Is joining an early stage startup worth it?

New ghypbd
Sep 3, 2018 36 Comments

Assume that the VCs are top class and the founders are very experienced (very senior positions at large tech co at the level of PayPal, Twitter etc) and the company has raised a Series A currently with a prototype. Assume I get 0.3% equity as an engineer and a standard base salary (~150s). Assume my payout after 4 years of vesting but only after 8 years or so accounting for time it takes to IPO is 250k-400k per year from equity (assuming we even succeed).

3 yoe

How does this compare with working at a Lyft/Facebook/Uber/Google? My guess is that the comp in big cos would be comparable esp if it's liquid sooner.

My read :
Pros of working at a startup : growth opportunities, connections, better use of my time, fast paced.

Cons: it'll be a lot of work and risk for relatively little gain financially.

What do you guys think?

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TOP 36 Comments
  • Uber / Eng daddy_tk
    In my experience unless you're a founder it's almost never worth the risk and time investment. Mostly because the majority of the work will be on your shoulders but not a commensurate reward. If you really believe in the product and you own a significant stake in the company then do it. Otherwise hard pass
    Sep 3, 2018 2
    • New ghypbd
      OP
      Define significant stake
      Sep 3, 2018
    • New / Ops TechLeed
      A founders position stake
      Sep 3, 2018
  • New CmYC28
    I'd say you should consider startup stocks strictly as paper with a chance of a fairy showing up and turning them into money. It would make it more realistic wrt expectations.

    (I went through 3 startups: Post-C, Post-A and as a founding engineer).
    Sep 3, 2018 12
    • LinkedIn / Eng [1, 2, 3]
      Wow! That’s amazing! Congrats.

      Did you have to wait for that amount to vest or was it immediately available?
      Sep 3, 2018
    • New CmYC28
      They inherited a vesting schedule and also they have an additional grant on top of that so it was a weird complicated scenario. I left some money on the table since I wanted to work on something more exciting.
      Sep 3, 2018
    • New ghypbd
      OP
      Lol it's stories like these that make joining a startup tempting. Congrats
      Sep 3, 2018
    • New CmYC28
      To the OP. Apart from VC & founders reputation, I'd argue that you should join a great-great team. I didn't care much about the product, I had no idea who a16z was, but I joined because the people I met during the interviews. They were brilliant and I wanted to work with them.
      Sep 3, 2018
    • New ghypbd
      OP
      Roger that. Definitely critical to evaluate the team.
      Sep 3, 2018
  • Microsoft Chorizos
    Joining an early stage was pretty cool. Founding was infinitely better. Opened doors I never knew existed, introduced me to people I’d never otherwise have met, and gave me an incredible education. Worth it even without a payout.

    I’d never join an early stage again without being a cofounder.
    Sep 3, 2018 1
  • New ghypbd
    OP
    Well well well, I have a deathwish and I accepted the offer. Tc : 180k, 0.7% equity. If I feel burnt out, disillusioned etc I can always move to another company. Still in my 20s so I thought why not.
    Sep 13, 2018 2
    • Facebook cynical.ly
      If you're young and don't have too many responsibilities, or if you have enough savings it's definitely worth taking a risk.

      And the deal looks great. You're not losing much in pay and getting 0.7% which is quite good if the company already raised a series A (which means the valuation would be in the order of double digit millions, right?)

      All the best!
      Sep 13, 2018
    • New ghypbd
      OP
      Indeed!
      Sep 13, 2018
  • Google mmmmy
    Good in 2003, 2010, 202x, not good right now because the fed rate is increasing
    Sep 3, 2018 2
    • Citadel / Other NotMyMoney
      Most startups fail or succeed for idiosyncratic reasons. Macroeconomic variables like interest rates have a very small bearing on exit valuation of any particular startup.

      Eg, a ton of social networking startups (FB, Twitter, LinkedIn) grew like crazy during the last recession when everything else was falling apart.
      Sep 4, 2018
    • Spotify Isn
      Those startups didn’t require people to pay so it was especially popular during the recession. Also they didn’t have to compete too much for talent because the entire market was down, its not risky for the early employees when the rest of the world is paying peanuts too. It’s a different equation late in a bull market.

      Financially, startups aren’t as good top mature companies that are growing rapidly. Also read about the AMT trap, depending on the terms, receiving or exercising your options could bankrupt you in terms of taxes. If you’re getting a stock award and the valuation is sufficiently low, file for 83(b).

      Another thing, people generally agree well experience a down turn in the next few years. There’s a chance your start up could make it through the market downturn, if it’s really intelligent with cash flow and burn rate, but don’t expect crazy acquisitions during a downturn.

      That being said, it can be useful if you think of it as a good learning experience that you’ll lose money on. My friend considered the cost of his early start up experience almost like a MBA due to learning and expected cost (vs FANG)
      Sep 4, 2018
  • Amazon Northman
    "With a prototype" implies to me that there is no clear sense of product market fit yet. Even very experienced tech people can and do screw up. If it seems obvious that the product will get traction, then this might be a good risk. But there is nothing more frustrating than a well funded startup that doesn't have a product generating real revenues yet. Like you said, a lot of risk with pretty small upside if your numbers are accurate.
    Sep 3, 2018 1
    • New ghypbd
      OP
      True that. I hate vcs who pour money into startups out of fomo, leaving employees taking more risk at higher valuations
      Sep 3, 2018
  • LeanTaaS iblinds
    I dont agree

    I made few millions from my previous companies ipo... I joined it as a fresher
    Sep 3, 2018 2
    • New ghypbd
      OP
      Really cool. What stage and % equity did you have?
      Sep 3, 2018
    • Amazon Northman
      I have made 2.8M, 200k and 0 from equity in three startups. ☺ If you weight between them, its an average of 1M each. Several years of life into each though. A sure thing of 400k-500k with growth to 1M+ is a better thing these days for an old fart like me though. If you are a kid, maybe your math looks different.
      Sep 3, 2018
  • New CmYC28
    But I think it's different. Most of the early stars are going nowhere. Joining before IPO is actually not a bad idea.
    Sep 3, 2018 0
  • New ghypbd
    OP
    What is a good median ballpark for per annum earnings in the top cos (fb, Google, Lyft etc) for 3 yoe? Is 250-300k per year a reasonable estimate?
    Sep 3, 2018 0
  • Square / Eng nom🍔
    Financially, it depends on what percent of the company you get, the potential company size if everything goes well, the odds of successful outcome (are the founders experienced? Is there product-market fit?), and your personal risk tolerance.

    Other than that, working at a startup means doing more things and learning a lot, some people prefer it, others prefer to focus on one tech.
    Sep 3, 2018 0
  • Salesforce MeWorryNo
    No if you’re going in strictly for financial reasons. The experience may be worth it though if you’re just starting out in the industry.
    Sep 3, 2018 1
    • New ghypbd
      OP
      Financial and growth related reasons. If I can become a manager within 2-3 years, that'd be cool and should sweeten the deal
      Sep 3, 2018
  • ^ what he said
    Sep 4, 2018 0
  • Cisco H1baba
    Don’t !!! Only founders and Vcs make money - you will get to slog !!
    Sep 3, 2018 0