Is the TC at these small companies (particularly taking into account the risk of any stock options) comparable to the TC at Big Tech (notwithstanding the recent sell-off on Wall Street)?
Or do you give up some TC for the other benefits of working at these small startups?
Sure but BigTech offers a significant boost in comp over start-ups so you are really trading away some of the upside for stability. I like being able to do things like pay a mortgage in a HCOL area out of base salary without dependency on stock. Some start-ups are starting to get more reasonable in comp so it's no longer a 50% pay cut (which it often used to be) but they are still often only offering about 70% of BigTech or less.
Just on paper, hands down Startup A. Smaller company means usually less politics. More cash (even when taking in consideration the lack of signing bonus and higher health insurance). Difference in stock options doesn't override it. You have to multiply the potential gain against the odds of you actually making that gain. Let's say you have a 1:1000 chance to make a 1000x gain. The difference in stock options is then worth ~20K. As long as you plan to work at the company for more than a year or two, then you will come out ahead with the higher salary -- especially since in a smaller company you are more likely to have seniority.
Of course, this isn't a question you should probably be asking the internet. My values are not yours. If you end up losing out on $20 million because you followed my advice, then you will hate me forever. So do what you want.
That's a fair point, we'd have to compare projected growth vs. expected salary of new job. Certainly the benefit of working at large tech companies or rocketships.
My experience with smaller startups, was that it's impossible to determine if the options would be worth $0 or $$$.
Startups have risk associated them, sure. But that risk is different for different parties, in general those that are in control experience much less risk than the small time stockholders.
The pay can be lower in return for 'options', but whether or not those options are ever going to be worth anything depends on how the company is run and how ethical the management will be when vesting and/or buyout time comes around.
It's not rare for small time shareholders to be totally screwed in that case.
A good way to protect against such trouble is to make sure that a mid sized shareholder and your interests are suitably aligned.
That way you're not the only one fighting, and the other party has a lot more clout to make their point than you do. So if you're going to be in that position make sure your type of stock and conditions match that of a larger shareholder.
I think you're discounting the other benefits of working at a startup vs. a larger company. More freedom, more high-tech, more excitement. This pays you back as well.
Actually, my observation over the last 20 years of being a venture investor, bigco acquirer and startup CEO (including at a unicorn) is that the risk-adjusted $ compensation is the same at a startup and at bigco. Startups just have more beta in the comp. You learn a lot more at a startup and hence it's the experience you want if you hope to do your own startup. If you just care about short-term $ then absolutely stay at bigco. If you want experiences unavailable at bigcos and are willing to take the chance of making less, but also the chance of making 10X+ more, do startups.
If you're optimizing for money, early startups would be the last place I'd look. I'm well aware that I'm making ~60% of a big 4 salary (tc) assuming my options are useless.
Additionally I doubt I'm learning as much technically than if I were to work at a big 4and be exposed to much smarter people.
The benefits of startups tend to incur huge tradeoffs.
> I think you're discounting the other benefits of working at a startup vs. a larger company
False dichotomy. There are plenty of smaller non-startup companies that pay well and offer everything else you mention without asking you to gamble your salary on a big payday.
Don't forget health insurance! Larger companies have larger risk pools and can afford better health insurance with lower premiums and co-pays for employees than small startups can. Especially as workers get older (and that experience becomes more valuable for startups), the value of healthcare can become a surprisingly large percentage of compensation.
Source: I have family close to retirement age that had significant health issues in the past year, and they estimated that their insurance paid probably $200,000 in the last year alone. Works for a BigCo, not in Silicon Valley.
I'm working in a public company and I have FOMO about startups. Problem is the public company pays 3-4x (liquid) what a startup would. For now my compromise is that I have a number, and once I hit that number I can take jobs that merely pay the bills with modest savings instead of really moving me ahead. But who knows, it's hard not to get addicted to TC.
I think it is a poor idea to put stock options in a startup at a high priority when job hunting because startup success is a long shot. It is a different situation for Facebook and other well established pre-IPO companies or older companies that have an established value to their stock (I stayed at SAIC for a long time because of stock bonuses, options, and the expectation that the value would continue to increase).
For small startups, it seems like you have founders who have taken a real risk vs. employees/consultants who are getting a salary and perhaps some equity. If you are working for hire, better really enjoy the work and/or the immediate compensation.
I have a childhood friend (actually, I also used to baby sit him when he was really young) who started 3 companies over a 20 year period, finally getting $300+ million when selling a large interest in his last company. My friend (and people like him) who take risks get most of the rewards - a fair system.
