Startups are the most efficient organisations in the economy. Because you have to get shit done and can't fuck around. A lot of people love to fuck around and do "fake work". Only output and impact matter. Hard work is "hard", and at startups you can't hide "not working". It sounds pedantic but that's quite the reality, a lot of people just don't know what "work" feels like, and don't want to do it.
Working at a startup is overrated, both financially and emotionally
151–160 of 430 posts
Re: Working at a startup is overrated, both financially and emotionally
#152This article isn’t about if you should join a startup vs. a big company. It’s about if you should join a startup vs. a FAANG company, which offers outrageous compensation & benefits. From that perspective, FAANG is the obvious choice 99% of the time. The more and apt comparison would be if you should work at a startup vs. a corporate job at a HP or Qualcomm. At those type of companies, compensation is not competitive…
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Re: Working at a startup is overrated, both financially and emotionally
#153Earlier quoted context omitted.
It's funny how often I got rejected after saying that I am not 24/7 available and that I believe that, if someone needs to have this kind of availability, it means that something in the company is not working and needs to be fixed. The words they used in the rejections were always something like: "we feel like you are not willing to put enough skin in the game" or "everyone else sees the opportunity here is is willin…
I don't like having to be on call 24/7 either and would prefer to work on a team that has 24/7 ops, so the devs don't have to do that. However, in the case of a startup where the devs also do ops, what is the option? I don't understand the part where you said that this means something in the company is not working and needs to be fixed if devs need to be on call. What happens if something goes wrong with an environme…
I think you're basically right. At the end of the day, if the servers catch fire, you probably need to call the responsible developers for help getting things back on track.
The real questions then are how is the work divided, what does escalation look like, what steps are taken to reduce incidents outside of office hours, what's being done to allow for urgent maintenance to wait until office hours, etc, and also like how well is that all working, and where is the leadership in this?
I worked somewhere with not great answers to a lot of these questions, but it was okish because the cofounders were waking up with all the pages and hoping on to fix things too, and I had a mediocre experience with a dedicated ops team at a previous job that I didn't want to repeat. Eventually, as the team got bigger, we made a lot of things better, including on call responsibilities.
Re: Working at a startup is overrated, both financially and emotionally
#154Earlier quoted context omitted.
The issue is you are taxed on them when you exercise them before you can actually sell them to get the money to pay the taxes.
I don't see how that is an issue. Exercising options is a form of income. Why not pay tax on income?
The issue people have is that you're being taxed on an unrealized (as in not converted to cash) gain--which in general is not the case.
Re: Working at a startup is overrated, both financially and emotionally
#155I think this is a really good article, but I think that one of the things it misses is that a huge reason the math works out so badly for startup employees is because founders and VCs take the lion's share of the gains. I mean, in my experience at startups, founders typically own around 40% of the equity. The option pool for all other employees is around 10-20%. Now, I certainly believe startup founders deserve far m…
Also it's impossible for me to tell whether my below market base salary startup offer from a seed/series A startup is at market or not. Especially the equity bit, is 1% equity enough for the second employee(and engineer)? Especially when I am taking a 50% cut on base salary in addition to losing some very real liquid stocks.
If you are the second employee (first engineer) at a tech startup with a solo founder company, most likely you can get more than this. Nobody will give you more than what they have to unless you educate yourself and negotiate on your own behalf.
You are taking the same risks as the founder and you being there is directly helping the founder raise funds and hire other engineers. Don't under-value yourself.
Your previous total comp was base + public/liquid stocks. You should compute the growth in valuation of those liquid stocks (if it was similar to FAANG stocks, its growth would have been 50%+) plus the return on investment of your savings. Add that to your total comp.
For your startup comp to beat this total comp, given your 1% stocks, compute backwards the valuation your startup has to achieve. Does it look feasible or too crazy? How long will it take?
Do market research to understand how much revenue and profits a public company in similar sector does to achieve that valuation and how much capital investment and tech innovation is needed to get to that. Ask questions to your founder boss, meet their investors to understand their thinking.
