Disclosure: I worked for various "startup" companies starting in 1991 through 2005. One got bought by a large company and made me some money, but not a life-changing amount. Some others variously went into "zombie" mode. One got bought by a company that simply milks the existing customer base for support revenue. One failed outright.
That said, when the first company was bought, there was a product that the buying company didn't want to continue to support. Some friends of mine made an agreement to take over that product, and started a company to do so. They never grew the customer base that much - it was a niche product. However, they were able to continue to work together as friends, have decent paychecks with 100% company-paid insurance, and after about 15 years, sold out to a company for enough to allow for comfortable (not rich) retirements. This was all on purpose and was discussed frequently by them - "Do we want to grow, or do we want to enjoy what we're doing, have some free time, less stress, and remain friends?"
I've always thought that was a FINE model for a company, if you can pull it off. I always wanted to work there (did some consulting for them), but they could never grow quite enough to hire me. Ah, well. :)
That's the story of the startup I work for as well. It survived long enough to find it's niche product and then stabilized. Everyone had decent pay and great hours. Eventually an exit opportunity came around and we all made some money. Parent org lets us keep maintaining and developing our niche product more or less independently. The more ambitious execs moved up into the parent org, but the rest of us remain friends working at a comfortable job.
Those aren't really startups though, at least according to Paul Graham. Those are more akin to small businesses. A startup is born to scale exponentially.
PG’s definition is only one, very VC-oriented definition. I think a layman’s definition would be a new for-profit organization started to solve problems, likely but not exclusively, using technology to do so.
Reading the comments on this an post and many others about compensation and payouts makes me feel like I'm losing my mind.
I grew up in a lower-middle-class house where both my parents worked for the postal service. Both parents worked strange and/or long hours and they performed very physically demanding work. I can remember several cases of them being out of work because of injuries. We were never poor but we never had extra. Meaning we always had food and cable television but rarely went out to eat or went on vacations.
I took a major liking to computer programming and pursued that as a career since high school. I find it unbelievable that I make a good living off of doing a job that I find really enjoyable and plus I make great money doing it.
My first job out of college I started working for a major manufacturer of PC's and printers and I started off with a higher salary than what my dad was making at the time, $65,000. I thought I was rich and set for life.
Working in the software industry makes me feel like I'm on another planet, I'm just excited to keep getting a paycheck every two weeks and then I read discussions about people chasing lotteries or trying to pull in 250k with bonuses.
I don't think it's bad to maximize your earning potential but the figures and mentality around feel so foreign to me. All that to say it's just a weird experience going from rural Oregon to the software industry and see the massive difference in lifestyle and the relationship people have with work.
You're not losing your mind, same here. I think a lot - particularly on the younger side - have done almost nothing besides software in a serious way. A lot of people have no perspective on how hard life is for a really large chunk of this country. The "go away to southeast asia and live on a beach for 6 months to reset yourself" is the one that makes me feel most out of touch. If/when we have another crunch some people will have very rude wake up calls.
I grew up in rural Oregon as well. (Outside of Roseburg) I made more than both of my parents combined with my first post college job at $65k/yr. (And I was severely underpaid) Now I make closer to $200k but without 2 $200k incomes it feels like poverty in the Bay area. I rent a 400sqft in-law unit and another person rents the 900sqft 1930's 2 bedroom house in the front. We both pay a lot for relatively meager living conditions. We live in a nicer area but it's very suburban. This property is worth close to $2m according to Zillow (and recent sales we have seen). It's not nice or updated or even a large lot (4k sqft).
$2,000,000 for a pretty small house and lot. There's a reason a lot of folks here are chasing money - it's the only way to have a quality of life and lifestyle similar to those outside the bay area.
You're not losing your mind. Your perspective is different, and it might perhaps change over time. From your description of your upbringing it sounds like we have/had a lot in common. I was raised by a single father who made $40k/year at best. I was able to get a "new" computer every 3 years from age 11 on, but that was about it. My clothes were old. My shoes didn't fit well. My school backpack was held together by safety pins. My car in high school was bought for $800 and was almost as old as I was.
My first job was for $75k - 80% more than my father was making at the time. Now I make more money than my entire family at their maximum earnings even adjusted for inflation. This doesn't impress me, give me any comfort or a sense of success.
The drive, for me, for a "fuck-you money" payout is this simple desire: "I don't want anyone to tell me what to do with my time."
I think we grew up in a similar level of a family and our first jobs were also quite similar. My first job was also for a big hardware chip maker for slightly less pay. (not in Silicon Valley) I felt rich and set for life.
I'll say though, the SF Bay Area has a way to make you feel poor. It's not even keeping up with the joneses type stuff with your software engineer peers. It's just normal living expenses. Six figures salaries don't feel rich unless you enter the "2"+ territory. $1xxk doesn't feel much more than the $60k first job outside of the bay I had in the mid-00s, even high $1xxk, especially with a family to raise. After years of living like that, it makes more sense that people want to maximize their earning potential.
The other day as a Gedankenexperiment, I took one of the "2+" numbers being thrown around and I did the math - taxes, mortgage/rent, etc. I could be wrong, but it really struck me ones real net income for the Bay Area ends up very similar to the person making half that much in the midwest (or wherever).
You're right on the money here. And I think an engineer can have a pretty solid, fulfilling, well-enough-paying career working for a whole string of failed startups!
The thing is that the rich-poor gap has grown considerably as well. In this era if you don't have at least millions you can hardly get themselves/their family a comfortable life/retirement in a metropolitan area. Nobody feels secure anymore and it's only understandable that everybody wants to pull in as much money as possible while they can. Some works such as Capitalism in the 21st Century talk about this but you should also have felt it yourself.
