And there are so many successful VC firms at the same time?
Be careful who you pick. Since most of the time they fail, it's more about how they treat you when the ship is going down. And VCs? That damn SoftBank fund. Just f*cked the market by giving money away to idiots. More money than brains. Most VCs are followers. It's a long window for them to get paid- usually b10 years. So they need an opportunity to cash out (ipo, sell to a bigger company) for them to ever make their bet worthwhile.
How can one make sure at the time of taking up position, that you will be treated well when ship is going down, or shuttle takes off towards sky?
work for the founders who write it into the company policy that they are just ordinary employees with more equity. their wellbeing becomes tied to yours.
Most startups fail. I was an early employee with startup A. Had a good number of options. Startup B acquired startup A and my number of options was essentially diluted to almost nothing (like moving the decimal point over in the wrong direction). Startup B was acquired by Public company C and I was given about 50% my salary in RSUs (on top of my salary). I won’t even be able to vest 1/4 of that since I was just laid off this morning. That’s just my experience though. There were some red flags I chose to ignore but hindsight is... (•_•) / ( •_•)>⌐■-■ / (⌐■_■) 2020
cerealbox, can you give a bit more detail on the red flags? Was this a bay area start up, and what was the motivation for joining (options, experience, liked the vision) Thanks
Based in the Bay Area but mostly distributed. Some of the flags were Senior leadership and people with tenure leaving around the same time, everyone you talked to was a bit on edge, mid management was being cycled through too quickly and chosen with little care, decisions were being made that affected the livelihood of people with little regard. My motivation was the mission and getting startup experience. Still recommend doing the startup bit if the chance comes up. I got experience in a lot of parts of the business that I wouldn’t have gotten otherwise.
It’s not a dumb move, but extremely risky one. It would be much less risky if you could work at 100 startup at the same time to have a portfolio of them (like VC does)
Also, VCs have much better terms to help make them whole, even if a startup fails.
One way to do this is to be a hack star in TechStars. You work for 10 early stage startups and get your pick of the litter after 3 months.
Is about expected value of the VC's portafolio
Haven’t seen this in the comments stated specifically but would maybe caution against joining a non solidly backed startup right now, especially since the economy is basically overdue for a recession of some scale by now, and recessions =\= great time for startups
It's not you idiot
My bad but no need to call someone an idiot over that...just pointing out we’ve been in a bull run of some sort for almost 10 years now jeez
You can only work at one startup at a time (and are investing your time) while VC firms can invest in multiple startups at the same time (by investing money). Your upside is locked up in a single company while the VCs just need 1 / 20 companies to be a success.
Keep in mind two things during a startup: 1. The valuation VCs get included a bunch of rights you don’t get including their capital account having priority 2. You have liquidity risk on top of your market risk Both of these mean you should significantly discount the price they gave investors as you don’t know the terms. If the startup is small enough, ask for a put option at 20% below current strike price for 5% shares.
Can you please elaborate on the put option you mentioned ? is this right - say strike price is $100 and you are offered 100k shares, employee should ask for put option at 80$ for 5K shares ?
If the startup really believes in themselves, they may be willing to give you less comp in exchange for a guaranteed floor on your equity (unless they go bankrupt). I meant the premium is 5% of your shares, so 5% fewer shares. So 80$ strike and 95k shares. It’s just another thing to negotiate on
Equity is heavily skewed to founders. Even first engineer will get a shit deal Below market salaries Work on shitty tech stack No scale or limited hard technical problems. The biggest problems for startups are non technical Huge risk Work on startups if you enjoy making VCs and founders rich or become a founder!
Why would startups have shitty tech stacks?
Yeah - startups, even if they fail, can be good for the founders. Less so the employees
I worked for 3 startups over 10 years. Two failed, the third was acquired my MS leading to a medium payout for me (~$500k). I was making between $110k - $150k during that time. Now I’m making $350k+. All-in-all I probably broke even, e.g. with the payout my low startup salary matched what I would have made at a big Corp. But I wouldn’t have done it any other way. I got to do so many things in startups and feel I’m a better engineer for it.
How many yoe do you have? I thought only senior engineers at google and fb make 350k
You can get the same experience without a startup risk by working at FAANG
Working for a startup is entirely different from investing in a startup. Also, you cannot categorically say working in a startup is not a smart move. There are lot of factors to consider..including one's interests and goals.
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Great answer.