This never made sense to me. The bigger the company, the less valuable the options or stock are (because the value is known - you might as well take an equivalent amount of cash, because the upside is capped). On the other hand, at a tiny company where the options are worthless, you can get way more options more easily. You can actually negotiate for points of the total ownership of the company. Can you ask for 0.01% of Google if you interview there?
If you don't want risk, why would you work at a startup? If you aren't betting on a big exit, why wouldn't you just work at a company like Google or Facebook where your total (guaranteed, risk free) compensation would be far greater?
At my last startup I negotiated for a lower salary and as much equity as I could get, and I asked for more equity with every promotion. Those were the best decisions I ever made. I want to work at a startup because I want more risk, not less.
In my experience startups, equity NOT included, pay worse than big tech companies but better than non-tech companies. So if you can get into big tech companies then that's better financially but if you can't then startups beat the alternative.
Well, if the only thing you care about is compensation and work/life balance then of course, you should never work at a startup. There can be benefits though, arguably better personal development, a broader view of the entire tech stack, and potentially more personal satisfaction.
Of course, if the difference is 2.5x then it's a no brainer.. I wouldn't take more than a 20-30% cut to work at a startup.
One thing I absolutely agree with you on is the option exercise window. I think it's pretty common in the startup world, but I can't really understand WHY. I mean your options at a startup are already worth less than stocks at a public company, and they still do this shit ? With all the extra risk you'd imagine they'd have to get rid of the liquidity window just so they can compete a bit better with the big guys.
Given how much the big tech companies are paying though, especially when it comes to RSUs, I'm not sure this calculus makes sense anymore, especially for early employees. Founders may do exceptionally well on many cases, but for most early employees at startups there really isn't that much potential upside in most cases, compared to the guaranteed earnings you can get at a top tech company.
Having worked at an early startup, I share the opposite view: startup options are much worse than they look. The expected cost of not working at a big company is much larger than mere 10% (go check levels.fyi if you're curious) that the author calculated. The upside of stock options is also bound by the slim chance of any startup's successful exit and dilution that comes after each round. Here's a good calculator (http://optionsworth.com/). If you have 1% equity (rarely given) of a company that exits for $100M, you gross ~$1M. That's before dilution and tax. Aside from the financial cost, you also sacrifice your career mobility because you are forced to exercise your options if you leave the company before a liquidation event (rarely happens before an exit). Do not work as an employee at a startup if your primary motivation is making a lot of money.
On the other hand, if you want to start your own startup, I think working at a startup is a great way to minimize your own risk while maximizing learning if you're like me ;)
It definitely is more risk. However when I evaluate startups I'm comparing them against other jobs. Stable income it may be but the runway is short, and depending on the founders it may or not be well communicated. So it is much less stable than a job in a big company. So to me I want a good multiplier.
Many of the payoffs I've seen for startups that did well for early employees put earnings on par with what I've done at a large company without the startup risk. And that's for the ones that do very well which is a low chance.
So in the end I personally would get a lot more stress and a lot less income to usually being equal in a great case.
So generally it doesn't seem that worth the risk, low control, and probably low payoff.
I'd actually be more likely to join a startup in some years when I'm financially at a retirement or FIRE point. But then it's like, working for a founder on their idea, and maybe the pressure to hold out for 5-10 years there for the actual payout.
1- Some of us pay equal to or more than BigCo, so you're not always making a salary trade-off.
True, but BigCo's also have consistent (if meager) raise policies.
2- Options are a lottery, but with better odds than most people give them credit for: 13% of VC-backed startups exit for over $10M, 5% exit for over $50M, and 2% exit for over $100M, which is what I'd call a meaningful exit for all parties involved [1]. Everybody's experience is different, but many of our early employees can attest that options sure can be worth quite a lot.
With a typical engineer slice, a $10m or even $100m exit isn't meaningful. You might get $10-20k per year of vesting. Even in bad years, bankers get better bonuses (without the tax problems.)
3- You get to have real impact at a startup. Try doing that at BigCo.
Startups win that comparison, no question. A startup doesn't guarantee an impact, but the odds are a lot better.
4- The culture isn't soul-sucking.
There are soul-sucking startups and non-soul-sucking big companies. Cultures tend to regress to the mean with size, so the really amazing and really horrible companies tend to be startups, while all the big companies tend to be somewhere in the middle.
Agree that the risk is overblown. Apart from the sometimes frantic pace, startups also have more flexibility for different personalities. In a small company things aren't standardized and there's room for uniqueness.
#4 to me is uncertain. I view startup equity as slightly better than a lottery ticket, but unlikely to beat RSUs in a public company unless you get super lucky.
Or do you give up some TC for the other benefits of working at these small startups?
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