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You’re obviously overstating the FAANG SWE lifestyle. But beyond that, it’s interesting you picked FAANG SWE and not startup SWE as the basis of your compariso

You’re obviously overstating the FAANG SWE lifestyle. But beyond that, it’s interesting you picked FAANG SWE and not startup SWE as the basis of your comparison. The whole premise of the article is that startup employees are often sold a bag of goods about equity and upside that’s simply a terrible deal. Not terrible in the sense that it’s highly risky, but that it doesn’t even come close to compensating for that risk premium. Its sold as FAANG is low risk medium upside but startup SWE is high risks high upside but really its extreme risk and almost no upside because VCs find dozens of ways to carve it out. And people will say startups pay “market” compensation but they almost always mean base salary only, and the equity is such a horrible deal, it’s borderline fraudulent scam on the part of founders to sell startup employees on the equity as a fair deal. As an aside, when people think SWEs don’t need unions/ professional associations, they think of teachers unions or autoworker unions where pay is standardized on seniority. Instead, we could have something where our lawyers in our camp could review equity terms and we could collectively advocate for things like liquidity deals. That will never ever happen if you only trust the deals the VCs and founders offer.

Finbarr 2y ago
Let's not forget that FAANG companies were all startups at one point. Early employees at those companies experienced significant upside. Startups can be very high risk, and in rare cases, extreme upside.
- ditonal 2y ago
  This is the “startup myth” that lets the scam perpetuate. The world has changed. Google IPOed just a few years after it founded. Now Stripe, objectively one of the most successful startups ever, still hasn’t IPOed after 15 years. Liquidity preference Dilution Even the F in FAANG had a major movie made about early employees getting shafted by dilution! FAANG is 5 companies founded a long time ago. Since then VCs have completely rewritten the rules of the game. But they’ll still point to extreme outliers in the old rules. The fairy tale of the Google masseuse has probably cost tens of thousands of engineers millions in compensation. You need to get things in writing and do the math and startups make it as difficult as possible to do that and then the math never adds up. So they resort to fairy tales.
  - Finbarr 2y ago
    Many huge private companies, like Stripe, have found ways to provide liquidity to their employees without going public, e.g., through tender offers. Some more recent examples of companies where early employees did very well would be AirBnB, Coinbase and DoorDash.
    - ditonal 2y ago
      Early executives at those companies did very well. Early employees did well, but risk-adjusted , not really. I know people who were fairly early at those companies and they own nice SFH in the Bay Area but they're still working as Directors or whatever. Consider that if you could make 400k (including liquid stock) in compensation at FAANG but you take 180k at the startup, you're basically betting 220k a year on the company. Except unlike any other company you bet 220k on, you won't get a board seat, you won't get access to key metrics, your influence will be dominated by "real" investor's influence. If your NW is less than 10M, which presumably it is, anyone who's heard even heard of the words "Kelly Criterion" would tell you your nuts for betting 220k a year on one startup. And yet, you get treated like "an employee" and not like "an investor" for taking that insane risk. So YC has invested in 5000 companies, and you can name 3 that had top-notch outcomes, thats 0.06% success - and you had to work like a dog to realize it! And that money was locked up. Those same early employees could have taken that $220k/ year, put it on Bitcoin or Apple stock, and retired off that. And Bitcoin and Apple were much easier "picks" than an given startup. The math simply does not add up and the whole system runs off mystique and naivety. And I've worked at startups that gave me a hard time about asking about outstanding shares, about asking about the cap table, about asking about liquidation preference. This is _critical_ information before you invest a significant portion of your life and net worth on a company and that they're guarded about and it should raise the ultimate alarm bells that they don't fall over themselves to explain every part of it. There's a bunch of propaganda out there "Explaining ISOs, written by a16z" that's a smoke screen of the truth. The math does not add up. The dream startup employee is really really good at Transformer architectures and really really bad at personal finance. Fortunately for startups, a shocking amount of these people exist. But it doesn't change that if sharp financiers looked at employee equity packages at startups objectively, every single one would agree it's a scam deal.
- gopher2000 2y ago
  The argument that a startup could be the next FAANG is anchored in lottery-like odds.
- chinchilla2020 2y ago
  The expected value of startup equity is far, far, far below a casino. The ON bet at a craps table is 50% odds. Less than 1% of startups survive. You might as well go to the casino. You will save years of sweat, heartache, and stress-induced mental decline. Instead at a casino you get to blow your money quickly, enjoy fun, free drinks, and still have the upside potential to become super rich if you are in the 0.000001 luck percentile.
  - Finbarr 2y ago
    At an early startup, your execution has a meaningful impact on the outcome. This isn’t true for craps. It may be for poker, though.
