in 2010. Also, unless you have insider access and join a very risky angel stage company, the likelihood of getting a good package that makes sense is low, very low. Also public companies have shown to get +3x gains, which can make the math even worse. Example from personal experience that is very lucky in startup…

I agree with all of the points raised, and share the same experiences. But this one: > I might as well become a founder and start my own at that point Great! So, how would you recruit your first 10 employees?

I don’t understand... why is the goal to convince a bunch of naive youngsters to work for you at 1/10 their value? You shouldn’t exist unless you can pay competitively for the same people, end of story. Until then, don’t hire

Re: Downsides to working at a tech giant

#196
I feel the comments in the threads are a bit too sour. Sure, you probably will not make 200 million dollars or even 20 million dollars. I am going to make that a bit stronger: It is highly likely you will end up broke as fuck. But so what? Starting something up is really fun and if you are young (20 something) and don't have many obligations yet, just go for it. It doesn't matter if you fail. You will learn a broad skill set, which will be useful in the rest of your life. It will build character. Even if you fail, it is not a worthless experience.

Re: Downsides to working at a tech giant

#197
post #2

The simple truth is that working for the equity of an unproven start-up is a gamble, and statistically unlikely to pay off. And sadly more and more start-ups are undermining access to equity in shady ways. Not that one should never work for a start up on the hopes it breaks big, but we should also never forget that the successes are outliers, by a massive margin. Just understand the trade-offs of your decision and th…

> statistically unlikely to pay off > probabilities involved with your decision While this is a good general approach to life IMHO as well — if you mean "be rational, not just emotional" and "work on your cognitive biases, seek objectivity" — it might also prove terribly counterproductive in this context. It would take a book or five but briefly: - you just can't use statistics when they say "95% fail", otherwise you…

- another stat for you: most entrepreneurs fail "about twice" before making it, i.e. you'll probably fail 1-3 times for sure before entering the 5% of those who create a profitable business. Trick #1, thus: you can roll the dice several times (consider 2-5 years per "real try").

I've never heard of this stat. Seems like a case of survivorship bias more than anything else.

For every entrepreneur that "made it" on their third try, there are millions who had to declare bankruptcy and set their career back years because their ventures didn't work out.

Re: Downsides to working at a tech giant

#198

I feel the comments in the threads are a bit too sour. Sure, you probably will not make 200 million dollars or even 20 million dollars. I am going to make that a bit stronger: It is highly likely you will end up broke as fuck. But so what? Starting something up is really fun and if you are young (20 something) and don't have many obligations yet, just go for it. It doesn't matter if you fail. You will learn a broad s…

Not everyone has the luxury of failing. Everyone’s cost-benefit analysis is different, and one takeaway from this discussion is that founders need to stop skewing the cost by depreciating the shares non-founder early stage employees get.

Re: Downsides to working at a tech giant

#199
post #120
post #68

It seems like he has found the problem with companies. "Even though these companies pay a lot of money, in real terms, what software is doing in society is creating a lot more value than what they pay you. Google's pure profit per employee is actually $1.6 million per year, after all costs." "If you're in the engineering, product, design, marketing, sort of the builder's side of that organization, you've got to know…

This is a problem, no doubt.

[deleted]

Re: Downsides to working at a tech giant

#200
post #120
post #68

It seems like he has found the problem with companies. "Even though these companies pay a lot of money, in real terms, what software is doing in society is creating a lot more value than what they pay you. Google's pure profit per employee is actually $1.6 million per year, after all costs." "If you're in the engineering, product, design, marketing, sort of the builder's side of that organization, you've got to know…

This is a problem, no doubt.

And can VCs help address this problem?
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