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When I was at PowerBI in Microsoft, all the execs hailed it as Startup within Microsoft. Come work here instead of Uber. I worked like a dog, sometimes till 2am

by nojvek 6y ago

When I was at PowerBI in Microsoft, all the execs hailed it as Startup within Microsoft. Come work here instead of Uber. I worked like a dog, sometimes till 2am in morning. My manager would routinely ask us to come on weekends. I was naive, I thought we are growing customer base, this is what a startup looks like. The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microsoft it was a base salary and set amount of stock. What we did moved very little of the top revenue metric. It made little difference if I worked like a dog, or slacked. The promos were very much “buddy buddy” system. In the end I realized you can’t have startups in big companies (esp as an engineer you don’t have the huge upside if the startup is successful, your upside is capped) Startups work because you have skin in the game, when you build something people want, you get to reap rewards proportional to it. That correlation and feedback loop is very important. At big companies you don’t have the the same correlation. Some big shot exec they hired reaps far far more on the work you did. Equity is what builds wealth.

abhinav22 6y ago
Off topic, but were you involved in PowerQuery/PowerPivot as well? I have moved away from Excel, but was one of the first users of PQ/PP, it was a great step forward and my understanding is PowerBI was an extension of that. Congrats because everybody I know loves PowerBI! Well done, even if the rewards may not have been commiserate.
- nojvek 6y ago
  Was involved in early PowerQuery while it was still part of Excel. PowerBI was fun to work on. I got to learn angular (the good and bad parts).
somberi 6y ago
I would like to offer an extended view from the wealth accumulation angle. True, equity builds wealth, but in a startup, since there is no floor protection, when the startup becomes worthless (can happen for any number of reasons, and often do), then one wishes one had taken a salary (and reinvested in stocks or as seed investment - ways to gain equity exposure). One could argue that PowerBI, in this example, gained any traction at all because it benefited from the large customer base and marketing muscle of Microsoft. To extend further on the point Nojvek makes about how PowerBI moved very little of the topline revenues of the company; this also means that the bonus accrued to the author was because _some other team moved the needle_. This grouping of risk for a mean payoff, could be a desirable outcome as well, if one has better avenues to invest the capital. It all comes down to how one views risk, its mitigation, and wealth accumulation horizon.
- munificent 6y ago
  > when the startup becomes worthless (can happen for any number of reasons, and often do), then one wishes one had taken a salary (and reinvested in stocks or as seed investment - ways to gain equity exposure). Well, sure. And when the startup becomes worth billions, one wishes they had taken the options instead of a higher salary. This is just an observation that having information lets you make better decisions. Unfortunately, most of the best information lives at a point in the future after we must make the decision.
  - thegginthesky 6y ago
    The point is that the odds of any startup to be worth billions, or for an employee stock option be worth a lot more than accumulated high base salary, is very very low. So if one optimizes by using the expected value over time the conclusion is that high base salary tends to trump employee equity. One can make this sort of inference at any point in time, without hindsight at all.
    - enra 6y ago
      Joining a startup is not some game roulette where you gave zero information about potential outcomes and just choose randomly one number. You as an employee have a lot of agency to find the startup to join that you think has potential. If the startups or founders are unwilling to share their thinking then it’s probably a bad sign. Think about Stripe when they started. The whole story was that most tech and other companies need payments but it’s a hard problem and back in the day we had do merchant accounts. Makes sense, and there is a clear business and maybe as you talk to the team, you are impressed. They raised from Sequoia and other too VCS. Great, sounds like good company. Obviously there are risks. What if they get shutdown? what if PayPal/visa/Google builds this? Maybe the product will suck? Compare Stripe to something like pet walking startup Wag which also has raised tons of money. Do you think it’s easier to make money by charging % on business revenue or charging % people walking other peoples pets? There are always risks and unknowns but it’s not a random throw dice which company you join. Probably there has never been a time it would have seemed a terrible idea to join Stripe, at most it would have seemed uncertain and risky. They could have failed too but now they are a $100B+ company, and your employee equity would be worth $1M-100M depending when you joined. If you join a random startup, you take a random chance. If you do your research and thinking you can increase your odds like you can increase your odds on the public markets. You can also optimize for the team or domain you want to work in, and even if the startup fails, you might have learned something.
onion2k 6y ago
Equity is what builds wealth. In exceptional circumstances, yes. In most circumstances equity in a startup ends up being worthless, even in the event of exit. Starting your own startup, or joining a startup as a very early employee can make you rich; anything else and you might as well be buying lottery tickets. That's not to denigrate startups in any way. Working in a startup is amazing. It's just not how you get rich as an employee unless you are staggeringly lucky.
- ashtonkem 6y ago
  Even when they’re not worthless, most startup options end up being worth less than the salary that one could’ve gotten at a non-startup. Last time I looked into it, and it was a while ago, the median startup option package was exercised for a profit of $30k, not nothing but far less than what one could’ve gotten at a large company like ... Microsoft. Arguably the existence of several different types of stock options has broken the startup option system, incentivizing founders to play financial games with dilution and debt, and separating their incentive structure from that of their workers. Instead they now get paid with the VCs, which is bad for the workers. Nothing is worth working like a dog though. That’s always a bad trade.
  - BurningFrog 6y ago
    > the median startup option package was exercised for a profit of $30k That must be one of those cases where "median" and "average" are very different.