We are lucky. We live at a lucky time, when the thing we like to do is very lucrative. 30 years ago it was not like this for programmers, and maybe 30 years from now it will also not be like this.
I appreciate that you are satisfied with your income and that the desire for more irks you. However, I think one thing to consider is that capitalism always means that people are making money on top of the cost of your labour.
Maybe the capitalists took a huge risk of investing (employing) you and you feel grateful to leave more money to them. Maybe the capitalists do a lot of work for themselves too and are rewarded appropriately in equity.
But it's not uncommon that labour is just exploited.
>But it's not uncommon that labour is just exploited
This trope is total BS. It makes workers out to be idiots who are too naive to understand the situation. Of course people are making a profit off me. That's the entire point of employment, I give you labor, you give me a steady paycheck. If I don't like it, I can figure out how to give other's work and a steady paycheck then take the profit.
Thinking that somehow if all workers striked, formed unions or formed co-ops, suddenly the world would be "fair" is naive.
Humans are greedy.
It's in our brains to try to grab as many resources as possible. Socialism is far more opaque than capitalism because greed is chided and has to be hidden (!)
I'd much rather have people building new things, trying to grab as much wealth as possible than be stuck in a system where creativity and drive aren't rewarded. It's total game theory: If Joe doesn't care, he will do the least amount of work. If I can never make more than Joe, then I will do less work than Joe. It's all about minimizing cost (effort) and maximizing profit (money). Once you disconnect effort from money, the system sucks, which can be an argument for why workers deserve pay raises.
I don't think I'm that greedy, I definitely ask for and have more than I actually need. I just built the assumption from the common pattern in why socialism has failed in the past ("All of us are equal, but some of us are more equal than the others")
The top of the pyramid in socialism always gets more therefore humans are greedy.
Also, it would make sense in my mind, from an evolutionary standpoint of why being greedy is actually a good trait. I'm not advocating that unchecked greed is great. I am advocating that understanding our brains is better, then we can check ourselves from that.
#6 Have a crystal ball that can predict the future. Since the success of a startup is often based on unpredictable changes in markets, technology, or world events, even if you follow all of the other steps here to avoid a zombie startup, you may end up in one. And you may avoid a startup that was really onto something.
Okay, so I am being a little satirical. But honestly, if it was so easy to pick winners, VCs would invest in far fewer companies. As an individual trying to pick the winner, you have close to zero probability of being right.
Well if you do your due diligence, look for startups which offer proper equity to employees (which is sadly very rare), you have an advantage over VCs. You get the option to quit or continue working at the company and earn the rest of your invested stock. The trick is to shop around, evaluating each startup while you work for it, until you find one that has hit the jackpot and made your unversed equity very valuable.
Buying 10 lottery tickets instead of 1 makes no practical difference to the odds of winning.
Of course every VC, CEO, and founder will say otherwise, since they're incentivized to get people excited about their investment. VCs also place more bets in a single year than the number of startups anyone could hope to work at in a lifetime.
But you can improve your expected returns if you get to double down on one of your lottery tickets when you know it has a high chance of winning. You invest little time in the startups that seem likely to be unsuccessful, and a lot more time in the startup that is on a path to success.
Agreed. Until you do not enter a startup, it's hard to know how it actually works.
During interviews and preliminary hiring-talks they may sell the pitch as if everything were wonderful, but potentially, the unfortunate reality could be that things are not that nice.
Losing a few months once in a while may be bearable, and even worthwhile as a positive experience towards a more selective criteria regarding future workplaces.
However, I would argue that depending on one's need and situation, time is gold, and jumping from one zombie startup to another continuously may not be feasible.
It hurts your CV, too. You can do this once, but if you stay for only a few months at 3 startups in a row, I probably wouldn't hire you anymore. The risk is too high that you would leave the 4th startup as well.
I haven't found that this has hurt my CV, or more specifically my ability to get hired by subsequent startups, at all, in fact the larger amount and larger variety of my proven expertise from working at multiple startups for relatively short periods seems to have only increased my ability to land jobs. And further, the varied experience I got at them has very quickly removed the ross-tinted view of the startup world and taught me hugely on what to look for and what to watch out for.
Disclaimer being that in each instance I joined in good faith, worked hard and added value to the company quickly (at least in the companies eyes), did my best to pragmatically resolve any major issue that happen to arise, and left once those resolutions reached a roadblock and that I felt I had made all reasonable attempts to fix things. On reflection it was always just a case of losing faith in the leadership of the company.
My advice to anyone starting out would be to do your best due diligence (read about it) before joining, but knowing that you'll only get the real workings of place from actually working in it, and especially if you are inexperienced you will have likely overlooked some subsequently obvious warning signs (I sure know I did in the past!). Throw yourself into it 100%, get established, then assess the situation. Always do your best to give everything the benefit of the doubt, and be open to being wrong, until you really just have to admit that you're right (or in reality you _think_ you're right), then move on if you have to in the most considerate way possible.
Future founders/leadership that I would want work with would (hopefully) understand my decision-making at those times, and would be confident enough that they could instil the motivation in me to continue to follow them long term.
Rather thin and worthless article, not really deserving of what looks to be on its way to a 100 comment article.
Very first sentence:
> People tend to underestimate the financial opportunity that startups represent for early employees.
um, no, absolutely, emphatically not. This article is written by a person whose job is headhunting for startups. So off the bat, the bias is off the charts.
It's exactly the opposite. People (employee candidates) tend to overestimate the financial opportunity, both in value and likelihood.
> But being good at picking which startup to join as an employee means, in part, being as diligent as an investor.
Diligent sure, but nowhere does the article explain such diligence, and anyway investor diligence is not anything like employee diligence.
