Working for a startup makes less sense (opens in new tab)

I've had a related discussion with a few VCs in recent months. Some kinds of startups are effectively impossible to build given current structural constraints on financing them, creating an adverse selection for startups that fit the classic model rather than startups with the highest expected ROI.

Broadly speaking, engineers will work at a discount to market-clearing wages of maybe 20% if they really like the startup. This is not necessarily an issue if you are well-funded and require ordinary levels of skill from your engineering team, which is most startups. Some types of software startups can't be built without a team of engineers where the market-clearing wages are typically more like $500k-1M. Even at a 20% discount to market, the amount of capital involved just for headcount is far too large for early stage investors, and startups that try to fit within the capital they can raise by getting by with less qualified engineers always fail at technical execution. Consequently, startups that have this property are effectively un-investable because there is not enough capital available in the early stages to achieve technical viability even though they may be great investments in the abstract. This wasn't a serious issue a decade ago, but it is spreading to a larger set of startups as wages rapidly escalate.

Given a long-term glut of capital, this could be addressed in principle by designing a model that modifies the distribution of capital/equity over time to accommodate startups that have difficulty financing the initial wage gap. As the startups grow, one would expect the average wages to start reverting toward the mean, but these startups won't get out of the gate without that initial investment in capable and very expensive engineers.

I've had interesting and productive discussions around this, it is seen as a way to bring fresh blood into an early stage pipeline that is drying up. It is obvious to almost everyone that the classic model of how you finance and build a startup team is breaking down in the current market environment, with an adverse impact on expected returns.

My experience: engineering at Startup #1 for 2 years, then Google for 3 years, then Startup #2 for 4 years, and now I've been working with seed stage companies as a VC for the last 7 years. The amount I earned as an engineer was highest at Startup #1 (got lucky!), significantly lower at Google, and a little lower than that at Startup #2. Startup #2 is still chugging along, which could eventually make it on par with or a little superior to working at Google.

But money isn't everything. Startup #2 was the place where I learned the most. I was senior enough to be single-handedly responsible for large projects like a distributed search engine and a logging and analytics service. Sure, my search engine was a POS compared to Google's, but at Google I would've worked on a part of a feature of a component of the search engine whereas at a startup I got to build the whole thing from scratch. I'm almost 40 now, and that search engine is still by far the most fun and educational engineering project I've ever worked on.

Aside from learning potential and financial comp, there are other factors like team camaraderie, independence, etc. I keep in touch with way more people from the two small startups than I do with Google colleagues. Google had a good culture, but the startups were much tighter knit.

Finally, I think articles advocating for startups vs. big companies are a little like trying to convert someone to atheism or Christianity with a blog post. It doesn't really work that way. Some people are wired for startups: they love them and spend their careers at small companies and don't understand why big companies are attractive. Other people are more drawn to big companies where the company itself has a huge impact, the teams are well-staffed and have lots of resources, and the employees get higher salaries and lots of other benefits. When these people try working at a startup, they often hate it and quickly go back to another large company.

Neither big nor small companies are objectively the best, but if you factor in personal happiness then often one type of company is the best for you.

Here's where I've been:

- worked at a startup out of college for 85k max plus significant equity (never amounted to anything). Stayed too long.

- worked at a later-stage startup starting at 120k, peaking at 130k. Got some stock options there (haven't amounted to anything yet)

- took a job at FAANG starting at 400k, plus some stock options. Currently at this job for > 600k base. Plus stock options.

While at FAANG, I created a tool that we open-sourced. I've had several VCs contact me to see if I want to try turning that into a company, but by my math it would be a lot of work for no gain over what my salary already is. I already get paid to work on this OSS thing, but I also get to work on other things - and on the OSS thing it's pretty clear cut what I need to prioritize, since my priority user base works with me at FAANG.

For me, startups have a 0/2 track record of delivering value. Being able to net more than I make as an IC seems pretty unlikely, and trying would be a whole lot of pain and sacrifice. The "faster growth as a founder" idea seems to be conditioned on the assumption that you'll succeed enough to pay yourself more than you make now, and/or be able to exit at an amount that will make up for the opportunity cost of getting paid well in the meantime while having a sane work/life balance. YMMV.

