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Working for a startup makes less sense

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Re: Working for a startup makes less sense

#151

Post by funded12345 »

> I think startups’ best bet is to make the most of the variables they can control outside of money and perks (if you lack the appropriate resources). This means being transparent and honest with candidates about all risks involved when joining a startup and factoring all this into the amount of equity they offer which should be something considerable.

Even if the original founders have the best intentions, large equity up front is unlikely to give you a big payday.

Since, in the traditional VC model the drive is to move toward bigger rounds (A, B, C, etc) and investors get paid back first.

So even if you do start with 10%, you'll probably only end up with a low % percent after 3-4 rounds.

The important thing to note is that this whole thing bamboozles our brains because of unicorn survivor bias. We feel like unicorns and $100m dollar companies are the norm but nothing could be further from the truth.

The chance of being part of unicorn is about 0.006% last I checked. The chance of being part of a $100m+ company is in low single digits (of all startups).

If it ends up just making a few million revenue investors will drop it (because not 10x enough) and you're 2-3% will be worth very little.

If ends up stagnating at $5m for a few years investors will drop it (because not 10x enough).

The overwhelmingly most likely outcome of you getting a large chunk like 10% up front is, when all is said and done, after 5-7 years you'll walk away with a few hundred thousand (before tax) if you are lucky.

In my case I was on founding team. Started out with 10% equity. Co. is now 7 years old. After a merger (diluted by 40%), $10m investment (diluted more), $4m strategic investment (diluted more), then investors taking money off the table first for an exit event - I stand to make $100k if we sell at $20m and $600k if we sell at $40m (currently valued at $20mish and has been for 2 years). That's pre tax.

Re: Working for a startup makes less sense

#152

Post by account73466 »

pickdenis wrote: post #140
account73466 wrote: post #102

I feel like it is hard for people to say what they truly love before they have at least $1M in their bank account. If you have FU money, your view on working at a FAANG vs building a startup can change. You will find it easier to know what you truly LOVE.

> I feel like it is hard for people to say what they truly love before they have at least $1M in their bank account. [edited to protect your feelings] Are you saying that simple introspection is hard? I completely disagree, because separating extrinsic motivation (I do this for money) from intrinsic motivation (I do this for fun) really isn't that hard.

Instead of being rude, you could try to formulate your point without attacking a straw man.

Re: Working for a startup makes less sense

#153

Post by scarmig »

sokoloff wrote: post #146
throwaway7951 wrote: post #126

Earlier quoted context omitted.

> Fuck being an employee for a startup so they can bleed you dry. Could not agree more, and this is my stance which I will happily share with anyone who cares to listen. I was first employee (and only engineer) at a startup which dangled 'equity' in front of me but didn't deliver. Contract was so full of gotchas that the path to me seeing some sort of actual payoff was astronomically unlikely. 90 day exercise windows…

Liquidation preferences for investors putting actual cash into a business exist for a reason. Suppose I have a company idea, maybe an early prototype and manage to raise $2MM at $10MM post-money valuation. The investors have a 20% stake for their investment. If I decide the next day, “Nah, it’s not going to work; let’s close the company and distribute the assets to the shareholders,” it would be manifestly unfair for…

Imagine you have an engineer who could be working at BigTechCo; she works at your company a year, and then that raise you specify happens. Engineer continues to work there for three more years. Company amounts to little, acquired for $2MM, engineer gets nothing.

Of course, everyone is disappointed. But it's still unfair for that engineer who gave up half a million dollars or more to work at the startup to get nothing. You might say that the engineer should be aware that they agreed to a way of structuring equity that means it's likely they'll get screwed. Fair enough! But all of this discussion is meant to make readers aware that, yes, the industry standard practice is to screw over the people who have the most skin in the game.

Re: Working for a startup makes less sense

#154

Post by fuckyah »

adriang133 wrote: post #103
senordevnyc wrote: post #65

Strongly agree with this. I just did about seven weeks of interviewing in NYC for senior iOS roles, at both startups and big tech companies. To be frank, it was a total shitshow. Especially on the startup side. Here’s some of the bullshit I faced interviewing at early stage companies before accepting an offer literally 2.5x as high as the (multiple) offers that startups made. 1. Shitty equity: one startup wanted me t…

Well, if the only thing you care about is compensation and work/life balance then of course, you should never work at a startup. There can be benefits though, arguably better personal development, a broader view of the entire tech stack, and potentially more personal satisfaction. Of course, if the difference is 2.5x then it's a no brainer.. I wouldn't take more than a 20-30% cut to work at a startup. One thing I abs…

The total liquid compensation difference can be huge, when factoring in all the public equity and big company benefits... Imo we’re not talking 20/30% here, but multiples...

Re: Working for a startup makes less sense

#155

Post by sokoloff »

scarmig wrote: post #153
sokoloff wrote: post #146

Earlier quoted context omitted.

Liquidation preferences for investors putting actual cash into a business exist for a reason. Suppose I have a company idea, maybe an early prototype and manage to raise $2MM at $10MM post-money valuation. The investors have a 20% stake for their investment. If I decide the next day, “Nah, it’s not going to work; let’s close the company and distribute the assets to the shareholders,” it would be manifestly unfair for…

Imagine you have an engineer who could be working at BigTechCo; she works at your company a year, and then that raise you specify happens. Engineer continues to work there for three more years. Company amounts to little, acquired for $2MM, engineer gets nothing. Of course, everyone is disappointed. But it's still unfair for that engineer who gave up half a million dollars or more to work at the startup to get nothing…

Why is it unfair? The engineer was part of a team that collectively destroyed economic value. What is the fair portion of bonus on top of salary that they should be rewarded with for that performance?

