[qqtt]

It would be interesting to see some analysis comparing pre-IPO offers versus standard FAANG-style engineering offers and see what the monetary difference actually is.

In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event, in the off chance you join a successful start up, work your tail off, and the company gets to a point where that exit happened (which was and still is rare).

But nowadays, with software development offers being what they are are large public companies with outstanding growth prospects, the argument that you need to join a start up to fast track earning millions is pretty much out the window. Not only do people who are working at large stable companies like Google & Facebook have the generous perks and large company work life balance stability behind them - they are also soundly beating almost all "successful" start up offers in terms of compensation over the long term.

I would love to see some real life practical numbers with start up offers at different stages of funding and how that would really compare to simply working at Google or Facebook over the same time horizon.

It seems the only reasons to work at a start up these days are if you really really love building products, want to wear many different hats, are frustrated by the pace of big companies, and are stifled by the big company processes that dominate the day to day life working at these companies.

Compelling reasons to work for a start up for sure, but compensation is not even in the top 10 reason to join a start up anymore, IMO.

[quokkafriend]

My equity grants as a non-eng (but involved in prod dev) have ranged from 0.05% to 0.6% over the course of 10 years in startups (age 25-35). All Series A to Series B.

My take is that unless you are very good at judging leadership teams and company prospects, that joining a FAANG or a Series C+ scale-up (and even that takes thoughtful research and luck) is the better play.

Early stage at my past grant levels has to hit a unicorn valuation for the equity to match FAANG packages. I'm not even sure a $1B exit is enough after dilution, investor preferences, and god forbid down/flat rounds. Certainly not at the grants that I started at in my career.

Plus keep in mind that FAANG stock also appreciates. I see some folks not accounting for that growth and only startup valuation growth. Comp packages for mid level ENG and PMs are 400-500k / yr, not even including appreciation!

[fatnoah]

I spent the better part of 17 years at startups, with grants ranging from 0.2% all the way to 1% (VP Eng in a Series C+). The latter exited, but options were worth $0 due to liquidation preferences. I did get a cash bonus equal to about 2x my salary, so that was nice...it was also about the same as the sum of my last two stock vests (i.e. 6 months) at the FAANG I'm currently at, and whose stock price has doubled since I joined. I currently make 4X what I made at the height of my startup career.

Unless I'm coming in hot with good equity and an imminent IPO OR I don't need/want the money at all, I can't see going to back to startup life. (I also wouldn't trade that startup experience away, either)

[hinkley]

I learned long ago that the most successful tech company I know is probably not the one I work for. Also that layoffs tend to follow drops in the stock price.

I don’t buy shares on margin, so why would I want my nest egg invested in the company I work for? If I get laid off I’m poor twice over.

[mattnewton]

That's a great argument for working somewhere where the equity is liquid IMO. You can just sell public company RSU's as they vest and put them wherever else to diversify.

[fatnoah]

Yes, I sell everything on vest and save/invest the money instead.

[akomtu]

A typical 4-year vesting plan at 500k/year gives 2M in "nominal" dollars. 2x that to account for stock market growth, 2x for work life balance (startups demand 2x more of your time than FANG), 3x for dilution and other startup shenanigans, 5x for the risk (how many C series get bought for 1B within 5 years?), and you need a 60x2M offer from a startup to just match FANG. 120M looks outrageous only because it's fake money: 95% of the time you won't get anything.

[icedchai]

95% chance of not getting anything seems about right.

I had 0.5% of a startup that just went through a seed round, about 10 years ago. It got acquired by a larger startup that was "going to IPO." Reality is that larger company went through a few down rounds, got bought by a PE firm, barely paid back the initial investors, and I wound up with about $10K (profit.)

Next startup: as the first engineering hire, I got about 5%. After several down rounds, that 5% is now 1%. Several years later, the company valuation is barely 7 figures. I also invested some of my own money into the company (preferred shares) that have declined in value by 90%. I've since moved on, but the odds of even getting my investment back are near zero.

I've done far, far better investing in the stock market.

[dasil003]

This is a silly way to think about the tradeoff between startup and big-co. Startup equity is typically ISOs which is to say it's literally worth zero the day it's granted, and it only gains value if the valuation increases, and even then subject to dilution, cliffs, etc. The reason you buy into it is some combination of believing in the company and valuing the experience, not because of some expected value calculation.

