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Working at a startup is overrated, both financially and emotionally

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Re: Working at a startup is overrated, both financially and emotionally

#311

Post by novok »

hellcow wrote: post #92
hn_throwaway_99 wrote: post #81

Earlier quoted context omitted.

> Savings should only come into it if you're leaving before the liquidity event. Which is another way some startups screw people. If the company is not willing to budge on the "standard" 90-day exercise window, there shouldn't be any negotiation. Just walk away.

There are two types of options, NSO and ISO. You want ISO as an employee because it's better for taxes, but that has a 90-day exercise window set by the IRS. You can push for yourself paying higher taxes in exchange for more flexibility, but it's a tradeoff. https://carta.com/blog/pte-90-day-window/

ISOs also don't save you from the AMT trap, so they're not really that useful.

Re: Working at a startup is overrated, both financially and emotionally

#312

Post by achillesheels »

dchichkov wrote: post #247
robomartin wrote: post #222

Earlier quoted context omitted.

> You are taking the same risks as the founder Not even close. You can quit and go get another job any second of any day with zero consequences. You have zero financial responsibility or obligations to the investors. You have zero responsibilities and obligations to clients/customers. You have zero obligations to financial institutions (banks, loans). You have zero or little reputation on the line in the industry bei…

Founder has all the control - Employee has none. So employee takes more risk. Founder has all the information. Employee wouldn't even know, if the stock was diluted twice. Or if the company is going to seize to exist next day. Employee is in the fog - so employee has more risk. Employee risks with her reputation. A nut case founder can consider employee a traitor for leaving the company and give bad references to fut…

How many employees would work for no salary but only equity? Disregard whether they have the material affordances to be able to do so.

Simply put, by necessity the founders have inherited more uncertainty with their life outcome than a salaried worker, regardless of the transience of the work agreement.

Re: Working at a startup is overrated, both financially and emotionally

#313

Post by novok »

qqqwerty wrote: post #276
break_the_bank wrote: post #183

Earlier quoted context omitted.

In this particular scenario I'd be the second employee, not counting the two founders as employees. I did similar math as you said and I didn't find the numbers fair. I figured how much would I be losing per year at the current valuation and my pay cut seemed more than what the investors got for the last round. I wish there was more public information about startup salaries at various stages of employment, while the…

Yeah, something to consider is that FAANG salaries are an outlier. There is a bimodal distribution in tech salaries. Outside of tier 1 unicorns, no one comes close to FAANG salary. So when evaluating your options, using FAANG salaries as a comparison might not be the most fair benchmark. For example if you work in biotech, even as a programmer, you are probably looking at a salary about half of what a FAANG will pay.…

But negotiations are based on BATNA, and most of the better engineers you actually want to hire can also get hired at FANG. So even if 'FANG is an outlier', it doesn't matter because they set the standard. You have to be willing to do things that FANG is not, like real remote, employees that cannot immigrate (ex: no degree in developing nation) or no leet coding.

Re: Working at a startup is overrated, both financially and emotionally

#314

Post by michaelt »

swensel wrote: post #131
rcruzeiro wrote: post #125

Earlier 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…

Where I work, being on call means being able to respond to a call by being at your laptop, with a reliable internet connection within 10 minutes - and able to keep working for as long as may be needed.

That means no stopping at the gym on the way home, no going into the city to see a show, no lengthy car journeys, no getting drunk, no going on dates, no evening classes, no school plays, no sport that takes you more than a block away from home, no taking your kids to the park to feed the ducks.

The idea you could have people be on call constantly sounds crazy to me.

Re: Working at a startup is overrated, both financially and emotionally

#315

Post by novok »

throwaway78123 wrote: post #278
NeverFade wrote: post #159

Earlier quoted context omitted.

> 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.

You only be hit by a tax bill if you chose to exercise the option, which only make sense if the stock is worth more than the strike. If you are "given" something that is worth more than $1, the IRS will want a piece of it. If you worked at a startup (not a small business), the most likely outcomes after 4 years is either 1) Company went bust, 2) Company grew. The option protects you from the not having to pay anythin…

Startup engineers are often young and do not have much savings.

