| 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? |