  - kelnos 2y ago
    I think a better analogy would be a poker room than a craps table. You don't get to influence the outcome at a craps table, but your performance at a startup will influence its probability of success. Also your choice of which craps table to play at doesn't change your odds, but you can certainly change your odds of success at a startup by choosing which one to join. Obviously there are no sure things, but after a while you can at least weed out most of the dumb startup ideas and/or the incompetent founders.
jakjak123 2y ago
This 100%. Really the only reason to work at a startup as an engineer is if you really want to, because everyone pays low and the tiny bit of equity is essentially worthless in 99% of cases, which gives it a very low value.
- nirvdrum 2y ago
  And, if you exit the company -- either voluntarily or involuntarily -- you often only have 90 days to exercise your options. If you've gotten laid off, eating into your savings while searching for a job is a pretty risky proposition. If you have an appreciable amount of equity, that bill can be rather high. Then there's AMT. Many end up letting the options expire. So, taking that pay cut for equity really didn't work out -- you had less money to exercise the options and because you couldn't, the option portion of your compensation was effectively clawed back. I very much appreciate the startups pushing to extend the exercise window out to 5 - 10 years, but that's far from the norm. I've debated this with a couple of investors and their stance is if you leave the company then you're not committed enough and shouldn't receive anything. I think that's quite debatable, but that's certainly not the case when folks are laid off. And we commonly discuss people thriving in one particular phase of a company. If you're not in that phase, it's no good for either the company or the employee to continue the relationship just to defer having to exercise options.
  - Finbarr 2y ago
    The 90 day exercise window is the most obviously broken thing about startup equity in my opinion. We changed this to 5 years at Shogun.
  - jjav 2y ago
    > And, if you exit the company -- either voluntarily or involuntarily -- you often only have 90 days to exercise your options. This is why I advise everyone that you must early exercise (exercise your option as soon as you start with the company) if you're going to join a startup. Some startups don't let you early excercise. Run far, far away. Find a different startup. Never join a startup that does not let you early exercise.
earnesti 2y ago
> high risks high upside but really its extreme risk and almost no upside Extreme risk? Some startups pay fair salaries. I don't think startups are that risky (unless you start putting money into them, that is a suckers deal). Or if you work for free, what you naturally should not do. Not everyone can get a FAANG job so it is not very clear alternative. If you get paid a slightly below market rate and get some worthless equity, what's the big deal? You can always quit any time and change to a corporate career. It is not an end of the world.
- rsanek 2y ago
  that's the thing though. you're not getting paid "slightly below market," you're taking a ~50% paycut to work at a startup vs FAANG
- jjav 2y ago
  > If you get paid a slightly below market rate and get some worthless equity, what's the big deal? If you really do, agree that it's ok and a fun ride. But where are you going to find a startup that pays market rate? Never seen one. Base salary can be very close! But at an established company you are also making money on RSUs, often more than your salary. And usually have a bonus, which can be quite significant. So your base salary might be 250K in an established company and 200K at the startup. Not a huge difference. But total comp at the established company is more like 500K-600K vs. at the startup just 200K. Huge difference.
  - kelnos 2y ago
    > But where are you going to find a startup that pays market rate? Never seen one. I guess you're looking in the wrong places. Over the past 13 years, I've worked for five startups (both full-time and contract) that paid market rate (two paid a fair bit above, even). In my professional and social circles, this has been pretty common. Certainly some have worked below market rate for some companies, but that seems to be the exception, not the rule. > But at an established company you are also making money on RSUs, often more than your salary That's definitely not been my experience. At established companies, the RSUs are usually a nice quarterly bonus, in the wide range of 10-50% of base (annualized). Certainly there are some where the RSUs can end up being several multiples of base (I've worked at one like that, though my equity comp level was not common, and was mainly a consequence of my long tenure there from when they were small), but I don't think it's that common. A lot of people seem to assert that you can easily get that at a FAANG, but that doesn't seem to be true. Some people can, but not the median employee. Also consider that a lot of the stories of high equity comp come from people talking about the FAANGs. Those companies were founded 20-25+ years ago, and matured into established companies 10-15+ years ago; the "rules" have changed quite a bit since then.
dfadsadsf 2y ago
Extreme risk is driving truck in Iraq or smuggling drugs to Singapore. Working in air conditioned office for double median US salary is not extreme risk by any means. With that I agree with you that upside is often lower than people expect.
- kelnos 2y ago
  I think we're talking about the risk level when compared to various ways to work at a tech company, not risk level when compared against all possible occupations.