By all means understand it; I’ll never argue against that, but I find liquidation preferences quite reasonable.

Re: Working for a startup makes less sense

#156

Post by bb88 »

sokoloff wrote: post #146
throwaway7951 wrote: post #126

Earlier quoted context omitted.

> Fuck being an employee for a startup so they can bleed you dry. Could not agree more, and this is my stance which I will happily share with anyone who cares to listen. I was first employee (and only engineer) at a startup which dangled 'equity' in front of me but didn't deliver. Contract was so full of gotchas that the path to me seeing some sort of actual payoff was astronomically unlikely. 90 day exercise windows…

Liquidation preferences for investors putting actual cash into a business exist for a reason. Suppose I have a company idea, maybe an early prototype and manage to raise $2MM at $10MM post-money valuation. The investors have a 20% stake for their investment. If I decide the next day, “Nah, it’s not going to work; let’s close the company and distribute the assets to the shareholders,” it would be manifestly unfair for…

> Suppose I have a company idea, maybe an early prototype and manage to raise $2MM at $10MM post-money valuation. The investors have a 20% stake for their investment.

The rich technically have less personal risk -- that's because, well, they're rich. GP arguably took more personal risk, took less pay, and created the machinery that made the company profitable.

If you want to say that the original $2M is paid out before anyone else is, that's fine, especially in a sinking ship.

If you mean to say that on a %1000 increase of company valuation, GP should not get his share because, well, he didn't fund $2M dollars -- that's _utter_ bullshit. And arguing that VC's should get preferential treatment so they can directly screw over the people who directly provided the growth is the stupidest argument I've heard for this clause.

Re: Working for a startup makes less sense

#157

Post by sl1ck731 »

siquick wrote: post #149
account73466 wrote: post #102

I feel like it is hard for people to say what they truly love before they have at least $1M in their bank account. If you have FU money, your view on working at a FAANG vs building a startup can change. You will find it easier to know what you truly LOVE.

I'm glad all the great artists, musicians, writers, theorists, scientists, teachers, and inventors throughout history didn't read this post.

If we want to equate them then we should aspire to write code that is meaningless while we are alive, while living our entire lives poorly or being completely ostracized in society?

I'm not sure the startup angle jives with the artist's.

Re: Working for a startup makes less sense

#158

Post by physicles »

lpolovets wrote: post #49

My experience: engineering at Startup #1 for 2 years, then Google for 3 years, then Startup #2 for 4 years, and now I've been working with seed stage companies as a VC for the last 7 years. The amount I earned as an engineer was highest at Startup #1 (got lucky!), significantly lower at Google, and a little lower than that at Startup #2. Startup #2 is still chugging along, which could eventually make it on par with o…

Learning has a way of increasing job satisfaction and giving you opportunities for larger scope in the future. You can get that in big tech too: my first four years out of college, I was fortunate enough to have some incredible teammates who seemed like gods, and they taught and showed me things it would’ve taken me years to learn on my own, if I ever did.

But then I switched teams and stuck around for 5 more years before leaving out of boredom. I joined a startup, and learned far more in that first year than the last five years in Big Tech. In the span of two years I went from not really knowing how SSL worked to being the architect and primary coder for a couple kubernetes deployments with a few dozen services.

The thing about big tech is that you become super specialized. Sometimes that’s fine, like if you’re a kernel hacker earning $$$, but if you join the wrong team then your world just shrinks.

I don’t ever want to go back to working on a tiny piece of something, even if that something has millions of users. Even if nobody exists on purpose, nobody belongs anywhere, and everybody’s gonna die, I still like the feeling that the work I do somehow matters to the people using the product.

So a dev team of less than 10 is probably the sweet spot for me.

Re: Working for a startup makes less sense

#159

Post by scarmig »

sokoloff wrote: post #155
scarmig wrote: post #153

Earlier quoted context omitted.

Imagine you have an engineer who could be working at BigTechCo; she works at your company a year, and then that raise you specify happens. Engineer continues to work there for three more years. Company amounts to little, acquired for $2MM, engineer gets nothing. Of course, everyone is disappointed. But it's still unfair for that engineer who gave up half a million dollars or more to work at the startup to get nothing…

Why is it unfair? The engineer was part of a team that collectively destroyed economic value. What is the fair portion of bonus on top of salary that they should be rewarded with for that performance? By all means understand it; I’ll never argue against that, but I find liquidation preferences quite reasonable.

The VCs are also part of the team that collectively destroyed economic value. They can't simultaneously claim credit for every success and disavow every failure.

Re: Working for a startup makes less sense

#160

Post by leoh »

I like this piece and I agree that startups can be great. But the first half of the essay, the hook of the essay, was contingent upon the author declining a $70k check from Thiel and noting that he walked away from $200 million; and the end of the essay suggested that one shouldn't work at a startup for the money (and you really shouldn't, it's unlikely it'll make you much).
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