Yes you will probably make more at an established company, but your rate of growth can be much higher at a startup.

I worked at a large tech company for 3 years before joining a startup, and learned more in the first month at the startup than the full 3 years at the large tech company. I was able to design and implement a service in a matter of days, whereas at the large tech company those 3 days would easily spent convincing people that the service is needed in the first place. Direct exposure to customers also is really interesting and changes you as an engineer.

It's definitely a no guardrail environment, in the early days we had a bug that directly cost us a large customer pilot. No better teacher than experience, we did not make that mistake twice.

I've been out of startups for a few years now, but it always struck me that there is plenty of room in the cap table for employees, if founders and VCs realize they have to cut back.

If founders and VCs gave a third to half of their companies to employees, instead of crushingly small option pools, this math would almost certainly shift. And the returns wouldn't be much worse for founders or VCs.

I worked at software startups in the Boston area from 1988 through 2013, so perhaps my comments are not relevant to this day and age. But what I read in that note sounded awfully familiar.

In the mid 90s, Microsoft was buying up talent left and right, in whatever area they wanted to go into. My field is databases, and I developed expertise in the integration of query languages with programming languages. I got an obscenely lucrative offer from Microsoft, and decided to turn it down. It was a dumb decision, financially, but actually worked out fine on that front. However, I'm sure that Microsoft enticed many promising software developers to work for them instead of startups. (A few names do come to mind.)

This problem was completely solvable then, and the same technique would work now. The problem is that VCs don't want to solve it. They want software developers cheap. They give miniscule amounts of equity, and bias the terms so that those tiny stock option grants almost never pay off very well, (e.g. liquidation preferences). Except, perhaps, for the chief architect, and one or two very senior developers, we are viewed as disposable, interchangeable cogs.

There are great reasons to work for a startup, other than equity. I am very happy with my 25 years doing just that. But equity is definitely a factor. Contrary to what they would have you believe, VCs are extremely risk-averse, certainly compared to the developers who are sacrificing the best years of their lives for their companies and the chance of a financial win.

It has always been mindboggling to me that startups are still so all in on the Bay Area. Most problems mentioned in the article go away if/when you are willing to staff developers in an area that is not as ridiculous in terms of cost of living as the Bay area. According to StackExchange data, the 50th percentile pay for a Full Stack Developer with a Bachelors degree and 3 years experience (a profile that would seem reasonable for a startup hire) in the Bay area is $140k, whereas in the St Louis and Minneapolis it is $89k. Not sure why for many startups Bay area seems to be the only option. If they staffed their developers in a place like St Louis they'd be able to avoid the SF salaries and still pay in the 75th percentile for the market and the developers would have more purchasing power making $115k in the midwest or Raleigh than they do in the bay area making $145k.

There is a lot of capital out there, what needs to happen is the number of startups shrink and the well funded ones pay more money - even more than google or FB pay. Simple as that! If you are sad that you can’t get a professional team on a $1mil seed, I have absolutely no empathy for you because I’m an employee and this is the free market.

Now, if you really want to make it more enticing, some things that would move the needle for me other than comparable salaries (although more cash is #1):

- Larger equity that automatically ups if it will be diluted, and the moment any shares vest I can sell them in the private market.

- Transparent cap table.

- If the founders take cash off the table, I can as well, and no preference for founders.

- 10 years after leaving to exercise my shares. I don’t want to have a 3 month trigger that handcuffs me to prevent a giant cap gains bill on “paper money” when the fair market value is way higher.

- Reasonable working hours.

- Flexible work from home policy.

But overall, go raise more and start offering more cash, because I assume 95% of startups are total failures.

I've said this before and I'll say it again. Never accept a lower salary in exchange for equity. Salary is your market rate for providing labor. Equity is what you get for taking on the risk of being out of a job sooner than later.

So with that in mind, if the equity and bonuses in BigTechCo are a sure deal, then it may be worth negotiating for more when you join a startup.

Don't sell yourself short.

