7 ms·

This will surprise nobody on Hacker News. The allure of startups isn't a guaranteed 20% more than a regular company's salary; it's the possibility of 1000% mor

This will surprise nobody on Hacker News. The allure of startups isn't a guaranteed 20% more than a regular company's salary; it's the possibility of 1000% more.

swampthinker 10y ago
It's like the lottery, except you can influence your odds a bit more.
- isoos 10y ago
  It would be interesting to see what the expected outcome's distribution is with buying lottery tickets for $X/month vs. doing a startup (and potentially earn less by $X/month than one could have had at a larger corporation).
  - elliotec 10y ago
    Interesting. If I spent 20% of my salary on lottery tickets, how good would my chances be of winning vs cashing in my stock at a startup that goes public in which I made 20% less salary? And what would the payout differences be?
    - vasilipupkin 10y ago
      The startup deal is a much better deal than lottery tickets. If you can get a 1% ownership stake and we assume a 10% chance of a 100 million dollar startup, the expected value of that grant is 100k. The expected value of buying lottery tickets with 20% of your salary is close to zero You should also consider the fact that if you are an early employee in a startup, your future expected payout is at least in part a function of your efforts
      - bendbro 10y ago
        Even given the generous 10% success rate, and 1% equity comp, you need to factor in dilution, time till maturity, whether the company even goes public, and below market salary/benefits. After that, I'll bet that in the vast majority of cases your maximum upside is significantly less than what you'd have with the standard bigco package. Edit: not to day there isn't legitimate reason for joining a startup: it's just if the work isn't super interesting, you're getting tricked
      - msandford 10y ago
        You don't get to say that the EV is close to zero in one case, but not in the other. 20k/year (dollars spent) * 1/100mm (odds of winning) * 100mm (jackpot) = 20k/year If you get a 1% ownership stake for a 20% salary reduction (per year) and you have to stay there for say, 4-5 years in order to get that 100k payout then you're looking at numbers on very similar terms. I understand why people need to be convinced that their odds are much better in startups than in the lottery. But wanting to believe something to be true and it being true aren't the same thing.
      - sidlls 10y ago
        Is 10% a reasonable value for that chance? Is 1% a reasonable value for the ownership stake? What about dilution and payout rights? A reasonable expected value of a lottery ticket is directly computable: jackpot times probability of a winning set. I'm not so sure the same is true for the value of startup employment.
        dragonwriter 10y ago
        Lottery tickets' jackpot is usually determined in part by sales of tickets for that drawing, and a winning combination wins a divided pot in the case of multiple winners (the probability of which depends again on sales of tickets for that drawing.) So, no, you can't, at the time of buying a ticket, actually calculate more than a guess of they parameters you cite for determining its expected value.
        sidlls 10y ago
        The published jackpot is a very accurate value to use, and the probability of being the sole winner is a very reasonable probability to use. The actual expected value is not going to differ from that product by enough to matter most of the time.
    - mbesto 10y ago
      More interesting would be to take the delta between a startup salary and a Google salary and invest it in SV real estate. I'd easily bet real estate would net higher returns.
- vollmond 10y ago
  And you're (hopefully) working on something more interesting and more self-directed than you might at a typical job.
- gdilla 10y ago
  and accelerate your learning/career path a bit. Big companies with big company politics tend not to reward talented 20y/rs like they should with promotion, raises, and bonuses. But being promoted or growing in a startup has a return when you job hop, at least when you're starting your career.
  - nommm-nommm 10y ago
    Not my experience at all!
susan_hall 10y ago
"not 20% more but possibly 1000% more" -- you are implying that the median startup employee makes less but it is worth it because of the big payoff for the lucky ones. That is, you imply that the median might be lower, but the average pay is higher. But that is not what the article is saying. The article is saying that average payoff is lower. In other words, being a startup employee is irrational the same way the lottery is irrational -- total payouts are lower overall.
- thoman23 10y ago
  Both the lottery and working at a startup are rational bets if you believe the value of money is non linear.
  - rlanday 10y ago
    No, many people believe the value of money in non-linear but most of those people believe that the marginal utility of each additional dollars diminishes as your wealth increases, rather than increasing. I.e. even if you might earn more money on average at a startup (which the article claims isn’t the case), it still wouldn’t be worth it because it’s better to earn a decent salary from a big company with high probability. Who seriously believes that the marginal value of money increases as you have more?
    - zachsnow 10y ago
      Interesting that while I agree that the marginal value decreases I also feel (literally feel) that somehow having say an order of magnitude more would somehow be qualitatively different (and better). Funny to see my own biases play tricks (?) on me!
      - phamilton 10y ago
        I think one could define a metric in which average result is higher for startup employees than for BigCo employees. Someone with $100M has access to politics/investments/etc that most people earning $250k/yr don't. So while the average monetary payout is smaller (1% chance at $100M is equal to a 50% chance at 2M), average social currency is much higher. (1% chance at the social power that comes with $100M vs 0% chance in the BigCo job).
tdb7893 10y ago
How many engineers get 1000% more? I thought it was the founders and investors that got more.
- Hytosys 10y ago
  Yep, you're right. There's a belligerent, Randian dream behind that 1000% nonsense that always seems to be accompanied by some far-fetched narrative of climbing the ladder.

