Can you make “big money” as an employee in software?
thinkfaster.co
thinkfaster.co
(1) Finance. They make so much "free" money that they can afford to just pay massive salaries and not blink. You just have to be okay with doing things that basically add no value to anything.
(2) As a very early employee in a hugely successful startup. But this is roulette, since most startups fail and some only succeed after so much dilution that your share ends up tiny.
(3) Working your way up to a CXO level (or near) role in a very large established company. This is hard and takes years of both work and corporate politics.
(4) There are some niches, like doing IT for oil and gas operations in remote areas, that I've heard pay very well... but these are almost like joining the army.
I'd say #1 and #4 are probably the most straightforward. If you want to pursue #2, you should approach employment with a super-early startup by thinking about it as if you are an investor. Would you take a small chunk in a seed round with this company? If not, pass, cause if you are taking a lower salary + equity you are making a seed investment.
I don't know whether the article is about income or wealth, but if one puts "big money" at, say, $250k of gross income, then it's clearly achievable in software. Options include a) get a job at AppAmaGooBookSoft and stay in it for 5~10 years or b) hang out your shingle as an independent consultant and charge $8k+ per week at 75% utilization.
For that matter, $8k+ per week at 50% utilization is still $165k at the same fudge factor for taxes & overhead. That's already well beyond my threshold for "I've increased this variable to the point that further increases are nice but not a primary motivator, and I'd rather that further optimization focus on quality of life as the primary variable."
I would also add that the "billion dollar VC series-B startup or bust" is not the only alternative to grinding away under the yoke of someone else. If you find a nice little niche that isn't drenched with developers (non-profits, serving lawyers, etc.) - You won't be a billionaire, but you stand a much better chance of creating a $million+ sustainable product or service company in that space.
So, most silicon valley startups?
Startups are one of the only mechanisms doing that in our contemporary financial pyramid economy. They are one of the only true class mobility engines left.
"Yet on close inspection, the evidence suggests that the keys to success in the start-up world are not much different than those of many other elite professions. A prestigious degree, a proven track record and personal connections to power-brokers are at least as important as a great idea. Scrappy unknowns with a suitcase and a dream are the exceptions, not the rule.
...
That means the founders had held a senior position at a big technology firm, worked at a well-connected smaller one, started a successful company already, or attended one of just three universities - Stanford, Harvard and Massachusetts Institute of Technology."
[0] http://www.reuters.com/article/2013/09/12/us-usa-startup-con...
Class mobility at the highest echelons -- say hundred-thousandaires to millionaires or billionaires -- helps class mobility overall by introducing new ideas and by enriching people who still remember what it was like to not have near-infinite supplies of money and power.
If you have a society where the top echelons are locked down, it won't be long until this caste system trickles down to the rest of the culture.
It's not everything and class mobility at lower levels of society is probably more important, but it's not a bad thing either.
Put another way, if you can now afford to buy a brand-new Ferrari, does it matter that you had to drive a three year old Lexus to high school?
This is a very poor way of describing the risk / upside of joining a startup.
In the aggregate, the odds of any randomly selected startup may present odds similar to roulette, but practically, you have the ability to choose who you work with and which company you work on.
Given the ability to be selective, you can dramatically increase your odds of a successful outcome, assuming that you have the skill set to a) identify / evaluate market opportunity / team capabilities and b) utilize your technical ability to add significant incremental value to the company.
The early team at PayPal did not have a 1/48 chance of success; it was probably closer to 1/10.
Edit - (Not actually 1/10, but significantly higher odds than those of a startup selected at random) Odds were chosen to correspond to the given example of roulette.
In roulette, there is no competitive advantage between specific numbers or colors. In startups, that is not the case.
Technical prowess, does not actually mean company success. Some really successful companies, have had some really bad software practices.
And companies with really good developers have failed.
Technical prowess does not mean company success, but if you are able to identify a company that with significantly higher comparative odds of success, in which your technical prowess can directly impact the success of the product, you are in a much better position to achieve a positive outcome than if you had joined a company at random where your talent didn't have significant incremental value-add.
With regard to your prowess adding significant value-add, I think it is easiest to give a counter-example / example.
SnapChat's success likely doesn't ultimately lie in their ability to create beautiful HTML5 landing pages for their app on the web, so their front-end web developers likely don't add huge incremental value.
