I have seen a lot of companies, a lot of rounds. I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). I love the idea of your universe, though.
You can find your comment in the HN archives as far back as 2010.
I think there are a lot of us who struggle to fit the larger corporate mold who pretty much only thrive in the startup world. I can't speak for all of them, but I've been very willing to take the balance of lower cash compensation and a fistful of lottery tickets and not having 12 layers of middle management breathing down my neck over more liquidity.
I guess I'm also blessed with inexpensive tastes, which helps, but I'm still able to live somewhere I love and do all the things I care to do, so it works out.
It’s possible you’d be making $700k+/yr if you were at google. About triple what you are now.
With that perspective, $200k/year and $700k/year both reduce to "well-paid".
Also, a Staff title at a Seed or Series A startup can definitely ask for $250k/year, although they'd likely be trading off against equity grants.
Assume an "effective" average pay (i.e. "net" pay + retirement and other deductions, inflation-adjusted to today's dollars and averaged over the course of your career) of $120k/year.
From age 22 to 40, you've earned $2.16mm in inflation-adjusted-to-today dollars as a single earner. With a not-unreasonable average savings rate of 30%, not accounting for tax-advantaged growth or any growth at all, you'll come out with $650k of inflation-adjusted-to-today capital in savings.
Realistically, this should end up invested in some kind of equity (housing, stocks, bonds, whatever). If you finance the purchase of a house at 30, you're only 10 years into a traditional 30-year mortgage at this point, for reference. So you're roughly 1/3rd of your way to owning all the equity in your home. That's fairly comfortably a $1mm home (home equity being 30% of your assets at 40).
Of course, if you're DCA-ing into something that yields a modest average of 5%/year in inflation-adjusted returns, that $650k is closer to $1mm inflation-adjusted-to-today capital. And you still have 25 years at that point for your retirement savings to compound. And you can work part-time in something more fulfilling until retirement to supplement your income.
YMMV, but the marginal utility of money beyond $1mm in equity at 40 and $6k/month in expendable (on rental housing, food, travel, social events) income during your 20s and 30s is pretty small for most people. If you add a partner with any kind of income to the mix, it makes the marginal stress of earning more money even less appealing.
Edit: the main thing you ought to avoid like the plague is lifestyle creep. Spending money on things with zero or vanishingly-small happiness ROI. Read this story every year or two, or whenever you get a raise at work. https://www.marxists.org/archive/tolstoy/1886/how-much-land-...
Certainly this depends on where you're going to live, but if you're in a place where startups are common (even considering the current remote work situation), $200k/yr will either be a stretch for you to meet your living expenses, or will require that you live fairly modestly, especially if you have dependents. If you are able to put any of that into savings/investments, it will be a fairly small amount.
With $700k/yr, you can live quite comfortably, while putting quite a bit away for retirement.
And I don't think your (1) & (2) points really make sense here. Investments compound over time; starting off in your early 20s putting $50k in your investment/retirement accounts every year vs $10k will give you a very different outcome once you reach retirement age. Hell, you'll reach a very different outcome in your 40s. (But honestly, if you decided to live a $200k/yr lifestyle at $700k/yr, you'll be saving so much money that you could easily retire in your 30s.)
It will also mean getting to put a down payment on that house much earlier, and/or being able to afford more of a house. And in the meantime, it will mean being able to dine at fancier restaurants, take more luxurious vacations, buy more expensive toys, etc., if that's the sort of thing you value. And I wouldn't even consider all this to be lifestyle creep (as you genuinely wisely advise against downthread of a sibling comment); this kind of lifestyle would be perfectly sustainable at $700k/yr, but not at $200k/yr.
(But really, though, who the hell is making $700k/yr in their early 20s? Very few, very exceptional people, that's who.)
This boils down to "if you have more money, you can spend more money and maybe retire early". This is not a line of reasoning I'm trying to refute.
Dependents are an interesting wrinkle that is worth discussing separately. But let's stay on the straight and narrow, we can talk about in another comment if you wish.