Finbarr 2y ago

Let's not forget that FAANG companies were all startups at one point. Early employees at those companies experienced significant upside. Startups can be very high risk, and in rare cases, extreme upside.

ditonal 2y ago
This is the “startup myth” that lets the scam perpetuate. The world has changed. Google IPOed just a few years after it founded. Now Stripe, objectively one of the most successful startups ever, still hasn’t IPOed after 15 years. Liquidity preference Dilution Even the F in FAANG had a major movie made about early employees getting shafted by dilution! FAANG is 5 companies founded a long time ago. Since then VCs have completely rewritten the rules of the game. But they’ll still point to extreme outliers in the old rules. The fairy tale of the Google masseuse has probably cost tens of thousands of engineers millions in compensation. You need to get things in writing and do the math and startups make it as difficult as possible to do that and then the math never adds up. So they resort to fairy tales.
- Finbarr 2y ago
  Many huge private companies, like Stripe, have found ways to provide liquidity to their employees without going public, e.g., through tender offers. Some more recent examples of companies where early employees did very well would be AirBnB, Coinbase and DoorDash.
  - ditonal 2y ago
    Early executives at those companies did very well. Early employees did well, but risk-adjusted , not really. I know people who were fairly early at those companies and they own nice SFH in the Bay Area but they're still working as Directors or whatever. Consider that if you could make 400k (including liquid stock) in compensation at FAANG but you take 180k at the startup, you're basically betting 220k a year on the company. Except unlike any other company you bet 220k on, you won't get a board seat, you won't get access to key metrics, your influence will be dominated by "real" investor's influence. If your NW is less than 10M, which presumably it is, anyone who's heard even heard of the words "Kelly Criterion" would tell you your nuts for betting 220k a year on one startup. And yet, you get treated like "an employee" and not like "an investor" for taking that insane risk. So YC has invested in 5000 companies, and you can name 3 that had top-notch outcomes, thats 0.06% success - and you had to work like a dog to realize it! And that money was locked up. Those same early employees could have taken that $220k/ year, put it on Bitcoin or Apple stock, and retired off that. And Bitcoin and Apple were much easier "picks" than an given startup. The math simply does not add up and the whole system runs off mystique and naivety. And I've worked at startups that gave me a hard time about asking about outstanding shares, about asking about the cap table, about asking about liquidation preference. This is _critical_ information before you invest a significant portion of your life and net worth on a company and that they're guarded about and it should raise the ultimate alarm bells that they don't fall over themselves to explain every part of it. There's a bunch of propaganda out there "Explaining ISOs, written by a16z" that's a smoke screen of the truth. The math does not add up. The dream startup employee is really really good at Transformer architectures and really really bad at personal finance. Fortunately for startups, a shocking amount of these people exist. But it doesn't change that if sharp financiers looked at employee equity packages at startups objectively, every single one would agree it's a scam deal.
gopher2000 2y ago
The argument that a startup could be the next FAANG is anchored in lottery-like odds.
chinchilla2020 2y ago
The expected value of startup equity is far, far, far below a casino. The ON bet at a craps table is 50% odds. Less than 1% of startups survive. You might as well go to the casino. You will save years of sweat, heartache, and stress-induced mental decline. Instead at a casino you get to blow your money quickly, enjoy fun, free drinks, and still have the upside potential to become super rich if you are in the 0.000001 luck percentile.
- Finbarr 2y ago
  At an early startup, your execution has a meaningful impact on the outcome. This isn’t true for craps. It may be for poker, though.
- kelnos 2y ago
  I think a better analogy would be a poker room than a craps table. You don't get to influence the outcome at a craps table, but your performance at a startup will influence its probability of success. Also your choice of which craps table to play at doesn't change your odds, but you can certainly change your odds of success at a startup by choosing which one to join. Obviously there are no sure things, but after a while you can at least weed out most of the dumb startup ideas and/or the incompetent founders.