    - onion2k 6y ago
      Which is exactly why you should look at the median.
      - BurningFrog 6y ago
        The median won't tell you the difference between 20% chance of making $1k and $1M.
    - 6y ago
wwww4all 6y ago
Most engineers at startups get very little equity and most end up worthless due to dilution or failure. Even if engineers hit the startup lottery, the payout for most are not that much. Very few end with multi million dollar payouts. Statistically, financials are better with big company offers for most engineers. Some engineers that get in early with a unicorn can hit the jackpot. This is mostly combination of timing and luck and network. Some just happened to be in the right place at the right time with right group of people. PayPal engineers, early Google engineers. Early Apple engineers were not so lucky.
- ghaff 6y ago
  Apple stock was essentially a flat line until about 2004. At which point, a random person who put in $10,000 would today have $4,000,000 had they held.
- stuff4ben 6y ago
  Yes, while financially you may be better with BigCorp, there are some benefits of startups that I experienced first hand. First is the experience of being a fast-moving startup and the comradeship that you build with your colleagues. I'm still friends with people I worked with at my first startup 15 years ago. Second is the learning experience of being around very smart people. I learned so much in my 4 years at my first startup. From how startups work (and that my equity was worthless) to how to do modern (at the time) development in Java. Finally, as someone mentioned earlier, you get to see how your work moves the needle. That feedback cycle is addictive! Also, you can see when you screw up the opposite happen (I once personally caused a loss of a couple hundred dollars in revenue due to a bad SQL query).
- vinger 6y ago
  Another point. If you are outside of SV / California your startup payouts are generally very small.
- codemac 6y ago
  This is why it was a founder that complained about the equity/pay problems, rather than any engineer. If they actually rewarded their Waze employees with enough equity, the employees would have pushed much harder to not get acquired and been much more upset afterwards. You should be highly suspect of any investor or founder that thinks an acquisition is a successful outcome. What's clear is that Waze employees finally got compensated fairly, and the founders suddenly didn't have 100x upside. There's a reason it's a founder with the frown at TGIF at Google, and all the employees are excited and smiling. They're finally getting paid.
DebtDeflation 6y ago
>The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microsoft it was a base salary and set amount of stock. I joined a startup in 1999. There were 3 founders and I was employee #2 after that. I received a ton of options (this was before RSUs became popular). We had a great product and a great team, but 18 months later ran out of money and unfortunately it was right after the dotcom implosion of early 2001 when funding had completely dried up. My takeaway was that base salary is actually the most important component of TC. Cash bonus based on some metric that you control comes second. Equity comes third. If you work for a FAANG, maybe equity can move higher up (though it remains to be seen how long this will be true). Outside of FAANG (and top executives at F500 sized public companies) very few people are getting rich off of the "equity" component of their TC. The vast majority of startups go bust before IPO or acquisition. Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises.
- marcinzm 6y ago
  >Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises. That goes the other way around too, the only way to have massive amounts of free time without going FIRE is to win the lottery. So why not throw the dice once or twice when you're young and then settle into a stable corporate job if it doesn't pay out?
  - Swizec 6y ago
    Modern Silicon Valley lets you do both. Why not throw the dice and still make around $200k cash? As a [good] engineer you can have your cake and eat it too. Sure it won’t make you a billionaire but you can live a comfy life, maybe win the lottery, and retire at 50 if the lottery fails.
    - westurner 6y ago
      Living and working elsewhere with the wages of the region reduces expenses and opportunities; but the wealth of educational resources online [1][2] does make it feasible to even bootstrap a company on the side. Do you need to borrow money to scale quickly enough to pay expenses with sufficient cash flow for the foreseeable future? Income sources: Passive income, Content, Equity that's potentially worth nothing, a backtested diversified portfolio (Golden Butterfly or All Weather Portfolio and why?) of sustainable investments, Business models [3]; Software implementations of solutions to businesses, organizations, and/or consumers' opportunities Single-payer / Universal Healthcare is a looming family expense for many entrepreneurs; many of whom do get into entrepreneurship later in life. Small businesses make up a significant portion of GDP. Small businesses have to have to accept risk. There's still opportunity in the world. [1] Startup School > Curriculum https://www.startupschool.org/curriculum https://www.startupschool.org/curriculum [2] https://www.ycombinator.com/library https://www.ycombinator.com/library [3] "Business models based on the compiled list at [HN]" https://gist.github.com/ndarville/4295324 https://gist.github.com/ndarville/4295324 From "Why companies lose their best innovators (2019)" https://news.ycombinator.com/item?id=23887903 https://news.ycombinator.com/item?id=23887903 : > "Intrapreneurial." What does that even mean? The employee, within their specialized department, spends resources (time, money, equipment) on something that their superior managers have not allocated funding for because they want: (a) recognition; (b) job security; (c) to save resources such as time and money; (d) to work on something else instead of this wasteful process; (e) more money.
ignoramous 6y ago
> Equity is what builds wealth. Comes with a lot of caveats, though [0]. Amazon and likely Microsoft, has made many people wealthy, too. The surge in BigTech stock prices over the years has been nothing short of extraordinary, and there's no indication of that slowing down as more enterprises move to the cloud and even more consumers take to the Internet. Also, overworking like a start-up employee isn't necessarily what a start-up is about: A start-up's value is in its under-the-radar disruptive potential (that is, being dismissed by the incumbents as a mere "toy"). That said, a start-up must capture as much value it can (this is where working hard, being highly flexible, and moving fast likely matters) from the market it helps create, lest it be subject to irrelevance; but this part comes a bit later in a start-up's life, at which point (the start-up is no longer under-the-radar and investors are circling around it like bees) its stock-options wouldn't likely make an engineer "generational wealth" either (different story for executives) but would have to work hard anyway. Read also: https://danluu.com/startup-tradeoffs/ https://danluu.com/startup-tradeoffs/ [0] https://mashable.com/tech/2854/how-amazons-97-million-eero-acquisition-screwed-employees-and-minted-millionaires https://mashable.com/tech/2854/how-amazons-97-million-eero-a...
