3 ms·

> For most of the offers I received, the company valuation would need to increase by 8-20x for the yearly compensation to achieve parity with the first-year off

> For most of the offers I received, the company valuation would need to increase by 8-20x for the yearly compensation to achieve parity with the first-year offer from a public SF-based company, let alone to exceed it. Damn, what a terrible deal, particularly for Series-C. As one data point, my company's stock has 5x from my initial grant value, and that has been enough to push my compensation above an equivalent position in Google Sydney, which is probably the highest paying public tech company in the country. That is _if I can sell my equity though_. So yes, please let employees sell their equity. I don't want to have to wait for the dream IPO. Edit: Actually, given Google's very strong YTD stock gains, maybe it's borderline whether I come out ahead.

lumost 6y ago
There's a time value of money question here as well. At FNG you'd earn the equity over n years. You can use this equity to buy a home, pay for college/debts, or build a diversified portfolio.
alfalfasprout 6y ago
Unfortunately this has ultimately led me to conclude that, purely from a monetary standpoint, it is just not worth joining a startup unless you're joining as a C-level employee or director and receiving several % of equity (which again, is going to be rare outside of that level). Otherwise the risk/reward makes little sense. There are other reasons to join a startup of course-- more autonomy, you believe in the product, etc... but they come at a cost (lower TC and usually much worse WLB).
- sokoloff 6y ago
  If you’re going to do that, why not just co-found something? Your position will likely be higher percentage than the amount of de-risking that’s happened in the company you’ll join. “First [non-founder] employee” is a very poor position to take on from an expected-value perspective.
  - marcinzm 6y ago
    Founder is a very different skills set and risk profile than executive/director/etc. Some people like that and others don't.
  - hkmurakami 6y ago
    The derisking value is greater than you estimate, imo. Getting from zero to that stage is very difficult for even the most capable and experienced people. (Also you save several years of getting the company to that stage, which means you'll get many more rolls of the dice for the same number of years)
  - alfalfasprout 6y ago
    Way higher risk and totally different "day to day". You have to really want it, have a good idea and good team lined up, and be ready to sacrifice a lot.
- opportune 6y ago
  I think this is true in many ways but lately I've realized there is a sweetspot of career (pre or just barely L5 at FAANG) and startup (founder previously successful, raised well from top funds, early traction) where it can make sense. Just as an example maybe your TC is currently $250k and you get an offer for a startup at $165k salary and 0.3% over 4 years of a series A company valued at $40m. That's a TC of $195k but your salary is still pretty good and if you think the startup is promising, it's basically a way to "invest" your time in it. The math starts breaking down if your opportunity cost gets high. However out of the people I've known who have worked at startups, a decent chunk of them made much more money than they would have at FAANG (and yes, for some of them, lifechanging amounts as just low/mid level engineers). So it makes sense to treat the equity/options as $0 for financial planning/budgeting purposes for sure, but from an expected value standpoint, I don't think it does.
  - necubi 6y ago
    If you're L5 at FAANG you're going to be making more like $400k, so the math starts to break down pretty quickly.
    - opportune 6y ago
      Yes, that's what I meant by "pre or just barely L5 at FAANG".
    - shostack 6y ago
      Only certain roles. Not everyone is getting that at L5.
      - alfalfasprout 6y ago