I believe this post does a very good job of bringing the elephant in the room into the discussion. The current structure of equity compensation for early-stage startup companies is simply not enticing enough to get people to choose that over the salary and predictable path of BigTechCos. I love working in startups and even I, when presented with the choice, pad the salary knowing that throughout the funding rounds, if the startup is lucky, any fractional percent that I have will be so diluted that I'm likely to walk away with nothing to show for the work I put in beside the cash I opted for, hopefully, some new connections and some learnings. While some of the more successful startups can compete with those companies on base salary it is just not enough necessarily to convince the top talent that you are the right move for their career. That said there are ways to improve this such as the increased transparency OP wrote about in their post. We should also give more equity to early employees and have favorable terms around vesting for these employees and better timing around the loss of options after leaving a company. Of course this negatively impacts founder equity and potentially investors as well. But to me, worrying about that negative impact to founders and investors comes off as short sighted on part of the investors and founders. Ensuring your early employees will be taken care of means they'll work harder for your company and this will increase the chance you'll survive long enough to see an event that makes anyone a return on their investment. The numbers are so overwhelmingly stacked against startups that worrying about the couple million less you'll have because you gave out 1-1.5% equity to your early employees is really silly, very much chicken before the egg. Instead we currently have the weird known but unspoken fact that your early employees will likely get nothing in a liquidity event while still asking them to put their all into your company which is unethical at best and downright manipulative and harmful at worst. So yeah startups are in a weird place. This doesn't even touch on companies that just stay private forever which is another issue all together.

The tricks that companies have used to dilute engineers' equity and to have different classes of stock are coming back to bite those companies.

1) People say you learn a lot more in a startup than in a BigTechCo. I don't think this is true: I've gotten far more skills during BigTechCo stints than at startups. YMMV.

2) A new grad at a startup gets, what, $100k in salary and some equity? If we're talking a three year stint at a startup, you're effectively asking a worker to invest ~$500k in exchange for that hypothetical equity. In the broadest strokes (obviously everything depends on the deal), what kind of equity does an angel get for half a million dollars, and how does it compare to the amount of equity the new grad gets? And it bears pointing out that that new grad equity is subject to all kinds of games and deception. Of course, the usual response is "you just have to be smart enough not to be scammed!" Perhaps, but I know tons of people (including myself) who are apparently just too dumb not to be scammed but are still smart enough to be gainfully employed at a safe job.

You can be compensated in other ways, but often I've found much of the work at startups can be no more interesting than their Big N counterparts. It might not even be faster paced. Your career growth might also be similar. In theory, for startups, you sacrifice pay for other facets. The reality is quite different.

The work might be similar but you're paid 50-75% of your peers. That was my experience in startup land, at least. Few good challenges or career growth and half of what I felt like I was worth. Completely personal anecdote, but I felt I was sold some half truth, where I was promised career growth, interesting problems and flexibility, but got nothing that I couldn't have found at many Big N companies.

> I think startups’ best bet is to make the most of the variables they can control outside of money and perks (if you lack the appropriate resources). This means being transparent and honest with candidates about all risks involved when joining a startup and factoring all this into the amount of equity they offer which should be something considerable.

Even if the original founders have the best intentions, large equity up front is unlikely to give you a big payday.

Since, in the traditional VC model the drive is to move toward bigger rounds (A, B, C, etc) and investors get paid back first.

So even if you do start with 10%, you'll probably only end up with a low % percent after 3-4 rounds.

The important thing to note is that this whole thing bamboozles our brains because of unicorn survivor bias. We feel like unicorns and $100m dollar companies are the norm but nothing could be further from the truth.

The chance of being part of unicorn is about 0.006% last I checked. The chance of being part of a $100m+ company is in low single digits (of all startups).

If it ends up just making a few million revenue investors will drop it (because not 10x enough) and you're 2-3% will be worth very little.

If ends up stagnating at $5m for a few years investors will drop it (because not 10x enough).

The overwhelmingly most likely outcome of you getting a large chunk like 10% up front is, when all is said and done, after 5-7 years you'll walk away with a few hundred thousand (before tax) if you are lucky.

In my case I was on founding team. Started out with 10% equity. Co. is now 7 years old. After a merger (diluted by 40%), $10m investment (diluted more), $4m strategic investment (diluted more), then investors taking money off the table first for an exit event - I stand to make $100k if we sell at $20m and $600k if we sell at $40m (currently valued at $20mish and has been for 2 years). That's pre tax.