All the points have flaws, but one general theme stood out, that they are pushing equity vs salary.
This seems well intentioned, but it strains credulity on a couple fronts:
1. This article is referring to VC backed startups, which generally speaking 9 of 10 die. Are you going to statistically better at picking a winner than a VC (consider also that you aren't diversifying your investment as you only work at 1 startup at a time).
2. While transparency is indeed key, there are levels. It's unlikely any company is going to be so radically transparent as to tell you the details you'd need to actually determine their financial fitness going forward.
Consider that Telltale Games last week managed to both hire a new developer, move them across the country and then call them into a meeting to let them know that they'd be let go along with most of the rest of the company in a massive layoff. That's a lack of transparency as to what is happening _within_ the company.
3. VC backed startups are just inherently volatile. I worked for a YC company that raised between $75-$100 mil (keeping it vague) and they were more or less insane: just weird unforced errors and oddness and Steve Jobs complex. They recently closed as their round failed due to a combination of IP theft, "Trump trade issues" and inability to execute in the face of more advanced competitors.
It's often not just one thing that pushes a startup from "rocket ship" to "zombie", it's everything.
4. Being an early stage employee (non-founder) is a rough spot. Typically you're taking less on salary because of "generous" equity. However, you're also expected to work founder hours. As liquidity events have diminished, so have opportunities to actually cash out.
All that being said, I'd still encourage people to work for a startup, but to do it on their own terms: to learn, to get a new experience, to try and set yourself up to do your own creation. Please just don't rely on picking a rocketship.
> Consider that Telltale Games last week managed to both hire a new developer, move them across the country and then call them into a meeting to let them know that they'd be let go along with most of the rest of the company in a massive layoff. That's a lack of transparency as to what is happening _within_ the company.
Does that mean there are no companies that do better than that, though?
But here in the real world outside of the HN Silicon Valley bubble, most would be statistically better off working for a company with a mostly guaranteed combination of salary+guaranteed stock over a known vesting period that is competitive with the market.
If the company is private, negotiate for a salary that’s competitive with the market.
“Competitive” doesn’t mean that everyone is going to move to SV and work for a FAANG.
4. I don't know all that is required, I'm going to learn, I love to learn, and the hiring company is ok with me learning and not having 100% skills mastery. Often the case in startups. Cf. post/discussion about "hiring unproven people" earlier on HN.
Best risk adjusted returns come from late stage startups - Series C or D typically - for VP level roles that get 1% grants ($4-$10m value over 4 years). Highly de-risked.
At year two or three the company will also likely top up the equity if they want you to stay... just negotiate a 10 year exercise window, so you're not writing a check on your way out the door.
For whatever reason, why individual contributor equity grants fall off a cliff after Seed or Series A, the VPs remain relatively constant even as the value of the company goes up 20-50x while risk plummets.
Now that I've got quite a bit of experience behind me, I've started to become very attuned to "savior-seeking": somebody (or a group of people) who underestimated how difficult building a business was going to be and is now underwater, desperate for a lifeline. Although I (sort of) sympathize with the position they're in, I also know that I don't have the magic that they expect, or the 24/7 availability they're going to need, to dig them out of the hole they've put themselves in.
Late comment though I'm not sure if point 2 about awards and press coverage is true. Surely you can't spend all your time on marketing but you still need to gain traction somehow? I would like to see some opinions on this.
It might be more interesting to write a post about how to exit a zombie startup once you've joined one, or how to determine the zombie status from the inside.
You're usually valued and crucial at one. So try to fix it and give them the option of firing you if they don't like it.
Identifying it is when they say things are going to happen but they either don't get done or some shadow of that thing gets halfway done 6 months too late.
Also you may be in because it's a hot idea. If you see other companies pop up with the same idea and they are actually moving and yours isn't, then leave.
First to market is irrelevant if the first people are bozos who can't scale. Everyone will steal their idea and the original innovator will trip over their shoelaces.
> Identifying it is when they say things are going to happen but they either don't get done or some shadow of that thing gets halfway done 6 months too late.
This is it! You just saved me from writing the blog post. I haven't been part of any rocketship startups, but have been part of successful bootstrapped ones, and unsuccessful zombie ones. The difference was the ability to:
* state a goal
* execute to achieve said goal
My guess is that the chosen goals are the difference between mildly and wildly successful startups, but if you can't state a goal and execute, you're in a zombie startup. It may pretend to be alive, but it's not.
Yes, I think that would be the most useful piece of advice (and probably something that inexperienced employees right out of college, tend to be particularly bad at).
They make joining a startup seem like it's supposed to be a get rich quick scheme.
Focusing on how someone can buy shares at low price and sell high kind of only selects for one kind of company -- the VC funded company whose entire goal is either an IPO or an acquisition.
What about the startup that has no plans for acquisitions nor IPO's, and is not in the business of giving out shares to employees, yet can pay their employees great competitive wages with benefits?
Most startups fail. Opting for equity that might be worth more tomorrow at the expense of liquid cash today doesn't sound much different than buying a lottery ticket and hoping you picked the right numbers.
Why not look at the offer at face-value instead? Is there decent pay? How much BS will I have to deal with? Is there opportunity for career advancement (if I care about that)? If I have to leave, will I be more competitive in the marketplace? Will I have a life outside of work?
Seeing a friend of mine go through that rigmarole more than once, my observations are that zombie startups simply aren't nice places to work, it's always crunch time, you're always piling on tech debt, and wiping your ass with the equity grant will serve you better than waiting for it to vest. The culture can turn hostile in an instant, and toxic management hires can come out of nowhere and upset the apple cart just to make their company look good for the mirage of an aquihire.
The founders don't give two shits about your career, mental health, or really anything, just meeting the next milestone.
