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Silicon Valley's best kept secret: Founder liquidity

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Re: Silicon Valley's best kept secret: Founder liquidity

#451

Post by inhumantsar »

xandrius wrote: post #158
inhumantsar wrote: post #105

Earlier quoted context omitted.

the lottery ticket analogy doesn't quite hit the mark imho. I've been seeing really shitty vesting schedules more often these days. a year in an early stage startup is often more intense than years in larger companies, yet they feel the need to push vesting schedules like 5/15/30/50 on people. even if you do stick it out and exercise those options and eat the tax burden, those shares can still be ignored in an acquis…

What would you suggest to someone who wants to work at interesting (non-evil) companies, wants a decent comp ($200k+) and doesn't mind being one of the first to lay the foundation with the possibility of upward mobility in the future?

be a founder or a consultant, not a founding engineer. build up a set of specialized skills in something you love doing, network your face off, keep lifestyle inflation under control, and keep a large amount of your savings liquid(ish). if the right people and opportunity comes along, be ready to tap those savings and live off them for at least a year while you build the company or be selective about your next consulting job. like the old cliche says, luck is where opportunity meets preparation.

if you're not that ambitious and simply want to live comfortably, then go to those early stage startups and negotiate for higher cash comp and a smaller slice of the options.

you can make great money as a SWE, but there's a massive leap between that rung on the income ladder and the ones above it. it takes a dedicated effort to get there.

Re: Silicon Valley's best kept secret: Founder liquidity

#452

Post by zenlikethat »

cosmic_quanta wrote: post #415
romanhn wrote: post #412

Earlier quoted context omitted.

At 10 employees the company is still incredibly risky. With this scheme you'll never grow past that size.

Well, the alternative (which appears to be the status quo) is to give lower % equity to the first ~50 employees. What do you think is the ideal breakdown of equity for early employees?

people already do a variant of “earlier gets more, later gets less” that’s a lot smoother/linear than your scheme and can be customized and adjusted to roles (engineers get more than salespeople as an example). With what you describe, offering some exec down the line 0.5% or whatever is impossible.

You need flexibility because at any moment some killer candidate might come along that you need to juice the grant for. Just being earlier doesn’t mean they contribute more to the company

Re: Silicon Valley's best kept secret: Founder liquidity

#453

Post by peter422 »

boringg wrote: post #413
doodda wrote: post #247

This post has managed to piss off everyone: employees who didn't realize founders were getting liquidity events while they're still sitting on their more-often-than-not valueless equity, and founders who feel they've earned it and don't like the implication they haven't.

Good point. Its interesting to see the comment thread here. The part to me that I see as surprising is dismissal of the stress of taking VC money and being a founder. It is a job thats incredibly demanding. Which is eye opening to me that that's how people see it. If it was so easy why aren't there more of them and more companies? Early employee is tough - unless the company is on a significant trajectory the options…

The main advantage of being an early employee is that you can leave.

Founders generally need to go down with the ship, early employees do not. If the growth trajectory starts to falter after 1.5-3 years, just get out of there and try another company. Let the founders clean it up (and you have equity in case they do).

Re: Silicon Valley's best kept secret: Founder liquidity

#454

Post by gen220 »

stevesthrowaway wrote: post #419
throwailearner wrote: post #297

Posting from throwaway so I can be very open. I joined a YC startup as engineer #1 with close to $200k salary and 2% options vesting at the usual 4 years, with a 10 year window. I feel like this was bettern than usual, and for a while felt like I struck an awesome deal, but as time went on I realised I was building everything single-handedly, while getting (at best) 2%, which started to annoy me deep down. Over two y…

throwaway acct here. I left a flagship tech company with $500k total comp and joined a startup as engineer #1 with 5% options over 4 years. My salary is current $120k and I'm losing money each month, although I've been promised that will changed as soon as we raise more. We are going to raise a Series A in the next few months. I know a little bit about this stuff, but not enough that I'm confident in exactly what to…

You should be candid with them that you're uncomfortable with the cash portion of your comp.

5% is an unusually high % of equity, the founders likely assumed you were happy to trade-off cash for equity. Series A is usually a dilutive round and it's normal to grant people like yourself more options to compensate for the dilution (i.e. to keep you at 5% of the new cap table).

My 2¢: I know people in your position who have ~$200k cash comp in addition to meaningful equity. Don't feel bad about asking for more cash, if your founders have a good relationship with you and you're providing value for the company, they'd rather invest the marginal cash in you and keep you happy + comfortable.

Re: Silicon Valley's best kept secret: Founder liquidity

#455

Post by dclowd9901 »

onlyrealcuzzo wrote: post #417
foobarian wrote: post #406

Earlier quoted context omitted.

> making ~$1M per year working 6 hour days at FAANG Can you say more on this? I didn't realize FAANG TCO was quite that high. Maybe it's time to swallow some pride and take the adtech money after all...

The average SUCCESSFUL founder is in their earlier 30s. At that point - you should be at least L4 (probably L5) at FAANG. Salaries are about ~$450k at that level and age. In 5 years, if you work even a fraction of as hard as you need to be a successful founder, you should be L7 - salaries are usually >$800k at that point. No, it is not like any average slacker straight out of college in 5 years can get to a $1M salar…

Big caveats on these numbers:

1. You’ll have to be located in SF or Seattle.

2. Going from L5-L7 is _not_ trivial. It requires a somewhat miraculous combination of being on a productive team with a good boss, a lot of opportunities for showy work and your own gamesmanship around corporate politics.

