Just a few cons....
The big players have drastically pushed up developer comp. The "maybe" money that might come from a best-case startup exit isn't holding up well against the RSUs of the big players. I have friends pushing total comp north of 400K / year at the usual suspect companies. Over a five-year-span-till-liquidity your "maybe" money is competing against a near-guaranteed $2M in comp.
Equity grants for early hires haven't kept up well with both the afore mentioned industry comp pressure and the drastically increased time till liquidity. An early hire employee will be in the soup nearly as long as the founders but with significantly less upside.
That said, working at a startup can be great fun. It's also a fine opportunity to learn on somebody else's dime.
I can't echo this enough, I have been going from startup to startup most of my career and I am about burned out and have almost nothing to show for it financially. I am ready to work with a big player from now on. I wish someone would have told me steer clear of startups unless I was a founder.
The problem is that since we are drawn to startups, we tend to read material about startup by startups. And startups would never say joining one is bad, since they need employees. And they would never make it easily known that founders get most of the benefits here. They throw things around like "great culture" and "office perks" but at the end of the day, they walk away with millions and you walk away wiser. Saying you're the next Google is like saying you're the next Buffett - the numbers make it too unrealistic for an early employee to do well.
I'm a startup founder and will happily say that if you are an engineer, in Silicon Valley, in 2018, and you are maximizing for income, then you should not work at an early-stage startup.
I did some hand-wavy math, here: https://medium.com/@kwindla/what-kind-of-silicon-valley-company-do-you-want-to-work-at-6739679c4bb8 https://medium.com/@kwindla/what-kind-of-silicon-valley-comp...
Dan Luu did some, too, here: https://danluu.com/startup-tradeoffs/ https://danluu.com/startup-tradeoffs/
I’m sorry but I don’t buy it. Startups employees are squeezed out by vc dilution and lack of big exits. Those $1m total equity cash out from startups I fear are fairly rare.
Whereas working for faang type companies, a l5 is more or less guaranteed to make $300k a year. $500-750k is doable without being a “brand name”. Timing and luck, but the spread is much smaller.
Startup founders have made a devils deal with vcs to underpay employees. You know it. Unless you issued preferred stock to all employees?
It looks like you both agree, they said you should not work at an early stage startup.
Maybe a devil's deal, but not with the goal of under-paying employees.
I know very few founders who have the highest salary at their own company, which is as it should be. Founders of VC-backed companies are making an explicity equity-vs-salary trade-off.
And every founder I know would love to pay employees more.
The challenge is that taking VC money is a commitment to try to figure out how to grow relatively quickly. There are never enough resources to try all the things you wish you could, on the way to product-market fit.
It's perfectly reasonable to criticize this model, but it's not a model that is intended to negatively impact early stage employees. Hence the discussion in this thread, much of which is about how the economic context in the SF Bay Area employee market has changed, and how to adapt.
Look at this another way: employees at early stage boot-strapping tech startups generally make less money than employees of early stage VC-backed startups.
Yeah my first company out here in the Bay Area was a startup. After that experience, not really looking for another startup position at the moment. All my friends I used to work with have moved on to other non startup companies and are all making minimum 50% more in terms of total compensation.
Yes, yes, there is always things more important than money and they have all that too as well. They can afford good leadership, good management, talented ICs. I can go on and on.
Entirely accurate. At a startup, I expect to make ~$100k/year, have mediocre insurance and work life balance, and underwhelming equity (<1%). At my enterprise job (southeast US), I’m making double the salary, 20% annual bonus, five weeks/vacation a year, great work life balance, and much better health insurance for a family of four than any startup can offer.
Unless you’re a founder, I actively steer colleagues away from working at a startup. The sense of accomplishment, impact, or whatever the feel good term is, isn’t worth shorting yourself on significant comp for years (while founders and funds are getting almost all the upside).
Edit: If you want to compete, pay more and provide more equity with less risk. Throw “hire fast, fire fast” out the door; anyone who isn’t single and in their 20s can’t rely on a job like that. Maybe consider giving preferred shares to early employees as well, so they share in early liquidity events during pre-IPO/acquisition offerings.
I basically agree.
Unless you are a founder, go with the money.
Better Estimated Value.
Just to state the obvious, there are things to optimize for other than compensation (like happiness); ~$100k/year provides a comfortable life and saving opportunity in many (most?) parts of the country.
Happiness doesn’t provide good health care to my wife and kids, or help me retire years earlier (I get to save >$100k/year because we live in a low cost of living area). I suggest a hobby if you want to be happy, as well as time with your family and loved ones.
Be careful about those who offer you emotional fulfillment or purpose in your job. There’s always a cost.