Worst case: it's a stressful waste of time that doesn't help your career.
Stressful because the company is already in distress. Maybe the employees aren't aware, and maybe even the founders themselves are too naive to be aware, but the founders will be heavily under the gun to find a path to satisfy the hype they've built up. Or they'll check out if they don't even care to get back on the path.
Waste of time because you won't learn anything in a flailing, failing company.
Doesn't help your career because of the lack of learning and growth opportunities within a distressed company. Nobody will be impressed by the entry on your resume. Will likely hurt because of the opportunity cost, even.
I disagree with the author that being an early employee is a solid path to make you wealthy — that only happens when a company experiences sharp growth after you join and finds liquidity at a much higher price than your option price. That happens but is rare. A better benefit is to jump-start your career and get experience you wouldn't be able to get at a BigCo. For that all you need is upward mobility in a well-performing startup. And you won't get that at a distressed company.
Unless you are a founder, look for product-market fit, growth and revenue. Think like an investor. Otherwise you will show up one day and are told, "We have to let everyone go". Or a permanent 50% salary cut with no notice the day before payroll.
Basically you should make the same assumptions you would joining a project as a freelancer/contractor - if you make enough money and don't care about career development and job security and quite possibly difficult atmosphere then why not, a job is a job. But if you're joining with the assumption that you'll be able to develop your career, or that it will be a fun/friendly/familial environment, or that you're deferring making real money until you cash in your equity, it's extremely likely that you'll end up bitter and disappointed a few months/years later.
All of the downside of a startup (long hours, fire fighting, stress... all of which never ends) without the upside (an exit which is the pot of gold at the end of the rainbow that you put up with the rest of it for.) The way to make a zombie startup work for you is in a role where you're getting paid by the hour or deliverable that you can control (i.e. contracting or consulting) and absolutely do not go in as an employee if you have a choice.
Yeah I think the downside elements you mentioned are important and it's a significant factor.
Add to this the one year cliff plus one quarter before any options vest and even then there's a good possibility you will leave them on the table b/c you don't have the money to buy them when you leave.
These are all great points but they assume you have the financial freedom and the understanding that you'll actually get offers which gives you the freedom to pick the perfect startup for you.
Most of the time, in reality, I've had to pick from one or two while my savings are quickly dwindling.
While it's true that you are unlikely to hit it big as a startup employee, I think the article misses some of the real reasons to not join a zombie startup. I worked at one many years ago and the problem was there was no place to take your career. The stock wasn't going anywhere, compensation was lackluster, the company wasn't going to expand, and thus the only way to get a promotion was to sit there and build personal connections, IE: not based on merit, rather on drinking buddies / nepotism / etc. The career challenges - responsibility, technology, etc were not great. So, it was a good place to be an alumni in terms of connections, but there was no other benefit.
The article makes a couple of references to "public actors":
>"Business angels investing with strong tax incentives, universities or companies filling up their marketing brochures and public actors who aren’t betting their own money at all are a couple examples. So don’t settle for “We’ve raised a Series A”: Ask with whom and look them up.
If you see that the money raised just comes from public actors, ..."
Could someone say what is a "public actor"? I am not familiar with this term.
Arguably pensions, too. Although I don't know of pensions that invest in startups, it wouldn't surprise me to find out there are some given the market these days.
I would also argue that corporate investing arms tick this box. It's "other people's money" twice removed.
In fact, the degree to which you're betting other people's money is probably the rubric here. Angels are investing their money (usually -- crowd funding has made this murkier). VC's are betting an LP's money, and if they fail to return value they will have a hard time raising another fund and will eventually "die". (VCs are the real zombies in the startup ecosystem!) Other entities are further away from the money and the consequences they will feel if the investment doesn't pay off.
I'd also look at motivation. This is another area where governments and corporate investing often fail. Governments are usually motivated in ways that aren't aligned with the startup world, and invest money in ways that seem irrational (at least to a startup) as a result. Corporate investing arms are often treating their investments as an extension of corporate development as well as a way to get an option on ideas that either formally spin out of the company or that people leave the company to start. All of these are subject to distortions that pull them away from focusing solely on chance of success.
I don't think anyone limited it to angels. And governments do investing all the time, they just don't always call it that. Solyndra and 38 Studios are two notable failures, for instance.
Governments also invest indirectly through big contracts, hard to come by so. SpaceX and NASA come to mind as one example, also an exception at the same time
Let us cut off an underlying assumption of the article - that only rocket ship startups with massive exits are worthwhile places to work. That simply isn't true. A long, slow, stable growth of a bootstrapped company can still give a lucrative exit because there is no dilution. You also can be a multi-millionaire with simple saving and investments, no "exit" needed. Non-funded startups also can produce less stress as you get profitable and nobody is pushing you for a billion dollar exit. You can decide as a group if you want to push for something larger or just enjoy the ride and have more time with your family.
These are not bad things. As was mentioned in a few threads over the past few weeks, nobody lies on their deathbed wishing they had done more work and spent less time with friends and family.
While VC-driven startups can give you a large exit, so can playing the lottery. Don't fool yourself into thinking this is a guaranteed get rich plan. By all means, try it if you have the time and energy and enjoy the work. But if you don't have the passion and energy for VC-funded startups, then admit that to yourself and do something else.
For quite a long time now, the smart advice has been to avoid startups if you are only there for the payoff. You, as an employee, are not a VC who can gamble across many investments. Where 10% success is great because of the power law.
I'm continually surprised that this needs to be repeated, almost biweekly here on HN.
As someone advanced in my career, I enjoy startup life for the startup life. As a noob out of college, I very, very highly recommend startup life as you will never be so risk tolerant again in your life, and you can't get the experience any other way. You can afford to fail and then move on to a bigco if you want stability. Also, you will form bonds and make friends that won't happen at a bigco.
