The market has also drove San Francisco based startup valuations to ridiculously high levels - you have to take the bad with the good.
All else being equal, a Silicon Valley/San Francisco based startup is able to achieve a much higher valuation than an equivalent startup outside San Francisco. However, this Silicon Valley/San Francisco based startup has to deal with higher real estate and salary costs.
> All else being equal, a Silicon Valley/San Francisco
> based startup is able to achieve a much higher
> valuation than an equivalent startup outside San
> Francisco.
How sure are you that that's true, and if you are, why do you think that is? Is it really so hard for a founder in - say - Vegas - to get on a plane to SF frequently enough to neutralise any location advantage? If so, sounds like a massive opportunity for a VC to get some really cheap deals (and hence my skepticism).
The author sells equity as a main motivator in joining a startup. But if you believe in equity, you are far better off being a founder than an early employee
Being the first employee (or an early employee) of a startup seems to be the worst possible choice.
* none of the stability of a larger company
* a salary which is likely less than market
* 10 to 100 times less equity than a founder (So, in an exit, you'll make 10 to 100 times less money! Not all startups have billion+ dollar exits.)
* a huge amount of responsibility - might not be as much as a founder, but still comparable
* less influence and decision making ability than a founder
* less insight into the finances of the business than a founder (without that insight, how will you know if that equity is worth anything?)
The only benefit I see of being an early employee is if the founder is a seasoned veteran who has already done this who you can learn from and be mentored by. But the vast majority of ycombinator founders seem to be new to the startup game.
To add to your list: as an early employee, there is a good chance that your equity will get diluted a bit. The small fraction of the company you "own" when you join (and after your options fully vest) might shrink significantly after future funding rounds. As an employee you have little leverage against getting diluted.
The worst statistic of all: the vast majority of employees never exercise their stock options. According to this article, less than 5% of employee stock options are ever exercised: https://medium.com/@henrysward/broken-cap-tables-bbf84574a76... Start-ups would love for you to take a lower than market rate salary in exchange for options as the risk is entirely leveraged to the employee.
If you are going to work for a start-up you should never count your options as payment in lieu of salary. They are a lottery ticket and they are no substitute for cold hard cash. There are various other good reasons one might have for joining a start-up, but options should not be one of those reasons.
During my last job search, I was contacted by several companies with seed funding (not even series A). They wanted to lowball a salary and then give 1% or less equity to "make up for it".
Hahahahahahaha. Haha. Ha. Are you serious? For an early non-founder employee, startups might as well be scams.
Pretend the company is valued at $1m. Pretend you consider a standard programmer's salary to be $100k. If they offer you a $75k salaray, you are saving them $25k/year. Assuming you'd be there for 4 years (because that's how often most vesting periods are), you are saving them $100k. $100k of the company's $1m comes from your substandard salary. So you should get $100k in equity. That's 10%.
If they try to convince you that you don't deserve that much because the value of the company will rise in the future, ask them where the signed term sheets for the next round are.
A company today is worth however many billions it will be worth if it succeeds, discounted by the risk that it won't succeed. That's an incredibly difficult calculation to make, but fortunately you don't have to do it if the company recently had a funding round, just use the value the other investors decided on.
So if the company raised money at $10MM and you're being offered 0.5% equity, then treat it as a $50,000 bonus that you get for being a loyal employee over the vesting period.
You are speaking in some really large generalities. Being an early employee of a startup isn't indentured servitude.
If you are offered little equity as compared to the founders, don't join. If the founders won't share the financials of the company with you, don't join. If they wont pay you the salary you want, don't join. If they wont offer you the opportunity to grow into the role you want, don't join.
And you can't argue that every company is like this, because once upon a time I was employee #1 of an early stage startup and your post doesn't align with my experiences at all.
I'm not taking anything away from founding a company, I think in many cases that is a great idea. But being an early employee isn't such a horrible deal if you are selective in what jobs you take.
If there's a market for lemons, you'll get two types of people: people who realize it's a market for lemons and stay clear of it—and people who don't realize this, and end up exploited by the market.
Tu quoque: "If you find out the car has water damage, don't buy it. If you find out the car was in an accident, don't buy it. If you find out the car was stolen, don't buy it."
Nobody wants to buy such cars; people are effectively tricked into buying such cars by the information assymetry inherent in the market. This is why there are lemon laws.
And just because there are good used cars for sale, doesn't mean it isn't a market for lemons. The good cars (and jobs) sell and sell quickly, while the bad cars (and jobs) stay on the market—so the market becomes saturated with bad cars/jobs, and the actual good cars/jobs become so rare that people invest more in pursuing them than they're worth, creating a sort of dollar-auction market failure.
