That’s the point of options though - most of the time that “cash” doesn’t exist to be paid out in bonuses. Options are a bet that it will exist in the future.
Why do startups pay lower salaries than Facebook? Because Facebook throws around $200-300k salaries and doesn’t care. Startups can’t do that, so it promises a piece of the pie if the company becomes big and successful instead.
At this point, unless you're C-suite, most startups are a really bad bet compared to the BigCos paying out anywhere from $250K-$1M annually depending on your skill set and experience.
What's happening now IMO is that the hot talent has figured this out and they have accepted positions at Tesla, Salesforce, Google, Facebook, Apple, or Amazon. That said, I know someone who walked away from a $10M package over 4 years to be the CTO of his startup. I wouldn't have, but everyone has to follow their path, right?
> At this point, unless you're C-suite, most startups are a really bad bet compared to the BigCos paying out anywhere from $250K-$1M annually depending on your skill set and experience.
I agree that if you can get into one of the established companies in the top quintile of the industry you are probably better off than if you joined a startup. I'd hazard a guess, though, that the startup jibs are easier to obtain and more plentiful than those BigCo jobs.
It all depends. It’s certainly hard to compete with a $500k/yr sure thing, but personally I’d rather have a $150k/yr salary with a chance to retire if the company does well than a sure $200k/yr. It just all depends.
Risk-adjusted, the best way to get returns is probably to take an equity-heavy stake at a post-series-B startup with obvious growth and product market fit.
I used to feel that way too until I tried it multiple times. All of the startups I've been involved with have been buried or purchased with deals that made my options worthless or effectively worthless (i.e. needing to come up with enough capital to execute the options for such a meager gains that it was hardly worth the effort).
> What's happening now IMO is that the hot talent has figured this out...
It sounds like Tesla et al. have figured out the market clearing rate for great engineers. Why haven't the other companies also figured this out? There are plenty of other companies with big budgets. And early stage startups could certainly offer bigger percentages in equity (or at least better terms on the equity they offer).
I've heard Tesla and Apple actually generally don't pay that well (though my source is a few employees, so that may not be uniform across the company).
> ... but everyone has to follow their path, right?
That's the thing. I'm sure I could make more in salary from a larger company, but I'm addicted to autonomy, limited amounts of process, and having significant influence on what the company does and on its success.
On the other hand, even $1M/year doesn't look good compared to what you would have made via options/RSUs if you were employee < 10 at Facebook/Google/Amazon...
Getting a few downvotes for this comment but my point is I think it's too simplistic to frame it as options are junk, it's a rigged lotto for naive young guns yada yada. Sure, the stats aren't great but if you're young, talented, looking for a thrill and aware how the game is stacked, I don't think options/RSUs are bad 100% of the time.
Personally, I'd like that road to always exist and make the choice myself rather than having it disappear from the tech scene completely. I personally know more people that have done well out of startup stock grants than I do earning >$500K in tech.
A lot of the US's problems with share options could be solved with saner tax. It seems bonkers to me that you are taxed when you exercise rather than when you sell.
It's not that options are worthless, they're great in fact. It's that the C-suite and the investors usually divvy up the pie amongst themselves and give the rank and file the crumbs that stuck to the pie pan. But let's do the math. The average startup exit is ~$243M, let's call it $250M for say 4 years of work.
Let's say you get paid $150K salary for those 4 years of work at the startup vs $300K at BigCo. To break even, you need to close a $600K deficit, that means you need at least 0.25% just to break even with a guaranteed ROI.
Now let's say you're experienced and you're getting $500K at BigCo, now you need ~0.6% just to break even.
Finally, now you're a domain expert and you're getting $1M at BigCo, now you need ~1.4% just to break even.
In my case, I would need at least 2x the listed equity in each of these scenarios to choose the startup over BigCo. I have never been offered numbers like that. I have had CEOs and CTOs get indignant with me over my math though. Math is hard I guess.
However, if you crave autonomy and freedom, I think the message is clear here: be the C-suite at your own startup, even if you have to bootstrap from a place with a lower cost of living. Lifestyle income is a lot easier than building a $250M+ company IMO.
