Working for a startup makes less sense • Hacker News Board

Re: Working for a startup makes less sense

#321

Post by CalChris » Tue, Dec 24, 2019, 3:24 PM UTC

ummonk wrote: post #220

CalChris wrote: post #166

Earlier quoted context omitted.

That’s a title. I’ve never seen an accepted definition of cofounder but mine is anyone pre-money. Someone pre-money is taking a 100% pay cut and often invests their own money.

Cofounders typically get double digit or at least mid-high single digit grants in equity. Whereas employees typically have 1% or less in equity. If they're this vital to the success of the startup, they should receive equity accordingly.

Cofounders do get equity but don't get paid until funding. Employees get equity and pay. If it's a startup, the employee will get value = equity + (K * market wage) + benefits where K is less than 1. That value should be competitive with the market and key contributors should get more equity but NOT in the range of cofounder because otherwise something doesn't add up.

There is an implicit startup social contract and the OP points out that maybe startups can't outbid the FAANGs for talent now. That may be but I think startups (and the VCs+lawyers who are guiding them) are absolutely pathetic at managing this social contract.

You want equity? Fine. Here's some equity in the form of an RSU (fuck you, Bill Gates) which won't qualify for either 83b or QSBS tax protection. Sure, it may crush the employee with AMT taxes. Yeah, the startup gets a minor tax benefit from this but then expects its employees to bleed for them. This is beyond stupid. This is beyond stupid by the founders, the employee (who knows nothing) and the VC+lawyers (aka the institutional memory of the Valley) who do know something.

It should be part of the startup social contract and best practices to inform and help manage the employees tax situation. Don't use RSUs. Put a gun their head and make them sign and file the 83b. Etc.

Re: Working for a startup makes less sense

#322

Post by TuringNYC » Tue, Dec 24, 2019, 3:30 PM UTC

bumblebee4 wrote: post #275

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…

Imagine Steve Jobs having to pay Steve Wozniak. The trick of the startup is that the key engineers are the founders. Startups are not a place for an MBA to get engineers for free but a place for engineers to make bank if their egghead managers in their corporations don't get going with an interesting business idea of which they know that it is a missed opportunity.

Thank you for so succinctly responding. I'm going to expand a bit and ask the GP (rhetorically) - if you want 500k-1M engineers (R&D I'm presuming) to work for you, what are you bringing to a table?

If you are failing to attract these high-end engineers to a low paying job, perhaps it is because they dont see what unique skills the "business person" is bringing to the table to balance the risk.

As an extreme example, I'd guarantee if the "business person" was Elon Musk, people would flock this startup. What high-end Engineers do not want is to give away a lions share of equity in exchange for a pay cut with no real upside, that would make no sense.

The typical procedural founder with "business skills" may have solid business skills, but those can be hired anyway, the business founder needs to demonstrate equal 500k-1M level of skills/background/trackrecord/etc.

Re: Working for a startup makes less sense

#323

Post by chrshawkes » Tue, Dec 24, 2019, 3:42 PM UTC

kareemm wrote: post #48

garry wrote: post #29

Earlier quoted context omitted.

I was a software engineer who learned to start a company right off the pages of the site you're looking at right now, Hacker News. It was here where I learned to start a startup. I later worked for Y Combinator as a partner helping founders make products and services. The best ones made something that touches millions of people now. While there is a lot of zero sum thinking in startupland and finance/capitalism in ge…

> Where else can you, with just your hands and a laptop on the Internet, create something a billion people use? Serious question: how many software companies have something that a billion people have used? It's a pretty special industry, for sure. But the odds of it happening are basically zero. I see how selling the dream makes for a good story for young and hungry startup founders to passionately change the world a…

From what little I've seen of this guy, he really doesn't come off as a genuine person at all.

Re: Working for a startup makes less sense

#324

Post by edem » Tue, Dec 24, 2019, 3:55 PM UTC

A few years ago I decided to start working for a startup because I wanted to try out the experience. It was a late-stage startup with no VC money and they had good prospects for a possible acquisition.

I did the math and I figured that it might work out for me. 2 years later it turned out that they have been talking about a possible acquisition for the last 3 years, but nothing happened. I also checked the company's public information and it turned out that they weren't that transparent about the shares. I was told that I get 0.5% worth of shares (they refused to tell me the total amount of shares) and what I saw is that it was true: I had 0.5% of the outstanding shares. But in case of an acquisition, they are free to dilute them 5-fold because the authorized shares are 5 times as much as the outstanding ones.

So I decided to join a big company which is paying almost 2 times more right off the bat and I also get additional shares each year. I made a calculation and even if the old company gets acquired I get less money (it is just a rough estimation) than I get at the new company. And that's still a big if. I think that I still started from a much better situation than most of the other folks working for startups. This company produces profit, they have a business model I believe in and there is no VC to please. Most of the startups are in a much worse situation.

I will never work for a startup again.

Re: Working for a startup makes less sense

#325

Post by TuringNYC » Tue, Dec 24, 2019, 4:05 PM UTC

muse900 wrote: post #248

jandrewrogers wrote: post #221

Earlier quoted context omitted.