This will surprise nobody on Hacker News. The allure of startups isn't a guaranteed 20% more than a regular company's salary; it's the possibility of 1000% more.

swampthinker 10y ago

It's like the lottery, except you can influence your odds a bit more.

isoos 10y ago
It would be interesting to see what the expected outcome's distribution is with buying lottery tickets for $X/month vs. doing a startup (and potentially earn less by $X/month than one could have had at a larger corporation).
- elliotec 10y ago
  Interesting. If I spent 20% of my salary on lottery tickets, how good would my chances be of winning vs cashing in my stock at a startup that goes public in which I made 20% less salary? And what would the payout differences be?
  - vasilipupkin 10y ago
    The startup deal is a much better deal than lottery tickets. If you can get a 1% ownership stake and we assume a 10% chance of a 100 million dollar startup, the expected value of that grant is 100k. The expected value of buying lottery tickets with 20% of your salary is close to zero You should also consider the fact that if you are an early employee in a startup, your future expected payout is at least in part a function of your efforts
    - bendbro 10y ago
      Even given the generous 10% success rate, and 1% equity comp, you need to factor in dilution, time till maturity, whether the company even goes public, and below market salary/benefits. After that, I'll bet that in the vast majority of cases your maximum upside is significantly less than what you'd have with the standard bigco package. Edit: not to day there isn't legitimate reason for joining a startup: it's just if the work isn't super interesting, you're getting tricked
    - msandford 10y ago
      You don't get to say that the EV is close to zero in one case, but not in the other. 20k/year (dollars spent) * 1/100mm (odds of winning) * 100mm (jackpot) = 20k/year If you get a 1% ownership stake for a 20% salary reduction (per year) and you have to stay there for say, 4-5 years in order to get that 100k payout then you're looking at numbers on very similar terms. I understand why people need to be convinced that their odds are much better in startups than in the lottery. But wanting to believe something to be true and it being true aren't the same thing.
    - sidlls 10y ago
      Is 10% a reasonable value for that chance? Is 1% a reasonable value for the ownership stake? What about dilution and payout rights? A reasonable expected value of a lottery ticket is directly computable: jackpot times probability of a winning set. I'm not so sure the same is true for the value of startup employment.
      - dragonwriter 10y ago
        Lottery tickets' jackpot is usually determined in part by sales of tickets for that drawing, and a winning combination wins a divided pot in the case of multiple winners (the probability of which depends again on sales of tickets for that drawing.) So, no, you can't, at the time of buying a ticket, actually calculate more than a guess of they parameters you cite for determining its expected value.
        sidlls 10y ago
        The published jackpot is a very accurate value to use, and the probability of being the sole winner is a very reasonable probability to use. The actual expected value is not going to differ from that product by enough to matter most of the time.
  - mbesto 10y ago
    More interesting would be to take the delta between a startup salary and a Google salary and invest it in SV real estate. I'd easily bet real estate would net higher returns.
vollmond 10y ago
And you're (hopefully) working on something more interesting and more self-directed than you might at a typical job.
gdilla 10y ago
and accelerate your learning/career path a bit. Big companies with big company politics tend not to reward talented 20y/rs like they should with promotion, raises, and bonuses. But being promoted or growing in a startup has a return when you job hop, at least when you're starting your career.
- nommm-nommm 10y ago
  Not my experience at all!

susan_hall 10y ago

"not 20% more but possibly 1000% more" -- you are implying that the median startup employee makes less but it is worth it because of the big payoff for the lucky ones. That is, you imply that the median might be lower, but the average pay is higher. But that is not what the article is saying. The article is saying that average payoff is lower. In other words, being a startup employee is irrational the same way the lottery is irrational -- total payouts are lower overall.

thoman23 10y ago
Both the lottery and working at a startup are rational bets if you believe the value of money is non linear.
- rlanday 10y ago
  No, many people believe the value of money in non-linear but most of those people believe that the marginal utility of each additional dollars diminishes as your wealth increases, rather than increasing. I.e. even if you might earn more money on average at a startup (which the article claims isn’t the case), it still wouldn’t be worth it because it’s better to earn a decent salary from a big company with high probability. Who seriously believes that the marginal value of money increases as you have more?
  - zachsnow 10y ago
    Interesting that while I agree that the marginal value decreases I also feel (literally feel) that somehow having say an order of magnitude more would somehow be qualitatively different (and better). Funny to see my own biases play tricks (?) on me!
    - phamilton 10y ago
      I think one could define a metric in which average result is higher for startup employees than for BigCo employees. Someone with $100M has access to politics/investments/etc that most people earning $250k/yr don't. So while the average monetary payout is smaller (1% chance at $100M is equal to a 50% chance at 2M), average social currency is much higher. (1% chance at the social power that comes with $100M vs 0% chance in the BigCo job).

tdb7893 10y ago

How many engineers get 1000% more? I thought it was the founders and investors that got more.

Hytosys 10y ago
Yep, you're right. There's a belligerent, Randian dream behind that 1000% nonsense that always seems to be accompanied by some far-fetched narrative of climbing the ladder.