Working at a startup is overrated, both financially and emotionally • Hacker News Board

Re: Working at a startup is overrated, both financially and emotionally

#321

Post by novok » Sat, May 22, 2021, 8:41 PM UTC

wgyn wrote: post #284

derekdahmer wrote: post #252

Earlier quoted context omitted.

> Even at $500k/yr, it's 20 years—a whole working life—to make it to $10m Just one nitpick here, FAANG companies have 2-5x’d in the last five years so with $250k of equity in this example would have had an actual comp of $750k-1.5m/year which would leave you set-for-life rich in just 5-10 years no matter which one you chose. If you have access to a FAANG job and are optimizing for expected return you have to ask your…

Perhaps, but it's possible to invest in Google via the stock market. I'm not sure it makes sense to bake in the stock market performance of a public company when considering value of their "equity." It seems like you should be using whatever your standard discount rate (S&P 500 or NASDAQ)?

FANG equity packages are an implicit buy option that lasts 4 years. $1 million dollars of options that lasts 4 years is very expensive and very lucrative.

Plus in startup land, your missing that equity half, so you can't take that money and go invest it in google like you could working at FANG.

Re: Working at a startup is overrated, both financially and emotionally

#322

Post by khazhoux » Sat, May 22, 2021, 8:42 PM UTC

hellcow wrote: post #83

hn_throwaway_99 wrote: post #36

I think this is a really good article, but I think that one of the things it misses is that a huge reason the math works out so badly for startup employees is because founders and VCs take the lion's share of the gains. I mean, in my experience at startups, founders typically own around 40% of the equity. The option pool for all other employees is around 10-20%. Now, I certainly believe startup founders deserve far m…

> what founders risk in terms of opportunity costs and lower wages is usually only slightly more than very early stage employees Maybe this is different for others, but my co-founder and I spent 2 years bootstrapping before we got our first customer. We gave up 2 years of wages and consumed our savings to do this with no assurance of success, and even after that first customer it was another full year before we had a…

Let me guess, you're not a Silicon Valley tech company? In S.V., it usually goes like this:

* A couple of people have an idea, and quit their job (or didn't have a job), build a quick prototype, pitch it. Maybe they spend a couple of months at a startup summer camp like YCombinator

* They raise seed funding or a small first round

* ...and then immediately hire Employee #1 at 1% equity, and it's their job to build the first "real" usable version of the product. Employee #2 follows shortly at The risky investment put in by founders often amounts to: "We had to spend a few months grabbing coffee with potential investors"

Re: Working at a startup is overrated, both financially and emotionally

#323

Post by novok » Sat, May 22, 2021, 8:43 PM UTC

kingsuper20 wrote: post #88

I was just musing about how the definition of 'startup' has changed. I've worked in a couple plus a few post-startup small companies, but they always involved a fairly expensive piece of boutique hardware. At best, stock options might mean a decent bonus after a few years and you work as long as they pay you. You take the job because it's interesting and because it's more fun to lay track than to fix it. Using foldin…

Now it's ikea LINNMON reinforced cardboard tables, but same ethic :P

Re: Working at a startup is overrated, both financially and emotionally

#324

Post by khazhoux » Sat, May 22, 2021, 8:45 PM UTC

neilv wrote: post #272

hn_throwaway_99 wrote: post #36

I think this is a really good article, but I think that one of the things it misses is that a huge reason the math works out so badly for startup employees is because founders and VCs take the lion's share of the gains. I mean, in my experience at startups, founders typically own around 40% of the equity. The option pool for all other employees is around 10-20%. Now, I certainly believe startup founders deserve far m…

> what founders risk in terms of opportunity costs and lower wages is usually only slightly more than very early stage employees Excellent point. And there can also be huge differences in non-monetary value that make the opportunity cost more worthwhile for founders. If the startup fizzles, but the founders were spending most of their time getting startup founder experience, and building their professional network an…

Or this:

* Startup doesn't outright fail, but gets acquihired...

* Founders gets executive positions with bonus on top of bonus. Their resume has taken a huge leap forward, and if they stay at the acquiring company for just one year, they'll amass enough cash to take another couple of years off to try another startup.

* Employees get regular salary, and some small bonus to make it "worth it". They may as well have never done the startup, because it's an overall net-negative.

Oh, and the employees still have to individually interview at the company, and several won't make the cut.

Re: Working at a startup is overrated, both financially and emotionally

#325

Post by novok » Sat, May 22, 2021, 8:45 PM UTC

hluska wrote: post #127

FooBarBizBazz wrote: post #86

Earlier quoted context omitted.

Problem is, how do you support this? You must have made a lot of money to both (a) support your family, and (b) pay for the childcare that your wife would have been too busy to help very much with. Either that, or you lived in a low cost of living area and were able to do some kind of price/salary arbitrage. And if the solution was "make a lot of money", then that again makes childcare doubly important, because if yo…

Why do you assume they have children? Not everyone choose to have children and frankly, that's a great decision. I'm a parent but I subscribe to the feeling that instead of assuming everyone has/wants kids, we should praise people who don't.