Is it possible? Sure. But in my short stint at Amazon, I met a lot of people who should have been higher level and were simply not due to missing one of these factors.

Re: Silicon Valley's best kept secret: Founder liquidity

#456

Post by sponaugle »

rKarpinski wrote: post #71
kneath wrote: post #16

Earlier quoted context omitted.

I have seen a lot of companies, a lot of rounds. I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). I love the idea of your universe, though.

> I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). Have seen companies offer this to employee's And companies that let employee's take money off the table at series A are also likely to be generous with meaningless titles; that is they will let early employee's call themselves founders.

"> I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees)."

Nice to meet you. Now you know one. :)

Re: Silicon Valley's best kept secret: Founder liquidity

#457

Post by stratigos »

As someone who has worked in startup environments for 20 years, its rather offensive that anyone in 2024 would claim that employees arent taking risks.

In todays salary brackets, one could be comfortably making 220k as a staff dev some huge healthcare/pharma tech firm. One may also feel the job is boring, soulless, and mostly uncomfortable. Then one may choose to work at an exciting AI startup for ~160k, and suddenly find themselves way happier, growing more, and engaged. One just took ~60k worth of risk right there, not to mention that it could be come $0 tomorrow, and one likely now has crap healthcare benefits, given the startup status.

That 60k could be a million dollars in ~15 years if invested wisely.

Re: Silicon Valley's best kept secret: Founder liquidity

#458

Post by gen220 »

bradlys wrote: post #405
p1esk wrote: post #317

Earlier quoted context omitted.

Why does everyone thinks startups don’t pay well? I have worked for various startups all my life, most of them well funded, and competing for talent with faangs. Yes, I could probably make more at Google but I don’t feel like I’m underpaid. At the last 3 startups my base salary was above 250k. I work remotely and I rarely work more than 30 hours a week.

I’d say you’re uncommon. I’ve never seen anyone who is a typical engineer making $250k/yr at a startup that’s below $1B valuation. Same for the amount of work you’re doing and that it’s remote with that compensation. It’s possible you’d be making $700k+/yr if you were at google. About triple what you are now.

I think one component of their point is that the marginal utility of money beyond $200k/year cash comp is quite small, especially if you (1) came to tech early in life (2) plan on staying in it for most of your working life.

With that perspective, $200k/year and $700k/year both reduce to "well-paid".

Also, a Staff title at a Seed or Series A startup can definitely ask for $250k/year, although they'd likely be trading off against equity grants.

Re: Silicon Valley's best kept secret: Founder liquidity

#459

Post by inhumantsar »

torginus wrote: post #346
inhumantsar wrote: post #105

Earlier quoted context omitted.

the lottery ticket analogy doesn't quite hit the mark imho. I've been seeing really shitty vesting schedules more often these days. a year in an early stage startup is often more intense than years in larger companies, yet they feel the need to push vesting schedules like 5/15/30/50 on people. even if you do stick it out and exercise those options and eat the tax burden, those shares can still be ignored in an acquis…

Sorry I'm a total dumbo when it comes to startups, but what do you 'vest'? I thought vesting is for stock options (maybe stake?). And your startup is not on the stock market, and won't ever be unless it gets a billion-dollar valuation. Even stake might be worthless, if the company fails, despite you building a kickass backend for it.

most startups don't offer actual equity even though that's what everyone calls it. they offer options. the idea is that the options you'll receive will have a strike price much lower than what the stock will be worth in future funding rounds or when the company is acquired or IPOs. the vesting schedule defines when you can start to exercise those. typically you'll receive 25% of your options after the first year, then the other 75% will vest every month after.

and yes, liquidity in a private company is always going to be an issue.

all of this is why I tell everyone that their options are worthless right up until they're not. anyone who's burned out or looking at a new opportunity shouldn't include them in their decision making process.

Re: Silicon Valley's best kept secret: Founder liquidity

#460

Post by zenlikethat »

geepeeyoudata wrote: post #316
koalaman wrote: post #266

I recently left a long career in FANG to roll the dice on an early startup. I was pretty surprised by the uneven terms between founders and early employees. From what I could tell the early employees takes more risk than the founders because they don't get that magic token dollar turning into their share of the founding equity event and have to pay the fictional valuation of the seed to convert their options. Dependi…

I worked at a Series A startup as an employee, and wont be doing that anymore. Early engineers have all the risk (lose job the second things go bad) but little upside. They would offer 500 options, or 1000 options, or 30,000 options -- but when you look at the prices, that was worth $100-$10,000. Why would anyone take all this risk, and lower base salaries for that lottery ticket?! Secondly, they wont share the cap t…

Even if you don’t see the cap table, any company you talk to should be clear and consistent in disclosure of facts like number of shares outstanding, including viewing it in tools like Carta. You are basically describing the abusive version of a startup and then saying all startups are bad.

I actually think going to a Series C or D is not the ideal play. It’s better to join an early company, with good leadership, reasonable if not mind blowing salary and cheap shares. Then, work hard, but not brutally hard. Somewhere that you enjoy the people, the work/product, and you can level up a lot. The options are cheap, and you can bail to FAANG at any time if you burn out. Realistically, that’s your shot at making 1% of $Xmm without completely hating your life. It will be a rare company so, yeah- be picky. I don’t know why all startups get lumped into one when there’s a lot out there for the discerning employee.

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