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Can you make “big money” as an employee in software?

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Re: Can you make “big money” as an employee in software?

#51

Post by mooreds »

ChuckMcM wrote: post #20
nakovet wrote: post #5

In between GlassDoor data he talks about founders being the Lords of the Startup Feudalism and I kinda agree, companies used to pay 25-40k to an employee, a programmer/engineer can take several jobs from the industry henceforth the salary is 3x the regular salary. However the successful founder become rich and invest in other companies small, medium, big and help raise the inequality.

That is the broken narrative. An employee can get stock in 5 different companies in 5 years, a founder is, at best, able to get one company off the ground in 5 years. An employee can move change jobs (and often get a pay raise) when the unexpected hits a company puts it on the skid. A founder will never be invested in again if they jump ship on the company when it hits a big problem. An employee can work for a cash s…

Right. If you view your labor as an investment (and you should), employees are diversified and founders definitely are not.

An interesting book on the subject is "Are you a Stock or a Bond" [0]. It really makes you think about how your time/labor has a risk profile in the same way that financial instruments in your 401k do.

    [0] http://www.barnesandnoble.com/w/are-you-a-stock-or-a-bond-moshe-a-milevsky/1111895174?ean=9780137127375

Re: Can you make “big money” as an employee in software?

#52

Post by UK-AL »

Plough_Jogger wrote: post #32
api wrote: post #7

Yes, in a few ways I am familiar with: (1) Finance. They make so much "free" money that they can afford to just pay massive salaries and not blink. You just have to be okay with doing things that basically add no value to anything. (2) As a very early employee in a hugely successful startup. But this is roulette, since most startups fail and some only succeed after so much dilution that your share ends up tiny. (3) W…

(2) As a very early employee in a hugely successful startup. But this is roulette, since most startups fail and some only succeed after so much dilution that your share ends up tiny. This is a very poor way of describing the risk / upside of joining a startup. In the aggregate, the odds of any randomly selected startup may present odds similar to roulette, but practically, you have the ability to choose who you work…

If you can predict company success, why would you be a developer?

Technical prowess, does not actually mean company success. Some really successful companies, have had some really bad software practices.

And companies with really good developers have failed.

Re: Can you make “big money” as an employee in software?

#53

Post by api »

Plough_Jogger wrote: post #32
api wrote: post #7

Yes, in a few ways I am familiar with: (1) Finance. They make so much "free" money that they can afford to just pay massive salaries and not blink. You just have to be okay with doing things that basically add no value to anything. (2) As a very early employee in a hugely successful startup. But this is roulette, since most startups fail and some only succeed after so much dilution that your share ends up tiny. (3) W…

(2) As a very early employee in a hugely successful startup. But this is roulette, since most startups fail and some only succeed after so much dilution that your share ends up tiny. This is a very poor way of describing the risk / upside of joining a startup. In the aggregate, the odds of any randomly selected startup may present odds similar to roulette, but practically, you have the ability to choose who you work…

You're right, and I hit on that at the end. Problem is twofold:

(1) You get the most by being a very early employee -- like #1 - #5. It's a hockey stick distribution here. The later you get in, the exponentially lower your stake will be.

(2) The most successful startups are outliers.

Getting in that early means you do not have a large team or a long track record to look at when making your decision. The big bucks will come from the coffee shop hobo or ramen-snarfing grad student outfit with 1-3 full time people (all founders), barely any capital, and no track record. People will laugh at you and they're probably right.

Probably.

But if they're wrong, you will laugh more later.

If it has success written all over it, it will look "hot" and "cool." That means there will be a ton of competition for those early positions. You will be edged out by someone with a Magna Cum Smartypants degree from an Ivy League school. It's also probably going to be so capitalized (since it looks "hot") that they'll just skimp on the equity and pay more, which invalidates the thesis here and makes it just a regular job from a purely financial risk/reward perspective. (It still might be worth taking for the experience and fun factor.)

That's why if this is the strategy you want to take you are more or less doing what seed stage angels do. You are looking for feral unicorns that poop unpolished diamonds. If everyone else thinks it's a good investment too, the market will behave "efficiently" and you will not get rich. The market doesn't "want" you or anyone else to be rich. Rich people are outliers.

Google and Facebook are great examples by the way. They both looked stupid: "another search engine?" and "so it's like MySpace and Friendster but with no capital and some Harvard dropout nozzle running it?"

Edit: the reason your equity/stake drops off exponentially the later you get in is precisely because of the stupid unicorn factor. Really early stage companies have to offer you a fatter option package because you're an idiot to work for them and they know it. There is no other way they can compete for talent. If they're successful, those options turn out to be very expensive -- they come out of the founder's equity pool.

Re: Can you make “big money” as an employee in software?

#54

Post by arbitrage314 »

burger_moon wrote: post #46
arbitrage314 wrote: post #41

If you want to make "big money," you should pretty much avoid WORKING at startups at all costs. Instead, get a high-paying job at an established company, and invest the difference in the startup's equity. I've considered lots of startup jobs because I believed strongly in the companies. Every single time, however, I was able to get a larger chunk of the company by keeping my current job and simply investing. To give…

This may be a really stupid question, but how do you cash out your investments in these startups? Do you have to wait for them to get bought out or can you sell your stake in the company to other investors?