"To make the situation worse, the very good engineers, the ones who could truly help build a tech company from the ground up from day 1, were getting offers so exorbitant they could not possibly fathom to turn them down."

Ok I have seen this written every now and then.

What does this person look like and how do I become one given a willing to sacrifice everything else?

I can not find a good answer to this question. Everybody seems to have their own opinion.

I love how the article ranked right above this one is titled "Downsides to working at a tech giant".

> Equity agreements should not be intentionally confusing or designed to screw over employees.

Totally agree with this. Unfortunately I think there might be about 5 startups left if this idea were widely implemented.

There were a few recent Ask HNs on the subject:

https://news.ycombinator.com/item?id=21709724

https://news.ycombinator.com/item?id=21641864

https://news.ycombinator.com/item?id=21645117

a larger question is : why can't startups make money

It seems like start-ups could catch up, at least somewhat, by offering more stock. Right now founders are still ending up with an order of magnitude or more stock than the first few employees.

There are certainly situations where that makes sense but if the founders are adding extreme value compared to the first few employees perhaps they should only end up with twice as much stock. That would free up a lot of equity for early employees.

I think another reason that people are wary of joining start ups, is they've realised that:

a) The market is now incredibly saturated, and being an early equity owner in a start up that will be worth billions is very rare now. Gone are the days of a unicorn every month or two.

b) People have noticed the trend of FAANG companies buying up start ups, and that this is the goal of many (most?) start ups today. Reach critical mass, get a good valuation and customer reviews, get bought out by tech giant. If you want to work on the most viable new products, just join a tech giant and work on one of the projects they've acquired. (Or wait till the company is bought and join them if they are still independantly run at which point they're not really a start up anymore)

The problem is getting paid in common stock. A pay cut is money that, instead of making, the employee is investing in the early-stage startup. That's no different than the money the investor is putting in.

Employees should get preferred stock in the amount of their pay cut.

I think the questions/issues around this topic don’t really make sense:

A. Why are we comparing an employee situation at a FAANG company with what should be a co-founder situation? If someone is an engineer that can make something happen at a startup, they should probably be a co-founder rather than an employee.

B. Why are tech center startups trying to hire coders of a certain skill level that will be incredibly expensive due to local competition? If a startup is looking for skilled coders to implement the vision of the co-founding engineers that can make things happen, then there are plenty of remote coders in non-tech-center areas that will do a bang up job for a reasonable price. Note that many of these remote coders don’t want to or cannot come to a tech center. I assume that this is an issue because many/most startups are not good at hiring, on-boarding, managing people, managing remote workers, etc.

C. Related to issue B, why play the micro-equity game with coders at all when they should either be co-founders or they (as remote workers) can be paid a satisfactory wage without equity bait?

D. Why is this conversation comparing a job with (relatively speaking) a lot of hierarchy and politics at a FAANG with a job that should have a flat structure and a great deal of autonomy? These jobs cater to two different groups of people — the ones who like the former probably won’t like the latter, and the opposite is true as well. There are subtle sides to this (e.g., do your time at a FAANG to develop a network), but many people who succeed at startups are not folks you want working at a large company — they will go nuts, and they will drive the people around them crazy.

This whole conversation is bizarre to me. I think there are three relatively simple choices:

1. Take a company job if you’re a company person — that is, someone who likes structure and hierarchy. It might not be trendy to admit it, but many/most elite school grads fall into this category.

2. If you prefer things like autonomy, being close to the customer, and being a generalist, then go to a startup. Plan on leaving once it hits a certain size.

3. If you have a plan for an alternate path that includes both, then go for it — specialist work at FAANG, FAANG then startup founder, startup employee then startup founder, etc. Just know what you’re getting into, because it can be awfully tough to walk away from $300k annual comp as a 25 yo.

Most people I’ve known clearly fall into one of these categories barring some sort of life-changing event.

My career path has been startup, public tech, startup, public tech, startup.

I got lucky that the public techs both had the largest stock growth in their history while I worked there.

