Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How to Choose a Startup to Work for by Thinking Like an Investor

triplebyte.com

Post reply on HN
Print view View original

101–110 of 154 posts

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#101

Post by deanmoriarty »

the_jeremy wrote: post #100
deanmoriarty wrote: post #96

Earlier quoted context omitted.

Something I never understood about this attitude ("... then I'm absolutely willing to work for less pay ...") is: why there are almost no examples of such behavior in other highly paid professions, such as physicians or lawyers? Very rarely you'll find physicians saying "I really want to become a brain surgeon, I'll happily take 40% less than my market rate". You'll certainly find physicians doing volunteering, but t…

I think there are. Teachers (pretty much as a whole) and public defenders seem to fit here. I know multiple photographers whose passion is landscapes/nature and only grudgingly supplement that income with weddings/portraits.

With regards to teachers or photographers, that's not a fair comparison in my opinion: in those cases, low wages are mostly dictated by high supply vs low demand, so from an economic point of view it "makes sense". That's much different than software engineering or medicine, where there is a scarcity of supply (and the only reason why software salaries are in the 6 figures).

In other words, teachers are not willingly giving up a portion of the compensation that they could otherwise be making doing the same job somewhere else. In software instead, that happens ("Oh, you work on FOO v2.0, I'll happily take 40% less than what I could otherwise be making doing this job in another company").

I don't know about public defenders, you might have a point there.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#102

Post by sbilstein »

tschwimmer wrote: post #84

The metaphor of early startup employee as investor seems really smart at first but is ludicrous in reality. It is physically impossible to choose a startup like a VC because you cannot diversify your portfolio like they can. VCs can sprinkle (relatively) small amounts of money across dozens or hundreds of startups. If one fails then the impact to the portfolio is negligible. In fact, VCs expect that most of their por…

Investors spend all day hearing startup pitches from companies who would gladly accept a check from them.

Engineers spend a grueling month or two getting onsite offers from maybe 8 companies at the most and one or two offers.

Agree 100%, a very misleading metaphor.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#103

Post by sk5t »

deanmoriarty wrote: post #96
JohnFen wrote: post #92

Earlier quoted context omitted.

Decades of experience has taught me that stock options are essentially wallpaper. Sure, if a company wants to give me options, I'll take them -- but they are in no way a substitute for real compensation, and I won't accept them in lieu of something real. That said, if a startup is doing something that really turns my gears and I like the company, then I'm absolutely willing to work for less pay in order to be a part…

Something I never understood about this attitude ("... then I'm absolutely willing to work for less pay ...") is: why there are almost no examples of such behavior in other highly paid professions, such as physicians or lawyers? Very rarely you'll find physicians saying "I really want to become a brain surgeon, I'll happily take 40% less than my market rate". You'll certainly find physicians doing volunteering, but t…

How about: Doctors Without Borders? Docs who enter general practice in underserved areas rather than metropolitan dermatology? Legal pro bono work, or most prosecutors?

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#104

Post by deanmoriarty »

sk5t wrote: post #103
deanmoriarty wrote: post #96

Earlier quoted context omitted.

Something I never understood about this attitude ("... then I'm absolutely willing to work for less pay ...") is: why there are almost no examples of such behavior in other highly paid professions, such as physicians or lawyers? Very rarely you'll find physicians saying "I really want to become a brain surgeon, I'll happily take 40% less than my market rate". You'll certainly find physicians doing volunteering, but t…

How about: Doctors Without Borders? Docs who enter general practice in underserved areas rather than metropolitan dermatology? Legal pro bono work, or most prosecutors?

You might have a fair point. I am, however, empirically convinced (but have no data) that the examples you are quoting are a very small portion of their respective professional market population, whereas, always empirically, I'd say that the amount of software professionals who willingly choose to be underpaid purely because of their attraction to some kind of work is much much higher, probably in the 30%+.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#105

Post by danenania »

fhbdukfrh wrote: post #87
tschwimmer wrote: post #84

The metaphor of early startup employee as investor seems really smart at first but is ludicrous in reality. It is physically impossible to choose a startup like a VC because you cannot diversify your portfolio like they can. VCs can sprinkle (relatively) small amounts of money across dozens or hundreds of startups. If one fails then the impact to the portfolio is negligible. In fact, VCs expect that most of their por…

I agree with you, and this was my initial response when i started reading the post. VCs also get far more information about the company and can demand way more control. How many employees of a startup get a board seat, even if you're non-founder employee #1? Even those diversified portfolios aren't going to have huge returns in most cases. I think the lesson is that if your value proposition is exchanging your skills…

On the other side, as an early employee you can have a much bigger impact on the odds of success than an investor. If you think a company has huge potential, but it's missing X/Y/Z, and you're an expert in X/Y/Z, then you have both a unique insight and unique leverage to make a success out of something that might not have been without you. Looking for situations where you make the difference is perhaps one way to have the whole thing feel like less of a lottery.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#106

Post by joe3774 »

the_jeremy wrote: post #100
deanmoriarty wrote: post #96

Earlier quoted context omitted.