>The big players have drastically pushed up developer comp. The "maybe" money that might come from a best-case startup exit isn't holding up well against the RSUs of the big players. I have friends pushing total comp north of 400K / year at the usual suspect companies. Over a five-year-span-till-liquidity your "maybe" money is competing against a near-guaranteed $2M in comp.
I can second this. But it's not just the money though. One big thing for me is lack of actual vacation/sick time accrual in favor of this "unlimited PTO" nonsense. It leads to a culture where no one ever feels comfortable taking vacation or sick time (the obvious goal of the policy), and work life balance is a nightmare as a result.
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Ditto - I prefer a flexible and generous actual paid time off policy over unlimited PTO. One big benefit to a defined policy is accruing time off you'll be paid out for if you leave. That can be a non-insignificant amount of money for some people.
I work for a non-startup/non-tech company with unlimited PTO and people here take advantage of that all the time.
Unlimited PTO doesn't lead to work-balance nightmares; it's the result of management discouraging employees from taking breaks.
I work for a tech company that's public now, but has had an unlimited vacation policy since before IPO. I take 5-6 weeks of vacation per year (in addition to the 10 fixed holidays we get). Who cares if you don't "feel comfortable"? Do it anyway! Trust me, you'll start feeling comfortable real fast once you have a reasonable work-life balance.
Agree. Paysa is off their rocker for ranking the comp from a private company like Uber vs the comp from a public company like Google. (https://www.paysa.com/company-rank https://www.paysa.com/company-rank)
RSU grants from big public companies are the new/old way to get ahead in tech.
This. I joined a moderately successful startup (good acquisition where founders made > $1 m) and the rewards were not worth the risks as an early employee. Also, the RSUs are low risk, high rewards at the "usual suspects". Unless you love working on a small team with more autonomy, but without comfortable resources and losing sleep over whether your company will be there next week, I just don't see the attraction of joining a startup as an early employee. You can learn a whole lot from a "usual suspect", where the world's experts reside, and a whole team of competent and hard-working people are also.
With that said, I'm super interested in how we can make it better for early employers, and the obvious solution is to give them more equity. Why do founders get over 10x early employees ? Just doesn't seem fair.
+1 to this. 10 years ago you couldn't make 400K at Google, Facebook, Microsoft, etc. Now you can.
Startups made a lot more sense when your opportunity cost was 50-150K per year.
The math on this is even more direct, as you can take the differential in salary and invest directly into early stage companies that interest you, trading technical advising for access to seed rounds. You often end up with more equity (on better terms) than you would have had as an early employee, with less risk.
How do I get 400k at Google?
...160k is architect pay in most of the country.
Now the VCs that made lots of money selling their Google, etc., would now have to spend much more on giving a new startup runway. That's also a reason why many US startups and corporations hire dev teams in Eastern Europe and make it much harder to hire for local startups.
I think the core of a "fix" is here.
If I were building an engineering org today I'd either go remote-only or build it somewhere which is not SFO/SEA/NYC and friends. An underwhelming bay area compensation package puts you at absolute top-of-market in most European cities.
So Y-Combinator can help companies get out of dodge immediately after raising a seed round. For recruiting, warm up a pipeline of talented engineering managers outside the tiny handful of overheated areas in the US. Provide legal, hr, and accounting assistance with setting up shop elsewhere.
You can always still keep sales, account managers, and fully customer facing-roles in SFO.
YC could do that, but it goes against YC's mantra of the importance of having a team working in the same office of a startup and it being located only in SV.
https://blog.samaltman.com/how-to-hire https://blog.samaltman.com/how-to-hire
Thats not to say that it is the right policy, but if I were founding a startup I would definitely be looking for remote workers in other locations.
> If I were building an engineering org today I'd either go remote-only
There's a reason why so few startups go the remote-only route. How many remote-only startups ended up a success? I can't recall a single remote-only unicorn, for example.
> For recruiting, warm up a pipeline of talented engineering managers outside the tiny handful of overheated areas in the US.
Finding good engineering talent anywhere is hard. You're supposing you can find them in various foreign, remote countries you don't know. It's not that simple.
> It's also a fine opportunity to learn on somebody else's dime.
If you're getting paid less to work at a startup, it's not on "someone else's dime", though. It might be the most affordable way to (re)train yourself, but opportunity costs are still costs.
Stock markets have fared quite well in the past 5 years which explains why compensation is so good. But what if there is a market crash?
Three quick thoughts:
* The base compensation and benefits alone, even if RSUs became worthless, are still serious money.
* I would expect startups founded and running in today's boom market to fair worse than established firms. Short runways, limited revenue, and a sudden contraction in funding availability is not a great mix.