Options are a cost, often in the 5 to 6 figures range to exercise. If you exercise at time of hire, your cost can be significant for something that will probably perform less than putting it into bitcoin as far as expected value goes. If you count exercise cost as part of the 'salary', then startup salary is even worse than it usually is.

When you leave, the options expire away typically after 90 days. If you exercise, even if they are ISOs, AMT tax can easily make the exercise cost 6 figures anyway. Most engineers in their mid 20s do not have 6 figures in savings unless they already worked at FANG for the first 4 or 5 years of their career. You have to choose, do i put most of my savings into something that will probably go nowhere? Most do not and lose out on the significant compensation they would of at FANG. It's a system that favors the already wealthy and young adults with wealthy parents.

Companies actively try to prevent giving liquidity to employees through restrictive clauses. The best case scenario is an employee that works hard and then forfeits their equity due to the above math. The company has a financial incentive to screw employees over and seduce them with unlikely projections of life changing wealth.

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On the other hand, founders have stock at the start, valued at $0. Even if they have a vesting schedule, they can pre-exercise for no cost. Since it's extremely unlikely that they will sell in the first year, all of their income from that stock in the future will be taxed at LTCG rates. Since the average employee can't afford to pre-exercise (or they get RSUs), they pay at income tax rates, so if they do get lucky, they've compressed 4-8 years of equity compensation in one year, which means they pay %25-%35 more in income tax alone. Employees are often subject to 6 month lockups after IPO, which means if it drops, they have to pay tax on a value that is much higher than they can liquidate with the stock they actually have.

Founders often get special liquidity access that employees don't, in secret, during funding rounds. VCs do this to align the founder's interests with theirs, which is going for an outlier $10B IPO vs. liquidate at $300 million at series B, because if the founder has %20, that is a life changing $60 million, taxed at LTCG rates, that makes you an ultra high net worth individual, but is basically a failure from the VCs perspective.

Re: Working at a startup is overrated, both financially and emotionally

#317

Post by toomuchtodo »

dbancajas wrote: post #300
toomuchtodo wrote: post #21

Earlier quoted context omitted.

I will give you the other perspective. I get paid double what I’ve made at startups, for 35 hours a week, no overtime, no on call, and clear expectations of what success looks like for both myself and my team. I get six weeks of PTO (real weeks, not “unlimited”), 4 months off if we have another kid, and significant bonuses, while being fully remote. This is at what you’d call an “enterprise”. I am happy to keep exist…

Sounds like an outlier? Can you also tell us the actual comp? is that like 500K or 200K? YOE? I mean it's an online forum with unknown identities.

~$220k base, role required 6-8 YOE. Not FAANG comp, but doesn’t need to be.

Re: Working at a startup is overrated, both financially and emotionally

#318

Post by novok »

throwaway212722 wrote: post #296
geophile wrote: post #52

This is mostly accurate but it misses one essential point. And so do many of the responses here. One of the reasons to work at a startup is to get a lot of responsibility for something interesting to you, the sort of thing that wouldn't come your way outside of a startup, for a long time, or maybe ever. The point in the article that comes closest to identifying this regards "calling", but that's not the same thing. I…

Throaway for obvious reasons. Sharing my journey: Startup 1: joined as the first employee pretty much straight out of school. Talked to potential customers, worked on the product and overall learned lot about startups. Modest low exit some years after I left. No payout. (Europe, so not common to have equity back in the day). Startup 2: joined the founding team of a gaming startup. The company flopped. Built and learn…

How many years did you spend at each place, and where to next?

Re: Working at a startup is overrated, both financially and emotionally

#320

Post by novok »

ryanSrich wrote: post #178

I’m biased because I run a startup and have only ever worked at startups. But I’d say it basically comes down to different strokes. If you’re in it just for the money AND you have the background and interviewing skills to get a job at a FAANG then you’re better off doing that, you’ll make far more money. For me though, there’s not many salaries that don’t end in “million” that you could pay me to work at a FAANG. Not…

FANG also has many lines of business where each one would be equivalent to a startup sized company. You can have way more impact than you think, on the specific product you work on. You'd be surprised how small many engineering teams are at apple for example, working on discrete products used by hundreds of millions of people.
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