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Working at a startup is overrated, both financially and emotionally

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

#91

Post by lbacaj »

The article is good but it’s missing a big point that equity in startups is tied to risk taken not to contributions.

Many people, including myself, make this mistake the first round at startups. The mistake of believing if you work hard the outcome will be good. I wrote an article a little while back on how this relationship works and how it follows a logarithmic and exponential relationship, risk and equity, and how human minds are terrible at understanding those scales.

For anyone interested: https://louiebacaj.com/equity-and-risk/

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

#92

Post by hellcow »

hn_throwaway_99 wrote: post #81
barrkel wrote: post #69

Earlier quoted context omitted.

The way it should happen with a liquidity event is that you simultaneously exercise your options and sell them, pay off the taxes and bank what's left over. Savings should only come into it if you're leaving before the liquidity event.

> Savings should only come into it if you're leaving before the liquidity event. Which is another way some startups screw people. If the company is not willing to budge on the "standard" 90-day exercise window, there shouldn't be any negotiation. Just walk away.

There are two types of options, NSO and ISO. You want ISO as an employee because it's better for taxes, but that has a 90-day exercise window set by the IRS. You can push for yourself paying higher taxes in exchange for more flexibility, but it's a tradeoff.

https://carta.com/blog/pte-90-day-window/

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

#93

Post by kingsuper20 »

jsonne wrote: post #60
cudgy wrote: post #17

What is success? The article assumes for the most part that success is mainly monetary, and further it makes the classic mistake of comparing success monetarily to companies like Facebook. Success is different depending on many factors. For example, if a person needs or likes guidance and structure, a startup is likely not a good fit, especially when they are inexperienced. There are some good points about the strong…

> The author likely comes from a structured, religious background and prefers the “certainty” of a corporate environment. I'm a practicing Catholic and have worked either as a freelancer or a startup founder for >90% of my career. Not sure how you're drawing that conclusion but plenty of my peers are religious in a traditional sense and work in startups.

It's a thing that engineers (particularly software, hardware guys aren't as rude) really have to watch.

Given the tendency for programmers to be that edgy libertarian atheist guy, it's easy to be unthinkingly rude to a coworker who is of a churchly persuasion.

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

#94

Post by moron4hire »

I firmly believe that one should never, ever take a pay cut to work at a startup. We've all heard the numbers, 80% of startups fail in the first year, by year 5 it's 90%. If you're taking a pay cut, you're not building savings for the inevitable thin times. When the startup fails, you're going to have a period of zero pay while you look for a new job. How long is that period going to be? If anything, one should be demanding more money.

And this is especially true if the field is one you're excited about working in. You're putting yourself at an emotional disadvantage. You're more likely to put up with missed paychecks because you're supposedly "working your dream job". And when you end up in a bad situation, if you don't have a cushion of cash to fall back on, it could very well sour your view of your "dream".

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

#95

Post by surfsvammel »

barrkel wrote: post #69
eecc wrote: post #47

Earlier quoted context omitted.

That’s what Wiener suggests in Uncanny Valley, when she describes the windfall when Microsoft bought the GitHub shares she had the option to buy during her time there. It wasn’t life-defining, plus she noticed that many other employees didn’t have enough savings to actually exercise.

The way it should happen with a liquidity event is that you simultaneously exercise your options and sell them, pay off the taxes and bank what's left over. Savings should only come into it if you're leaving before the liquidity event.

That’s kind of how it worked out when we sold our company. All the transactions happened simultaneously so the only real payments was the net of it all. Both business and tax lawyers where involved to set up that whole process.

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

#96

Post by cmrdporcupine »

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 continued to work in the office with delayed pay. He came from a wealthy background, while I had a young child and a pregnant wife at home and a mortgage to pay.

So he didn't really get it, I think, when I raised a stink. I was offered more stock options and a higher title to retain me (without that title being communicated to anybody else). But a mark was put on me for my whining and my attitude and the founder's attitude toward me took a turn. He pivoted again, and I was either fired or I quit (I was already interviewing elsewhere and had an offer) depending on who you talk to.

Through some hand waving the ability to buy the options disappeared, though I couldn't be bothered.

He built that business up, and a few years later he sold for an OK sum. But the business itself was dubious, I doubt the company that acquired his business kept any talent or tech worth anything and he's now living in Costa Rica. The people I know who worked there and were there from day one certainly didn't get rich.

So yeah, that's when my attitude towards startups in general changed significantly. I used to be very interested and motivated by being early in the process in a company and getting to be technically creative and involved in the decision making and architecture, and I loved the feeling of coding like crazy and really pounding metal on something greenfield. But honestly, it's not worth it when you start to see the kinds of people and egos involved.

So I'm getting older and maybe I'm not the ultimate talent that a startup today would be looking for, but there are plenty of other people like me who've been burned in this game and their advice would most likely be: don't bother. This isn't the 80s or 90s, you're not likely to change the world tech wise, and you're unlikely to get rich out of it, and jobs at FAANGs are soul sucking boredom in many ways, but they'll treat you well.

(FWIW I went from there to a later stage 50-100 person company that was acquired by Google a year later and did OK out of that, but that was a properly managed company run by ethical human beings.)

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

#97

Post by tkiolp4 »

BelenusMordred wrote: post #16
blakesterz wrote: post #4

As much as I agree with everything said in this article I wouldn't trade my years at a start up for anything. Both financially and emotionally it was awesome. I didn't get rich, and I worked way too much, but it was awesome. I loved the constant change and chaos. I learned so much, way more than I would've in any other type or work place. I made great friends too. It was as bad as the article, but it was way waaaay b…

This is relatable. It's incredibly satisfying building new things rather than maintaining decades old cruft, regardless of the paycheck, hours and stability. Also the joy of working in small nimble teams and the freedom to experiment with new technologies. Like everything in life these things are a tradeoff.

Umm, I do enjoy the things you mentioned (building new stuff, experiment with new tech) but I love doing that on my free time, without pressure, deadlines and bosses.

At work, though, I love: boring stuff I can deal with easily, long epics that end up in features that are barely used (so, no big deal with critical bugs, also no need to be on call). At work I can be done in 4h and call it a day (which gives me TON of free time to experiment with new tech, keep my cv up to date and even fantasize with making my side projects profitable).

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

#99

Post by throwaway78123 »

NeverFade wrote: post #70
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…

Bingo. As a senior engineer, I get startup offers at the Staff-Principal levels, and even those grant no more than 0.1-0.5% equity at most, on top of ~$180-200k salary. That simply isn't competitive with big established companies like FAANG that offer me $400k+, far better career growth prospects, and far lower risk. For most startups, the equity will be worthless, and the whole company will either shut down or get a…

Not sure where you live, but in the US, options are typically granted with a strike price equal to the latest 409A valuation, which makes the grant neutral from a tax standpoint.

I don't see a world where you have to pay lots of taxes for worthless options, unless someone really screwed-up (i.e. messed up the 409 Safe Harbor election etc...)

Now... if you exercise the option, that is a different story. At least in theory you would only exercise if things went well and the stock went up vs the strike, which makes sense why one would have to pay taxes then.

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

#100

Post by Eridrus »

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…

Stable doesn't really describe early stage startups at all. Just because there is a paycheck doesn't mean there will be one when a big account falls through.

But anyway, I would urge founders to think more about the logarithmic utility of money and whether it makes sense to take 30x+ the gains of early employees. In particular, think of the number that make it all worthwhile and ask if you need to capture all the gains above that, or whether you could be more generous if you hit it out of the park, and if there is a way to write that into your contracts.

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