[jollybean]

It's nary impossible to judge founders, even investors are not very good.

I think that 'heat' is probably the best way to judge: if they are growing, they have a good product, customers like it, and they're not paying substantially more for customer acquisition - and it's a large market - then that's a good sign.

[hinkley]

Maybe it’s like people using their tax refund as a savings strategy. If you’re good with your money then fixing your withholding and increasing your savings rate nets you more money in the long term. But you have to have self control to save the money instead of just fighting temptation once a year.

[nostrademons]

"In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event"

I'm actually not sure this is true, and wondering if this was reporting bias. When a startup exits for a billion and all the employees get rich, you hear about it on the news, and you can do the equity calculation yourself based on public funding round press releases. When a big company quietly gives a multi-million-$ comp package to a valued employee, they have zero incentive to share that news with the rest of the world.

My wife grew up in Silicon Valley, and somehow all of her friend's parents have large real estate holdings. These were people active in the 70s-90s, big company employees, no exits. But there was one guy who had a beautiful house in the Saratoga foothills with an artificial waterfall between his two swimming pools; "Oh, his dad was a rainmaker at Intel." Or another friend of the family who had made some key inventions at HP, and retired early. Or the innkeeper we met in Alaska who had simply worked big companies in Silicon Valley, no exits, saved his money, but then when he turned 40 he bought a sailboat, sailed around the world with his family, then when he reached Alaska bought 2 old warehouses and converted them into a B&B.

[dasil003]

Considering the vast swathes of 1.5M homes across the Bay Area that were <$100k in the mid-70s, you didn't need to be anywhere near a millionaire to making a killing in real estate if you've been here 50 years.

[nostrademons]

That's very true in dollar terms, but wealth is owning 4 homes, or a couple apartment blocks, or being able to retire at 40, right? That's what most people are seeking. And if folks were able to achieve that in the 80s from being extremely-impactful ICs at big companies, maybe big companies were paying select employees more than the general public was aware?

[Dwolb]

Silicon Valley companies were paying salary and equity and were growing really fast.

Employee’s vested shares turned out to be worth a lot and so was the real estate employees bought.

The market was ripe and the people were talented. Not so sure there’s much to it then that.

[noodle]

I think it's true if you add the caveat "only avenue for an average person". Not everyone gets the big liquidity event in the startup game, but also very few people actually get multimillion dollar comp packages at well established post-IPO companies despite how much it seems to get discussed here.

[nostrademons]

The startups that succeed do not generally have average early employees. Remember that founding a startup and successfully taking it to a large exit is a decidedly non-average outcome; the average startup fails miserably.

I think that if you're seeking non-average wealth you should first strive to be non-average. There are a number of pathways to exceptional wealth, but all of them require being exceptional in some way.

[noodle]

Eh, I've been an early employee at several startups with successful exists. Each one had average early employees where the only thing they did that was truly exceptional was believe/commit in the cause early and stick it out. They helped the company get from point A to point B when others wouldn't. And they got great outcomes when liquidity arrived.

Being non-average definitely has better results, of course. But if you aren't, I do think there are still pathways for you at startups, while there generally speaking aren't at FAANG level companies.

[enra]

The challenging part about equity that every company is different, takes bit different path and has different chances of success.

My anecdotal example that I don't know anyone who made massive/post-economic money by joining a public company. You can probably make six figures easily, and potentially low 7 figures in some years. The only people I know who have mode 8 or 9 figures are people who have joined startups early or relatively early before the IPO, and the startup became a $20-100B company.

Seed stage, as one of the first senior engineers, you might get 2%-0.5% equity. At $20M valuation (common YC valuation at the moment). That's $400k-100k value vesting over 4 years (which might sound low compared to FAANG offers). The point is the upside potential, not the value. FAANG companies might grow 5x in 5 years. Startups can grow much more. That's why the whole VC market exists.

Hitting $1B means the company valuation went up 50x, hitting $10B means 500x, hitting $100B means 5000x. So your initial offer could be worth several millions to hundreds of millions. Even if you join later, when the company is valued $500M-$1B, you might still get 50-100x upside.

The math is more complicated since usually companies raise multiple rounds which then dilutes the existing shareholders. Roughly 20% at seed/series a, and then less after that.