ma2rten 6y ago
You can have payouts proportional to success even in big companies. Google famously payed $120M to Anthony Levandowski. This is because there was an agreement in place to pay projects in X based on the value that they create.
- ryandrake 6y ago
  True, but this is a vanishingly small edge case. You generally have to be a certain person to negotiate something like this with a big company. Surely the "Ninth Cog Engineer From The Left" at Waymo will not have the negotiating power to get this kind of profit-sharing or pay-for-value comp package.
  - CobrastanJorji 6y ago
    I recall reading somewhere that Waymo had retention problems due to many of the early engineers were given so much money that they simply no longer cared to work. I don't know how true that is, but I believe it.
    - ssk2 6y ago
      The Verge reported on this [1] in 2017- > Bloomberg says that early staffers “had an unusual compensation system” that multiplied staffers' salaries and bonuses based on the performance of the self-driving project. The payments accumulated as milestones were reached, even though Waymo remains years away from generating revenue. One staffer eventually “had a multiplier of 16 applied to bonuses and equity amassed over four years.” The huge amounts of compensation worked — for a while. But eventually, it gave many staffers such financial security that they were willing to leave the cuddly confines of Google. [1] https://www.theverge.com/2017/2/13/14599186/google-waymo-self-driving-salary-compensation-autonomous https://www.theverge.com/2017/2/13/14599186/google-waymo-sel...
  - ma2rten 6y ago
    I think the same deal applied to all projects at X at the time. The other projects were just not all successful.
Spooky23 6y ago
It’s a no true Scotsman scenario. Obviously working on a “startup” in a big company isn’t the same as starting a new company. But... you get to enjoy the bigco benefits and security while avoiding a lot of bigco bullshit. I did something like this in a public sector org. We got to do something new and exciting, many of the team ended up getting promoted, and the big shots got to pay themselves on the back too. We did not get rich, but we did not risk much. Generally speaking, if you want to build wealth on a short horizon, working for someone is the hardest path.
- Mauricebranagh 6y ago
  Lol I remember volunteering for a ground breaking RAD / DSDM ? Agile web project in 94. BT gave me a £25 pound voucher which I put together with my previous projects £25 voucher and brought a diamond Rio MP3 player.
decebalus1 6y ago
> Startups work because you have skin in the game, when you build something people want, you get to reap rewards proportional to it. Eh... not really. Especially not for the rank-and-file employees. Most don't get proportional rewards even if the company exits successfully. Unless you're a founder or one of the early employees, for the high percentile of successful startups, rewards are proportional with what you'd have gotten at FAANG companies during the same time. Not to diminish your experience, but I think the idea there was that you get to work on something 'risky' but regardless of its success you'll still get your paycheck, health insurance benefits. And if it goes belly up, you can just do a lateral move to Azure or whatever instead of worrying about the very existence of the company.
Uehreka 6y ago
This is also an issue I’ve seen with companies that began as startups, but then transitioned into the “big company” phase: Founders and early employees complain that “when we were getting started, we could’ve gotten this feature done in a week! What’s taking so long?” There tends to be frustration that employees won’t work nights and weekends, even though their work could “turn this company into the next Amazon!” When you bring up the fact that the difference is that they have equity and you don’t, and that they would materially benefit from growth but you wouldn’t, they tend to get grumpy. But they never do have a better answer.
- AtlasBarfed 6y ago
  UnitedHealthCare is an example of this on steroids. UHC basically can't show a huge profit. Otherwise they'd be subject to investigations and pilloried for profiting off of the misery that is the US health care system. But they make money hand over fist, because... it's the US healthcare system, and they have an effective monopoly/dominant cartel position as one of the four pigs at the trough (trial lawyers, doctors, insurance, drug/device companies). So instead of profits, a gigantic management tree has built up, and the managers take all the money. Then tell their workers they aim for the bottom third of market compensation. Colleges seem to me the same way: no "profits", but suck in huge amounts of money as the tuition skyrockets. Hmmm, and suddenly a huge administrative/management/MBA apparatus has appeared in higher education? You don't say. Salary was basically a contract with employees to take steady income and employment (once upon a time ....) while the management layer and stockholders will eat the gravy. Motivation in that contract is strictly around 1) access to management for the "ambitious" and 2) don't get fired for the rest. Hand in hand in IT with not being able to get things done quickly is that doing things quickly is high risk, and that violates the core motivation of almost everyone in the #2 don't get fired crowd. Salaries = risk aversion.
- daemin 6y ago
  I said this thing in response to Game Development crunch, which also applies to startups. The original creators of the company, now people in charge, have equity and that is a big reason they worked so hard to grow the company from nothing into what it is today. Therefore when they ask (or subconciously demand through company culture) to crunch or work overtime they should give out equity as an extra part of the compensation for working extra hours. Part of this is to align the founders' and employees motivations so they're more in sync, as both parties now have some form of upside to work hard and see the company grow. Another part of this is to make the shareholders and founders really think about the culture and how they expect other people to work. So if they want a culture that is about putting in many hours and effort then they should be prepared to lose a little bit of ownership to make that happen. If they're not comfortable with that then they this will act as a disincentive for them, so they fix the culture and their expectations and people can have a normal work schedule. One final note is that with whatever system there will be people that end up exploiting it, and as ever that's a people management problem. Hopefully with a trustworthy culture this will not happen.