> The good cars (and jobs) sell and sell quickly, while the bad cars (and jobs) stay on the market—so the market becomes saturated with bad cars/jobs, and the actual good cars/jobs become so rare that people invest more in pursuing them than they're worth, creating a sort of dollar-auction market failure.
This, at least in my experience, is exactly what happens with musicians seeking bands.
> If you are offered little equity as compared to the founders, don't join. If the founders won't share the financials of the company with you, don't join. If they wont pay you the salary you want, don't join. If they wont offer you the opportunity to grow into the role you want, don't join.
Lots of people don't join startups because of these reasons - which is exactly why she wrote this piece, in an effort to convince more people to consider startups.
> If you are offered little equity as compared to the founders, don't join.
There is no "if". Employee equity is always a small fraction of founders'. This won't change until people realize the discrepancy, or demand more equity at early stage startups.
I agree with you about equity, and I'd go one step further - if you're inclined to work for a startup, you're better off in almost every way being a founder rather than an early employee.
For instance, one thing people mention here is "experience" - that you gain experience working for a startup that you wouldn't get at a big company. You only might.
Ask yourself: Are you pitching investors and making contacts? Are you meeting with the lawyers to nail down legal issues? Are you negotiating office space? Setting up equity arrangements and deals? Managing PR? Getting users? Or are you mainly just handling technical issues, while those tasks are kept from you. I know a lot of managers like to say they handle the business side so that engineers can focus on the important stuff, but keep in mind, when the storm hits, you may find, as you stand in the rain and 70mph winds without roof or even an umbrella, that all you were really protected from seeing was the forecast.
I've worked at a couple of startups, and they really didn't expose me to much about running a business. They did expose me to new and interesting technical challenges, and to that extent, I did get something out of it, but certainly nothing more than I would have gotten out of working for a big name company like Google or Facebook.
Really, if your big goal is to learn how to start a startup, I doubt you'll get that by working for one as an employee, even an early one. If you want to prepare for your second startup, I doubt there's better preparation than starting your first one.
Having been both a founder and an early employee, I wholeheartedly agree with this. Early employees really do wind up working nearly as hard as founders and the payoff is extremely disproportionate. The most likely scenario by far is failure, so your equity will be worth nothing. Your next-best hope is a moderately-successful exit, where the investors get their money back, the founders get enough to have made the endeavor worth their time and the early employees walk away with a few thousand. Hardly a year-end bonus at a bigger company (which you can expect _not_ to get at a startup). The Facebooks and Twitters of the world, where many/most early employees become millionaires are few and far enough in between to be essentially lottery tickets.
However, if you are totally fresh and want to gain some experience, it can be worth your time. The market for developers right now is such that you may not need to take such a pay cut vs a bigger company. This is the real variable. What are you giving up. And while you may work about as hard as a founder, you aren't as likely to wind up ruining your credit and destroying relationships with family and friends due to the incredible stress.
So it may be worth it for the experience. Just don't get sold on being an early employee as a path to riches via your equity. That path is vanishingly rare.
Having the opportunity to take on a larger role earlier in a company's lifespan has a lot of allure to me - you get a lot of valuable experience that a larger company would be loathe to offer to not as experienced employees. For an example, I am a senior/lead software engineer with only about 2 years of professional experience. However, my experience has been increasingly high quality, and allows me to move up at my speed, which could pay off in the future if I decide to join a larger company or if I want to start a company of my own, having some credibility with other professionals I work with or network with.
In addition, it gives me the opportunity to affect the culture of a company and help the environment be run the way I want it to be. There is a lot of work to be done, but it's the same in any non-big company.
The stability isn't as much of an issue to someone like me, since I have plenty of contacts I can reach out to if I don't like the looks of things - I've gotten in person interviews set up as short as a few hours. The salary isn't as much of an issue when I am investing in myself and preparing for a larger salary down the line due to outsized responsibilities. The equity may not be as much, but it doesn't need to be founder level to be good enough, and also there are other concerns for a founder - increased dilution and the incredible early stress fundraising & networking is not something I necessarily might want right now.
Not everyone necessarily has the skills to be a successful founder (or co-founder) - personally, I may choose to found my own company down the line, but it will be in what I want. In the meantime, working as an early employee is ok to me.
Has the term "CEO" lost all meaning, amid the hundreds of startup founders who have no management experience? Not at all. They're called CEOs because they make top-tier executive decisions and act as the public face of their startups.
Based on the post above, Bahamut's senior title is also a function of the responsibilities he's dealing with - in this case, building the first viable product of the company at an architectural level, and overseeing the completion of major features from start to finish. Just like the crop of startup CEOs in YC, his title has nothing to do with his previous experience. If the leadership of the company has decided he's fit to train new engineers and prioritize tasks for them, the "lead" description is apt too.