All the money I ever made was at the public companies. I also learned a lot of cool, very specialized skills and got to do a lot of “ohhh so cool” type stuff.

Almost all of the knowledge I learned that allowed me to be successful at the big companies I learned at the startups, and most of the friends I made at work that I still talk to were at startups.

Both environments offer something unique.

I usually tell young people to start at a big company with a well known mentorship program and then quickly move to a startup to learn a bunch of practical skills.

But YMMV.

I have a very straightforward suggestion for startups: Focus on the engineers who've put in a decade or more at the big companies.

They are, given the exorbitant salaries, financially set enough to afford the startup risk, and there's a good chance they'd like to see some more agility again.

But 1) you'll need to stop lowballing equity for hires, and 2) you need to get used to the idea that it's not going to be an extension of university life - these people have all better things in their spare time than playing beer pong.

Bonus points: Offer an office instead of cubicle mania. Bonus bonus points: Make sure you hire a diverse workforce from the get-go.

I've worked at 3 big tech companies and 3 startups. 2 got bought out, the other is going strong. I made more money off 1 year of bonus at Google than I did with any of the successful startups. It's not because I did anything wrong (I was Eng #1 at one, First iOS Lead at another and Lead for the 3rd) It's because I was building someone else's vision for the promise that that my stock will be worth something. When a company gets bought even if you have a high % when it gets funding, it will be diluted. If the company doesn't do refreshers often enough you will be working long hours for close to free. The charming CEOs will talk about how they plan to change the world, the sleazy ones will tell you they are a sure thing (and what will you do with your millions). That makes no difference, it's just a lottery ticket. You have to decide how much of your career to put on that ticket.

Startups are a wild ride, and a thrill to join, you'll learn a lot, and have a great chance of coming out learning more than you'd learn as a entry level at a big company. Don't for a second think you have the winning lottery ticket, because if your number doesn't come up you'll left with memories and the paper it wasn't written on.

PS I'd argue if you have a group / team, build your own vision. Go big, we have enough insta-wecha-snapple sauce out there. Build something that will have real impact. And if you don't have the Team / Vision / Risk tolerance go somewhere they'll pay you what you are worth. Maybe you'll be even meet some of those you want to build a team for whats next.

Maybe startups should try cities like Pittsburgh, Columbus, Atlanta, Knoxville, etc. Lots of talent that will work for less for the simple reason that the cost of living is not so stupidly high. Hell even SoCal, Portland, Austin, and Chicago are bargains compared to NYC or worse SF.

Problem is that all the capital is in NYC and SF, and they still prefer to invest locally. At this point VCs should just skip the middle man and cut checks directly to landlords and property speculators.

Isn’t this also a function of the limited runway VC’s give to startups. If they 10x’d the amount of funding for seed and series A, startups could afford to hire the best.

It would add a lot more risk, but given the outsized rewards, it would still be profitable for some VC’s.

Otherwise, there will be lots of ideas left un-persued because many experienced engineers will not want themselves or their employees to live (in relative terms) an ascetic lifestyle while perusing their dream.

It's VCs' and founders' fault for always diluting employees on the big exits. If they want to gain back trust we need iron-clad poison-pill provisions that prevent employees from getting screwed out of their equity.

I work at a startup and have for 2 years since graduating college. Its quite hard to gauge my true value. I know that for the area (according to Stackoverflow's salary numbers) it seems competitive, but big N companies are moving in to Culver City which may be changing that.

Since starting, I've seen engineers who can't hack it leave or get fired. I've been the one engineer who has been productive and seen our projects to completion. Our team has gotten stronger over the past 2 years however and I feel that we are in a good position. In this way, I feel that I am valuable, but I have nothing to compare myself to.

Working at a startup I've also learned an extremely broad area of knowledge, much of this completely on my own. I'm often worried that that may hurt me if I apply at a larger company and that hiring managers would question my fit.

It’s worth mentioning that this post is focused on USA and (unsurprisingly) highlights Bay Area.

I’m sure the points exposed apply there but there are many other places in the USA and the rest of the world where this doesn’t apply and you can find good talent without needing to offer an exorbitant paycheck.