Something I never understood about this attitude ("... then I'm absolutely willing to work for less pay ...") is: why there are almost no examples of such behavior in other highly paid professions, such as physicians or lawyers? Very rarely you'll find physicians saying "I really want to become a brain surgeon, I'll happily take 40% less than my market rate". You'll certainly find physicians doing volunteering, but t…

I think there are. Teachers (pretty much as a whole) and public defenders seem to fit here. I know multiple photographers whose passion is landscapes/nature and only grudgingly supplement that income with weddings/portraits.

doctors without borders unusually have a very well paid job and do the free consultations on the side, like writing code and publishing it on github

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#107

Post by apersona »

deanmoriarty wrote: post #101
the_jeremy wrote: post #100

Earlier quoted context omitted.

I think there are. Teachers (pretty much as a whole) and public defenders seem to fit here. I know multiple photographers whose passion is landscapes/nature and only grudgingly supplement that income with weddings/portraits.

With regards to teachers or photographers, that's not a fair comparison in my opinion: in those cases, low wages are mostly dictated by high supply vs low demand, so from an economic point of view it "makes sense". That's much different than software engineering or medicine, where there is a scarcity of supply (and the only reason why software salaries are in the 6 figures). In other words, teachers are not willingly…

From my perspective it looks like a good amount of teachers decided to give up a portion of the compensation earlier (i.e. they gave up good pay not when they're looking for another job in an industry they're already in, but they decided to give up good pay upon joining the industry).

It's like how artists/writers/game developers/etc. decide to go into their field even though they know that they could be making much more money in any other field.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#108

Post by fizx »

tschwimmer wrote: post #84

The metaphor of early startup employee as investor seems really smart at first but is ludicrous in reality. It is physically impossible to choose a startup like a VC because you cannot diversify your portfolio like they can. VCs can sprinkle (relatively) small amounts of money across dozens or hundreds of startups. If one fails then the impact to the portfolio is negligible. In fact, VCs expect that most of their por…

It's actually easier to "invest" as an employee than as a VC. VC's have to wait until the next round, and have to compete with other VCs.

As a potential employee, you can see a company wildly succeeding (twitter in 2009, uber in 2012-13, slack, github, etc) and yet they will have You will hit some underperformers/duds (coinbase? bird?), but you will have worthwhile stock options a good chunk of the time.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#109

Post by deanmoriarty »

GoatOfAplomb wrote: post #99
medius wrote: post #81

Earlier quoted context omitted.

Yes. I generally like to make a reverse calculation when evaluating such offers. To get $1 million out of this risk, the company has to exit for $1 billion if I have 0.1% stake. How likely is it? And that's before considering dilution, preference stocks, option exercise problems, etc. Joining a BigCo can give $1 million (above startup salary) in 5 years with a very high probability.

And AFTER considering all those other factors, you may need to see a $10B exit to get your $1M.

Ditto! I have been at a startup that was pretty successful and generated a payout for me of about $1M post taxes.

The original grant plus all the refreshers would have originally amounted to ~$8M (I was within the first 3 employees), but joining early means that at each and every single round you'll be massively diluted (20%+, and there are many of those from a seed round up to a series D/E), and this is without counting the liquidation preference (which in my case was a good 1X non-participating) and other stuff (e.g. emitting new shares for the newly hired fancy CEO that will help us sell the company, refreshers will have a higher cost basis, ...).

If you join early, expect your relative slice of the pie to shrink by roughly an order of magnitude. In the best case.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#110

Post by sk5t »

deanmoriarty wrote: post #98
naveen99 wrote: post #94

Earlier quoted context omitted.

Or you could just take a non startup job for higher pay and buy 0.1% of a bunch of late stage startups on EquityZen or Equidate. No need to wait 10 years...

I would advise against that, I tried to dabble with both platforms, but the markup at which those shares are sold is often incredibly high: common shares of most companies on those platforms are actually sold at prices higher than the preferred (crazy), even if such company just went through a very recent round of funding, meaning that the preferred price is pretty much the very top investors valued the company at. I…

It stands to reason that the premium is based on providing the only opportunity for the would-be investors to buy a piece of the companies at any cost.
Post reply on HN