DamnYuppie 6y ago
Equity can also be bought with your excess capital for you work. At the current market salary for developers it should be quite obtainable to live well below your income and invest a sizeable portion of it in the markets, either stock or realestate. Do this for 10 years and about 20 years later you will have many millions of dollars.
6gvONxR4sf7o 6y ago
I don’t think the issue is that working at a pseudo startup doesn’t pay enough while a real startup does. Startups almost always pay less than big companies. Even most of the successful ones. For a worker, the pseudo startup is a great option. You get a high base salary, and a large stock grant, and the high growth stock we’ve seen at a lot of the big companies over a reasonably long period. By the end of your vesting, your $125k cash + $75k RSU = $200k/yr has (using apple growth, which is reasonably FAANG representative) grown to $125k + $245k RSUs = $370k/yr assuming no promotions and a linear vest. Equity does build wealth, and BigCo equity does it much more reliably than a real startup.
otabdeveloper4 6y ago
Monetary compensation is only part of the equation. Having "the guy who made PowerBI" on your resume can be worth more than some stock options.
g9yuayon 6y ago
Many comments below focus on failures with a single startup. I think it misses the point. Working for startups is risky, but the key is to build a system that increases your accumulated probability of success -- this is exactly why it's important to live in the bay area and work for some startups there, at least before the Covid-19. You get to see a large number of people who didn't fund any company, but still became financially independent by choosing to join the right companies at the right time. You get to see how those people make their choices. You get to see how those people decide to jump ship. You get to build a social circle where you learn lots of first-hand information about startups. There are a few simple steps that worked well for many people (again, no guarantee of success, but they do increase accumulated probability of finding the right company). - You bet on product you love. Airbnb/Pinterest/Uber before 2013, Netflix before 2010, FB before 2009, Google before 2003, Databriks before 2017, Tesla before 2017. - You bet on sectors. SDN, gig economy, search, big data, and etc. - You bet on company's productivity - the customers/engineer grows exponentially without Uber-style marketing cost - Instagram/WhatsApp; the company releases features faster than they hire - Google; people deliver without working like a dog - Netflix - You bet on people you know or you admire - You bet on the leaders in each sector
UncleOxidant 6y ago
You can certainly work like a dog in an actual startup with the hope that your equity will someday be worth something... only to have it be worth nothing because the company didn't make it. This is what happens in the vast majority of startups as few startups end up making the big time.
hinkley 6y ago
I worked as a contractor for a sort of startup inside a big company, so the pay was good and immediate. The problem is when we got successful everyone tried to pin us down with the existing bureaucracy, and everything that made us great was a reason we should be stopped. Autoimmune response.
csours 6y ago
PowerBI is pretty cool though, so thanks for that
1vuio0pswjnm7 6y ago
Jeff Bezos: "It's Day One." Ah, not quite. At that early stage, the risk and opportunities are different. He wants his employees to to work as hard as if it were Day One, but he cannot offer 10s of thousands of workers the same possibilities as if they arrived on Day One.
- zalequin 6y ago
  I think Bezos referred to the mindset of the people who live and die by the success of the company - namely the founders and executives who are responsible for making sure it succeeds.
  - 1vuio0pswjnm7 6y ago
    Do they live and die by the success of the company. If the business starts to decline who is terminated first. The founders and executives. The audience for the letter from this quote is taken is not only founders and executives, it is Amazon employees, investors, potential investors and analysts, i.e., the public.
sytelus 6y ago
This is quite one sides view. There are many many examples such as Word, Excel, Google Maps, Gmail, FB Messanger etc started as “startup within big co”. Initially they were small, people worked hard and then they become very big. When they were small (<50) people, those early folks ripped similar rewards as early startup employees. Many later became distinguished engineers, CVPs raking many millions over the years. I don’t know when you joined PowerBI but the probability of you getting disproportionate rewards if you weren’t in first 50 employees in usual startup is not very high either. I don’t agree with thesis in this article. Yes, most startup efforts in big co fails but failure rate is probably not worse than usual startups. For successful startups within big co, rewards are pretty huge as well. For Waze case, I had argue that they were already running out of steam when they joined Google even though they continued growth. It wouldn’t be feasible for them to compete effectively while growing exponentially with strong and free product like Google Maps as their competition. I am doubtful if Waze employees would have faired vastly better as independent startup.
- Decker87 6y ago
  That's a good point and a fine distinction about whether the success is higher or lower. The point that Noam makes is more that its different. It's not a startup anymore. That probably means less chance of abject failure or success.
kerng 6y ago
Good comment. It seems the only ones benefiting are the partners in these companies - who actually try to create that startup narrative and get the compensation in return. If a group within a large company tries to advertise as startup, it's a big red flag. One should join a company like Microsoft to learn and see how things are done in a mature place and to have good work life balance with reasonable pay - then if you want take that knowledge and experience with you outside to a startup if you want.
HeavyStorm 6y ago
Hmm, you are at least talking about a tech startup on a big tech company. I've seen many attempts of hosting (incubating?) a startup in a traditional company like a financial institution. That's what really isn't possible.

