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So basically being a startup employee is a very bad deal, and you should either be employed at big tech, or be a founder yourself. But how startups find early employees then?
This guide leaves out something extremely important that just fucked over a friend of mine: double-trigger RSUs. My friend thought he was getting a certain amount of stock annually, but in fact he only got it if he was still employed there when the company went public. So after six years they fired him right before going public a month later, and he got nothing. And in order to get any severance, he had to sign an ag…
The guide mentions double-trigger RSUs
Doesn't exactly mention the important part, that you don't necessarily get anything, does it?
So basically being a startup employee is a very bad deal, and you should either be employed at big tech, or be a founder yourself. But how startups find early employees then?
Many early stage startups are a low oversight environment. This can mean lots of things, beneficial to certain kinds of people: easily push code to prod, touch production databases directly, work weird hours, fix almost any problem you want yourself, know how everything fits together, have more control over your work machine, etc.
Not all startups are grueling to work for. I've been at startups where I barely worked 4 hours a day at times. Results matter more.
Finally, if you just really hate the big tech interview process, you can get into many startups with minimal prep. Not saying it's a financially optimal use of one's time, but it is a thing some people value.
One thing I've learned working for startups is if you're working for a founder who's already had a previous successful startup exit(s), two things are true: 1. the founder already has generational wealth and this current company means practically nothing to them. 2. they've already learned every trick in the book to keep the company's value in their own pocket and out of the hands of their employees.
I'm working for a founder with a previous successful exit and neither of those statements are true of him.
And there's no telling what he will do if your startup does actually end up being worth something. Transfer the IP to a new company and fire everyone? Introduce new share classes for investors and dilute everyone else to zero? Sell the employees (acquihire) to some horrible BigCorp™ and then retire to Hawaii? No shortage of stunts they could pull once real money is on the table.
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I'm working for a founder with a previous successful exit and neither of those statements are true of him.
OP is making broad statements, and you might even be right about your guy. But even if your founder is not super wealthy from the first exit, your current startup could go under and if that happens employees will be left with absolutely nothing. Him, on the other hand, will probably have a golden parachute to land with. Either way he will be now be a "serial entrepreneur" and will be able to utilize his VC friends to…
So what is your equity really worth? "The difference between the most recent FMV (409A) valuation and your exercise price." This will almost never be the case. This doesn't account for different share classes, liquidation preferences, preferred stock, all of which get exercised before common shares. A better description would be "the most recent 409A valuation, minus preferred treatment, and your exercise price." All…
409a valuations explicitly take into account share classes/liquidation preferences. That's kind of the point. If the Preferred last sold for $1.00, the 409a might value the Common at $0.10 per share, which would then typically be the FMV strike price set in the next round of issued options. If the Common FMV has been steadily increasing from when you received your options, that would typically be a positive sign. Of…
Ultimately the 409a is for the IRS, not a mark for employees
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Startup positions vs regular positions often pay much lower. Obscene salaries and startups (which are mostly bootstrapped) don't go hand in hand. Startup founder who raises gets to play with obscene money. If you come across obscene money startup jobs share them. Tons of unemployed developers lurking who would take % of obscene.
Startup positions pay significantly better than everything but FAANG and are easier to get than FAANG.
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Startup positions pay significantly better than everything but FAANG and are easier to get than FAANG.
Where would be a good place to look for these type of startups?
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Not sure if you mean that seriously, or with tongue in cheek. It takes a very healthy dose of luck and market timing to be successful. Even the VCs, the experts, don't know how to pick winners. They expect a 90% failure rate, and this is among the ones they picked ! As an employee you don't have the same profit structure in play -- you can only work at one startup at a time. You cannot spread your bets around and let…
That all is correct and leads to a very simple conclusion: working for a startup has a very low probability of making you rich. Doesn't mean that people shouldn't do it, but it's better to have healthy expectations.