Conversely, Google's success largely hinged on their ability to return highly relevant search results with great speed, so early developers with talents in these fields had a much larger impact on the eventual success of the company. - This is the kind of situation you should aim to find.
(1) You get the most by being a very early employee -- like #1 - #5. It's a hockey stick distribution here. The later you get in, the exponentially lower your stake will be.
(2) The most successful startups are outliers.
Getting in that early means you do not have a large team or a long track record to look at when making your decision. The big bucks will come from the coffee shop hobo or ramen-snarfing grad student outfit with 1-3 full time people (all founders), barely any capital, and no track record. People will laugh at you and they're probably right.
Probably.
But if they're wrong, you will laugh more later.
If it has success written all over it, it will look "hot" and "cool." That means there will be a ton of competition for those early positions. You will be edged out by someone with a Magna Cum Smartypants degree from an Ivy League school. It's also probably going to be so capitalized (since it looks "hot") that they'll just skimp on the equity and pay more, which invalidates the thesis here and makes it just a regular job from a purely financial risk/reward perspective. (It still might be worth taking for the experience and fun factor.)
That's why if this is the strategy you want to take you are more or less doing what seed stage angels do. You are looking for feral unicorns that poop unpolished diamonds. If everyone else thinks it's a good investment too, the market will behave "efficiently" and you will not get rich. The market doesn't "want" you or anyone else to be rich. Rich people are outliers.
Google and Facebook are great examples by the way. They both looked stupid: "another search engine?" and "so it's like MySpace and Friendster but with no capital and some Harvard dropout nozzle running it?"
Edit: the reason your equity/stake drops off exponentially the later you get in is precisely because of the stupid unicorn factor. Really early stage companies have to offer you a fatter option package because you're an idiot to work for them and they know it. There is no other way they can compete for talent. If they're successful, those options turn out to be very expensive -- they come out of the founder's equity pool.
You made my day.
I might also add government, though you want to avoid lower-level contractor positions there and go for higher-end stuff or becoming a direct Federal employee. Also avoid sexy areas like space if your goal is to get rich, since these will have intense competition. This is part of why science pays so badly -- people want to do it.
https://en.wikipedia.org/wiki/Bell_Labs
> office equipment manufacturer
The systems we create are complicated and require automation (PLCs, embedded systems, PCs) to function, so the company requires programmers. The money is fantastic for two reasons: they have a really hard time finding people and money for oil companies shoots out of the ground (most of the time).
The work is different from most systems someone would deal with at a startup. The systems range in age from new to 20 years old. Object oriented is a new and scary thing. I write and debug a lot of pascal and C. Also do a lot of sysadmin work on ancient systems, token ring networks etc.
The biggest difference however is work environment. Most rigs have an absolutely awful (think dial up) satellite internet connection, so there is no remote work. Everything gets done on site. This leads to a lot of travel, which is where you make the big money if you are willing to do it. The work environment is a lot different from a startup: Folding chairs and a table in the corner of a room if you are lucky, sitting on the floor if not. You get to see some interesting and scary parts of the world, police escorts from the airport, body guards on the way to the rig in really bad places, which can be very isolating as well as traveling for months at a time.
I've considered lots of startup jobs because I believed strongly in the companies. Every single time, however, I was able to get a larger chunk of the company by keeping my current job and simply investing.
To give an example, my current job pays about $250k, and one year, I invested $100k of that into a startup, leaving me with ~$150k of salary. This $150k + startup equity was a better deal than the startup was offering in both salary and equity. Plus, equity bought as an investor is much less tax toxic than equity options received as an employee of a startup.
On the other hand, most people who work at startups aren't interested in money. If that's you, that's totally cool, and I respect that!
i'm a CS student, i would be very glad to listen to your story. i know it may sounds rude, but i'm sincere.
if you want, send me an email to
giuscri <at> gmail <dot> com
:)
For most established companies, however, I think the difference of one person is typically quite low.
Can you win at money in software? Yes, but pretty much only by founding your own company or being among the first handful of employees at a startup that gets huge. On the other hand, you can make a comfortable middle-class living at software very easily.
What kills me is seeing friends whose jobs involve hard physical labor. They can't save enough to win at money before their bodies start giving out from the abuse. In better economies with unions and cultural support, they just sort of loaf away their less productive, later years. In America, they get laid off and can't work anymore.
50-100k/yr is a comfortable life in most places. That's 1.2-2.5 million in capital. Definitely don't have to start a company of be in a start-up for that at all.