How about you just start giving your first engineers a bit more equity?

Well said. Startups can't really compete with MGAFA those days. Not the people, not the resources. For domain like ML, it is hard to imagine what you can realistically achieve outside of working in those companies.

A few years ago I decided to start working for a startup because I wanted to try out the experience. It was a late-stage startup with no VC money and they had good prospects for a possible acquisition.

I did the math and I figured that it might work out for me. 2 years later it turned out that they have been talking about a possible acquisition for the last 3 years, but nothing happened. I also checked the company's public information and it turned out that they weren't that transparent about the shares. I was told that I get 0.5% worth of shares (they refused to tell me the total amount of shares) and what I saw is that it was true: I had 0.5% of the outstanding shares. But in case of an acquisition, they are free to dilute them 5-fold because the authorized shares are 5 times as much as the outstanding ones.

So I decided to join a big company which is paying almost 2 times more right off the bat and I also get additional shares each year. I made a calculation and even if the old company gets acquired I get less money (it is just a rough estimation) than I get at the new company. And that's still a big if. I think that I still started from a much better situation than most of the other folks working for startups. This company produces profit, they have a business model I believe in and there is no VC to please. Most of the startups are in a much worse situation.

I will never work for a startup again.

Captable slots for early employees range anywhere from 5 to 40% (collectively, not individually), depending on who the partners are and what the company does it might make sense to join a start-up. But it's better to be a founder and if you are risk averse then it is better to work for a big company with long term viability.

This definitely isn't one size fits all and there are a lot of people that will happily try to sell you on their version of the story because 'it worked for them'.

It's fun to watch the Bay losing its startup spirit and becoming a land of mega corporates. It might resemble Atlanta in 20-30 years. There are so many other places where joining a startup is the best option you have (excluding remote gigs). I guess most startups will become remote-first and lure people who care either about the team or the problem being solved. Building a startup employer brand will be of paramount importance.

Use your brain, when offered a role, do you like the product ?

Do you believe in it ?

Are they paying you a nice amount of money ?

If you can only answer 1/3 please continue to the purgatory state.

I like this piece and I agree that startups can be great. But the first half of the essay, the hook of the essay, was contingent upon the author declining a $70k check from Thiel and noting that he walked away from $200 million; and the end of the essay suggested that one shouldn't work at a startup for the money (and you really shouldn't, it's unlikely it'll make you much).

Agreed, if you're living in SF or NYC I don't see the point in working at a startup unless you're just really passionate/optimistic about the work/company or are getting some other perks you wouldn't get at a FAANG.

Personally I work for startups, but only because they let me work remotely, something I wouldn't be able to do at any FAANG. I would only go back to an office job to work at a FAANG, since compared to a startup the money, "exit ops", work life balance, and job security are probably going to be way better.

If startups want to be more competitive and have access to more talent, then they'd be wise to open to hiring remote workers. Otherwise they're going to struggle to compete with FAANG type companies. Remote is the one perk that FAANG companies don't offer, and unfortunately probably won't for the foreseeable future short of some serious cultural change.

If the cost of housing was substantially lower, perhaps these great engineers would work for startups that could really use their talent, as they might not care as much to being millionaires so they can afford what's considered a middle class home for their family in most other places besides SF/Bay Area.

It seems to me that most companies start to gain a tedious/conventional/corporate atmosphere once they get to more than, I don't know exactly, somewhere in 100-400 employees. At that point the company has acquired, in addition to those who care purely about building companies and building software and building hardware and physical processes, a middle layer of conventional auxiliary staff, and nice though everybody may be, the company just becomes a standard corporate office environment. Many people (especially those who have enjoyed academic environments) strongly don't like such atmospheres, and for those many people this is a pretty strong incentive to work at small companies.

> And, to be clear, I’m not saying that one should or should not place money or perks above everything

Why not?

The whole premise of venture capitalism is that money is an appropriate common denominator for what is valuable in the world, that the best way to change the world is through establishing a legal entity whose goal is to make money, that once you have lots of money the best thing you can do is to put that money to further use instead of directly engaging your own technical skills.

Why do we tell potential employees at startups "money isn't everything" but potential founders "you'll make more money this way" and potential funders "please, sir, some money"?