I'm sure there are much more skilled CEOs and much more skilled lead developers at other companies, but it's completely impractical to compare people based on internal titles. We're talking about descriptions of an employee's role in the context of his or her own company - don't read anything more into titles than that.
For 20 years I've only ever called myself "software developer", or "QA analyst," or whatever the role was. I've never added level of seniority, and I always used my own term, not whatever corporate label a particular HR department dropped on a role. ("Technical staff member?" Please.) I really don't care how my employer of the moment labels me.
Absolutely! If you framed your diploma, hung it on the wall, started work the day after graduation, and made "Senior" before you have to dust the frame the first time...
The terms CEO/CTO/etc. haven't lost their meaning with all of the startups out there (some pretty poor), why would years of experience necessarily dictate that a quality engineer cannot reach that position so quickly?
In my case, I continually hone my craft outside of work (with some breaks here and there) - I spend a lot of time learning, digesting new patterns, and assessing then. I read articles, and spin up many projects to experiment hands on with the technology, patterns, etc. My abstract depth was already sharpened from my time as a math PhD student (ultimately dropped out), and spending 2 1/2 years unemployed from having trouble finding work whetted my appetite for working to an insatiable degree. The Marine Corps enhanced my innate leadership traits, which I then took the lessons learned and applied them to leading a team (which I had to do as an acting tech lead when the tech lead had to take leave due to a family death), as well as generally carrying myself.
I earned the senior title through domain expertise at an exceptional level, and with a bit of luck achieving it in a piece of tech that exploded in popularity just afterwards (AngularJS). I have been seriously recruited as a lead developer for about a year, although I have turned down such positions for a while since I did not consider myself ready at the time.
The one thing I appreciate about being in the Bay area is that companies here recognize that such talent can exist, and such people may not even be unique. In most of the country, I probably would be still a mid-level developer, and not given the opportunity to demonstrate I would be a capable senior developer, much less lead developer.
>> "But if you believe in equity, you are far better off being a founder than an early employee"
But not everyone is cut out to be a found or has a good idea they can execute on. For those people being an early employee is the best they can do. It's also incredibly more stressful being a founder and a lot of people don't want that. They are happy to take a lower than market salary in exchange for lottery ticket (equity).
Employee #1 is taking on 80% of the risk of a founder for usually a sliver of the upside. I know a lot of single-digit startup employees and I really think you're doing them a disservice by characterizing that role as really at all less stressful than being a founder.
You see founders parachute straight into consulting or speaking after flaming out of their tech startup. Their team needs to go get jobs.
I can't speak for everywhere on earth but in this current Bay Area tech job market, I can just as easily parachute into a well-paying, full-time gig at $TRENDY_TECH_COMPANY. You build interesting experience & insight being the first-hire and, if you're actually a skilled engineer, shouldn't have a problem finding your next job in about 4 to 6 weeks if things don't work out.
It's still stressful but nowhere near as stressful. For instance - employees get a salary, founders usually don't. That alone makes a huge difference. The founder has to keep the startup alive, try to find funding, direct the product all while one bad decision could kill it. The employee has to do what the founder asks, do it well, and go home at the end of the day. Being an early employee is still more stressful than a normal job especially as there is no one to help out if you're stuck, but I think the difference between founder and early employee stress is vast.
Not to mention not everyone has 6-18 months of expenses saved up to live off of while they try their start-up, not to mention capital to start the business.
I'd go off and found a startup tomorrow if I had some way to keep paying my mortgage and feeding three mouths for however many years it took to adequeately replace my current income.
Also, you are unlikely to survive the hard work of a startup if you are not there for intangible reasons. My rule of thumb is that I will join if I believe in the vision and want to work with the team in the culture we would create together. If that is not there it is much better to get a big-co name on your resume or consult if you have strongly marketable skills.
"GitHub is a specific community that’s grown very quickly since it launched [writeup]. It was not initially reflective of open source as a whole but rather centered around the Ruby on Rails community"
Github has moved out of a niche over the past five years, and the graph demonstrates that.
Not really. It is universal that statistics can easily misrepresent if one doesn't take a critical look at choice of data and how it is presented. For example in this case the focus on new repos/issues/etc. is suspicious to me. It could very well be that we just see a rise in one-off Javascript uploads to Github here, instead of a comparison of sustained development on mature projects.
If you are are fortunate enough to have the liquidity needed (E.g.: you've already participated in a successful exit in a startup in your home country), there is always the EB-5 investor visa. (invest a half a million to a million dollars and create 10 jobs)
Obviously not an option for everyone, but if it is available to you, it may be one of the easiest ways, as you can get a green card relatively quickly via that route.
All else being equal, a Silicon Valley/San Francisco based startup is able to achieve a much higher valuation than an equivalent startup outside San Francisco. However, this Silicon Valley/San Francisco based startup has to deal with higher real estate and salary costs.