That doesn't mean the only choice is to become a founder, not everyone is there yet. Looking at the article though, you see the bias that defines so much of the literature: despite the fact that we're creating software that reaches the world, the only place to get a job is the west coast of the US, right?
Wrong. There are tons of places doing 7 and 8 figures in industries driven by software. Small businesses. Be prepared to rethink how your career works. If you want to just hack and live in your little hacking world with your fellow hackers drinking hacker beer and listening to hacker music, then you're just an employee. If you're willing to stretch, and embrace what makes business happen, and apply your technical skills to those problems, and tie your success to the success of the business, there are some tremendous opportunities to be had. There are plenty of non-VC'ed businesses owned by people making real money who are more than happy to reward those who help them make more.
could you explain better?
An employee can get stock in 5 different companies in 5 years, a founder is, at best, able to get one company off the ground in 5 years. An employee can move change jobs (and often get a pay raise) when the unexpected hits a company puts it on the skid. A founder will never be invested in again if they jump ship on the company when it hits a big problem. An employee can work for a cash salary every year, a founder often will spend one maybe two years without salary. Founders file for personal bankruptcy, employees generally don't.
And the interesting thing is that any technical "employee" can work for 5 years in the Bay Area and get up enough cash to be a "founder" for their first startup. (I went 12 years before going into a startup but the earliest I've seen it be successful is 5, you have to know enough about running a company to make it work).
The reason the narrative is so skewed though is because you here stories about the successful founders but few about the marginal ones. You rarely hear about the person whose personal bankruptcy has made every part of their life that involves running a credit check harder. For every successful billionaire founder there are THOUSANDS of millionaire employees.
The problem here is the notion "big money" and perceived inequity of distribution. But if you actually put everyone who identifies as a "Founder" in a group, and everyone who identifies as an "Employee" in a group, it is much more likely the people in the latter category will have retired early.
An interesting book on the subject is "Are you a Stock or a Bond" [0]. It really makes you think about how your time/labor has a risk profile in the same way that financial instruments in your 401k do.
[0] http://www.barnesandnoble.com/w/are-you-a-stock-or-a-bond-moshe-a-milevsky/1111895174?ean=9780137127375Is that really true? What about all the "fail fast" mantras we hear so much about? It seems like I read about plenty of founders who have run three or four companies into the ground before finally having a success?
For a founder who fights hard, they put in the work to make it happen and try various approaches when adversity strikes until they, and their investors, agree they have done everything they can to try to make it fly. That person will get another shot, because investors do realize that this is a gamble but they know that if there had been a way to make it work, this person probably would have found it.
Then there is the founder who never varies from their day one tactics, against advice from advisors, and then decides, when it is clear the company is going no where, to resign and go somewhere else. That person rarely gets a second shot at the prize.
There is a third category of founder who, and this is almost literally true, curls up in the face of all the stress and shuts down. With luck, their investors replace them quickly and they get early treatment to avoid PTSD. Folks rarely talk about them. Their best outcome is to move to a stable, low to moderate responsibility position in a large company.
If you're a fighter, you can get funded as many times as you can afford (remember pre-seed is all on you). If you're a runner you get at most two shots at the game. And if you're not cut out for the life, its important to find that out and deal with it early, even one person taking the short exit, is too many.
Also, while maybe not relevant to a discussion of $200k+ jobs, averages among employed people may not be the average relevant to you -- it's much easier to find work as a junior marginal software developer than a junior marginal lawyer.
the short answer is no. Why ? Statistics. 1-2% doesn't get you anywhere, after dilution, vc's getting, stake and if an eventual takeover happens. A 50mn takeover will leave a founder with about 6mn is an O.K aprox. Granted he had 50% of the company to start with, where does that leave you?
established company case: As an employee you can hit the 1mn mark over a few years depending on the company. But that depends on what you mean by "big money"
Assumptions: big money > 5mn
But I get to deduct state taxes from my federal taxes, so it's not exactly 10% different.
So let's compare total taxes: $28,375 with state tax vs. $21,175 without. So you're paying an extra $7,200, or 7.2% of total income. That's on top of the sky-high cost of living in CA compared to other locations.
after starting my own company and seeing modest success, i wouldn't want to get rich any other way. i feel much more in control this way, and even if it is an illusion, it's a useful one.
I see what you did there.