The startup ecosystem is a way for venture capitalists to get richer, and to incentivize the people who can directly help them get richer. Evidently it's not enough - so maybe they should incentivize the people who help them indirectly get richer. If money isn't everything, don't join a startup or a big company, go to grad school, where you can actually work on whatever you want. Or go work for a big company for several years and retire, or find a half-time consulting gig, or something.

I have worked at 3 startups for 3 years of my career. At one, I was a founder and seed-venture investor; that one lasted 8 years. It was the only company NOT run by criminals. Total out-of-pocket costs to me (in 2019 dollars) : $45,000 in 2 startups for shares and for options. Total return : $0. Total discount to market salary that I worked for : 33%. In 2 out of 3 startups, the CEOs (1) stole all the money and fled the country, or (2) conned the VCs out of $2.5m and shut down the business the next day after the final funding round (all monies went directly into CEO bank accounts.) Ask me what I think about startups .... Fuck startups.

I agree that the game is clearly rigged in favor of corporations at this stage.

If money is what you're after then joining a big company is by far the most rational choice. Eventually, big tech companies will realize this and start significantly lowering wages until new engineers are paid the same as blue collar workers.

The reality is that new startups do not disrupt corporations; they feed them.

The only way I can see to end corporate dominance is with blockchain tech because it can disrupt the incentive structures that feed corporarions. The new generation of developers can build a new financial system using cryptocurrency as the decentralized foundation in which to store value.

While I understand your sentiment, there is a 2015 Dan Luu article which goes into far more depth saying basically the same thing: https://danluu.com/startup-tradeoffs/

I can see you just started writing on this blog so I don't want to discourage you, but I was struck by the formatting of your notes page and this post being so similar to Dan's along with the topic and content of this post. Keep writing but I would maybe suggest something with more of an original spin.

A few things developers are waking up to...

burnout, working evenings and weekends, a life outside of code, having children or families, master in a specific field vs jack of all trades (master of none), money is more important than free snacks, working your butt off to watch all the credit go to the founders (as well as the money), long term stability, benefits and retirement is much less risky than hoping for an equity payout

I feel the startup founders should enjoy reaping what they have sown.

I really agree with your opinion, especially the words in the last paragraph. I am working in a startup now for half a year, in which all the rules you mentioned is done well, so as a fresh graduate, I never regret working for a startup. There, I have learned a lot of different skills that definitely will be my great treasures in the future. So, for the fresh graduates, I think working for a startup makes great sense that helps them find their true value.

i'd say if a start-up is hiring outside of founders / stock offerings then they are no longer a startup and should offer somewhat realistic wages. before that time, people accept to get paid less with prospect of their stock options exploding and that compensating for the lack of initial wages.

that being said, if a person wants to work at a startup, i'd say they already accept that the wage will be much lower than at some big corporate or company who is making good income already. it seems a bit if not a lot silly to me that someone would join a startup in the early phases but then demand a corporate salary. startups are kind of a popular term, but think about it... people used to actually build stuff and then get funded / success, instead of wanting funding upfront without any actual effort put in (thats exaggerating i know). A lot of startups these days though really ask for ALOT of money from investors without having even an MVP or viable product yet. I can't see why someone would pay for just an idea ... it seems a lazy way to make a startup. Building something, prove it works, and investors will have no issue to invest?

> The two things I really like about working for smaller places or starting a company is you get very direct access to users and customers and their problems

I don’t understand this at all. Big companies have lots of individual projects, where engineers get direct access to customers. At my big co, we all watch every App Store review come in, conduct thousands of interviews with customers and have a direct say on what gets built.

YC has been saying that for a while, but great & early employee need way more equity; they're the one who change the game.

Better solution is to make do with as little staff as possible. Lower headcount makes management overhead and friction inefficiencies lower and saves you money big time. And this is something big companies can't replicate. This is how a startup was supposed to be: do one thing and do it perfectly, with as few people as possible.

Sounds like wealth inequality doesn't just affect private individuals- it's affecting corporations themselves!

The blog post echoes sentiments in TechLead's video last month about the same topic: https://www.youtube.com/watch?v=Btbvv9kfLqo "Software Engineer Salaries in 2020. How much do programmers make?"

