4 ms·
Here's an alternate way to look at it: You're at FAANG making $250k salary (plus equity). You love the idea of a startup, but dropping to $150k salary + 1% in
by beambot 5y ago
Here's an alternate way to look at it:
You're at FAANG making $250k salary (plus equity). You love the idea of a startup, but dropping to $150k salary + 1% in equity over 4x years isn't entirely appealing. (Setting aside starting your own.)
At the same time, you have a network of awesome, capable people who want to start their own business. These people are motivated, scrappy, and enjoyable to be around -- i.e. the traits YC looks for, which you can recognize. You'd help them for "free" anyway.
So take the delta in salary ($100k), and invest $50k @ $5M cap for 1% ownership into two startups a year. Four years on, you've got 1% in 8 companies with preferred stock & no vesting. Your net cash salary is equivalent in both situations, plus you earned equity in FAANG. You get to live vicariously through your entrepreneur friends, avoid startup FOMO, and relish in the relative comfort of a FAANG employer.
- gsaines 5y agoGreat to hear from you, beambot, been a while. :) Yeah, I think, though that this falls into the category of investing without hopes of market returns. You're just doing it for enjoyment. Nothing wrong there, though.
- pyb 5y agoSounds like the kind of M.O. that should be common in theory, but maybe not so much in practice... Are the best startups really funded by FAANG engineers initially?
- fragmede 5y agoI don't know about "best", but it's part of why Silicon Valley is Silicon Valley. The place is just swimming in people who ended up millionaires after a successful exit, along with FAANG engineers who have a lot of money and, even if they don't have enough to own property in the Bay Area, still have enough to give $10k to a friend with no real expectation that they'll get any of it back. Combine that with a enough other people, and raising $100k is trivial, relatively speaking. Someone who's worked at a FAANG has also seen how those places remain functional, which helps shape a startup's culture when growing from 10 to 100 to 1000 to 10,000 employees and (hopefully) can avoid toxic pitfalls that poison a company to a slow death with.
- Traster 5y agoI'm sure the actual numbers are a bit different, but taking what you said literally - at $150k salary you're taking home $100k after taxes. At $250k salary you're taking home 160k after taxes. So it's not quite as simple, you're handing quite a bit to the tax man, although I'm sure someone more interested could find some useful tricks.
- joshu 5y ago$5m cap? what is this, 2014? four years later, you've got, in all likelyhood, three dead companies, and one company that has raised another round and you've been diluted, perhaps significantly. don't use stories to make decisions. (FYI, I've been angel investing for 15 years over 250+ companies)
- option_greek 5y agoCan you add more reasonable numbers based on your experience. Also why is 2014 significant?
- joshu 5y agobecause very little is happening at a $5mm cap in 2021 in silicon valley. other people have posted publically: a third of companies die, an third eventually return a 1x, a third go on to offer better returns than that. tweak that based on investor skill/insight/luck. i've done better but remember pareto.
- beambot 5y agoI still see $5M-$6M pre-seed rounds for first money, friends & family rounds with just an idea & founding team -- the type of deal flow you're most likely to encounter while embedded in FAANG? Post-revenue, post-YC seed rounds are going to be $10M-$15M+. Then again, I've also heard of companies raising at $40M+ in the last 6 months with less than $300k ARR. YMMV. (I've only been angel investing for 3-4 years, and as a very part-time endeavor. 8 of 12 initial seed investments survived past SeriesA (so far), with 1 unicorn. Looked up your track record on AngelList: Mad respect!)
- deleted 5y ago[deleted]
- gkoberger 5y agoThis doesn't value quality of life. Startups, for many people, are a lot more fun than FAANG. If you stay at your FAANG job but invest, you have the worst of both worlds... a lower salary without the fun/excitement/pride of a startup. We have lots of angel investors, and I doubt any of them feel like they're getting a "startup" experience for their money. Plus, I think there's some real problems with the math. Nobody is doing a $5M cap anymore, you have to somehow have really good deal flow to get two good $50k investments a year, $50k is a lot for an angel investing their own money, most companies are going to fail, and as soon as there's another round there's dilution.
- beambot 5y agoPurchased equity suffers the same dilution as earned equity (on the same grant date), but with the added benefit of liquidation preference.
- naveen99 5y agoMost companies starting even seed closer to $10 million cap these days. But minimum investment can be as low as $1k on angellist syndicated deals. so for a 100k, you could do a 100 deals… if just for fun. Though it is time consuming, and I agree with most of the article. But I enjoy it, and am good at it, so I do it.
- lifekaizen 5y agoJust beware your taxes will require extra work as each deal issues a 10-K and TurboTax has no auto-import
- naveen99 5y agoVC’s don’t stress about doing their taxes. We just higher accountants. We don’t even worry about running our own companies. We higher founders for that.