What's considered a good bps for an very senior engineer joining as 20th employee, at a series A company with a couple of million dollars revenue?
How to Choose a Startup to Work for by Thinking Like an Investor
131–140 of 154 posts
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#132And why startups condense in America? http://paulgraham.com/america.html
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#133“If you're happy working where you are, and you don't have any ambition to do anything else, you're probably going to get paid less and work more if you leave for a startup. If getting paid less and working more is unappealing to you, then I would recommend staying where you are!”
There's another option. You can pick a job that isn't a startup, that makes you hate your life, and phone it in every day just to get by. You save your energy and grind away at night on your own company. I say "company" instead of startup because I don't think venture capital is the right thing to pursue for a single founder doing this.
Just have a goal to build a product that has at least 1000 customers paying $10/mon so you can quit your dayjob. The hatred of your dayjob will fuel your motivation to work at night.
A startup is much riskier than taking this approach. You put in 60 hours a week at a startup and even in the very unlikely scenario it pays off and the startup becomes huge - at most you have a 1% stake and become a millionaire. You become a millionaire way easier working on your own project.
So my philosophy is to get a job you hate - work to build the future you want yourself - never let anyone else exploit you to the point where the only way you become a millionaire is if they become a billionaire.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#134Earlier 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…
"Less pay" generally entails something that's still reasonably lucrative. One could potentially make 20% more at one or two FAANG companies. Frankly, the big difference is in the RSUs. It's not unusual to see $100k/yr RSUs going to a senior engineer at one of them whereas at a startup, the equity is most likely worth nothing.
Basically, startups are a terrible place to work. I wouldn't recommend them to anybody. However, there are some folks, myself included, that love them.
Tech or IT or whatever you call it tends to happen at a glacial pace in structured organizations. Most IT projects fail. Most folks don't care. They want to come to work, do their thing, potentially excel at their thing, go home at the end of the day, and enjoy their life. At a startup, someone that's eager to contribute can really make a difference. One inspired idea has the potential to really move the needle when it comes to the success of the business.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#135Earlier quoted context omitted.
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.
If this is true why not just be a VC? You could pick all these unicorns at a great value. Even if you don’t put any of your own money in the fund you will make vastly more on the fund fees than you would have as even CTO. I think you’ll find that consistently picking unicorns is essentially impossible across a long time frame.
If any VC could have bought $TWTR at a $280MM cap in 2010 they would have. Only employees got that deal. Twitter was already a unicorn, but the internal paperwork hadn't caught up yet.
It's arbitrage, not clairvoyance.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#136Earlier quoted context omitted.
They (founders),are use to showing investors so it has never been an issue. Don't try the same with a small business. You will probably get kicked out.
I have asked several companies about financials and they never gave any meaningful information. I got the impression that as an employee you aren't supposed to ask any questions. This is acceptable only for investors and upper management.
The companies who were open were the ones who options/shares became worth something from personal experience. The ones who hide those details had worthless options.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#137The 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…
Startups are often great learning opportunities
This isn’t really true. The experience you can only get at a startup is learning to work with VCs, the board, early strategic partners and so on. This will be dangled in front of you like a carrot but as a mere employee you will never get meaningful exposure here. Unfortunately, like “dilution”, this is something that founders hope you don’t know so they can exploit you.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#138Earlier quoted context omitted.
The best part is stock options. Not only are you not diversified, now you get to concentrate your portfolio by buying stock in the company that provides your income. Stock options: for concentrating your income and your investments when you're excited and biased.
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…
If Google or MS give you options, or RSUs, or whatever, they are essentially cash. You'll be able to liquidate them at market price as soon as you vest. So in those companies stock options are a real form of compensation.
For startups whose stock has 0 actual value in a market, then yeah stock options are worth nothing.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#139Earlier 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…
If Google or MS give you options, or RSUs, or whatever, they are essentially cash. You'll be able to liquidate them at market price as soon as you vest. So in those companies stock options are a real form of compensation. For startups whose stock has 0 actual value in a market, then yeah stock options are worth nothing.
Stock Options are just that - an option to buy a share of stock at a future date. They are a bet on a future outcome which contains lots of risk.
Restricted Stock Units are cash. They are new shares issued to you with restrictions on exercising them. Once they vest, there is no value in not selling them immediately. The tax consequences are the same if you hold them, and you gain the value of diversification by selling.
The above should tell you something about the calculation you are espousing. Yes, the very risky asset called stock options is much less likely to hold any future value. The risk implied should also tell you that for a rare good pick with lots of well managed influence to the outcome, you can succeed with fantastic gains where you cannot simply by holding public shares.
YMMV. The only way to win the startup lottery is to work very hard to influence the outcome. I can't think of any other lottery like that.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#140Earlier 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…
There are a few factors that you are overlooking. A lot of startups (and small companies) aren't on the 'SV Unicorn Track', particularly so for startups focused on 'hard' problems. Energy, biotech, aerospace, etc.. These types of startups often have to cobble together funding from a variety of sources (grants, strategic partnerships/investments, niche VC firms). The pay is lower because it has to be, funding is limited and developing the product (and sometimes just a prototype) can take years, so there is little to no revenue.
Something to consider as well, is that while the salaries might be lower, they are often not that far off from what one would make in their respective industry. So someone working at a biotech startup will probably be making a lot less than a FANNG engineer, but would probably be pretty competitive with their peers in 'BigBiotechCo'.
And the other thing to consider is that engineers, and in particular programmers, tend to be pretty bad negotiators. Its possible that your co-workers would gladly take a 30% raise if they knew they were making that much less. I highly doubt they are 'trust fund kids' (those folks tend to found crappy startups, cause if you are set for life, why would you work for someone else?). And if they are older (as you imply) its also possible they were starting to feel the impacts of ageism in tech, and took a low ball offer as a result. Or perhaps they have saved up enough from previous jobs and just don't care that much if they are maximizing their pay, and are more focused on working on cool things and with non-toxic co-workers!