Working for a startup makes sense if you think it has good odds of making it, and you are in for a share of it.

My main question is how do you attract developers to join your open source project? Wordpress and RoR and all those other projects?

Instead of startups I want to attract people to a project to change the world just like the OP is saying. But where to find the first few developers who would do it not for the money?

I work for startups because generally there's not useless word docs and red tape. You can have a fully reproducible engineering cycle without all the nasty forms.

I can't find the link but a while ago hacker news how to link to an article about useless jobs at large companies. Reminds me a lot of this.

The consensus on HN is pretty clearly towards being a founder or working at Bigtech Co vs being an employee at a startup.

So, if you're a founder, how do you tip the equation to make working at your startup attractive to talent who presumably also read HN?

What would make you interested in joining a startup as an employee?

Frequently in the UK I'm seeing options that are clawed back if you leave the company at any point. EMI options that can only be exercised under certain conditions such as an exit.

Actually, my observation over the last 20 years of being a venture investor, bigco acquirer and startup CEO (including at a unicorn) is that the risk-adjusted $ compensation is the same at a startup and at bigco. Startups just have more beta in the comp. You learn a lot more at a startup and hence it's the experience you want if you hope to do your own startup. If you just care about short-term $ then absolutely stay at bigco. If you want experiences unavailable at bigcos and are willing to take the chance of making less, but also the chance of making 10X+ more, do startups.

Just hire abroad. Working in a completely remote environment is entirely feasible, and it's actually in many, many ways, more comfortable and productive.

A solution could be to let engineers work for multiple companies at once and laws to prevent employers from penalizing such behaviour.

Awesome post! Also this is where nailing PMF is so Important too before hiring

Many new startups (with massive VC backing), aren't really startups

Strongly agree with this. I just did about seven weeks of interviewing in NYC for senior iOS roles, at both startups and big tech companies.

To be frank, it was a total shitshow. Especially on the startup side.

Here’s some of the bullshit I faced interviewing at early stage companies before accepting an offer literally 2.5x as high as the (multiple) offers that startups made.

1. Shitty equity: one startup wanted me to be engineer #7 and completely own the mobile app and strategy, which is the single point of interaction for their customers. They offered me 0.1% and spun some story about how much it would be worth when they were worth $800mm. Their last valuation was about $35mm. Even if their numbers were real, I’d still make more at a big tech company in equity alone. They also made it clear they wouldn’t budge.

2. Bad work/life balance: the big tech company where I accepted apparently has no issue with people taking off whatever time they need (avg is about 25 days per year), working normal 40 hour weeks, and working from home if needed. By contrast, the startups felt way more restrictive here.

3. Terrible interview process: almost all these startups had pretty disorganized process. Worse: they did the standard whiteboard algorithms interviews, whereas multiple bigger tech companies had more iOS-specific interview loops. Even worse, the startups tended to have a higher bar for hiring than the bigger tech companies. This one is subjective and could be random or misperception on my part too.

4. Most infuriating of all, all of these startups (except coinbase) had a 60-90 day option exercise window for employees who left before a liquidity window. Let me be clear: fuck you if you think this is fair. IPO might be 7-10 years out and if I stay and add value for anything short of that, you’re going to ask me to take a huge risk to exercise my options (and pay the taxes) on your probably worthless stock, otherwise you’ll just keep it? Fuck you.

The entire thing left a bad taste in my mouth. It’s pretty clear that these founders and investors don’t give much of a fuck about their talent, and watching them get squeezed by big tech companies offering sky high comp fills me with glee.

Be a founder, investor, or big co employee. Fuck being an employee for a startup so they can bleed you dry.

I feel like it is hard for people to say what they truly love before they have at least $1M in their bank account. If you have FU money, your view on working at a FAANG vs building a startup can change. You will find it easier to know what you truly LOVE.

Dunning and Kruger explained how people drastically overestimate their value. The author won't be earning what he thinks he deserves, isn't working on projects he thinks he deserves, and doesn't get the promotions he thinks he deserves wherever he goes. His reality may never change for him and that's his cross to carry.