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Working for a startup makes less sense

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Re: Working for a startup makes less sense

#221

Post by jandrewrogers »

AndrewKemendo wrote: post #177
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…

This is a good summation of the current challenges with startups that are attempting to compete on technical merit. I know this first hand as I started a computer vision company right around 2012 when the "AI" boom was really picking up steam. I would never dream today of starting a very technical company because every major will poach your talent (happened to me), invest in your competitors or attempt to acquire you…

Your points are well taken, and I have thought about them at length because I like to build startups in areas where this situation is the norm.

One unorthodox strategy, which I've discussed with investors, is funding early stage such that you can pay comp that BigCo can't easily compete with -- their scale works against them. In early stage, the absolute amount of capital is trivial (and there are trillions sloshing around these days), but the quality of the initial engineering team will have an enormous impact on the success probability of the investment. A few extra million in wages can have enormously high leverage in generating billions in returns. Imagine poaching literally the best engineers in FAANG and the kind of core team that would give you to attack markets no one has attacked before.

I'd like to see top engineers in tech compensated like top professional athletes. Investors pay the wages for athletes because the returns justify it, the scale of the wages is not material if you are chasing results. I believe that model applies in tech as well.

Re: Working for a startup makes less sense

#222

Post by jedberg »

Infinitesimus wrote: post #60
jedberg wrote: post #40

Earlier quoted context omitted.

To be fair it’s mostly been the VCs learning how to extract more value and forcing that on the companies. The VCs have naturally gotten better at what they do, which is bring returns to their LPs. The consequence is that they get more value from exits than they used to which comes at the expense of the employees and founders.

The founders agree to those terms though

They don’t really have a choice if they want funding. Also that’s why the terms are usually good for founders and it employees.

Re: Working for a startup makes less sense

#223

Post by ummonk »

echelon wrote: post #215
AndrewKemendo wrote: post #177

Earlier quoted context omitted.

This is a good summation of the current challenges with startups that are attempting to compete on technical merit. I know this first hand as I started a computer vision company right around 2012 when the "AI" boom was really picking up steam. I would never dream today of starting a very technical company because every major will poach your talent (happened to me), invest in your competitors or attempt to acquire you…

> I would never dream today of starting a very technical company because every major will poach your talent (happened to me), invest in your competitors or attempt to acquire you (some people don't want to be acquired). Damn, this is exactly what I want to do. Computer vision too. Do you have any advice other than "don't"? Would basing the company on the East coast near a tier-1 research university help with talent?…

>Another thing I really want to do is offer a 4-day work week with the promise of sabbaticals and/or remote work. That might not be attractive to everyone, but it's something that would speak to me and that I would want in addition to equity and salary.

I think this would be a very strong advantage in the hiring market (assuming you can raise money from investors who're okay with it).

I'm not your target market (I'm just an in-demand software engineer who happens to be learning ML, not a top computer vision researcher), but this is something I'd be willing to accept substantially lower comp for.

Unfortunately most startups seem to require even higher work output than big tech.

Re: Working for a startup makes less sense

#224

Post by ummonk »

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.

>AI is linear algebra that costs x1000 because of the brand name.

Sure, but we've learnt to apply linear algebra to achieving things we could only dream of 10 (or even 5) years ago.

Re: Working for a startup makes less sense

#225

Post by paulmendoza »

gfodor wrote: post #35

I've been out of startups for a few years now, but it always struck me that there is plenty of room in the cap table for employees, if founders and VCs realize they have to cut back. If founders and VCs gave a third to half of their companies to employees, instead of crushingly small option pools, this math would almost certainly shift. And the returns wouldn't be much worse for founders or VCs.

The reason they don’t is because they already gave 50% to the investors. And it isn’t uncommon for companies with $30M or $1B exits for the founders to get nothing. I heard about a company recently where the company sold for $40M and the founders only owned 4% after years of raises. I doubt the founders got anything. Most of the time these companies are having trouble scaling sales.

Re: Working for a startup makes less sense

#226

Post by wh-uws »

throwaway112234 wrote: post #107

Here's where I've been: - worked at a startup out of college for 85k max plus significant equity (never amounted to anything). Stayed too long. - worked at a later-stage startup starting at 120k, peaking at 130k. Got some stock options there (haven't amounted to anything yet) - took a job at FAANG starting at 400k, plus some stock options. Currently at this job for > 600k base. Plus stock options. While at FAANG, I c…

> "faster growth as a founder" idea seems to be conditioned on the assumption that you'll succeed enough to pay yourself more than you make now, and/or be able to exit at an amount that will make up for the opportunity cost of getting paid well in the meantime while having a sane work/life balance....

I posit its even more than that. It's a meme / propaganda by the survivors with their bias and those who hope to follow in their footsteps.

Also what's also interesting is you posted your comment to a throwaway while the others parroting that talking point were happy to reveal themselves at least pseudonomusly.

I'm pretty sure why. You don't want to burn your shot if you want to have another go at the startup thing and have people be able to read you saying you wouldn't be fully committed.

I fully respect that.

The only reason I point it out is to show how Silicon Valley the larger VC ecosystem is an echo chamber around this ethos.

My guess as to why is how would they recruit the next generation without that?

Re: Working for a startup makes less sense

#227

Post by techsin101 »

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…

Open source technology that requires 500k skills so all can share in cost

Re: Working for a startup makes less sense

#228

Post by apotheosis-neko »

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…

This is soooo true!

Re: Working for a startup makes less sense

#229

Post by golergka »

bb88 wrote: post #156
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…

> 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 befo…

> The rich technically have less personal risk

It's silly to automatically assume that "investor" or "capitalist" is someone rich. Chances are, the VC get their money from banks and pension funds who, in the end, invest money of people who earn much less than an average startup employee.

Re: Working for a startup makes less sense

#230

Post by candybar »

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…

None of this logic applies to equity granted to employees, which are already subject to vesting. The argument you're making is actually for founder vesting, which is a separate issue.
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