The other problem is cryptocurrencies have created a ton of new companies that are paying big for talent. I actually think this is a good thing. Too many people were working on dumb startups back then. I want more engineers at Tesla.
I don't think this is true anymore. I think this is one of those funny vestigial things that evolved in a different era.
If you think of a startup as a true "garage venture" with a few people toiling away trying to ship a product, maybe that's the right model.
That isn't really the model for SV entrepreneurship anymore, though, even though we kinda pretend it is. How it works today is, $8 million-dollar "seed" rounds, downtown office space, early-stage companies paying $150k or more for talent, incubators and signaling, etc.
Maybe one of those cases where the game has changed, but our mythos hasn't.
That’s simply incorrect. I founded a company that raised a mammoth seed round in Silicon Valley (not $8m but more than $3m), and we do pay some high salaries, but Apple and Facebook still pay salaries that are much, much higher.
Critical employees have joined us while taking $100,000/yr pay cuts, despite. Having a salary in the six figures.
To think that startups can play that game of “equity doesn’t matter” is just wrong, even in an era of $8m seed rounds. I know HN likes to say “go for cash not stock,” which is a good way to negotiate if you want to avoid downside risk, but if you eliminate stock compensation there’s no way startups can play ball with incumbents. Full stop.
I don't think so. Why should employees make up such a large percentage of the money invested in the company? When you take a salary cut of 50K, it's like taking that money an investing it right then and there. Why should an employee be investing 50K of their own money into the company every single year? It's bad enough that someone would invest 50K in a single company: one that picked them, not the other way around, with all the information asymmetries that applies, but to add insult to injury: the risk is compounded by the fact that their investing all this money into the very same company they depend on for their paycheck.
VCs are much much better equipped to do investing: both in terms of skill sets, experience and information. Employees should not be forced to become angel investors just because they work at a start up.
VCs will always have enough money to invest in truely excellent opportunities. It just means, they'll need to invest more. And in this low interest rate world, I don't think the world is starving for cash is it?
Maybe an employee believes in the company and wants to take part, deeming the risk is worth it for them? Clearly that's what's happening.
It's certainly rational in some cases to take the risk of owning a portion of a company instead of taking the same amount of cash and putting it in the S&P 500. You're always investing your time and money, it's just a matter of where.
And for what it's worth, if you're getting paid $250k at Apple, you can probably go back at almost any time.
His point is, that you have to assume that will happen quite often. We're simply not equipped to forsee all the legal and financial risks of having stock options. We've seen too many ways that employees have been taken advantage of. You can't simply "trust" that if the company does well, you'll do well.
That's the implicit suggestion behind the entire options thing. Especially given that almost no individual developer has a bargaining position strong enough to demand the safeguards that would avoid those problems.
> it's like taking that money an investing it right then and there.
I disagree. This is only the case if the options are $50k in cash, or $50k in equity. With startups, the options are $0k in cash or $50k in equity. Startups can wish equity into existence, but they can't magically produce cash.
> Why should an employee be investing 50K of their own money into the company every single year? It's bad enough that someone would invest 50K in a single company: one that picked them
Recruiting and hiring, after new grad level, is a two way street. You have the choice to accept, deny or negotiate an offer.
So why are you going after these guys that need to take such big pay cuts? I can almost guarantee you that there are plenty of people with a high enough level of talent that are in other areas.
We hire remotely. It's not the instant solution to all problems, despite what HN would have you believe. A lot of experience is still concentrated and SV and highly-compensated.
> “go for cash not stock,” which is a good way to negotiate if you want to avoid downside risk
I think significant amount of people would be fine with "just risk". They are not fine with risk plus malicious business practices - diluting stocks, delaying IPO indefinitely, creating different tiers of stocks with multipliers, preferential stocks for non-employees, etc.
Silicon Valley isn't the world. I think the reality is that a startup is often the "garage venture" or somewhere well below a well-funded startup. Most startups of the world don't have multi-million dollar seed funding, even many that do aren't paying 150k plus salaries.
Why do startups pay lower salaries than Facebook? Because Facebook throws around $200-300k salaries and doesn’t care. Startups can’t do that, so it promises a piece of the pie if the company becomes big and successful instead.