* If the lucrative comp packages of the big companies collapses, the world of startups will still be there for you. You'll have the added advantage of a very healthy bank balance going in.
I believe those tend to hurt startups worse because even more of those startups go bankrupt thus causing you to lose your job at the worst possible time.
I guess a lot of startups would shutter
Take that view with a huge grain of salt. Nobody is denying that someone, somewhere is making $400k as a software engineer, but we are talking outlier employees at outlier companies. You’re not getting this as a medium level rank and file engineer, or at a non-FAANG company. This whole “software engineers make $400k” trope seems to have taken on a life of its own. Every time salary comes up here, these guys come out of the woodwork to tell you that their brother’s girlfriend’s roommate makes $400k at Facebook, therefore it is an average compensation in Silicon Valley. That is far from accurate.
Most startups are not competing for talent that would otherwise be making $400k.
Well... If you can get 400k per year semi-guaranteed... that puts you in a certain category. I don't think that's average though, even in sv. Anyone making this kind of money (regardless of industry) usually has limited options for employers that can match it.
I do agree there's a problem with early employee comp. They don't have anywhere near the upside founder's do, but may be taking more risk on their equity than later employees. Personally, I think the best solution would be to create some liquidity for employees. 5-10 years, if you're still around is just too long.
So well put. Startups in 2018 make economic sense iff you're not CS-ish enough for the big apes, or live in a location they have no presence in.
I think the open secret is that in 2018 most people who go work for startups are those who simply couldn't get a better offer from one of the big players.
Yea this is the big one. Even a good exit won't be able to compare monetarily.
is the compensation really like this for a mid level engineer at a FAANG? I'm still fairly new into my career and I can't believe that the enterprise money is sooo much better than the startup world. I'm currently earning around 120k a year with health insurance and no equity. Should I really be designing on trading up into a nice big enterprise job?
Facebook's median compensation across all employees is $240k. Median of engineer compensation would be significantly higher. Also note that Facebook's median age is 29.
I can only speak for the bay area, but the compensation numbers your parent quotes is not too wild.
Your number, IMO, seems low if you're in the bay area.
It won't be anything like that for a mid level.
The friends I'm talking about are deeply experienced and knowledgeable (10 years minimum, mostly more), phenomenally talented, and incredibly effective at delivering results.
The pay spread between startup and big-co exists at all tiers, but it's particularly huge once you start hitting the top talent.
If you are in FAANG, and in bay area, then your numbers look too low. I know mid-level engineers in bay area, can make ~300k. All this assuming a good engineer who has been performing consistently, and is among the top 10% in his/her team.
I just started a job as a data scientist at a FAANG company. PhD + 2 years of experience for $200k total compensation (plus another $50k in one time bonuses/relo). It’s almost double what my previous (non-tech) employer paid. Although I’m starting to wonder if I should have gone the software engineering route instead. SWEs get double the RSUs as data scientists for the same experience level (so ~250k for my level) and they also didn’t spend 4 years working on a PhD to get there. Oh well... I can’t complain. Very happy with my current situation.
Unless you are working in a country where compensation is not that great. Not everyone is working at Silicon Valley or even in States so compensation between working in a well-funded start-up and big Co. is not that different. This is at least the case in Finland. Average developer in Helsinki from what I've learned might get paid 4-6k € per month equal to 48-72k year. Underpaid? Maybe. But this is how things are at the moment.
It's easy to lose perspective looking at the world from Valley/States but the salaries are generally much lower elsewhere.
This gets even more exacerbated as you become more experienced. Most startups I find seem to be quite averse to having Senior or above titles, which is fine (desirable for some, even), but then offer comp that doesn't really scale with experience in any meaningful way. It makes little-to-no sense to work for a startup when they only offer you 50% of the total comp of FAANG, being a non-founder.
I agree with this from experience. I worked at a startup for about 2 years and when they exited, it was a horrible exit for me. I made $30k in the sale. I got a $15k bonus my first year with the next company, plus I had so many other benefits of being at a larger company.
Work-life balance is not great at most startups and you're expected to not ask questions about it.
Larger companies, it's always touted that they're better about work-life balance, and after being in larger companies for the past 2-3 years, it's been apparent my stress has gone down while still being productive!
What also comes into the picture here is the extremely high cost of living in the Bay Area. Even startups have to offer $200k in non-"maybe" compensation to make sure people can afford living here. Even a relatively small size startup with 50 people now already has $10 million in salary costs per year (not even counting taxes, benefits, etc.).
So overall the balance is tilted very much in favor of the big companies that can afford paying people that much. I'm wondering how that changes where startups get started. Is the Bay Area still the dominant place for this?