jakjak123 2y ago

This 100%. Really the only reason to work at a startup as an engineer is if you really want to, because everyone pays low and the tiny bit of equity is essentially worthless in 99% of cases, which gives it a very low value.

nirvdrum 2y ago
And, if you exit the company -- either voluntarily or involuntarily -- you often only have 90 days to exercise your options. If you've gotten laid off, eating into your savings while searching for a job is a pretty risky proposition. If you have an appreciable amount of equity, that bill can be rather high. Then there's AMT. Many end up letting the options expire. So, taking that pay cut for equity really didn't work out -- you had less money to exercise the options and because you couldn't, the option portion of your compensation was effectively clawed back. I very much appreciate the startups pushing to extend the exercise window out to 5 - 10 years, but that's far from the norm. I've debated this with a couple of investors and their stance is if you leave the company then you're not committed enough and shouldn't receive anything. I think that's quite debatable, but that's certainly not the case when folks are laid off. And we commonly discuss people thriving in one particular phase of a company. If you're not in that phase, it's no good for either the company or the employee to continue the relationship just to defer having to exercise options.
- Finbarr 2y ago
  The 90 day exercise window is the most obviously broken thing about startup equity in my opinion. We changed this to 5 years at Shogun.
- jjav 2y ago
  > And, if you exit the company -- either voluntarily or involuntarily -- you often only have 90 days to exercise your options. This is why I advise everyone that you must early exercise (exercise your option as soon as you start with the company) if you're going to join a startup. Some startups don't let you early excercise. Run far, far away. Find a different startup. Never join a startup that does not let you early exercise.

earnesti 2y ago

> high risks high upside but really its extreme risk and almost no upside Extreme risk? Some startups pay fair salaries. I don't think startups are that risky (unless you start putting money into them, that is a suckers deal). Or if you work for free, what you naturally should not do. Not everyone can get a FAANG job so it is not very clear alternative. If you get paid a slightly below market rate and get some worthless equity, what's the big deal? You can always quit any time and change to a corporate career. It is not an end of the world.

rsanek 2y ago
that's the thing though. you're not getting paid "slightly below market," you're taking a ~50% paycut to work at a startup vs FAANG
jjav 2y ago
> If you get paid a slightly below market rate and get some worthless equity, what's the big deal? If you really do, agree that it's ok and a fun ride. But where are you going to find a startup that pays market rate? Never seen one. Base salary can be very close! But at an established company you are also making money on RSUs, often more than your salary. And usually have a bonus, which can be quite significant. So your base salary might be 250K in an established company and 200K at the startup. Not a huge difference. But total comp at the established company is more like 500K-600K vs. at the startup just 200K. Huge difference.
- kelnos 2y ago
  > But where are you going to find a startup that pays market rate? Never seen one. I guess you're looking in the wrong places. Over the past 13 years, I've worked for five startups (both full-time and contract) that paid market rate (two paid a fair bit above, even). In my professional and social circles, this has been pretty common. Certainly some have worked below market rate for some companies, but that seems to be the exception, not the rule. > But at an established company you are also making money on RSUs, often more than your salary That's definitely not been my experience. At established companies, the RSUs are usually a nice quarterly bonus, in the wide range of 10-50% of base (annualized). Certainly there are some where the RSUs can end up being several multiples of base (I've worked at one like that, though my equity comp level was not common, and was mainly a consequence of my long tenure there from when they were small), but I don't think it's that common. A lot of people seem to assert that you can easily get that at a FAANG, but that doesn't seem to be true. Some people can, but not the median employee. Also consider that a lot of the stories of high equity comp come from people talking about the FAANGs. Those companies were founded 20-25+ years ago, and matured into established companies 10-15+ years ago; the "rules" have changed quite a bit since then.

dfadsadsf 2y ago

Extreme risk is driving truck in Iraq or smuggling drugs to Singapore. Working in air conditioned office for double median US salary is not extreme risk by any means. With that I agree with you that upside is often lower than people expect.

kelnos 2y ago
I think we're talking about the risk level when compared to various ways to work at a tech company, not risk level when compared against all possible occupations.