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There’s no such thing as “a startup within a big company”

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Re: There’s no such thing as “a startup within a big company”

#241

Post by tarr11 »

staysaasy wrote: post #239
aerosmile wrote: post #126

The predominant sentiment in the comments is that equity is worthless, which very well may be a fair statement. It would also explain why relatively few people decide to start companies, let alone do it back to back several times after getting burned over and over again. But those same people will then argue that founders should not get 10x more equity than employees [0] (which, for the record, may or may not be just…

I would add to scenario 3 that the startup needs to do well enough to grow at least a bit (growth is a great teacher) AND your position at the startup has to scale with that growth. Otherwise from what I've seen you might be better off just starting your own company sooner, as founder equity is 1-2 orders of magnitude higher than non-exec early employee equity so it's arguably worth just taking more shots on goal. "W…

Isn’t sitting on boards while you work at megaCorp a conflict of interest / violates your employment agreement?

Re: There’s no such thing as “a startup within a big company”

#242

Post by frellus »

I was in a "startup inside a Company" (about 5 years old at that point, pre-IPO) a few years back. It operated independently, separate building, separate recruiting with a large amount of equity compared to the main company.

The benefits were that we could hire major talent who wanted to take some risk but not complete risk (i.e. our funding was "secured"), politics were completely removed, we operated in semi-stealth and we had an already established base of customers to do POCs and get feedback from. It was successful and post-IPO of the main company it merged fully and became a fully branded product under the same umbrella. It was almost like a Cisco-style "spin-out-spin-in" but way less equity.

The downside was if the project failed for technical risk reasons, we would all be axed, of course, and the partially vested equity wouldn't have been worth as much of course.

I think really think the biggest benefit was the removal of politics and distractions from the main company. Other large companies (Ex. Oracle) you cannot innovate internally unless you do it faster than someone can find it and kill it. After a company reaches a certain size and maturity, the only growth is through M&As not through internal innovation and taking risks IMHO.

Re: There’s no such thing as “a startup within a big company”

#244

Post by AdrianB1 »

kludgekraft wrote: post #2

What is the main reason though? The BigCo being too risk averse? Or employees having too much of a safety net? Or BigCo processes weighing the team down? A combination of these?

Big companies are risk adverse. At the same time, the motivation for the people is missing, in a startup you have the chance to become a billionaire or at least a multi-millionaire, in a big company you can get them a billion and be the employee of the month with a $100 gift card. I saw it myself some years ago when I got my company a ~ 5 million/year saving project all by myself with a one-time cost of ~ 20k, I got a $250 reward on top of the regular salary. That was a lesson to not care too much. 2 years ago I got them over half a million per year in a 3 days of work mini-project, I got nothing, not even a formal thank you note. That project was not regular work, it was none of my business and I came with the idea and the execution alone, so you cannot say I was paid for such work. Translate this into a risk adverse big company play-pretending to do startup stuff.

Re: There’s no such thing as “a startup within a big company”

#245

Post by sharkweek »

t0mas88 wrote: post #240
sharkweek wrote: post #199

Earlier quoted context omitted.

Friend of mine left MSFT back in the early 2010s for a startup that is set to IPO in the next year or two if all the prevailing winds remain relatively similar. He'll do pretty well in the IPO because he has some of those early enough options as one of the first 25ish employees. BUT!!!He left MSFT at $30-40ish a share, now worth $240 a share. Unfortunately, he divested most of it into more general index which has bee…

Investing in the right single stock always outperforms the index. But risk adjusted returns may not be better than a diversified portfolio, Microsoft could also have dropped due to some scandal whereas the downside risk of a balanced portfolio is much smaller.

Absolutely, and him and I both know this, but... I still like to remind him of it (only because we're close enough to prod each other like this).

Re: There’s no such thing as “a startup within a big company”

#246

Post by ptmcc »

trimbo wrote: post #237
DebtDeflation wrote: post #103

Earlier quoted context omitted.

>The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microsoft it was a base salary and set amount of stock. I joined a startup in 1999. There were 3 founders and I was employee #2 after that. I received a ton of options (this was before RSUs became popular). We had a great product and a great team, but 18 months later ran out of money and unfortunately it was right after…

> The vast majority of startups go bust before IPO or acquisition In recent times, these giant late rounds with the amount of preference given mean that when acquisition happens, it often doesn't pay out for regular employees/common stock. The common stock employees get is for the moon or bust, or hope an acquiring company is generous.