by nojvek 6y ago

abhinav22 6y ago

Off topic, but were you involved in PowerQuery/PowerPivot as well? I have moved away from Excel, but was one of the first users of PQ/PP, it was a great step forward and my understanding is PowerBI was an extension of that. Congrats because everybody I know loves PowerBI! Well done, even if the rewards may not have been commiserate.

nojvek 6y ago
Was involved in early PowerQuery while it was still part of Excel. PowerBI was fun to work on. I got to learn angular (the good and bad parts).

somberi 6y ago

I would like to offer an extended view from the wealth accumulation angle. True, equity builds wealth, but in a startup, since there is no floor protection, when the startup becomes worthless (can happen for any number of reasons, and often do), then one wishes one had taken a salary (and reinvested in stocks or as seed investment - ways to gain equity exposure). One could argue that PowerBI, in this example, gained any traction at all because it benefited from the large customer base and marketing muscle of Microsoft. To extend further on the point Nojvek makes about how PowerBI moved very little of the topline revenues of the company; this also means that the bonus accrued to the author was because _some other team moved the needle_. This grouping of risk for a mean payoff, could be a desirable outcome as well, if one has better avenues to invest the capital. It all comes down to how one views risk, its mitigation, and wealth accumulation horizon.

munificent 6y ago
> when the startup becomes worthless (can happen for any number of reasons, and often do), then one wishes one had taken a salary (and reinvested in stocks or as seed investment - ways to gain equity exposure). Well, sure. And when the startup becomes worth billions, one wishes they had taken the options instead of a higher salary. This is just an observation that having information lets you make better decisions. Unfortunately, most of the best information lives at a point in the future after we must make the decision.
- thegginthesky 6y ago
  The point is that the odds of any startup to be worth billions, or for an employee stock option be worth a lot more than accumulated high base salary, is very very low. So if one optimizes by using the expected value over time the conclusion is that high base salary tends to trump employee equity. One can make this sort of inference at any point in time, without hindsight at all.
  - enra 6y ago
    Joining a startup is not some game roulette where you gave zero information about potential outcomes and just choose randomly one number. You as an employee have a lot of agency to find the startup to join that you think has potential. If the startups or founders are unwilling to share their thinking then it’s probably a bad sign. Think about Stripe when they started. The whole story was that most tech and other companies need payments but it’s a hard problem and back in the day we had do merchant accounts. Makes sense, and there is a clear business and maybe as you talk to the team, you are impressed. They raised from Sequoia and other too VCS. Great, sounds like good company. Obviously there are risks. What if they get shutdown? what if PayPal/visa/Google builds this? Maybe the product will suck? Compare Stripe to something like pet walking startup Wag which also has raised tons of money. Do you think it’s easier to make money by charging % on business revenue or charging % people walking other peoples pets? There are always risks and unknowns but it’s not a random throw dice which company you join. Probably there has never been a time it would have seemed a terrible idea to join Stripe, at most it would have seemed uncertain and risky. They could have failed too but now they are a $100B+ company, and your employee equity would be worth $1M-100M depending when you joined. If you join a random startup, you take a random chance. If you do your research and thinking you can increase your odds like you can increase your odds on the public markets. You can also optimize for the team or domain you want to work in, and even if the startup fails, you might have learned something.

onion2k 6y ago

Equity is what builds wealth. In exceptional circumstances, yes. In most circumstances equity in a startup ends up being worthless, even in the event of exit. Starting your own startup, or joining a startup as a very early employee can make you rich; anything else and you might as well be buying lottery tickets. That's not to denigrate startups in any way. Working in a startup is amazing. It's just not how you get rich as an employee unless you are staggeringly lucky.

ashtonkem 6y ago
Even when they’re not worthless, most startup options end up being worth less than the salary that one could’ve gotten at a non-startup. Last time I looked into it, and it was a while ago, the median startup option package was exercised for a profit of $30k, not nothing but far less than what one could’ve gotten at a large company like ... Microsoft. Arguably the existence of several different types of stock options has broken the startup option system, incentivizing founders to play financial games with dilution and debt, and separating their incentive structure from that of their workers. Instead they now get paid with the VCs, which is bad for the workers. Nothing is worth working like a dog though. That’s always a bad trade.
- BurningFrog 6y ago
  > the median startup option package was exercised for a profit of $30k That must be one of those cases where "median" and "average" are very different.
  - onion2k 6y ago
    Which is exactly why you should look at the median.
    - BurningFrog 6y ago
      The median won't tell you the difference between 20% chance of making $1k and $1M.
  - 6y ago

wwww4all 6y ago

Most engineers at startups get very little equity and most end up worthless due to dilution or failure. Even if engineers hit the startup lottery, the payout for most are not that much. Very few end with multi million dollar payouts. Statistically, financials are better with big company offers for most engineers. Some engineers that get in early with a unicorn can hit the jackpot. This is mostly combination of timing and luck and network. Some just happened to be in the right place at the right time with right group of people. PayPal engineers, early Google engineers. Early Apple engineers were not so lucky.

