It worked ok for Carvana which was incubated within DriveTime. They eventually spun off as a separate company and went public. DriveTime is still private.
There’s no such thing as “a startup within a big company”
161–170 of 326 posts
Re: There’s no such thing as “a startup within a big company”
#162Earlier quoted context omitted.
> I didn't get to keep any upside. I had most of the risks of a startup, but very little of the payoff. That sounds super exploitative tbh. Using people’s passion and naivety to give you free moonshots.
I agree that an incentive structure is probably needed as a matter of practice (since few people will want to do extra work with zero upside), but I wouldn't call it exploitative. You're an employee, you work for a guaranteed salary now in return for someone else shouldering the risk. That's the nature of the deal. If you want to share in the upside, you have to share the risk. It's not like anyone's being forced to…
Sure, in that sense it’s “fair”. It’s also meaningless, as this example shows most people will not make a really great product if there is no upside for them so they will mail it in. So sure you can try to squeeze your employees but maybe if you gave them some more you would get a smaller percentage of a much bigger pie giving a win win. It’s very unlikely big corporations can do that for the precedence it sets.
Re: There’s no such thing as “a startup within a big company”
#163If you are a great engineer that can get a job at FAAG, joining a start up is almost never worth it from a strictly financial point of view.
17 years ago, Paul Graham was able to post this essay: http://www.paulgraham.com/wealth.html - nowadays, the compensation in tech has shifted upwards so much (https://www.levels.fyi/) - that start ups are just not competitive when you adjust for a risk premium. Finance captures this concept using metrics such as the Sharpe ratio (https://en.wikipedia.org/wiki/Sharpe_ratio) - which measures how much extra returns you are getting in exchange for the additional risk you take on. For start ups - your expected returns are lower, and the risk is very significantly higher.
Are there other great reasons to join start ups? Absolutely: several start ups are working on exceptionally cool science problems, some are solving tasks that will make a meaningful improvement in the lives of people (https://detroitwaterproject.org/, etc), some people just prefer working in a small company, you get a chance to work with your friends - but - if you are going to work for a generic SAAS company, don't accept a pay cut.
The VC that's financing your start up evaluates their investments with a spreadsheet and zero affection. Ask them how they sacrifice their own income to work on more interesting work, and they'll (politely) laugh in your face.
Re: There’s no such thing as “a startup within a big company”
#164When I was at PowerBI in Microsoft, all the execs hailed it as Startup within Microsoft. Come work here instead of Uber. I worked like a dog, sometimes till 2am in morning. My manager would routinely ask us to come on weekends. I was naive, I thought we are growing customer base, this is what a startup looks like. The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microso…
>The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microsoft it was a base salary and set amount of stock. I joined a startup in 1999. There were 3 founders and I was employee #2 after that. I received a ton of options (this was before RSUs became popular). We had a great product and a great team, but 18 months later ran out of money and unfortunately it was right after…
The thing most people forget about options & RSU is that one is taking away a big chunk of the TC and delay it to a future year. Even when you hate your job, you will be hesitant to leave the company because of FOMO and sunk cost fallacy
That said, anecdotally, every one of my close circle of friends made decent amount money from equity (one of the many companies they worked at did very well) - far higher than the 10% stat that I hear talked about. May be the last two decades was lucky for this group of people.
Re: There’s no such thing as “a startup within a big company”
#165When I was at PowerBI in Microsoft, all the execs hailed it as Startup within Microsoft. Come work here instead of Uber. I worked like a dog, sometimes till 2am in morning. My manager would routinely ask us to come on weekends. I was naive, I thought we are growing customer base, this is what a startup looks like. The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microso…
Equity is what builds wealth. In exceptional circumstances, yes. In most circumstances equity in a startup ends up being worthless, even in the event of exit. Starting your own startup, or joining a startup as a very early employee can make you rich; anything else and you might as well be buying lottery tickets. That's not to denigrate startups in any way . Working in a startup is amazing. It's just not how you get r…
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Re: There’s no such thing as “a startup within a big company”
#166Earlier quoted context omitted.
Living and working elsewhere with the wages of the region reduces expenses and opportunities; but the wealth of educational resources online [1][2] does make it feasible to even bootstrap a company on the side. Do you need to borrow money to scale quickly enough to pay expenses with sufficient cash flow for the foreseeable future? Income sources: Passive income, Content, Equity that's potentially worth nothing, a bac…
I’d you are going to start something on the side, carefully read your current employment agreement, particularly the part about IP assignment. Most Silicon Valley companies I’ve worked with, including FAANGs, claim ownership of everything you produce, inside or outside of employment, at home or in office, using their equipment or yours. You don’t want to lick into a unicorn idea and have your former employer’s lawyer…
Are these actually enforceable?
Re: There’s no such thing as “a startup within a big company”
#167This can mean many things. Examples:
- we don’t know what we’re doing yet
- we’ll be overworking you
- our funding is getting cut off
- we’re irrelevant to the corporation
- we have an open office
- we fire quickly
- we wish we didn’t work here
Re: There’s no such thing as “a startup within a big company”
#168Earlier quoted context omitted.
> the median startup option package was exercised for a profit of $30k That must be one of those cases where "median" and "average" are very different.
Which is exactly why you should look at the median.
The median won't tell you the difference between 20% chance of making $1k and $1M.
Re: There’s no such thing as “a startup within a big company”
#169Earlier quoted context omitted.
I’d you are going to start something on the side, carefully read your current employment agreement, particularly the part about IP assignment. Most Silicon Valley companies I’ve worked with, including FAANGs, claim ownership of everything you produce, inside or outside of employment, at home or in office, using their equipment or yours. You don’t want to lick into a unicorn idea and have your former employer’s lawyer…
Are these actually enforceable?
It probably doesn’t matter in practice. They will have more lawyers and more money to burn on legal process than you. Who will go bankrupt first fighting a legal battle between you and, say, Apple?
Re: There’s no such thing as “a startup within a big company”
#170Earlier quoted context omitted.
>The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microsoft it was a base salary and set amount of stock. I joined a startup in 1999. There were 3 founders and I was employee #2 after that. I received a ton of options (this was before RSUs became popular). We had a great product and a great team, but 18 months later ran out of money and unfortunately it was right after…
The thing most people forget about options & RSU is that one is taking away a big chunk of the TC and delay it to a future year. Even when you hate your job, you will be hesitant to leave the company because of FOMO and sunk cost fallacy That said, anecdotally, every one of my close circle of friends made decent amount money from equity (one of the many companies they worked at did very well) - far higher than the 10…
I have never had a stock option that was worth as much as a penny in the course of my career. In one case, a “can't lose” employee stock purchase program (where you put aside money for purchase and at the end of the year you would get stock bought at the lower of the price at the beginning and end of the purchase period with a 10% discount on top of that) ended up being a loss because the stock dropped 50% between the purchase of shares and delivery of the shares. The company was eventually bought out by 3M and I got a hundred bucks or so out of my initial investment (which was, thankfully only a thousand or two, if I recall correctly).