> And I don't think your (1) & (2) points really make sense here. Investments compound over time
The reason I invoked these points was not to compare "could you save $50k at age 22 or $10k at age 22?", it was to compare "could you save $10k at age 22 or $50k at age 32?"
If you're beginning a high-income career later in life, the time-value of money is different because you have less time.
If you start early, you actually need to earn less to hit the same comparatively "fixed" long-term savings goals, because you have more time to compound.
Again, be careful to avoid falling back on "if you have more money, you'll have more money, which is obviously good".
> And I wouldn't even consider all this to be lifestyle creep
Regularly dining at fancy restaurants (anything in the Michelin orbit), taking luxurious vacations (I'd define as anything north of $300/day), and purchasing expensive toys (I don't think this needs any qualification...) is indeed the definition of lifestyle creep, and it's A-OK that they aren't sustainable at $200k/yr.
You can live extremely comfortably without these things. Whether you perceive them as acceptable or not is a you thing, not an objective thing. We actually do get to choose our values and our hobbies!
If someone's offering $500k/yr to an engineer plus stock, they're definitely trying to attain someone with very niche skills. Which begs the question: Just how applicable is this scenario for everyone else?
I haven't found many startup roles going past $200k for a fully remote engineer, almost regardless of level. I don't think they even try to get someone who would be Staff+ at FAANG because it's basically pointless.
Top quality in your scenario might mean niche skills like you've done specific computer vision work, have a PhD, and are going to a self-driving startup... Cool but not really applicable to most of us, is it?
Whereas compare as to how common it is to be a typical full stack or backend engineer with a decade of experience... join FAANG at Staff and make $600k+.
> It’s possible you’d be making $700k+/yr if you were at google.
Possible, sure, but not likely. For a mid-tier SWE joining Google (or another FAANG) today, even $350k/yr salary+equity is probably above the median.
Also that feels like a specious comparison: most people (including those who would be otherwise joining a startup) are not joining a FAANG, and will not be getting paid as well.
At a startup you have more autonomy and power over your personal position. I wrote 90% of the code that is generating company growth, released 2 months after a layoff. If I had taken longer to release that code or if my code didn't work the company would be in a worse financial position.
But that also means a lot of personal stress. There aren't 4 layers of middle management to catch flak for you. If you fuck something up, you are directly responsible and depending on the environment that can result in some heated conversations. I also work way harder at a startup than I ever did for a big company
What makes me want to put my head through a wall is when I fuck up, and four layers of people above me are the only ones allowed to fix the thing, but they don't, so I keep catching flak for my fuckup without any way to stop it and fix the thing. I have many more heated conversations with those managers, which typically leads to the door.
When I fuck something up, rarely is anyone more upset about that than I am. Nobody's dumping more heat on me than I am on myself, so bring on the heat-- as long as I have the agency to fix the problem.
As a rule, it is and always has been. For every unicorn piñata stuffed with winning lottery tickets, there are hundreds/thousands? of others whose employees walk away with nothing or less (debt, strained relationships, mental health issues, etc.) at worst or a job at AcquiHireCo at best.
To put it another way: early employee equity was always a lotto but now the payout is like some lame scratch off instead of the powerball jackpot.
It's just that these companies very often are the darlings since their inception, get constantly talked about. Everyone wants to to invest in them and everyone wants to join them. So they have the ability to pick out the best talent, in other words, it's unlikely you'll be able to join that specific startup.
But even 20 years ago, try getting into early Google. From what I heard they had extremely high bars for hiring as well and only lowered them once they got so large that the pool was exhausted.
I'd argue that the total comp at the established companies for engineers has increased precisely because of competition from startups: to make the startup not be the better option.
Does that mean that VCs are not taking a bigger slice than they used to? Absolutely not, but I wouldn't put the blame solely on them.
We’ll see when it happens. If I had to name a company most likely to have massive landmines buried in front of common stock cashing out, it would be at the top of the list.
As long as naive 22 year olds think have that one friend that stuck around long enough to cash out on an IPO, then yes. On a risk-adjusted basis, this has basically always been the case - you're better off working at FAANG.