ghaff 6y ago
Apple stock was essentially a flat line until about 2004. At which point, a random person who put in $10,000 would today have $4,000,000 had they held.
stuff4ben 6y ago
Yes, while financially you may be better with BigCorp, there are some benefits of startups that I experienced first hand. First is the experience of being a fast-moving startup and the comradeship that you build with your colleagues. I'm still friends with people I worked with at my first startup 15 years ago. Second is the learning experience of being around very smart people. I learned so much in my 4 years at my first startup. From how startups work (and that my equity was worthless) to how to do modern (at the time) development in Java. Finally, as someone mentioned earlier, you get to see how your work moves the needle. That feedback cycle is addictive! Also, you can see when you screw up the opposite happen (I once personally caused a loss of a couple hundred dollars in revenue due to a bad SQL query).
vinger 6y ago
Another point. If you are outside of SV / California your startup payouts are generally very small.
codemac 6y ago
This is why it was a founder that complained about the equity/pay problems, rather than any engineer. If they actually rewarded their Waze employees with enough equity, the employees would have pushed much harder to not get acquired and been much more upset afterwards. You should be highly suspect of any investor or founder that thinks an acquisition is a successful outcome. What's clear is that Waze employees finally got compensated fairly, and the founders suddenly didn't have 100x upside. There's a reason it's a founder with the frown at TGIF at Google, and all the employees are excited and smiling. They're finally getting paid.

DebtDeflation 6y ago

>The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microsoft it was a base salary and set amount of stock. I joined a startup in 1999. There were 3 founders and I was employee #2 after that. I received a ton of options (this was before RSUs became popular). We had a great product and a great team, but 18 months later ran out of money and unfortunately it was right after the dotcom implosion of early 2001 when funding had completely dried up. My takeaway was that base salary is actually the most important component of TC. Cash bonus based on some metric that you control comes second. Equity comes third. If you work for a FAANG, maybe equity can move higher up (though it remains to be seen how long this will be true). Outside of FAANG (and top executives at F500 sized public companies) very few people are getting rich off of the "equity" component of their TC. The vast majority of startups go bust before IPO or acquisition. Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises.

marcinzm 6y ago
>Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises. That goes the other way around too, the only way to have massive amounts of free time without going FIRE is to win the lottery. So why not throw the dice once or twice when you're young and then settle into a stable corporate job if it doesn't pay out?
- Swizec 6y ago
  Modern Silicon Valley lets you do both. Why not throw the dice and still make around $200k cash? As a [good] engineer you can have your cake and eat it too. Sure it won’t make you a billionaire but you can live a comfy life, maybe win the lottery, and retire at 50 if the lottery fails.
  - westurner 6y ago
    Living and working elsewhere with the wages of the region reduces expenses and opportunities; but the wealth of educational resources online [1][2] does make it feasible to even bootstrap a company on the side. Do you need to borrow money to scale quickly enough to pay expenses with sufficient cash flow for the foreseeable future? Income sources: Passive income, Content, Equity that's potentially worth nothing, a backtested diversified portfolio (Golden Butterfly or All Weather Portfolio and why?) of sustainable investments, Business models [3]; Software implementations of solutions to businesses, organizations, and/or consumers' opportunities Single-payer / Universal Healthcare is a looming family expense for many entrepreneurs; many of whom do get into entrepreneurship later in life. Small businesses make up a significant portion of GDP. Small businesses have to have to accept risk. There's still opportunity in the world. [1] Startup School > Curriculum https://www.startupschool.org/curriculum https://www.startupschool.org/curriculum [2] https://www.ycombinator.com/library https://www.ycombinator.com/library [3] "Business models based on the compiled list at [HN]" https://gist.github.com/ndarville/4295324 https://gist.github.com/ndarville/4295324 From "Why companies lose their best innovators (2019)" https://news.ycombinator.com/item?id=23887903 https://news.ycombinator.com/item?id=23887903 : > "Intrapreneurial." What does that even mean? The employee, within their specialized department, spends resources (time, money, equipment) on something that their superior managers have not allocated funding for because they want: (a) recognition; (b) job security; (c) to save resources such as time and money; (d) to work on something else instead of this wasteful process; (e) more money.

ignoramous 6y ago

> Equity is what builds wealth. Comes with a lot of caveats, though [0]. Amazon and likely Microsoft, has made many people wealthy, too. The surge in BigTech stock prices over the years has been nothing short of extraordinary, and there's no indication of that slowing down as more enterprises move to the cloud and even more consumers take to the Internet. Also, overworking like a start-up employee isn't necessarily what a start-up is about: A start-up's value is in its under-the-radar disruptive potential (that is, being dismissed by the incumbents as a mere "toy"). That said, a start-up must capture as much value it can (this is where working hard, being highly flexible, and moving fast likely matters) from the market it helps create, lest it be subject to irrelevance; but this part comes a bit later in a start-up's life, at which point (the start-up is no longer under-the-radar and investors are circling around it like bees) its stock-options wouldn't likely make an engineer "generational wealth" either (different story for executives) but would have to work hard anyway. Read also: https://danluu.com/startup-tradeoffs/ https://danluu.com/startup-tradeoffs/ [0] https://mashable.com/tech/2854/how-amazons-97-million-eero-acquisition-screwed-employees-and-minted-millionaires https://mashable.com/tech/2854/how-amazons-97-million-eero-a...

