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Well, of course, standard venture model option grant percentages do not make sense in case of a small exit ($50M) which takes 4 years. They are designed for an
by gleb 18y ago
Well, of course, standard venture model option grant percentages do not make sense in case of a small exit ($50M) which takes 4 years. They are designed for an exit of 5 to 10 times the size. So, if you are setting up an options pool, you should account for target exit size and time. Incidentally, the interests of full salary employees with stock options are much more closely aligned with those of VCs than founders.
In Silicon Valley as an experienced engineer working for a startup you should be getting about $150k/year + stock options. Some startups will have good exits. Expected total return per year is about $300k/year long term. But you are forced to save 1/2 of your compensation, and get tax advantages -- both good. And you get to play the become-really-rich-on-stock-options lottery. If you are hiring engineers here the packages should somehow be competitive with that.
- tptacek 18y agoAt 150k/yr, to make 600k in a liquidity event, you would need to be holding .5% of a company that sold for $115MM --- or about 5.5 times as much as Flickr. In what valley job do you get a full half point of the company for a 150k dev job? How many companies have sold over the past 5 years for more than $100MM?
- webwright 18y agohttp://startup.partnerup.com/2008/01/02/2007-acquisitions-web-internet-technology/ http://startup.partnerup.com/2008/01/02/2007-acquisitions-we... More in 2007 than I woulda guessed, but still... I think your points are dead on. 150k seems awful rich for a startup job. Job boards seem to agree: http://www.indeed.com/q-python-l-ca-jobs.html http://www.indeed.com/q-python-l-ca-jobs.html (check the pay box out on the left)
- gleb 18y agoI really meant good experienced engineer. Such a person is worth much more than $150k/year, but you can't get much more cash as an employee in a startup (for good reasons). Also, at that level you are getting at least 10% target bonus, and that's included in the number.
- tptacek 18y agoReally, really, really good engineers with keyword-compliant resumes walk in the door on Wall Street at 175k. I'm having a hard time with your numbers.
- gleb 18y agoSure, but what does that have to do with SV startups?
- tptacek 18y agoValley engineers make less than Wall Street engineers --- COLA and scarcity. (Sorry, you asked.)
- gleb 18y agoCash compensation, yes. Total compensation -- I am arguing otherwise. SV engineers are asked to take more risk, and perhaps to sacrifice quality of life more. Thus higher expected compensation. That $175k in NY is probably $200k after bonus, so it makes sense that SV would be more. Another way to look at it is that new grad is now close to $100k. The experienced guy is easily 10 times more productive. But only gets 1.5 in salary. So, he also gets 5-10 times as much equity, and that's valued because historically it made good money.
- hello_moto 18y agoNew grad is making almost $100k? WHOA! How bad is the working environment on the valley?
- jamiequint 18y ago$100k?? Are you speaking from direct experience, because none of the companies in the valley I know pay anywhere close to that.
- menloparkbum 18y ago
- gleb 18y ago$115M is still a small exit. A successful VC exit is an IPO or similar size acquisition, meaning $300M+, in many cases quite a bit more. At that level the numbers work out. Sure, the last 6 years have been tough, but there's been plenty of exits at level. For some of the smaller exits, the earn-outs/retention packages would have also been significant.
- tptacek 18y agoA successful VC exit happens once for every 7-10 companies they invest in. That's the model. Adjust your (I think) unrealistic $600k expectation for the risk. Moreover, look at the companies that sold for over $100MM in Tony's list: in how many profitable companies making $35MM/yr does senior engineer #3 or #4 hold a full half point worth of options? The CEO of that company holds 5-6%.
- gleb 18y agoA good engineer has better dealflow than VCs. He can cherry pick companies backed by top VCs, within those he can pick the ones with the best engineering teams, for example. I didn't mean that you should expect to double the salary for any given job stint. If you consider time horizon of, say 10 years, multiple jobs, 2x salary is quite a reasonable expectation.
- anamax 18y agoIf cherry picking worked, VCs wouldn't invest in the "not cherries". Actually, cherry picking does work, but the cherries aren't clear until after all of the big engineer stock grants are gone. VCs get to cut their losses and double-down on their wins. Engineers don't. Even if engineers averaged as much gain as VCs, the distribution will be different. The typical VC would be close to the average because they get to make 10-20 bets/year while an engineer gets to make <1 bet/year. As a result while the typical engineer would be far below average return. (Yes, a small fraction of the engineers would be ahead, but ...)