And I think starting now at a FAANG is a lot less lucrative than people seem to think for the average (or even above-average) employee. Certainly nowhere near as lucrative as it was 7-10 years ago or more.
My startup idea is a firm that uses generative AI to flood the internet with pro-startup, pro-VC, pro-founder propaganda, so that message will never reach the naive 22 year olds. Personally, I think it's like saving the environment, since naive 22 year olds are precious resource we cannot allow to be destroyed.
But overall that statement is making a lot of assumptions.
It's assuming money is the main priority for everyone. Sometimes the priority is to have a ton of autonomy and influence on product direction, not have to deal with 8 layers of management, and have an actual, large, often-measurable impact on the company's success.
It's assuming that the alternative is that anyone can work at a FAANG, and be in the higher tiers of salary they offer for their quite-above-average employees (hired today, not 10 or 20 years ago). Most competent, talented people won't pass an interview at a FAANG. Of those that do, many of them will not immediately be making $500k/yr. These points are especially true for 22 year olds, naive or otherwise.
I was going to make a comment about working your ass off at a startup vs. working 9-5 at a more established company, but I know plenty of people at FAANGs who work 50- or 60-hour weeks, every week, and often put in time on weekends. Granted, I would agree that pretty much everyone at a small/early startup is going to be working long hours, while a large number of people at a FAANG are going to enjoy a nice, relaxing life outside of work, so they're not at all equivalent in that regard.
I was offered the option to liquidate up to 20% of my vested shares at my last company's Series A. It was restricted by tenure though (3 years), so it wasn't available to everyone. In retrospect, I should have liquidated the full amount, but it was a new concept to me at the time and I was more conservative with the amount.
I more recently interviewed with a pre-series A company and they said that they'd include me in a liquidity event when I brought up compensation.
I think more companies offering it is maybe driven by feedback loops around recruiting (prospective employees asking for more and varied opportunities for compensation, and rejecting offers that don't include them). And also perhaps by employees just simply becoming educated about and talking about this stuff, with the sometimes-tacit understanding that they're going to be looking elsewhere for other employment opportunities if their employers don't give them more than just salary bumps and occasional equity grant refreshes.
It's not related to risk, at least not directly. It's related to the supply of entrepreneurship as a factor of production. Entrepreneurship is scarce, so founders have leverage in any bargaining situation against early employees, who are more numerous and therefore less valuable and less powerful. If 10x the number of people tried to become founders, then founders would hold less leverage and the equity terms would become more "fair" because they'd have no choice but to give generous terms if they wished to hire people.
But this isn't a static situation. For example, the article author points out that his startup doesn't reduce the options-expiration clock to 90 days after leaving the company, and I've read of similar cases in the past 5 years or so. I wouldn't say this practice is common now, but I feel like this was unheard of around, say, 2010.
After the company I worked at went public in 2016, they did another public offering 2 or 3 months later, before the 6-month lockup period ended. Nonetheless, they allowed employees to participate and sell up to 10% of their shares in this offering. I feel like this sort of thing is more common these days, and absolutely wasn't 20 years ago.
Established still-private companies like Stripe, and even newer ones like OpenAI, have given employees the opportunity to sell some of their equity to new investors during funding rounds, giving them some pre-IPO/pre-exit liquidity. There are certainly other examples of this in recent years. That surely was rare in the past.
I'm not sure what's driving these changes. Employees have been gaining more negotiating power somehow. Maybe that's a function of labor supply. Maybe that's a function of employees being better educated now about corporate finance and the things that are possible but historically not offered. Not sure.
Oh wow, how many companies have a series A after 3 years? How did your company survive without any raises for 3 years and what made your company finally decide to raise money after going 3 year without doing so?