ma2rten 6y ago

You can have payouts proportional to success even in big companies. Google famously payed $120M to Anthony Levandowski. This is because there was an agreement in place to pay projects in X based on the value that they create.

ryandrake 6y ago
True, but this is a vanishingly small edge case. You generally have to be a certain person to negotiate something like this with a big company. Surely the "Ninth Cog Engineer From The Left" at Waymo will not have the negotiating power to get this kind of profit-sharing or pay-for-value comp package.
- CobrastanJorji 6y ago
  I recall reading somewhere that Waymo had retention problems due to many of the early engineers were given so much money that they simply no longer cared to work. I don't know how true that is, but I believe it.
  - ssk2 6y ago
    The Verge reported on this [1] in 2017- > Bloomberg says that early staffers “had an unusual compensation system” that multiplied staffers' salaries and bonuses based on the performance of the self-driving project. The payments accumulated as milestones were reached, even though Waymo remains years away from generating revenue. One staffer eventually “had a multiplier of 16 applied to bonuses and equity amassed over four years.” The huge amounts of compensation worked — for a while. But eventually, it gave many staffers such financial security that they were willing to leave the cuddly confines of Google. [1] https://www.theverge.com/2017/2/13/14599186/google-waymo-self-driving-salary-compensation-autonomous https://www.theverge.com/2017/2/13/14599186/google-waymo-sel...
- ma2rten 6y ago
  I think the same deal applied to all projects at X at the time. The other projects were just not all successful.

Spooky23 6y ago

It’s a no true Scotsman scenario. Obviously working on a “startup” in a big company isn’t the same as starting a new company. But... you get to enjoy the bigco benefits and security while avoiding a lot of bigco bullshit. I did something like this in a public sector org. We got to do something new and exciting, many of the team ended up getting promoted, and the big shots got to pay themselves on the back too. We did not get rich, but we did not risk much. Generally speaking, if you want to build wealth on a short horizon, working for someone is the hardest path.

Mauricebranagh 6y ago
Lol I remember volunteering for a ground breaking RAD / DSDM ? Agile web project in 94. BT gave me a £25 pound voucher which I put together with my previous projects £25 voucher and brought a diamond Rio MP3 player.

decebalus1 6y ago

> Startups work because you have skin in the game, when you build something people want, you get to reap rewards proportional to it. Eh... not really. Especially not for the rank-and-file employees. Most don't get proportional rewards even if the company exits successfully. Unless you're a founder or one of the early employees, for the high percentile of successful startups, rewards are proportional with what you'd have gotten at FAANG companies during the same time. Not to diminish your experience, but I think the idea there was that you get to work on something 'risky' but regardless of its success you'll still get your paycheck, health insurance benefits. And if it goes belly up, you can just do a lateral move to Azure or whatever instead of worrying about the very existence of the company.

Uehreka 6y ago

This is also an issue I’ve seen with companies that began as startups, but then transitioned into the “big company” phase: Founders and early employees complain that “when we were getting started, we could’ve gotten this feature done in a week! What’s taking so long?” There tends to be frustration that employees won’t work nights and weekends, even though their work could “turn this company into the next Amazon!” When you bring up the fact that the difference is that they have equity and you don’t, and that they would materially benefit from growth but you wouldn’t, they tend to get grumpy. But they never do have a better answer.

AtlasBarfed 6y ago
UnitedHealthCare is an example of this on steroids. UHC basically can't show a huge profit. Otherwise they'd be subject to investigations and pilloried for profiting off of the misery that is the US health care system. But they make money hand over fist, because... it's the US healthcare system, and they have an effective monopoly/dominant cartel position as one of the four pigs at the trough (trial lawyers, doctors, insurance, drug/device companies). So instead of profits, a gigantic management tree has built up, and the managers take all the money. Then tell their workers they aim for the bottom third of market compensation. Colleges seem to me the same way: no "profits", but suck in huge amounts of money as the tuition skyrockets. Hmmm, and suddenly a huge administrative/management/MBA apparatus has appeared in higher education? You don't say. Salary was basically a contract with employees to take steady income and employment (once upon a time ....) while the management layer and stockholders will eat the gravy. Motivation in that contract is strictly around 1) access to management for the "ambitious" and 2) don't get fired for the rest. Hand in hand in IT with not being able to get things done quickly is that doing things quickly is high risk, and that violates the core motivation of almost everyone in the #2 don't get fired crowd. Salaries = risk aversion.
daemin 6y ago
I said this thing in response to Game Development crunch, which also applies to startups. The original creators of the company, now people in charge, have equity and that is a big reason they worked so hard to grow the company from nothing into what it is today. Therefore when they ask (or subconciously demand through company culture) to crunch or work overtime they should give out equity as an extra part of the compensation for working extra hours. Part of this is to align the founders' and employees motivations so they're more in sync, as both parties now have some form of upside to work hard and see the company grow. Another part of this is to make the shareholders and founders really think about the culture and how they expect other people to work. So if they want a culture that is about putting in many hours and effort then they should be prepared to lose a little bit of ownership to make that happen. If they're not comfortable with that then they this will act as a disincentive for them, so they fix the culture and their expectations and people can have a normal work schedule. One final note is that with whatever system there will be people that end up exploiting it, and as ever that's a people management problem. Hopefully with a trustworthy culture this will not happen.