Someone should put together a spreadsheet showing the value of a 1% equity stake at seed and series A for YC companies that have had an exit. (It's not hard.) I guess airbnb hasn't had an exit yet, but we can just use $40bn as a reasonable number.
All the online dilution calculators are targeted to founders, so they can model and make raise decisions at each round. For us, it's a very easy depreciation calculation. Anyway 1% post-A results in .52% post-E using a calculator I found easily that has reasonable defaults for each round. That $200MM of airbnb, really astounding. Do consider it took 13 years to get there. OTOH your 1% would have been good after only 4 years.
Let's say you limit your startup job search to just YC companies. Now you just need to factor in the number of YC companies, the number of employees at Series A and earlier, your likelihood to get 1% (unlikely to impossible), and your likelihood of landing in a successful startup.
YC could make this type of calculator online for anyone but that would discourage employment. Someone here can easily produce it.
Please don't make the mistake of thinking you can pick the winner and therefore your likelihood of success is multiplied. You can't. Even YC (and all other incubators) can't, that's why they spray the money around.
> Also, you will form bonds and make friends that won't happen at a bigco.
I heard this about university, and here it is again about startups.
Counter-anecdote from me: I never made any long-lasting connections at college, and I never made any long-lasting connections at a startup, either. (And I've worked at ~10 of them.)
Instead, my only real adult friendships have come from either working at bigcos, or from extra-curriculars (e.g. social hobbies, sharing creative works and then meeting people who liked them, etc.)
Agree. Most, like 99.9% startups are not going to make ANY money. Even if there is a positive outcome for the startup, how much money you could make out of it, is still questionable.
If you want money, go to big companies, your reward is likely to be much more bigger and stable.
This is a really good point. I enjoy startups because I feel I'm relatively more productive in unstructured environments, which in turn makes the work more enjoyable. That is definitely not true of all people.
Working for a VC-backed startup is definitely not a guaranteed get-rich-quick scheme, but working for a low wage at a no/slow-growth "startup" is a guaranteed stay-poor scheme.
I disagree. It depends on how sticky it is with the customers. I recall a small mortgage data vendor who owned a tiny niche of the market. They had ~3-5mm in revenue and 7 employees, several of which who were admins. Most made better money than in comparable jobs. The founder did extremely well on a cash basis. He didn’t need expensive salespeople because he had saturated the market.
He couldn’t retire young, but I’m pretty sure he owned his house and could send his kids to whatever school he wanted.
That parent comment also is the only person who has mentioned "working for a low wage". It was not part of my original comment, and not the scenario I intended to describe.
It is a valid point, though. Working for a low wage at any company is a fundamentally different story than an above average wage at a bootstrapped success that can afford to pay good salaries.
I read that comment as adding a new dimension to the discussion: the wage dimension. I think it is an important part of the discussion. In my experience it is well known that startups pay poorly and make up for it with a lottery ticket, and many companies piggy-back on that widespread knowledge to pay similarly poorly ("competitive pay" where the competition are startups) despite not actually having that lottery ticket to include in the deal.
Don't get me wrong, I feel for these companies. They are in a bind. There is no way they can pay salaries competitive with big corporations, and they've made a (wise, IMO) decision to avoid funding and grow organically, which precludes them from compensating through a seat at the exit table. Personally I think the solution for companies like this is employee ownership and dividends. This seems to align incentives properly. I don't see this being done much (at all?) though, which makes me wonder whether there are ugly pitfalls I'm unfamiliar with.
To me it seems that the problem is the definition of "startup". Not every new/small business is a startup. A profitable, no/slow-growth small business can be a great place to work at. The article is about a particular kind of startups - ones that aren't delivering on their promise of fast growth.
I generally call small businesses like that a lifestyle business rather than a startup.
They don't return huge amounts of money, but they are not going to disappear overnight as they have the market cornered on one or two very small niches (eg: the entire worldwide demand for the product they offer is $0.5-5mil). In my experience, a lifestyle businesses has found a problem that a dozen or two midsized companies have and precisely solves it or produces a low volume customizable product.
Basically the goal of the company is to keep the owners comfortable rather than play the unicorn lottery.
That would be a regular business. A lifestyle business the goal is to give the owner a job they like without the distractions a larger company would have because the owner/founder likes doing the work.
It is possible to start lifestyle then transition to regular or be a blend (eg: currently lifestyle, but keeping a eye out to grow). Sparkfun is a example of this where the founder hired someone to be CEO so they can actually have time to do the stuff they love.
It seems there's also an implication that if you're not maximizing your expected income you're doing something wrong. People can make a reasonable choice to work for a smaller business (or, indeed, any type of organization) that doesn't pay the highest salaries for other reasons.
Low wage means less than you can earn for doing exactly the same thing elsewhere. Of course people often compromise on wage to do something they are particularly interested in. In the case of unpaid internships or volunteer work people forego any monetary compensation. All other things being equal, though, you should seek to maximize your income.
Well, sure. If every attribute other than salary is absolutely identical, of course there's no reason to accept a lower wage. But everything else is pretty much never going to be equal when it comes to professional jobs.
Poor? Really? We make a great living, none of us are poor. We are very well off and you don't need a winning lotto ticket to grow your wealth outside of your salary.
Assuming "we" are all engineers. There's no reference to role in the article or comment you're replying to, so I don't think that can be assumed. There are plenty of low wage jobs at startups.
In the article, sure. I assume that because we're by a large a bunch of engineers, many of whom work at startups.