        That's pretty low for software L5 at FB/GOOG/NFLX. Probably not AMZN.
  - alfalfasprout 6y ago
    Yeah, I agree that there's definitely a time when it can make sense. From what I can tell it's either at the very beginning or much later in your career though. In the beginning of your career, a startup that has solid senior eng talent means you get a good mentor and a big playground where you can really "get your feet wet" and learn a lot, fast. Frankly, in a way that I think is really difficult to do at most FAANGs nowadays where a large number of things are abstracted away. L5 (and equivalents) are terminal levels at most FAANGs and most engineers don't make staff or above. I think it's pretty common for engineers that get the vibe their current team isn't going to let them reach L6+ to bounce to a startup. This is where typical startup offers (even for "staff" level eng) aren't going to include enough equity for it to be worthwhile. Here, the "non-monetary" factors really need to be huge for it to really make sense as a career move. So I'm really not convinced as your "run of the mill" L5 engineer that going to a startup is ever going to monetarily be the rational choice. You really have to value something else. Again, the math here is totally different when you're talking L6+ (or effectively performing/hireable at that level)
- BrandonM 6y ago
  I can't speak for the FAANG side, but I imagine based on resources like https://staffeng.com/guides https://staffeng.com/guides that it can be a huge social/political effort to ascend to staff/principal levels within a FAANG. By comparison, if you're an early employee at a startup, if you're smart and put in the work, if the startup has significant growth, and if you stick around for several years, growing into this sort of role is practically automatic. (I realize that was a lot of "if"s for "automatic".) By that point, you can go several ways. You may see an exit on the horizon and decide to stick it out. The startup could recognize the market for your skills and give you a salary that's in the ballpark of FAANG, or they can provide other compensating benefits more tailored to your personal desires. You could have experience and network connections to create your own startup. Or you could "exit yourself" to a high-level FAANG role for a huge pay raise, while still holding onto that early startup equity. Again, I'm talking about joining a startup at early stages here, like first half dozen engineers, first couple dozen employees overall. Of course, there's a lot more risk in that approach, but there are also unique benefits. You'll have a huge hand in helping to shape the culture to be the sort of place you like to work. That's the real selling point of startups; they'll never compete with FAANGs on a monetary basis, even in rather successful exits. A "generous" 0.5% equity slice of even $1B is $5MM, and it will likely take at least 10 years to get there. Add that to maybe another $2MM in salary and bonuses earned over that time, and you're looking at $7MM in total compensation for 10 years at a successful startup. If you start at about $250K in total comp at FAANG and progress roughly linearly to $800K by year 10, you're looking at $5.25MM in total comp, without having to bet on a startup having a $1B exit. But then again, it's not guaranteed that you'll climb to those lofty $800K positions at FAANG.
vmception 6y ago
The real question being is there any way to change this? Ultimately it comes down to how competitive a startup can be right now. Venture Capital isn't prepared to stretch valuations further in lower rounds so that they can compensate better in cash. Sure everyone could also give out better percentages of equity, and VCs can have lower liquidity preferences. But it really comes down to the tax treatment of common stock options, versus publicly traded common stock restricted units, and ability to compensate employees.