Children are a public good that funds everyone's retirement, no matter your political system and the people who don't have kids are basically free riders in the end.

In a libertarian perspective, the young create growth in the market that the ownership old use to fund their retirements, and in a socialist perspective, they create a tax base of income that the government uses to fund the retirements of the old.

Re: Working at a startup is overrated, both financially and emotionally

#326

Post by jt2190 » Sat, May 22, 2021, 8:46 PM UTC

JoeAltmaier wrote: post #187

jt2190 wrote: post #105

Earlier quoted context omitted.

> Years of time and money. Exactly. Additionally, any of that money that you could have saved during those first two years would have had more time (obviously) for interest to compound than any savings you make today [1], so that "lost interest" needs to be factored into the equation as well. [1] https://www.investopedia.com/terms/t/timevalueofmoney.asp

Everybody involved is taking some fraction of that risk. "No raises until we're profitable", "Here's stock to make up for the lower pay", "Lets cut benefits again to increase our runway" are all tall tales that essentially squeeze cash out of employees with empty promises. When there's no way it will every even make up for the sacrifices of the employees, all those demands are empty noises. Just a way to fool folks i…

> Everybody involved is taking some fraction of that risk.

I think that by "that risk" you're talking about "the overall increased risk of investing in a new company". I deliberately use the word investing because that's how employees should think about their participation in a startup: They're usually giving up something now... salary, extra work hours... in exchange for some possible upside in the future, often in the form of stock options.

To state what you're saying another way: A lot of employees do not correctly assess the risks of the investment they're getting into, for example, of not having direct control over the date when a salary increase will occur, or whether that salary would be in the form or cash or shares. In short, employees often invest themselves into investments (i.e. startups) that bring far more risk than they can personally tolerate.

Avoiding startups completely is one solution. Another is to really start thinking like an investor: Personally, I like to consider whether I would be a passive investor in the company (i.e. just write a check)... If not, it's a sign that perhaps the company is not a good addition to my portfolio overall, and I'd be better off taking the cash from another employer and investing in something I do believe in.

(Aside: I've seen some pretty good "rent or buy your home" calculators out there, but never a good "work for a startup or an established company" calculator. If anyone can recommend one please reply.)

Edit: https://triplebyte.com/startup-equity-value-calculator

Re: Working at a startup is overrated, both financially and emotionally

#327

Post by s17n » Sat, May 22, 2021, 8:48 PM UTC

People work at startups because they want crazy hours and stress. It's fun. You get a bond with your coworkers that you can't get any other way.

If that doesn't appeal to you then yeah you shouldn't work at a startup. But tbh I've never met these mythical people who joined a startup thinking that it was actually a rational financial decision - everyone I know did it because they wanted an intense experience.

Re: Working at a startup is overrated, both financially and emotionally

#328

Post by [deleted] » Sat, May 22, 2021, 8:52 PM UTC

[deleted]

Re: Working at a startup is overrated, both financially and emotionally

#329

Post by gnicholas » Sat, May 22, 2021, 8:58 PM UTC

cmrdporcupine wrote: post #96

Fun story, I worked at as employee #3 or #4 or something at a startup many years ago, and it was fun at first, trying out various product ideas and strategies and pivoting a lot. Then the first serious funding crunch came, and the founder ran out of money to pay us, so we worked for a month without compensation. Except during this unpaid period the founder took off to Costa Rica to "work on his vacation" while we con…

> acquired by Google a year later and did OK out of that

What does it mean to "do OK" in an acquisition by FAANG a year after you joined? I would assume if you didn't think a liquidity event was coming soon, this would be seen as a windfall (assuming you were retained).

Re: Working at a startup is overrated, both financially and emotionally

#330

Post by cmrdporcupine » Sat, May 22, 2021, 9:03 PM UTC

gnicholas wrote: post #329

cmrdporcupine wrote: post #96

Fun story, I worked at as employee #3 or #4 or something at a startup many years ago, and it was fun at first, trying out various product ideas and strategies and pivoting a lot. Then the first serious funding crunch came, and the founder ran out of money to pay us, so we worked for a month without compensation. Except during this unpaid period the founder took off to Costa Rica to "work on his vacation" while we con…

> acquired by Google a year later and did OK out of that What does it mean to "do OK" in an acquisition by FAANG a year after you joined? I would assume if you didn't think a liquidity event was coming soon, this would be seen as a windfall (assuming you were retained).

It certainly was not expected, so it was nice. And yes, I'm still there, 9 years on. So I've done well for myself. I'm just saying, it's not like I got rich :-) Thing is, I liked the company before Google bought it. It was just the kind of small->medium sized company I enjoy working at.