If the frame of reference is "anyone" then I still don't get the argument. What percentage of jobs out there are lottery tickets? A tiny, tiny fraction. So what's the advice from the GP; everyone should try to work in some unicorn startup in hopes of getting rich?
This is slightly tangential but I always wonder whether this common piece of wisdom is tainted by bias: Nobody lies on their deathbed wishing they had done more work and spent less time with friends and family
As you grow older, your ability to be productive decreases to the point where 'doing work' is impossible. It's no surprise, then, that most people who sit on their deathbed value friends/family over work. However, this doesn't mean 'doing more work' and 'being productive' isn't a respectable and equally fulfilling value to friends/family when you are young.
Yet, this generic piece of wisdom is often used to diminish ppl who value productivity over all else. I'm not saying one is better than the other, but aren't we getting a slightly biased perspective when we mimic values after old people? Values morph over your life, and the values that are best suited for old age aren't necessarily best suited for young age.
Probably not, but then again $300k is not a normal “liquid tech company” comp. It’s above average at a handful of outlier companies in a handful of locations.
Which represents an extremely tiny slice of available opportunities, and they are often hiring for skills/skill level that developers qualified to work at the typical startup don't have.
It still represents many tens of thousands of opportunities. More importantly though, I would argue that the skill level required in its employees for a startup to not go out of business is at least as high as that at these top companies.
> It still represents many tens of thousands of opportunities.
There are between 3-4 million developers in the US. Assuming 30,000 of these $300k jobs (not likely), that's 1%.
> I would argue that the skill level required in its employees for a startup to not go out of business is at least as high as that at these top companies.
Most startup jobs are just another React or Rails or Node job. You're not going to get a $300k job doing that kind of work.
I think that a pretty large percentage of these $300k developer jobs are paying that much due to politics more than skill.
By politics I mean that they have worked within the company to attain that salary, taken the right management positions, kissed the right butts, or maybe just got in early enough and at the right time.
Very few open positions are going to be filled with a starting salary of $300k.
Nah, you don't need to get all political to make those numbers. ~300k total comp is not that hard to obtain as a salary if you meet the following criteria:
1) Are willing and able to work in SF/Seattle/NYC.
2) Have a degree from a decent university (preferably in CS) and about 3-6 plus years of experience.
3) You spend a lot of time prepping for coding interviews (i.e reading https://careercup.com, etc)
This is also pretty practical in Boston. I'm at ~$350k (half salary, half stock, with a bit of bonus) as a T5 at Google Cambridge. I don't manage anyone, am not political, and have been programming professionally for ten years (at Google for five).
Cost of living isn't ideal, but $350k is far more than me and my family (wife and two kids) need to live on. I've been donating 50% for several years, and we still are fine.
There's still the issue mentioned in your GP that there are not that many of those jobs out there to begin with. Also, there are more people who want them then there are slots.
Note that I agree about not needing to get political to get these roles. I just disagree about how easy it is to obtain them.
There are several employers paying that much to select from, and companies will reinterview you in a year after a semi-random false negative, so the false negatives are not really a showstopper.
I know several people out of college making $200k+ per year and they don't do anything extremely specialized or participate in crazy politics or management. Just your typical frontend JS dev from a good school, with good experience.
I know several people with 5+yrs of exp making $300k+ per year easily at several companies (not just at FANG).
Caveat: all these people are good at what they do, come from good schools, and have good backgrounds.
This is the real reason startups can't compete in the talent market today. The companies operating at scale can afford to pay high liquid comps for the best talent.
React or Rails or Node job is exactly the kind of work that you would end up doing with that $300k job, especially at the larger employers like Google or Facebook. A lot of engineers leave those companies in search of more complex work.
> It still represents many tens of thousands of opportunities.
With hundreds of thousands of candidates vying for them, and more qualified than there are slots available.
> More importantly though, I would argue that the skill level required in its employees for a startup to not go out of business is at least as high as that at these top companies.
I disagree with this one. First off, the skills required to help a small, rapidly-growing company be successful are very different than the skills required to help make a similarly-sized project within a large company successful. Second, I think most startups overestimate the quality of the people they need to successfully execute, partly due to the first point, partly due to not understanding the actual business risks, and partly due to overestimating the difficulty due to an inflated sense of self-importance WRT the company.
> As was mentioned in a few threads over the past few weeks, nobody lies on their deathbed wishing they had done more work and spent less time with friends and family.
I mean, that can be debatable imo. It's an oversimplification.
To think of it simply; Does spending less time with your family now, mean more time in 2 years? Are the now years more valuable than the 2+ years? Is there a risk of 2 years becoming 10? More time now is great, but what if you're worrying about money constantly? etc
There's a ton of decisions that go into big life decisions. Time with family, even if family is everything in your view, is not the only input. Time is meaningless without context.
Out of experience, once you reached "enough" income to not worry about money constantly, obviously a conservative lifestyle helps, there is no time like today for spending time with family and friends. Spending this precious time to get, maybe, some more in future is a very risky gamble. The only thing I regret so far in my life, lucky it didn't last too long.
When making that calculus, assuming you are talking about a situation where you already have "enough" money or salary, you have to consider the fact that it's possible you will never make it to that big payday you are looking for.
But one thing is certain. Your children will grow old and move out, you parents and grandparents will pass on. Life is short and death and taxes are your only guarantees.
And the goal of just growing as quickly as possible to the exit event is questionable at best. It leads to many unfortunate side effects that create unsustainable businesses with illusory short term growth, and the overlooking of unethical and illegal behavior in many instances. I don't need to provide examples, there are plenty in the news.
We need to move beyond this old fashioned idea of shareholder primacy, there are more important things to consider than just clawing at an equity stake and optimizing to increase the value of that stake at the expense of everything else.