What this suggests, capitalistically-speaking, is that there is insufficient supply of developers and the supply that does exist can be most effectively employed by large companies. Is the problem that startups are not an efficient way to use scarce developer resources, because there are too many of them producing too little value? Or is it that the supply of developers is too small?
A YC apprenticeship program, with in-house coaching, could play a similar role to traditional union programs.
There is also the developer !== developer problem.
I've worked with terrible developers, developers I'd trust to maybe write a blog for my cat, developers I'd trust on an important system but they all called themselves developers.
The old joke used to be "You know what they call the guy with the lowest passing grade in his medical school? Doctor".
I'm excited by projects like http://darklang.com/ http://darklang.com/ that are looking to make basic development more widely accessible, rather than requiring esoteric skilled labor mostly done by people who don't actually have the skills involved. It would be great if the industry got to the point that people coming out of school could be a net positive.
Not that 400K isn't believable, I don't think it's the norm, but being outside of the Bay Area or the US for that matter, I'll buy it.
However there's one other area where startups have failed to evolve, doing a worse job than big companies actually and that's accepting remote employees.
Big companies have been doing better because at the very least they are opening offices in multiple countries, whereas most of the startups I'm seeing are staying in the technological centers, a majority being in Silicon Valley and hiring locally. Which is nuts.
For somebody living outside of San Francisco's bubble or other expensive and overrated cities like New York or London, 150K is actually better than 400K. In many of Europe's cities, minus the expensive ones (e.g. Zurich, London, Paris), you can have a great life with 150K.
It doesn't happen though. And for the very few startups I've seen accepting remote employees, many times they are hired as contractors, without any perks or stock options and an extreme expectation for low hourly rates.
Well, you know what they say, most startups die and this is one reason why.
I disagree. There is nothing worse than teams scattered around the world in "Tech Hubs". Big companies have no idea how to run remote teams, they only know how to outsource.
A startup needs to deliver fast and have access to capital. SV, in particular, have most important ingredients - money and talent.
You can have a great life with 150k in London or Paris. Very very great.
> For somebody living outside of San Francisco's bubble or other expensive and overrated cities like New York or London, 150K is actually better than 400K.
There's no way that's true. You can easily save six figures per year on 400k total comp, no matter where you live. Saving 100k per year on 150k is much more of a challenge, especially when health insurance and taxes are accounted for.
Point being, you need to measure net savings. And you don't want to adjust that by cost of living.
How much is that per month after taxes? I'm not from the US and here normally we describe the salary after all taxes and monthly.
also there can be stress every now and then
Related question but not directly to OP:
I'm a 6 years experience SWE making $200K TC (all "paper money") in Orange County (CA) right now -- is it realistic to ask for this much paper money if I wanted to attempt a spot at a FAANG(MUA)? I'm still young and flexible and have no trouble moving around so I wouldn't mind at least trying.
The money aspect is interesting from a want-to-be founder's perspective.
Suppose you know you want to do a startup, but want to gain some "experience".
You could
A) Work at FANG for 4 years, put away 200-300k, blow most of it in the first year learning how to run a startup.
B) Work at a startup for 4 years, put away 50k, raise 200k seed and find yourself in roughly the same place, minus 10% equity.
For someone who doesn't intend to go on as a founder, my current conclusion is go to whoever will pay the most without completely compromising your morals.
The expected value of your options is not 400k, and even if you get lucky it wont be available for 8+ years. Dear 22 year old self, would you like to put a down payment on a house when your 30? If so, go get a job that aligns with your goals.
As others have mentioned here, as long as a founder isn't blatantly fraudulent, things tend to work out quite well for them. Founders learn the most and are often in the position to try again, either in the form of another startup or as a product manager within an established company. FAANG companies are also hungry for aquihires, so its possible that founders holding preferred stock may even walk away with something.
As an employee, the butt end of the bimodal distribution is probably negative. It's easiest to get through the FAANG hiring process as a new-grad, and not having one on your resume makes it even harder to break back in later.
My experiences only. I interned at and ultimately turned down a FAANG for startups 5 years ago. In the process of starting my own now.
I find it quite amusing that it is normal to find non-junior engineers getting paid 40K / year here in japan.
I personally would absolutely never take shares/options in a company, just pay me for the work I do. You can work at a startup and have fun and get extremely great compensation instead of betting on the gamble of eventually getting a small amount of payoff.
Is that "$400k in base salary and max bonus?" or is that "$400k a year in base salary, max bonus, considering benefits and stock grants which are taxed heavily unless they're held 2 years?"
I very much dislike the habit of people not explaining what goes in the knapsack.