Very important to consider what happens if you quit before it got there. If you have to pay to exercise options, or your options get bought back by the founder at a discounted valuation etc. (some startups have started doing "stock appreciation rights" which are somewhat unfair) understand those for what they really are and factor that into your calculation. Understand how cap tables, dilutions, liquidation etc works and factor the risks into your calculation.
Finally, remember that founders get fired/replaced; your direct boss is going to be someone else very shortly (especially if the company grows fast) etc. so don't go by verbal promises. If you are looking to make millions, invest time and energy to understand and negotiate your employment contracts properly.
Re: Working at a startup is overrated, both financially and emotionally
#156Earlier quoted context omitted.
How so? Recursion doesn’t scream full of Mormons to me.
Just one example. The Mormon mission program is quite possibly the best sales training program in the world. If you can go door to door in a country that isn't your own, in a second language, selling religion then enterprise SaaS is really a breeze. (Note I am not Mormon)
Selling eternal salvation to the poor will always be easier than selling another support tool to a procurement person spending someone else's money and probably with one eye on a new job.
Re: Working at a startup is overrated, both financially and emotionally
#157A starving wolf asks a very well-fed dog what he should do to be bulky too. The dog advises him to put himself at the service of a human: the services rendered, he will be spoiled. The wolf then realizes that the dog has a wound where the human puts a leash on it. When he finds out that this injury is from the object depriving him of his freedom, he decides to run away with his freedom and return to the woods.
This animal fable opposes two animals similar in morphology but which have two different lifestyles: one is wild and the other is domestic. This confrontation allows La Fontaine to present two conditions: the insecurity linked to freedom and the comfort linked to servitude.
Re: Working at a startup is overrated, both financially and emotionally
#158I think this is a really good article, but I think that one of the things it misses is that a huge reason the math works out so badly for startup employees is because founders and VCs take the lion's share of the gains. I mean, in my experience at startups, founders typically own around 40% of the equity. The option pool for all other employees is around 10-20%. Now, I certainly believe startup founders deserve far m…
Also it's impossible for me to tell whether my below market base salary startup offer from a seed/series A startup is at market or not. Especially the equity bit, is 1% equity enough for the second employee(and engineer)? Especially when I am taking a 50% cut on base salary in addition to losing some very real liquid stocks.
Back of the envelope: IIRC, the article indicates that there is a 1% chance of $1B. 1% chance of 1% of $1B is worth $100,000; if $100K is greater than what you're giving up then it is worth it.
Two confounding factors: time and partial payouts. What if it takes 20 years to pay out? How does the range of possible payouts and probabilities change the valuation? That's where you establish your margin of safety and start making conservative assumptions.
Re: Working at a startup is overrated, both financially and emotionally
#159Earlier quoted context omitted.
Bingo. As a senior engineer, I get startup offers at the Staff-Principal levels, and even those grant no more than 0.1-0.5% equity at most, on top of ~$180-200k salary. That simply isn't competitive with big established companies like FAANG that offer me $400k+, far better career growth prospects, and far lower risk. For most startups, the equity will be worthless, and the whole company will either shut down or get a…
Not sure where you live, but in the US, options are typically granted with a strike price equal to the latest 409A valuation, which makes the grant neutral from a tax standpoint. I don't see a world where you have to pay lots of taxes for worthless options, unless someone really screwed-up (i.e. messed up the 409 Safe Harbor election etc...) Now... if you exercise the option, that is a different story. At least in th…
> Now... if you exercise the option, that is a different story.
You exercise if you leave, and startup IPOs can take many years, and most startups don't have a compelling options package for you after the first 4 years anyway.
So a senior engineer who got their full 4 year equity and wants to leave, which is the most typical scenario, will indeed have to exercise and get hit by the tax bill.
Re: Working at a startup is overrated, both financially and emotionally
#160Earlier quoted context omitted.
Couldnt a bank front the cash to exercise the options? Not familiar with the matter but it seems like an easy thing to get a loan for
I guess it’s still a question of borrowing money for a speculative investment, you just get a significant discount that makes profit more likely. Depending on your indebtedness (outstanding student loans, mortgages) savings and current earnings a bank could still refuse to lend you enough money, if at all
Whats speculative about exercising options, dont you know the exercise price and market value?