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Working for a startup makes less sense

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Re: Working for a startup makes less sense

#201

Post by NalNezumi »

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'd say it's less about the number in the bank account and more about the perceived safety you feel. Similar to the lower two layers of Maslow's Hierarchy of Needs. If you don't think that the worst outcome of pursuing something you truly love is manageable, you're less likely to put yourself up to that risk.

In US this might correlate more strongly to the numbers of zeros in the bank account or the salary difference to similar workers at FAANG. But feeling of safety is subjective and depend a lot on the environment you're in so I don't think that's universally the case.

Re: Working for a startup makes less sense

#202

Post by sokoloff »

geophile wrote: post #196
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…

How often does something like this happen? I don't have statistics, but I believe the more common scenario is that the company gets acquired, and the return on investment is not the 10x or 1000x or 1000000x the VCs hoped for, so they recoup their original investment. Leaving the engineers with options worth nothing. I view liquidation preferences as VCs offloading risk to employees because they can.

IMO, it doesn’t happen in part because the liquidation preferences are present. If they weren’t there, a great many startup founders would find their highest expected value play to be to close up, distribute the funds, and go back to working for someone else. Maybe not the day after funding, but 3, 6, or 18 months in. “This isn’t working out, but I can cash out from the cash left in the bank.”

Just like the “declare strategic bankruptcy a few months before graduation” doesn’t happen much because student loans aren’t discharged in bankruptcy.

Both moves would “break the game” in a very similar way and so are blocked.

Re: Working for a startup makes less sense

#203

Post by swiftcoder »

divbzero wrote: post #171
jandrewrogers wrote: post #125

I've had a related discussion with a few VCs in recent months. Some kinds of startups are effectively impossible to build given current structural constraints on financing them, creating an adverse selection for startups that fit the classic model rather than startups with the highest expected ROI. Broadly speaking, engineers will work at a discount to market-clearing wages of maybe 20% if they really like the startu…

> Some types of software startups can't be built without a team of engineers where the market-clearing wages are typically more like $500k-1M. What types of software startups have these constraints? And, as suggested in sibling comments, could building a highly technical founding team ( e.g. bootstrapping) be a viable alternative to hiring with high wages? There ought to be a sizable subset of highly skilled engineer…

> There ought to be a sizable subset of highly skilled engineers who have achieved financial independence and would enjoy tackling a challenging problem in a startup.

The flip side of this equation is that those same engineers can tackle pretty much any challenging problem they choose, while continuing to take home those massive paycheques from a big tech firm.

Big tech operates in almost every part of industry simultaneously - want to work on Blockchain? AI? VR? Shipping and logistics? Silicon design? Drones? A valued engineer at a FAANG can switch between all of those at will without ever even interviewing.

Re: Working for a startup makes less sense

#204

Post by geophile »

sokoloff wrote: post #202
geophile wrote: post #196

Earlier quoted context omitted.

How often does something like this happen? I don't have statistics, but I believe the more common scenario is that the company gets acquired, and the return on investment is not the 10x or 1000x or 1000000x the VCs hoped for, so they recoup their original investment. Leaving the engineers with options worth nothing. I view liquidation preferences as VCs offloading risk to employees because they can.

IMO, it doesn’t happen in part because the liquidation preferences are present. If they weren’t there, a great many startup founders would find their highest expected value play to be to close up, distribute the funds, and go back to working for someone else. Maybe not the day after funding, but 3, 6, or 18 months in. “This isn’t working out, but I can cash out from the cash left in the bank.” Just like the “declare…

You have a point. However, it would be very easy to distinguish between this scenario, and a sale of the company. VCs don't make this distinction. They could.

Re: Working for a startup makes less sense

#205

Post by jandrewrogers »

ummonk wrote: post #164
jandrewrogers wrote: post #125

I've had a related discussion with a few VCs in recent months. Some kinds of startups are effectively impossible to build given current structural constraints on financing them, creating an adverse selection for startups that fit the classic model rather than startups with the highest expected ROI. Broadly speaking, engineers will work at a discount to market-clearing wages of maybe 20% if they really like the startu…

Why not bring on the early engineers as cofounders with sizeable equity in lieu of market-clearing wages?

Most engineers don't want to be co-founders, and this does not scale well in any case. That role comes with responsibilities that can't be executed by committee and drama/stress that many engineers would just as soon avoid. There is nothing stopping anyone from giving engineers a decent chunk of equity but it doesn't address the core issue of scaling reasonable comp.

A "founder" is not just another name for a very early employee. It is a wildly different experience. I've been both, multiple times.

Re: Working for a startup makes less sense

#206

Post by peripitea »

jgelsey wrote: post #141

Actually, my observation over the last 20 years of being a venture investor, bigco acquirer and startup CEO (including at a unicorn) is that the risk-adjusted $ compensation is the same at a startup and at bigco. Startups just have more beta in the comp. You learn a lot more at a startup and hence it's the experience you want if you hope to do your own startup. If you just care about short-term $ then absolutely stay…

>The risk-adjusted $ compensation is the same at a startup and at bigco. Startups just have more beta in the comp.

I work with startups, and while this may have been true 10-20 years ago I can't imagine how you would think it's true now. As the sibling comment says, I'd love to see your work, i.e. a remotely plausible example case with numbers illustrating how startup EV would approach bigco EV.

Re: Working for a startup makes less sense

#208

Post by arcticbull »

alasdair_ wrote: post #179
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…

There are definitely startups that offer better equity terms - the last one I was at offered ten years to exercise after leaving. I hope the trend continues.

Pinterest started that around 2014 if memory serves and it became quite popular for startups to follow suit but recently less so and I’ve even seen some roll-backs; ultimately many startup employees don’t understand equity and don’t optimize for it.

Re: Working for a startup makes less sense

#209

Post by abhs »

buzzkillington wrote: post #194
streetcat1 wrote: post #187

Earlier quoted context omitted.

So there are actually three tech revolutions going on in parallel: 1) Kuberentes 2) Microservices. 3) AI All of them are based on open source, and all of them are permissionless (I.e. the startup does not need permission from a big company, e.g. an app store owner). They also erode the build-in advantages of big tech: 1) Kubernetes erode cloud lock-in on compute/storage. 2) AI is best serve on the edge. I would say t…

Kubernetes is a solution worse than the problem. Microservices are unix pipes but slower. AI is linear algebra that costs x1000 because of the brand name. There is no revolution in software. We are just building crud as high and as fast as we can because the quality of developers tends to zero as the number of developers increases.

I like that username... :D

Re: Working for a startup makes less sense

#210

Post by eanzenberg »

jandrewrogers wrote: post #125

I've had a related discussion with a few VCs in recent months. Some kinds of startups are effectively impossible to build given current structural constraints on financing them, creating an adverse selection for startups that fit the classic model rather than startups with the highest expected ROI. Broadly speaking, engineers will work at a discount to market-clearing wages of maybe 20% if they really like the startu…

I think a solution is less hiring at early stages (until you can afford it) and having co-founders hyper-focused on what’s important to the business (the ip) and they build and do the work to get it or the gate.
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