Remember the good old days (2010? 2012?) when everyone was trying to join the hot new startup? If it has a cool name and logo and top tier VC funding, everyone was game. Low salary? No biggie, just pay me in “equity!” Oh how the times have changed. Now people are so risk averse they just want to work at a FANG but then cancel out even Facebook due to recent increase in risk lol!! Also, lot of us saw how everyone who worked at Startups mostly got hoodwinked with “equity” that is valueless vs investor or founder share classes. And tons of people got screwed having to pay taxes on unrealized gains of equity that later ranked... When does everyone think the trend will reverse back to talent wanting to work at startups and accept equity? Seems everyone and their mama is asking for safety and max cash comp these days, with little trust in “equity”....
Sad part is that there are three types of startup end game scenarios: 1) value is zero, 2) startup succeeds greatly but then you realize your piece of it is so diluted and worth a lot less per share than the investors and founders got... 3) you end up LOSING money because you had to pay taxes on options with borrowed money, said options that ended up being worthless!!!!! Very few end up in category 4) of fuck you money....
2010 was the beginning of the growth, so people were willing to take more risk on equity and also had less alternatives. Now you are at the peak, so many people are looking for a safer position to face the next downturn, and companies are paying more. You will see more risk takers after the next downturn.
All the big companies have done really well over the past few years. Many of the companies that seemed really promising have hit a series of misteps. People are starting to think there might not be another Google or Facebook for a while.
In 15 years, when the new generation of workers grow up and not know about the scam. The same happened in late 90s till dot com bust.
This
What is unbelievable is how many super smart people accept low cash comp at startups in return for equity when they have no idea how many outstanding shares there are, or what rights their share class has vs other share classes, and what rules there are to diluting their equity.... otherwise brilliant people end up working slave labor wages for some charismatic CEO that convinced them they will get rich quick. Sad!
You answered it yourself. When people get dumb again. Much more info now on likely outcome of startups. Any startup worth joining that's still in high growth gives less equity than post IPO companies. Startups nearing IPO gives about same amount as FANG. Maybe when options/rsu terms are better. Access to secondary market. 10+ year exercise plan as standard. There are still people taking risks in crypto space. Decent salary and some coins are tradeable on exchanges.
I don’t know how many startups have tried to convince me to be “excited about their tech” to take 30% cut i salary and replace rsu with worthless options while the they hire a bunch of their buddies in the exec team. The worst was... a start up with such a great idea that will revolutionize the industry. The founder owns 30% in the company. Said founder busy running a different business and a day job. The previous ceo they hired with investor money owns 10% of the company spent all the investor money. Investors own the rest of the company. They want me to work for free for 2% equity to build a prototype to get more investor money since the previous ceo spent all their money and got squat done.
What if there's a startup that can offer a competitive TC? Maybe not FANG level, but let's say slightly higher than Amazon level base + equity, and fully remote so you can live anywhere and save money. Would anyone of you take that over a pre-IPO giant like Airbnb or Uber?
It would go out of business
At their current burn rate they can sustain for another few years. But let's assume they can last until the next round of funding, then what?
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I learned the hard way. Either you’re a founder or an investor. Don’t work for a startup as an IC. The chances of coming out ahead of where you go to a FANG with stock appreciation and good cash is pretty low.
Appreciate this advice, given that I’ve been looking at startups. Of course, if it’s a good idea with a solid market opportunity, Amazon is probably doing it already.
Just saying, it’s gonna be a super hard run. Think about this....you end up making 30%+ less than market. Your equity is worthless. You spend 4 years to get vested. Depending on your strike, could be a lot tax $$$ owed just to exercise. So now you’re deep in after 4 years. What happened to amzn stock in 4 years? Think you’ll be able to out do that? Plus...the chances of liquidity event after 4 years is pretty minimal. I would say look to the 7+ year time frame. And I am talking about company inception age. Look at docusign, I think they are 15 years old? Granted you could get super lucky if you were an initial ic at smart sheets. But be honest with yourself, how many of those exist? I wish my 25 year old self could hear me now. I’m not saying startups are a waste of your time...I learned a ton, very valuable stuff...what I’m saying is be an investor or a co-founder. Time is something you can’t get back, spend it wisely.