We hit an inflection point in the early pandemic where money was cheap and we had a ton of new customers coming in, so we were able to secure very favorable terms for the Series A and used that money to expand the business. Things continued to go in the right direction for the next ~2 years and we ended up doing a Series B round, and that in retrospect was a mistake. We over-hired in 2022 and couldn't back that up with increased business. And because we had given up so much control to investors in the previous rounds, we were unable to return to the sustainable-growth strategy that had worked for us in the past, and had to adopt faster growth strategies, none of which panned out and ultimately hurt the company and led to many rounds of lay-offs.
As someone that is outside of the tech industry, the fact that this is seen as an abnormal approach seems quite ridiculous.
The problem is that new startups often don't have options here. Unless you're in a market where VCs are shy about funding new companies, if you don't take the VC cash and go into high-growth mode, someone else will, and they'll end up out-competing you, at least in the short term. (Long enough that you won't be able to remain solvent, at least.) So you either fail, or take the money and often get into a situation of doing not-particularly-sustainable things.
Also Elon famously put 200 million of his own money into Tesla and SpaceX to keep it afloat, which is the opposite of cashing out early.
Can't "cash out" (early or not) if your company is sinking.
(This is the part where you say "Yes, having lived both <insert revelation>")
Has 250M: wishes they had 1B
If you have a philanthropic bent and want to be able to fund various charities to the tune of $5M or $10M per year (in addition to a reasonably luxurious lifestyle, though considerably less than the above hypothetical), $50M might not be enough to sustain that over time, but $250M probably will.
I think it's fair to say that there's not much difference between net worths of $25M and $50M, or between $50M and $75M. But jumping an order of magnitude from $50M to $250M will let you live a very different kind of life, if you so choose.
Is that what happened? I thought he had $200m, and put in $200m.
https://www.cnbc.com/2017/04/27/the-crucial-decision-teslas-...
Also, that may have kept tesla and spacex 'afloat' but what really saved both companies was billions upon billions of dollars in government contracts, subsidies, preferential loans, and tax breaks. Nevada alone gave nearly two billion dollars to Tesla.
A: I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out.
B: I have known zero founders who have turned down an option to take money off the table [...] I love the idea of your universe, though.
Have seen companies offer this to employee's
And companies that let employee's take money off the table at series A are also likely to be generous with meaningless titles; that is they will let early employee's call themselves founders.
That's insane to me. We're talking about the first priced funding round for the company, right?
Pre-Seed, Seed, and some really really early Series A employees got to cash out fairly significant chunks of equity. Not as much as a founders' 1-2 million, enough for downpayments on homes or slick new cars all cash. The founders apparently were incredibly generous to Seed stage employees.
Still doesn't compare to a Founders' equity, as this article implies.
Yeah, at Series A.
It also works well for everyone involved if they're selling their shares to the investors for Series A - investors get shares for cheaper, founders get paid based around the value of those shares, more cash & runway in the bank.
We also see pre-seed, where the goal is to get into an accelerator. It's like $2000 for 3%. Enough for a domain name, a laptop, a babysitter, something that gives you the space to do a proof of concept, but not a full MVP.
Here where VC funding is dry, we also have some stage between seed and Series A, where the startup raises from friends, angels, crowdfunding. It's not really given a name because it's a signal that the company has already burned through seed and yet hasn't done enough to raise Series A from proper "professionals".
But here, by the time you've raised Series A, you're expected to be #1 in a market - best language app, best tax app, etc. And Series A is just to prove it works in other markets. Worst case I've seen was a guy raising US$500k seed (not Series A), but they had to prove they could be #1 in five countries.
US is a market of 300M people and even top companies like Amazon don't have to go far, but many countries have both low population and low spending, and investment is still US-centric.
By the time they're ready for a series A (VCs/larger institutional investors, though sometimes angel investors from the seed round participate as well) they'll very often have something to show for it, and may even have paying customers. The A round can come during the first year of operation, or later.
Given this, it's not uncommon for founders to be able to have some liquidity during their series A. Granted, it's usually not going to be a ton of money, but it can be a nice bonus that allows the founders to pay off debt they might have accrued during the first stages of the company, or perhaps move out of their 1BR apartment and put a down payment on a larger house, etc.
Nice to meet you. Now you know one. :)