Hi burger_moon! There are a couple of options: 1. Attempt to sell back to the company 2. Sell your shares to an independent buyer that you've found (the company typically has right of first refusal, which just means they're allowed to outbid the independent buyer) 3. Wait until the IPO, and sell them on the open market. 4. Sell your shares on EquityZen, SharesPost, or something similar.

Re: Can you make “big money” as an employee in software?

#55

Post by arbitrage314 »

giuscri wrote: post #48
arbitrage314 wrote: post #41

If you want to make "big money," you should pretty much avoid WORKING at startups at all costs. Instead, get a high-paying job at an established company, and invest the difference in the startup's equity. I've considered lots of startup jobs because I believed strongly in the companies. Every single time, however, I was able to get a larger chunk of the company by keeping my current job and simply investing. To give…

Can I ask you what is you current job?, the one that pays you $250k per year.

Hi giuscri! I work as a developer at a large company (e.g., think Google, Facebook, Goldman Sachs, IBM, etc.).

Re: Can you make “big money” as an employee in software?

#56

Post by mdorazio »

jrockway wrote: post #47

> Because California income taxes are 10%, salaries in San Jose lose an immediate 10% when compared to those in say, Seattle. But I get to deduct state taxes from my federal taxes, so it's not exactly 10% different.

It's still a lot, though. Let's say you make 100k a year. State tax is 10k. If you weren't getting hit with the state tax, you would be paying $21,175 or 21.18% in federal tax (filing single). If you deduct the 10k from state tax to reduce your taxable federal income to 90k, you're still paying $18,375 in federal tax.

So let's compare total taxes: $28,375 with state tax vs. $21,175 without. So you're paying an extra $7,200, or 7.2% of total income. That's on top of the sky-high cost of living in CA compared to other locations.

Re: Can you make “big money” as an employee in software?

#57

Post by burger_moon »

arbitrage314 wrote: post #54
burger_moon wrote: post #46

Earlier quoted context omitted.

This may be a really stupid question, but how do you cash out your investments in these startups? Do you have to wait for them to get bought out or can you sell your stake in the company to other investors?

Hi burger_moon! There are a couple of options: 1. Attempt to sell back to the company 2. Sell your shares to an independent buyer that you've found (the company typically has right of first refusal, which just means they're allowed to outbid the independent buyer) 3. Wait until the IPO, and sell them on the open market. 4. Sell your shares on EquityZen, SharesPost, or something similar.

Thanks for the reply. Have you sold any of your investments so far? What process did you go through if you did?

Re: Can you make “big money” as an employee in software?

#58

Post by api »

rch wrote: post #38
api wrote: post #7

Yes, in a few ways I am familiar with: (1) Finance. They make so much "free" money that they can afford to just pay massive salaries and not blink. You just have to be okay with doing things that basically add no value to anything. (2) As a very early employee in a hugely successful startup. But this is roulette, since most startups fail and some only succeed after so much dilution that your share ends up tiny. (3) W…

Isn't (1) roughly equivalent to working for a monstrous telco monopoly, or stodgy office equipment manufacturer?

Yeah. Any boring money printing machine has to offer fatter salaries to attract talent because there is no other intrinsic appeal. Finance is just a particularly big one.

I might also add government, though you want to avoid lower-level contractor positions there and go for higher-end stuff or becoming a direct Federal employee. Also avoid sexy areas like space if your goal is to get rich, since these will have intense competition. This is part of why science pays so badly -- people want to do it.

Re: Can you make “big money” as an employee in software?

#59

Post by oilman »

api wrote: post #7

Yes, in a few ways I am familiar with: (1) Finance. They make so much "free" money that they can afford to just pay massive salaries and not blink. You just have to be okay with doing things that basically add no value to anything. (2) As a very early employee in a hugely successful startup. But this is roulette, since most startups fail and some only succeed after so much dilution that your share ends up tiny. (3) W…

I have personal experience with (4). I work for a company that creates systems that are used on oil rigs. I came about this job in a round about way. I used to work in SF at a big name tech company, but I'm from a small town with no tech community whatsoever. My parents got sick, and I wanted to live closer, so I made the move home to support them. Found this job though connections and here I am.

The systems we create are complicated and require automation (PLCs, embedded systems, PCs) to function, so the company requires programmers. The money is fantastic for two reasons: they have a really hard time finding people and money for oil companies shoots out of the ground (most of the time).

The work is different from most systems someone would deal with at a startup. The systems range in age from new to 20 years old. Object oriented is a new and scary thing. I write and debug a lot of pascal and C. Also do a lot of sysadmin work on ancient systems, token ring networks etc.

The biggest difference however is work environment. Most rigs have an absolutely awful (think dial up) satellite internet connection, so there is no remote work. Everything gets done on site. This leads to a lot of travel, which is where you make the big money if you are willing to do it. The work environment is a lot different from a startup: Folding chairs and a table in the corner of a room if you are lucky, sitting on the floor if not. You get to see some interesting and scary parts of the world, police escorts from the airport, body guards on the way to the rig in really bad places, which can be very isolating as well as traveling for months at a time.

Re: Can you make “big money” as an employee in software?

#60

Post by api »

venomsnake wrote: post #35
LeonRobrotsky wrote: post #26

Earlier quoted context omitted.

> You just have to be okay with doing things that basically add no value to anything. So, most silicon valley startups?

Silicon valley startups are good at redistributing the money from the top to the bottom.

Great point.

Startups are one of the only mechanisms doing that in our contemporary financial pyramid economy. They are one of the only true class mobility engines left.

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