DamnYuppie 6y ago

Equity can also be bought with your excess capital for you work. At the current market salary for developers it should be quite obtainable to live well below your income and invest a sizeable portion of it in the markets, either stock or realestate. Do this for 10 years and about 20 years later you will have many millions of dollars.

6gvONxR4sf7o 6y ago

I don’t think the issue is that working at a pseudo startup doesn’t pay enough while a real startup does. Startups almost always pay less than big companies. Even most of the successful ones. For a worker, the pseudo startup is a great option. You get a high base salary, and a large stock grant, and the high growth stock we’ve seen at a lot of the big companies over a reasonably long period. By the end of your vesting, your $125k cash + $75k RSU = $200k/yr has (using apple growth, which is reasonably FAANG representative) grown to $125k + $245k RSUs = $370k/yr assuming no promotions and a linear vest. Equity does build wealth, and BigCo equity does it much more reliably than a real startup.

otabdeveloper4 6y ago

Monetary compensation is only part of the equation. Having "the guy who made PowerBI" on your resume can be worth more than some stock options.

g9yuayon 6y ago

Many comments below focus on failures with a single startup. I think it misses the point. Working for startups is risky, but the key is to build a system that increases your accumulated probability of success -- this is exactly why it's important to live in the bay area and work for some startups there, at least before the Covid-19. You get to see a large number of people who didn't fund any company, but still became financially independent by choosing to join the right companies at the right time. You get to see how those people make their choices. You get to see how those people decide to jump ship. You get to build a social circle where you learn lots of first-hand information about startups. There are a few simple steps that worked well for many people (again, no guarantee of success, but they do increase accumulated probability of finding the right company). - You bet on product you love. Airbnb/Pinterest/Uber before 2013, Netflix before 2010, FB before 2009, Google before 2003, Databriks before 2017, Tesla before 2017. - You bet on sectors. SDN, gig economy, search, big data, and etc. - You bet on company's productivity - the customers/engineer grows exponentially without Uber-style marketing cost - Instagram/WhatsApp; the company releases features faster than they hire - Google; people deliver without working like a dog - Netflix - You bet on people you know or you admire - You bet on the leaders in each sector

UncleOxidant 6y ago

You can certainly work like a dog in an actual startup with the hope that your equity will someday be worth something... only to have it be worth nothing because the company didn't make it. This is what happens in the vast majority of startups as few startups end up making the big time.

hinkley 6y ago

I worked as a contractor for a sort of startup inside a big company, so the pay was good and immediate. The problem is when we got successful everyone tried to pin us down with the existing bureaucracy, and everything that made us great was a reason we should be stopped. Autoimmune response.

csours 6y ago

PowerBI is pretty cool though, so thanks for that

1vuio0pswjnm7 6y ago

Jeff Bezos: "It's Day One." Ah, not quite. At that early stage, the risk and opportunities are different. He wants his employees to to work as hard as if it were Day One, but he cannot offer 10s of thousands of workers the same possibilities as if they arrived on Day One.

zalequin 6y ago
I think Bezos referred to the mindset of the people who live and die by the success of the company - namely the founders and executives who are responsible for making sure it succeeds.
- 1vuio0pswjnm7 6y ago
  Do they live and die by the success of the company. If the business starts to decline who is terminated first. The founders and executives. The audience for the letter from this quote is taken is not only founders and executives, it is Amazon employees, investors, potential investors and analysts, i.e., the public.

sytelus 6y ago

This is quite one sides view. There are many many examples such as Word, Excel, Google Maps, Gmail, FB Messanger etc started as “startup within big co”. Initially they were small, people worked hard and then they become very big. When they were small (<50) people, those early folks ripped similar rewards as early startup employees. Many later became distinguished engineers, CVPs raking many millions over the years. I don’t know when you joined PowerBI but the probability of you getting disproportionate rewards if you weren’t in first 50 employees in usual startup is not very high either. I don’t agree with thesis in this article. Yes, most startup efforts in big co fails but failure rate is probably not worse than usual startups. For successful startups within big co, rewards are pretty huge as well. For Waze case, I had argue that they were already running out of steam when they joined Google even though they continued growth. It wouldn’t be feasible for them to compete effectively while growing exponentially with strong and free product like Google Maps as their competition. I am doubtful if Waze employees would have faired vastly better as independent startup.

Decker87 6y ago
That's a good point and a fine distinction about whether the success is higher or lower. The point that Noam makes is more that its different. It's not a startup anymore. That probably means less chance of abject failure or success.

kerng 6y ago

Good comment. It seems the only ones benefiting are the partners in these companies - who actually try to create that startup narrative and get the compensation in return. If a group within a large company tries to advertise as startup, it's a big red flag. One should join a company like Microsoft to learn and see how things are done in a mature place and to have good work life balance with reasonable pay - then if you want take that knowledge and experience with you outside to a startup if you want.

HeavyStorm 6y ago

Hmm, you are at least talking about a tech startup on a big tech company. I've seen many attempts of hosting (incubating?) a startup in a traditional company like a financial institution. That's what really isn't possible.