The math around e.g. bootstrapped companies is very unpromising though - at the end of the day there is still risk, though maybe a bit less (still unquantifiable), and the upside is near zero.
Working at a bootstrapped company is not going to earn you an exit worth more than a Ford Focus unless you have a non-trivial equity stake.
>Working at a bootstrapped company is not going to earn you an exit worth more than a Ford Focus unless you have a non-trivial equity stake.
I'd much rather be told that six-figures is a sure thing for basically eternity than know one day I could lose my job without warning, but hey maybe we'll (read: the founders) will become billionaires / millionaires.
Playing the startup lottery is a dumb prospect for short-sighted 20-year olds. Absolutely nothing wrong with joining a startup (I love them and plan on working at them for the foreseeable future), but you have to go in with the hedge that it might go to zero unless they plan on avoiding unsustainable VC-funded growth by finding sustainable profit
High and stable income put into investments and savings then leaving and founding your own bootstrapped company is the way to go. I'd much rather know I can sustainably increase my income over time than knowing I'll have to hit it big to not be in debt or lose someone's money.
VC is a fool's game. You have to be crazy enough to think you'll win, which is great for those huge wins but not so great for the losers who will have dumped 5 years and their sweat and tears to make $0 or have lost money.
I made this mistake as a starry eyed 20 y/o. Blood sweet and tears, and the end of the day my piece of the pie got turned into nothing as some VC money moved in. My 6 years there working in the data-center at 2am and 70+ hrs weeks became worth just my salary, and then the company/VC decided to IPO in 2008 (yea that's right) within a 2 months of the IPO failing they sold off our clients, gear and let all us go with 1 week notice.
I'd much rather be told that six-figures is a sure thing for basically eternity then know one day I could lose my job without warning,
You can lose your job anywhere without much warning. The trick is don’t depend on your job for your long term livelihood. Instead, depend on a marketable set of skills and a network that can help you land another job quickly.
Working at those smaller companies that aren't shoving butts in desks to make a VC happy gives you great opportunities to grow beyond your original skillset.
I agree completely. Besides the 2.5 year stint at one large company, I’ve only worked for small companies. But, I won’t work for a company that isn’t providing a competitive salary that will dangle bonuses or stock options. The only things I take into account are salary, 401K match/stock (public companies) with a short vesting period, vacation time, and health benefits.
Or work for yourself and have a diverse set of clients, and ideally a diverse set of products and services. Shouldn't diversification apply to work as it does to investments (modern portfolio theory)?
I sleep very soundly knowing that the only things I have to worry about are:
1. Going in to work and doing the best job I can.
2. Making sure my skillset is marketable and keeping my resume continuously updated
3. Keeping in touch with my local network of recruiters.
In 20+ years, it’s never taken me more than a month to get a job and once, I left a contract (long story) with nothing lined up, met a recruiter for lunch on Monday and had a job offer with a what was then a Fortune 10 company by Thursday[1].
If I worked for myself, I would be constantly hustling for clients, collecting payments etc. Working for a company means money shows up in my account twice a month for exactly the same amount. If the company goes bust, I can find another job. If I want to take a vacation or get sick, other people take up the slack and I still get paid.
I’m no special snowflake, anyone in my metro area that has kept their skills up can easily find a job.
[1] Yes that was dumb luck, the department that I was hired into was a recently acquired startup and their HR hadn’t been fully integrated into the large slow moving bureaucracy.
You're absolutely right, those are the tradeoffs and it's a matter of lifestyle preference. Having someone to help with administrative issues makes a tremendous difference, by the way, but all I meant was to share my surprise at discovering that not being an employee could be much more stable than I'd thought, sometimes even more stable than being one, and that the source of much of that stability can come from diversification of clients and products/services offered, just as with an investment portfolio.
Btw I think health insurance is the biggest problem here, in the US.
Anyway I didn't mean in any way that being employed by a company was some kind of bad choice, not at all!
Btw I think health insurance is the biggest problem here, in the US.
As long as the ACA exists, health insurance is available. It's just a cost of being self employed.
On the other hand, it's even easier if you have a spouse that works a stable job. I know a few people (including me) that have spouses that work a low paying government job just for the insurance so they can be more aggressive about their career or start a business. Since I've been married, I've jumped back and forth between working salaried and contracting with abandon.
VC is a fools game if you bet on the company going big to the extent that you're willing to work for nothing time after time. Take more risk when you get large chunks of equity, but even then expect a decent salary relatively quickly.
When you go into it demanding what you're worth and knowing the risks, on the other hand, it's not a fools game. It's a calculated high risk, high reward ride.
I've worked in many VC funded startups, and I've made money on all of them. Mostly not much above a normal job, but I've only ever put in "free" work or underpaid work for short periods, and then compensated with higher income later.
It's about not getting taken in by the sales pitch to the extent that you stop negotiating, and about not overestimating the value of the equity on the table. I typically won't take an offer that I wouldn't have taken in a non-startup without the equity.
The problem with working at a large company is dealing with all the large company BS. A small company with a business model and decent people is a much more enjoyable work environment. (OTOH, a small company with bad people is much worse). A company with revenue and a plan can afford to pay a reasonable salary, although it might not be fully competitive with total comp at a top firm.
If either job comes with a lottery ticket, I guess that's sort of nice?
I’ve worked at the largest tech companies, a 12 person startup and plenty of sizes in between. They all have BS. Small startups are not immune. The dog-and-pony shows for potential investors. The demo-ware for trade shows. The daily distractions and direct exposure to indecisive execs, without a layer of “management shielding”. I have yet to find the perfect company.
