One unorthodox strategy, which I've discussed with investors, is funding early stage such that you can pay comp that BigCo can't easily compete with -- their scale works against them. In early stage, the absolute amount of capital is trivial (and there are trillions sloshing around these days), but the quality of the initial engineering team will have an enormous impact on the success probability of the investment. A few extra million in wages can have enormously high leverage in generating billions in returns. Imagine poaching literally the best engineers in FAANG and the kind of core team that would give you to attack markets no one has attacked before.
I'd like to see top engineers in tech compensated like top professional athletes. Investors pay the wages for athletes because the returns justify it, the scale of the wages is not material if you are chasing results. I believe that model applies in tech as well.
Meanwhile, if you apply the same math to the founders and their equity, in every single case they are paying themselves multiples of what they are offering me and significantly above their own market value, despite them not having done anything yet beyond getting seed funding.
What then happens is that startups like these end up getting what they pay for - they get the appropriate level of talent at market price. This maybe a market-optimal result but the cumulative effect of all these startups doing this is that most top people have sort of written off "working at a startup" as a reasonable career option, because of pay and what pay implies about the talent level of the people they would work with. This hurts all startups, even those that are willing to pay up to get the right talent. And if top engineers won't even consider your company, offering top-tier comp may backfire - you run the risk of overpaying for the same talent you could've gotten at a lower price. It's hard to break out of this cycle - consider how the same few schools are able to persistently attract the best students - and I suspect the entire startup ecosystem is trapped in it.
The behavior of startups is not intrinsic, it is the product of incentives. If I created a startup tomorrow, I am confident that I could pull world-class engineers out of FAANG. But to your point, I would not play games with compensation. I hire the people I would hire because they are clever, they aren't going to be fooled by bullshit nor would they respect me if I tried that. That is an essential quality of good startups that should not be lost in this mix.
This is easy. Offer relatively competitive TC with a real potential upside to the equity package and a work environment that's attractive. BigCorp is mired in politics and decision-making that's grounded in risk mitigation. Do something legitimately interesting and folks will come. Give them some agency and the ability to really get things done and they'll stay.
The past 2 years I was working part-time for a startup as I am running a business of my own which is almost on autopilot and allows me time to work on other things as well.
After 2 years I realized the positive and negative sides of working for a startup that is hard to find out before working for one.
First of all there were 3 main guys running the show. Only one of them was a tech guy, the other two came from a business background with no tech knowledge wanting to build up a tech startup. Joining that startup as an early employee didn't mean much apart from getting close to 1% in options (which is nothing considering my contribution to the cause was worth way more but obviously 1% is an industry standard).
The work became increasingly more demanding, although they knew I had other things to do and I was part-time, I was asked to work more than what was normal and almost reached working full-time helping them out (which was stupid of me, I was sacrificing time that I could be doing other things). The paycut I took also from my previous part-time gig was about 40% which is almost half. The cause of the startup also started changing increasingly and although at the start I was keen to have the paycut etc it felt like I didn't belong anymore (thats important for others wanting to work at a startup to know. The idea is not gonna remain the same as it is especially with business people driving research all the time).
The only positive was that I got some more experience on as a fullstack than before as I had to work a bit more on aws and backend systems and also was using "newish" tech.
My honest opinion and advice to anyone that is willing to try out working for a startup is:
Don't compromise your salary and well-being.
Startups will offer you options which is usually crap unless you are a co-creator. If you are taking a paycut but you support and like the cause of that startup then ask for a bigger %. Realise that most likely the startup is not gonna vest or sell and generally think of your options as a gamble.
Its most likely that the chances of you making real money out of your options is the same as you winning the lottery. If you are asked to work hard and stupid hours, then reconsider your well-being and ask yourself if its worth it.
Also look at the composition of that startup. For me personally it was stupid thinking that 2 business guys having the biggest % in the company would ever work for a tech startup. They contributed in writing long essays and doing research all the time, but at the end they couldn't attract more engineers by paying shit salaries and giving out 0.2-1% in options. The product failed because it couldn't be delivered on time due to having less people working on it than it initially required, and because those business people in order to justify their own % to the company were going on heavy research and constantly deciding shift changes on the product completely out of the blue just because they had nothing else to work on. (we were supposed to release within the 1st year which would be a year ahead of our competition. We released after 2 years which gave competition the lead of releasing before us and a much better product)
All in all - don't sacrifice your salary, thats how you feed yourself and your family and someone elses weird-ass dream is not gonna make you silly money out of the blue. And also remember that working should be taking some part of your day, but you also have one life and working your ass off for someone elses shitty dream aint worth it.
Every person taking equity needs to justify their value now
This means that a setup with two "business people" founders need to justify their worth immediately. Not with promises of future sales. Not with vague research.
Worthy ways to prove their worth could be raising a giant amount of funding, or putting their own money into the startup as a sign of skin-in-the-game, or purchase orders standing ready to purchase the product once it is complete, or paid PoCs. Or serious track record of delivery/wins.
If you find a setup where engineers are taking all the initial risk while "business founders" stay on the sidelines waiting for a product to be built until they start to work -- run away. Think about it this way -- they have all the upside (they can choose later to work or to flee) while you have all the risk (you invested your pay-cut for vague promises of future work.)
