I was employee #1 at a SaaS startup 15 years ago. I got 0.5%, which translated into 175k after tax 8 years later (500m exit). That was the only successful exit out of 8 startups I have worked at in the last 20 years.
Examples like these highlight just how incredibly poor the return on investment for working at startups is. Very few will ever reach a $500m exit. Generously assuming a 50% tax rate, $175k before tax, spread over 8 years is ~$44k/yr. As a founding engineer, you could likely find a similar job at FAANG/FAANG-adjacent companies paying 2-3x that in (liquid) stock per year.
Lifestyle arguments aside, startups seem like a _really_ bad deal.
One datapoint: In 2022, I had an offer as engineer #2 at a venture backed startup in San Francisco for 1%. Not sure if this is typical, but I did some research at the time and it seemed about right.
I’d also be interested in knowing how much equity engineers get when they join a bigger startup later in their maturity. Ie engineer #100 for Databricks
The real questions surround typical startup issues:
- Dilution. You will get very heavily diluted.
- Shenanigans. There are all kinds of horror stories about the endless methods used to basically screw over the "little people" in startups. A major one is the already extremely rare "successful" exit where you will likely be subject to an extended lockup period (often at least one year) where the stock price will tank and leave you with a fraction of what you had on paper at the time the deal closed. The "big people" get paid first and take huge chunks out of the cash portion of any acquisition at the real value when the deal closes.
As others have noted the ROI on startups for all but the top and preferred equity holders is pretty terrible.