[qqtt]

With things like dilution mattering and stock options being popular vehicles for early stage start up it would be really interesting and elucidating to have practical examples to compare against.

It's easy to understand a FAANG style offer in this context.

You join Google in 2017, you get RSUs pegged at 800$ a share valuation, about 150k$ a year vesting, by 2021 those shares are worth 2800$ so you've earned about 2.1 million (not exactly as taxes come into play).

You join AirBNB in 2017, valued at 30 billion, you get a similar offer, fast forward to today and AirBNB is now worth 100 billion, you might have made 2 million (again, not exactly, considering taxes and potential dilution). And AirBNB is one of Y Combinator's most successful start ups/exits.

From some quick google searching - there are thousands of Y Combinator companies and only ~29 are worth one billion or more. Of those billion, they are all at this time late stage and trying to guess which up and coming Y Combinator company will be next to crack 1 billion is a very risky endeavour.

How does the tax implication of stock options really impact your net gain, and does that practically move the needle for a comparison against a standard FAANG offer?

Would be interesting to look at some cold hard numbers. Absolutely joining a 20M valuation YC company and sticking around until it grows to 1B would be incredibly lucrative - but how lucrative in a practical sense, given real offers? Dilution? Tax implications? Would love to see this analysis.

[preseedthrwwy]

throwaway for obvious reasons..

I joined a seed company w/ a $10m valuation in early 2014, starting offer was 1%. after series a, b, c, and some smaller retention grants, I had about 0.4%. Left before fully vesting, so ended up with 0.3%. Company was acquired for $4b and I made $12m. After taxes, netted about $7.5m

Joined another seed company with $10m valuation in 2016, starting offer was 3%. after a few dilutive funding rounds and some generous retention grants, ended up with 1.2%. Company also acquired for $4b and I made $50m. Will probably have about $35m from this one after tax.

Obviously I was _incredibly_ lucky in picking those two companies, but maybe those numbers shed some light on dilution, taxes, etc. I wouldn't have made anywhere near that much if I'd joined those companies after series a, let alone b or c. I encourage anyone I know who wants to make 7 figures to work for faang for a few years. If they want to make 8 figures, start a company or join as the very first hire (as I did) if you're not willing to take the risk of being a founder.

[clpm4j]

This is a good 'best-case' example that anyone could hope for, and like you say - you probably need to be one of first few engineering hires to have a shot at this type of outcome.

[quokkafriend]

Yea I think this is a top 0.1% survivorship bias. Hitting 2 startup lotteries in a row at that kind of exit. Kudos.

[devnulll]

I bet this goes the other way, especially at the exec level. That is, the best indicator of startup success is past startup success. Certainly funding is easier, building the team is easier, and the emotional decision making is easier.

The phrase serial entrepreneur is often used.

[glassconclusion]

Shouldn't be this more like 0.01%? Two startups as an early employee and hitting almost 50M. Wow. just wow.

[bloodyplonker22]

The problem with your assumption is that you think everyone is equally poorly skilled in choosing startups to join.

[preseedthrwwy]

absolutely agree - wasn't trying to give the indication that I think my situation is a likely outcome

[caenorst]

And it's not 100% luck neither, as one of the first employee you probably participated to the success of those companies! Kudos to you!

[quokkafriend]

What is next for you?!

[lostdog]

Wow! What companies do you like right now ;)

[Dwolb]

Thanks for sharing your counter-example.

Do you think you significantly affected company trajectory in these two cases or not? Can play around with the definition of “significantly here”.

[caenorst]

May I ask if you had some non-startup years of experience before joining this seed company?

[enra]

Yeah I wish YC or someone could provide some anonymized data on this across companies. And it's true that out of all startups, only probably 1% make it big. But the markets are growing fast and just this year there has been ~200 IPO which I think mostly are $1B+.

From a tax perspective, RSU are probably worst. They are taxed on your W-2, effectively a bonus. If you make a lot, you pay max bracket federally and in your state. In California I think it can be ~54%.

Joining seed/pre-seed company that hasn't done a priced round likely is the best. Employees get to buy shares, not options, at the nominal price, often $0.0001 per share. There is no taxes as there is no gain. After a year those turn in to long term shares, and you can hold them forever without paying any taxes. When the company is public, you can borrow money against it so you don't have to sell. If you sell, you pay long term capital gains, and if QSBS still exists and you hold the shares for 5 years, you have $10M tax free federal credit.