I think this is the most profound thing I've learned in my career. But an even more important lesson is that you have to find a place where the B.S. is tolerable to you. For some people the politics of a bigco may be impossible to deal with, for others the "another month, another pivot" shiny objects syndrome of a small startup may be the issue.
Every place has B.S. That's why they call it "work" and not "fun". Find a place where the B.S. is tolerable (or, better yet, minimal).
No, it isn't. The "work" is the fact that I am applying my skillset to satisfy my employer's desire whether I feel like it or not; often, that means polishing and grinding at rather boring but rather necessary tasks.
None of that requires bullshit, and calling bullshit "work" normalizes toxic behavior.
Ah, but what if you don't know the task is necessary? It might be necessary from the perspective of the greater organization, but not from your perspective. You might consider it wasteful B.S. But from another perspective it is useful. That's only one way I can think where a workplace might have a certain amount of bullshit, I'm sure there are others.
I would also like to distinguish between toxic and abusive behavior (which I don't think anyone should tolerate) and a certain amount of B.S. The latter can vary across a spectrum, but is tedious, or frustrating, or annoying, not psychologically harmful.
I prefer to think of it is a finding a bullshit compatible place. All companies have bullshit, but the trick is to find a place whose particular variant of bullshit is compatible with your particular tolerance of said bullshit.
Oh there can be plenty of bullshit in a small startup. When a company is small, there is very little place to move laterally to avoid dealing with people you find annoying. Especially if those annoying people have seniority over you by way of being in on the startup before you got in. They are unfireable and their ideas are held as gospel.
They can take the form of your manager, or colleague, or anybody in the company and the option is to either deal with it or bail on the company. In a larger company with many teams, you can usually route around such people by switching to a different org. Plus their power is often more constrained because there is just more people in the company.
Proper healthcare (insurance) should be a given. Trinet is a thing. I had all the same choices at big companies and the startup where I was ~ hire 15.
401k match is nice, but it's part of total comp. I don't want to be promoted into a job where I'm responsible for others, thanks -- it's more work, I'm not good at it, I feel bad about fucking up the careers of my subordinates, and it doesn't give me the same fulfillment of doing my normal stuff.
In exchange for a chance of promotion, I get to deal with a purchasing process that makes it nearly impossible to pay a recurring vendor; I get to do performance review cycles twice a year (no wait, there are actually two hidden mid cycle reviews, so 4x a year), and deal with co-workers who don't give a shit about actually getting things done, they just give a shit about appearing to have 'impact'. I get to deal with 'up or out' policies. I get to deal with pass the buck bullshit trying to get my state income tax changed to reflect where I work and where my desk is. Oh and so many meetings, because nobody is willing to be responsible for making decisions.
I'm willing to put up with this shit because of equity from an acquisition, but I was much happier with the typical bs at the startup, which was mostly that I ended up owning a lot of stuff I'd rather have offloaded onto IT because we didn't have IT, and because I worked at a rinky-dink ISP in the 90s so I knew how internet email worked.
But mooreds upthread is right, it's not a matter of finding a place with no BS, it's a matter of finding the BS that is most tolerable. I clearly have a preference.
I don't like hoops. I feel like startups are more about whether you can do the work, rather than learning and playing 4D Chutes and Ladders.
I've interviewed at large places and they either blew me off because no one cares (why would they) or they had pointless interview questions (cough google)
A VC funded company isn't necessarily going to pay out anything. Startups fail all the time. VC-backed ones even more often because they need to secure rounds of funding over and over - not to mention your equity being diluted over and over when they do.
When you consider company equity to be a nest egg but don't actually have any control over whether it'll be a success or not you're making a bet. I don't blame anyone who isn't interested in that game.
That depends on the stock plan and the nature of the business. If it is a stable company with growing revenue without VC funding all you need is an owner willing to share out profits accordingly to employees. Then it is not an exit per se but a steady, not to low income. And the option of being acquired, and paid for your shares without beneficial treatment of VCs, isn't to bad neither, is it?
Yeah. Let's not forget that being boostrapped doesn't prevent the company from issuing options or RSU's. Although not quite the same thing, ESOPs are nothing to sneeze at either. I got a "free" $100k in retirement money from a former employer who used an ESOP to buy out the aging founders.
Zombie startups can hurt people in more ways than just a lack of a big payday.
I joined a zombie startup. I wasn't there for the quick money or the get rich quick scheme or anything like that. Yes, the potential of a payday was part of the equation, but I joined because I hadn't been at a startup in 15 years and I was in a place in life where I had alignment on motivation, financial stability, ability, and desire to contribute. I went in wanting to work hard, do great things and have a lot of fun in the process. If there were great financial rewards that would've been great.
So, it's not all about the money. I lost a year of my career working at this dump that turned out to be a zombie. And it's a facepalm now, but all the warning signs were there: great coverage in the press, awards, prizes and so forth, a continuous source of funding through VCs and private investors, lots of customers, etc. I didn't see the warts until it was too late.
It wasn't until a few months in that I realized that it was operating like a comfortable place to just put in 8 hours a day for most people. The bureaucracy was worse at this 200 person company than it was at the large company I'd left.
That said, when the first company was bought, there was a product that the buying company didn't want to continue to support. Some friends of mine made an agreement to take over that product, and started a company to do so. They never grew the customer base that much - it was a niche product. However, they were able to continue to work together as friends, have decent paychecks with 100% company-paid insurance, and after about 15 years, sold out to a company for enough to allow for comfortable (not rich) retirements. This was all on purpose and was discussed frequently by them - "Do we want to grow, or do we want to enjoy what we're doing, have some free time, less stress, and remain friends?"
I've always thought that was a FINE model for a company, if you can pull it off. I always wanted to work there (did some consulting for them), but they could never grow quite enough to hire me. Ah, well. :)