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…

I don't feel like a top engineer. I think am no way near that tbh. I rank myself as an ok-ish engineer. I feel more like a hybrid though and I feel like I am valuable to a startup as I can bring on the table several things which include some photoshoping skills, being able to build a comprehensive front-end, can contribute to ideas as well as manage a db, build an api etc (to a level). The past 2 years I was working…

Thank you for your detailed take here. I'd like to nuance this a bit to a more general rule.

Every person taking equity needs to justify their value now

This means that a setup with two "business people" founders need to justify their worth immediately. Not with promises of future sales. Not with vague research.

Worthy ways to prove their worth could be raising a giant amount of funding, or putting their own money into the startup as a sign of skin-in-the-game, or purchase orders standing ready to purchase the product once it is complete, or paid PoCs. Or serious track record of delivery/wins.

If you find a setup where engineers are taking all the initial risk while "business founders" stay on the sidelines waiting for a product to be built until they start to work -- run away. Think about it this way -- they have all the upside (they can choose later to work or to flee) while you have all the risk (you invested your pay-cut for vague promises of future work.)

Re: Working for a startup makes less sense

#326

Post by johnsimer » Tue, Dec 24, 2019, 4:14 PM UTC

someguydave wrote: post #317

rhlsthrm wrote: post #295

Earlier quoted context omitted.

But not all engineers want to work at FAANG, there are some that are entrepreneurial at heart and would love to work on their own idea as a founder/co-founder.

Why do those engineers even need a cofounder? Why should they share a big chunk of equity with someone without the skills needed to launch?

Being a solo founder can be very lonely

Re: Working for a startup makes less sense

#327

Post by viklove » Tue, Dec 24, 2019, 4:50 PM UTC

yoz-y wrote: post #26

aeternum wrote: post #19

Yes you will probably make more at an established company, but your rate of growth can be much higher at a startup. I worked at a large tech company for 3 years before joining a startup, and learned more in the first month at the startup than the full 3 years at the large tech company. I was able to design and implement a service in a matter of days, whereas at the large tech company those 3 days would easily spent c…

I've had kind of the opposite experience. At the startup we were really sluggish it was hard to learn anything because we were jumping into any possible business opportunity before even thinking about ROI because money was always tight. 80% of the time was wasted supporting clients and fixing bugs that were due to the fact that the product was shipped too early. I think the biggest difference is money. A well funded…

> 80% of the time was wasted supporting clients and fixing bugs that were due to the fact that the product was shipped too early.

There are a lot of valuable lessons to be learnt here about product planning and dev process, but if you didn't make any attempts to fix the issues you mentioned, you probably didn't learn very much.

Re: Working for a startup makes less sense

#328

Post by viklove » Tue, Dec 24, 2019, 4:54 PM UTC

jefftk wrote: post #302

etrk wrote: post #232

Earlier quoted context omitted.

You didn't join straight out of school.

Whoops, thanks! I'd missed that! I don't think that had a large effect on my compensation, if any: I joined at L3, which is what most new grads are hired at, and my salary before Google was low enough that I don't think it pushed up my offer at all. I also didn't get offers from multiple places, which is the sort of thing that (a) results in higher offers and (b) is the sort of thing new grads usually do. But ideally…

Mind sharing what your rent was during those 3 years? The best figure would actually be comp minus taxes and rent.

edit: Oh, I see you were in Boston -- that's a great deal then. I still wouldn't want to work for Google for idealogical reasons, but I can see why the money would attract others. You also had ~9 YEARS of full time experience at that point, which makes it a lot less impressive.

Re: Working for a startup makes less sense

#329

Post by neltnerb » Tue, Dec 24, 2019, 4:59 PM UTC

jefftk wrote: post #143

neltnerb wrote: post #39

Earlier quoted context omitted.

The difference is whether you see learning to do meaningful things on a shoestring budget to be itself a useful skill. Boeing won't care if you save the project $5k by spending a week of your time coming up with a clever workaround. The week was more important than the $5k. Same for a high level role generally. But not getting work done for a week because your boss won't approve a $500 purchase... that would be frust…

> Boeing won't care if you save the project $5k by spending a week of your time coming up with a clever workaround. I'm confused what you're getting at here. $5k/week is $260k/y (or a bit less counting vacations and holidays) and the fully-loaded cost of an engineer at a startup is typically more than that. Then consider how high opportunity costs typically are at startups, and I expect most startups would view your…

Yes, but a week of delays costs the company like Boeing a lot more than just your salary, and they have deadlines to meet and other teams that need your project done.

I agree, most startups would view spending a week to avoid a one time $5k expense to be worth it for several years at least. That's why I'm saying the experiences are different.

If you're reading a judgment into my comment, there is none, I think doing super constrained engineering is super fun and an awesome skill to have. But I have also worked places that have the attitude of time being vastly more valuable than cash, and respect that both approaches are reasonable. Just different. But worst is when you're cash constrained to the point where even your clever workaround isn't possible to implement, even though it costs 10x less and is mission critical.

Re: Working for a startup makes less sense

#330

Post by viklove » Tue, Dec 24, 2019, 5:00 PM UTC

bhl wrote: post #51

eanzenberg wrote: post #21

Earlier quoted context omitted.

For a VC, scraping off net innovation minus startup-wages is a win. It's a lose for the employees, of course.

What’s a more democratic funding model to spread net innovation? Something like an employee owned company?

The technical term is a coop, like REI.