With options, it depends on the timing and the cost to exercise. Joining early, and exercising options early, is usually also good since now you own the shares and only had to pay the fair market value which is 20% of the investor valuation. Again now you can hold the shares forever, get QSBS or pay long term capital gains when you eventually sell.

If you join late, likely you should still exercise if you can/want to. If you don't exercise early, then you might have to pay taxes on the gains of the fair market value from the time you were granted the options and the time you exercised. Or you could just hold the options if the company allows. Then after the company is public you can just exercise and sell, and pay the short term capital gains similar to RSU.

[freewilly1040]

I think YC has not put out information like this because the data would show joining a startup as a regular employee is not remotely worth it vs publicly traded companies.

[throwawaysea]

As someone entirely unfamiliar with the tax options and strategies here, is there a good guide you would recommend around all this?

[esonderegger]

One of the things I rarely see mentioned when discussing career prospects of startups vs large corporations is how different their hiring filters are.

If you are self-taught, lacking credentials, and don't live in a major market, it can be difficult to get in the door at a FAANG. Whereas start-ups can be much more likely to take a chance on someone with a non-conventional background.

So for some of us, large corporations aren't even an option until after we've taken that startup job and the startup has done well enough that people have heard of it.

[leetcrew]

I just went through the job search again, and I found the exact opposite to be true. for context, I went to a regionally-known (at best) state university and have just a few years of experience at a small company you've probably never heard of. so not quite "self-taught" but pretty far from what you'd think of as a the typical FAANG employee.

I applied to at least twenty roles at startups and small/medium-sized companies that seemed like a good fit for my skills and wrote thoughtful cover letters for each one. not a single one of those employers responded, not even to reject.

I also applied to a couple FAANGs, thinking it was a pretty long shot. but I ended up getting two on-sites, one of which I converted to an offer. there's definitely some truth to what people say about the unreasonable/irrelevant DS/algo problems, but I found it comforting to know for once what I was actually being assessed on.

not sure whether I got lucky with the FAANGs, unlucky with the smaller companies, or what, but just thought I'd share that anecdote. not the outcome I was expecting at the beginning of the process.

[ctvo]

> If you are self-taught, lacking credentials, and don't live in a major market, it can be difficult to get in the door at a FAANG. Whereas start-ups can be much more likely to take a chance on someone with a non-conventional background.

Don't self select out of these jobs. I've been an interviewer at FAANGs. We take talent where we can and count ourselves lucky.

Our recruiters call everyone given enough time. Reach out to one directly on LinkedIn for an even better chance at an initial screening call. Ask for a referral from someone already working there in your wider network. Ask for a referral from Blind. Ask for a referral from HN.

From there it's your ability to pass the interview, not any set of credentials (different thread please on the interview process).

[throw123123123]

This has reverted in the last decade. Albeit the competition for companies with big names like hard makes it virtually impossible to pass the filter without a referral.

[joshuamorton]

Dan Luu wrote about this a few years ago: https://danluu.com/startup-tradeoffs/ (from 2015, but has been updated a bit since then).

I think the big challenge is that accurately evaluating a startup offer is very, very difficult. And it can be really, really contextual. As an example, I know someone who worked at a company that went public fairly recently, and their result was vastly worse than the EV of a big company, but they also had a below average startup EV because they left the company and didn't purchase all of their options when they left.

With Google or Facebook, the question is really just stock growth and grant sizes.

With startups its growth and grant sizes, yes, and the expected type of liquidity event(s) and the time horizon on that event and your plans and company culture over that time horizon, also any additional funding rounds can markedly affect things and...

[jdavis703]

I don’t know about Facebook, but my friends at Google seem to have terrible work life balance. Seems like they only get a breather when they’re between projects.

[nostrademons]

Google in general has pretty good work/life balance.

I think the challenge is that you're responsible for launching on a feature team at Google, and the lead up to a launch has a ton of work that needs to be done often under tight deadline pressure, plus the codebase is crazy complex. If you're a self-motivated, detail-oriented, slightly obsessive individual of the type Google loves to hire, you're not going to rest until it's all done.

Infrastructure/logging/analysis/reliability teams have it much better at Google, in terms of work-life balance, but the tradeoff is that it's harder to justify your impact when it comes to promotion time.