lumost 6y ago

There's a time value of money question here as well. At FNG you'd earn the equity over n years. You can use this equity to buy a home, pay for college/debts, or build a diversified portfolio.

alfalfasprout 6y ago

Unfortunately this has ultimately led me to conclude that, purely from a monetary standpoint, it is just not worth joining a startup unless you're joining as a C-level employee or director and receiving several % of equity (which again, is going to be rare outside of that level). Otherwise the risk/reward makes little sense. There are other reasons to join a startup of course-- more autonomy, you believe in the product, etc... but they come at a cost (lower TC and usually much worse WLB).

sokoloff 6y ago
If you’re going to do that, why not just co-found something? Your position will likely be higher percentage than the amount of de-risking that’s happened in the company you’ll join. “First [non-founder] employee” is a very poor position to take on from an expected-value perspective.
- marcinzm 6y ago
  Founder is a very different skills set and risk profile than executive/director/etc. Some people like that and others don't.
- hkmurakami 6y ago
  The derisking value is greater than you estimate, imo. Getting from zero to that stage is very difficult for even the most capable and experienced people. (Also you save several years of getting the company to that stage, which means you'll get many more rolls of the dice for the same number of years)
- alfalfasprout 6y ago
  Way higher risk and totally different "day to day". You have to really want it, have a good idea and good team lined up, and be ready to sacrifice a lot.
opportune 6y ago
I think this is true in many ways but lately I've realized there is a sweetspot of career (pre or just barely L5 at FAANG) and startup (founder previously successful, raised well from top funds, early traction) where it can make sense. Just as an example maybe your TC is currently $250k and you get an offer for a startup at $165k salary and 0.3% over 4 years of a series A company valued at $40m. That's a TC of $195k but your salary is still pretty good and if you think the startup is promising, it's basically a way to "invest" your time in it. The math starts breaking down if your opportunity cost gets high. However out of the people I've known who have worked at startups, a decent chunk of them made much more money than they would have at FAANG (and yes, for some of them, lifechanging amounts as just low/mid level engineers). So it makes sense to treat the equity/options as $0 for financial planning/budgeting purposes for sure, but from an expected value standpoint, I don't think it does.
- necubi 6y ago
  If you're L5 at FAANG you're going to be making more like $400k, so the math starts to break down pretty quickly.
  - opportune 6y ago
    Yes, that's what I meant by "pre or just barely L5 at FAANG".
  - shostack 6y ago
    Only certain roles. Not everyone is getting that at L5.
    - alfalfasprout 6y ago
      That's pretty low for software L5 at FB/GOOG/NFLX. Probably not AMZN.
- alfalfasprout 6y ago
  Yeah, I agree that there's definitely a time when it can make sense. From what I can tell it's either at the very beginning or much later in your career though. In the beginning of your career, a startup that has solid senior eng talent means you get a good mentor and a big playground where you can really "get your feet wet" and learn a lot, fast. Frankly, in a way that I think is really difficult to do at most FAANGs nowadays where a large number of things are abstracted away. L5 (and equivalents) are terminal levels at most FAANGs and most engineers don't make staff or above. I think it's pretty common for engineers that get the vibe their current team isn't going to let them reach L6+ to bounce to a startup. This is where typical startup offers (even for "staff" level eng) aren't going to include enough equity for it to be worthwhile. Here, the "non-monetary" factors really need to be huge for it to really make sense as a career move. So I'm really not convinced as your "run of the mill" L5 engineer that going to a startup is ever going to monetarily be the rational choice. You really have to value something else. Again, the math here is totally different when you're talking L6+ (or effectively performing/hireable at that level)
BrandonM 6y ago
I can't speak for the FAANG side, but I imagine based on resources like https://staffeng.com/guides https://staffeng.com/guides that it can be a huge social/political effort to ascend to staff/principal levels within a FAANG. By comparison, if you're an early employee at a startup, if you're smart and put in the work, if the startup has significant growth, and if you stick around for several years, growing into this sort of role is practically automatic. (I realize that was a lot of "if"s for "automatic".) By that point, you can go several ways. You may see an exit on the horizon and decide to stick it out. The startup could recognize the market for your skills and give you a salary that's in the ballpark of FAANG, or they can provide other compensating benefits more tailored to your personal desires. You could have experience and network connections to create your own startup. Or you could "exit yourself" to a high-level FAANG role for a huge pay raise, while still holding onto that early startup equity. Again, I'm talking about joining a startup at early stages here, like first half dozen engineers, first couple dozen employees overall. Of course, there's a lot more risk in that approach, but there are also unique benefits. You'll have a huge hand in helping to shape the culture to be the sort of place you like to work. That's the real selling point of startups; they'll never compete with FAANGs on a monetary basis, even in rather successful exits. A "generous" 0.5% equity slice of even $1B is $5MM, and it will likely take at least 10 years to get there. Add that to maybe another $2MM in salary and bonuses earned over that time, and you're looking at $7MM in total compensation for 10 years at a successful startup. If you start at about $250K in total comp at FAANG and progress roughly linearly to $800K by year 10, you're looking at $5.25MM in total comp, without having to bet on a startup having a $1B exit. But then again, it's not guaranteed that you'll climb to those lofty $800K positions at FAANG.

vmception 6y ago

The real question being is there any way to change this? Ultimately it comes down to how competitive a startup can be right now. Venture Capital isn't prepared to stretch valuations further in lower rounds so that they can compensate better in cash. Sure everyone could also give out better percentages of equity, and VCs can have lower liquidity preferences. But it really comes down to the tax treatment of common stock options, versus publicly traded common stock restricted units, and ability to compensate employees.