It’s funny to see this around the same time as this other thread where people are going through so much mental gymnastics to avoid obvious conclusions of how horrible it is to work for a startup,
If the start up offers market-rate wages, I am not seeing the downside. Job insecurity vs. chance to get more experience/lottery ticket? Seems reasonable .. but then again, I don't work at a startup.
Start ups don’t offer market rate compensation. Typically salaries will lag by 30% or more compared with even mid-level tech companies, not even considering FAANG at all. That’s just base salary. Most startups don’t pay a bonus, and the equity is usually very poor on an annualized basis, and it’s mostly tied up in options where you have to deal with the strike price and tax issues.
A wildly successful compensation outcome for an employee at a startup would be ~75% of a comparable market salary plus a few hundred thousand dollars of post-tax income from equity after 8-10 years, amounting to say $25,000 per year of equity/bonus.
At a totally mid range tech company or large company with some technology, you would make 100% of that market rate and probably make $25,000 just in a bonus per year, plus an additional $30k to $50k of RSUs per year, which you don’t have to wait 8-10 years to sell.
In an extremely conservative estimate, you’re probably losing $200,000 of post tax equity / bonus income over 8 years by choosing a startup over a mature but run-of-the-mill tech company or other large company that has tech teams.
If your market salary is ~ $150k, the startup is probably paying $115k and will give worse raises and promotions. Conservatively that’s another $180k of lost post-tax income over 8 years (35k delta times 8 minus taxes).
In total that’s about $400k of lost post-tax income by working at the start up for 8 years, and the alternative I’m comparing to is a very conservative estimate $150k base, $50k equity $25k bonus assuming no stock growth or raises, which is a totally run of the mill offer in large cities even 5 years ago for roles with 3-4 years of experience.
And that’s under a huge IF the startup is wildly successful and all those options are actually worth a few hundred thousand after taxes. That’s a rare outcome. They could be worth nearly nothing, and then you’re talking about foregoing around $550k of post tax income over 8 years (225k all in per year minus 115k at a failing startup, per year, x8 then less taxes).
Is the high, high risk of leaving $550k on the table worth it for vague promises of “interesting work” that isn’t guaranteed?