The best many non-founders can hope for is a cushy acqui-hire deal.

I've had several friends have the startups they worked for acquired, and their equity was worth nothing due to valuation and unfavorable liquidation preferences.

They got a nice hiring package from a big company, but not significantly better than one can get from applying on your own. And the opportunity cost of taking a below-market wage for several years probably nets out to a loss in pure dollar terms.

Re: There’s no such thing as “a startup within a big company”

#247

Post by landryraccoon »

onion2k wrote: post #91
nojvek wrote: post #77

When I was at PowerBI in Microsoft, all the execs hailed it as Startup within Microsoft. Come work here instead of Uber. I worked like a dog, sometimes till 2am in morning. My manager would routinely ask us to come on weekends. I was naive, I thought we are growing customer base, this is what a startup looks like. The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microso…

Equity is what builds wealth. In exceptional circumstances, yes. In most circumstances equity in a startup ends up being worthless, even in the event of exit. Starting your own startup, or joining a startup as a very early employee can make you rich; anything else and you might as well be buying lottery tickets. That's not to denigrate startups in any way . Working in a startup is amazing. It's just not how you get r…

> how you get rich as an employee

How do you get rich as an employee then? Because I've never heard of any salaried line engineer getting rich except through winning the startup lottery. I sure have friends who have done exceptionally well by working for the right startup with the right acquisition however.

Even Google engineers don't feel rich when they have to stretch to afford the down payment on a house in Mountain View.

Re: There’s no such thing as “a startup within a big company”

#248

Post by laurent92 »

dhosek wrote: post #170
harikb wrote: post #164

Earlier quoted context omitted.

The thing most people forget about options & RSU is that one is taking away a big chunk of the TC and delay it to a future year. Even when you hate your job, you will be hesitant to leave the company because of FOMO and sunk cost fallacy That said, anecdotally, every one of my close circle of friends made decent amount money from equity (one of the many companies they worked at did very well) - far higher than the 10…

I have never had a stock option that was worth as much as a penny in the course of my career. In one case, a “can't lose” employee stock purchase program (where you put aside money for purchase and at the end of the year you would get stock bought at the lower of the price at the beginning and end of the purchase period with a 10% discount on top of that) ended up being a loss because the stock dropped 50% between th…

A company sold for 3 million is... I mean, in average, I see that the worth is about 1m$ per employee. If you sold for less, your stock performed poorly compared to others. Maybe the product or the engineering was great, but on the wrong market or never met its window. Business is difficult.

The question is, would you have had excellent returns if the company had been worth $1m per employee?

Re: There’s no such thing as “a startup within a big company”

#249

Post by sdljfjafsd »

zeroonetwothree wrote: post #150
aerosmile wrote: post #141

Earlier quoted context omitted.

I agree. I didn't want to make too much of a point of that, because if you filtered just for founders with prior exits, you might have a hard time scoring early opportunities with them (they usually have plenty of people to fill the first 20-50 jobs). But yes - joining Square the day it was announced that Jack Dorsey started another startup would have been a no-brainer for that career path (same with Max Levchin's Af…

This is very cherry-picked. Actually research has found that prior business success does not predict future success at all. Though failure does predict failure, so at least avoid that.

Can you share your sources?

Re: There’s no such thing as “a startup within a big company”

#250

Post by codemac »

wwww4all wrote: post #102
nojvek wrote: post #77

When I was at PowerBI in Microsoft, all the execs hailed it as Startup within Microsoft. Come work here instead of Uber. I worked like a dog, sometimes till 2am in morning. My manager would routinely ask us to come on weekends. I was naive, I thought we are growing customer base, this is what a startup looks like. The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microso…

Most engineers at startups get very little equity and most end up worthless due to dilution or failure. Even if engineers hit the startup lottery, the payout for most are not that much. Very few end with multi million dollar payouts. Statistically, financials are better with big company offers for most engineers. Some engineers that get in early with a unicorn can hit the jackpot. This is mostly combination of timing…

This is why it was a founder that complained about the equity/pay problems, rather than any engineer.

If they actually rewarded their Waze employees with enough equity, the employees would have pushed much harder to not get acquired and been much more upset afterwards. You should be highly suspect of any investor or founder that thinks an acquisition is a successful outcome.

What's clear is that Waze employees finally got compensated fairly, and the founders suddenly didn't have 100x upside. There's a reason it's a founder with the frown at TGIF at Google, and all the employees are excited and smiling.

They're finally getting paid.

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