[joshuamorton]

This, I've basically never felt external pressure from management or deadlines in my job.

I have however, on more than one occasion, found myself up far too late (or in the pre-pandemic times having nearly missed the last bus home) because I just want to figure out what is causing this damn bug. It could wait until tomorrow, no one would care if I waited until tomorrow, there is no pressure for me to fix it today. But I want to solve the problem.

[pram]

Yeah same. Once I’m on a certain train of thought I can’t stop. Those are the days where I have 5am commits because I never went to bed lol

No one is demanding I do that though. They’d probably think I’m crazy tbh

[lostcolony]

Crazy? Maybe. Shooting yourself in the foot? Definitely.

The number of times I stepped away from a problem after hammering at it for a couple of hours, took a break, got some sleep, and came back to it and solved it in < 30 minutes is...solidly in the double digits by this point.

You may find yourself better served forcing yourself to step away; you may find you get an answer with less work, and take better care of yourself.

[siruncledrew]

IMO you have be lucky in both cases to really strike it rich.

Choosing a startup with this kind of potential is insanely hard to do, and if you get lucky then the explosive growth of immediately becoming wealthy is what redeems it. But the key is choosing the needle in the haystack. It's harder than being an investor. An investor can make 100 bets hoping one works out, but an employee is only deciding on 1 place.

Working at a FAANGM company is a safer chance at hoping to climb the corporate ladder and reach a cushiony role through steady work over time. Essentially someone is hoping to ride a steady incline up from $150k to $300k+. Granted it's not the exciting casino-like feeling that a startup exit provides.

[throw123123123]

I dont think the rewards of the corpo ladder make a lot of sense. An L9 at Google, someone with 15+ YOE and rocking the perf game for over a decade makes less than what any series B to Series E SWE makes.

[lostcolony]

Uh...what? In base maybe, but after bonus and equity you're looking at $1M+ per year even at an L8 - https://www.levels.fyi/company/Google/salaries/Software-Engi...

The average SWE working at a series B to series E startup is nowhere close to that. Even if the company exits successfully, it's after a few more years, further dilutions, and you might, MIGHT walk away with a million or two...which you have to amortize over the years you worked there.

Am I missing something?

[cco]

I'm aware of support agents at startups that are/were pulling down $300-400k/year in total comp in pre-IPO numbers. Presuming a happy path towards IPO, that total comp could end up being more like $600-800k, none of these people are Google L8 caliber but they will make money in that same ballpark.

No idea what engineers were making, but probably much more than 2x a support agent.

[onion2k]

Presuming a happy path towards IPO..

That's a big presumption. There were 407 IPOs in the US in 2020. That's not in tech, but in all industries. If you're pinning your hopes of 50% of your comp coming from an IPO event then you must be very happy with risk.

[cco]

Right, its a risk, but are you aware of FANGs paying $200-300k/year for technical support staff? I'm sure there are some openings, but low six figures in cash and a chance at 3 to 8x at a startup seems quite attractive.

[throw123123123]

An engineer that joins a Series B startup at 500M with 100k/yr equity, and that company gets to 5B valuation, very roughly gets 1M equity yearly. Also potentially tax advantaged.

How many L8's does Google have? 100? The chances to get there are probably resemble or are even worse than startups from Series B to Exit.

[joshuamorton]

You're off by a factor of probably 5-10 (and maybe more) in the number of L8s. It's a 150K employee company, with a dozen or so "S"VPs, and then VPs, and then below that are the directors. And its worth remembering that you're implicitly including stock growth in the startup valuation, but not in the big-co valuation. GOOG is up ~10x in the last 10 years and ~4x in the last 5. The 200K in stock the Google person was getting each year a decade ago is worth 2M per year now. Even the S&P 500 is up 4x in that period.

[throw123123123]

I'd bet that a sr engineer that worked 2001-2005 at google has multiples of a yearly income than someone that is an L8 in 2020.

[alfiedotwtf]

> It seems the only reasons to work at a start up these days are if you really really love building products, want to wear many different hats, are frustrated by the pace of big companies, and are stifled by the big company processes that dominate the day to day life working at these companies.

I can't believe this paragraph was written with a dismissive negative tone

[mkhizar53]

Check out Levels.fyi, also their last pay report has a bunch of (then) startups at least for new grad: https://levels.fyi/2020/