I'm a senior software engineer with over 12 years of experience.
6 out 7 start ups I worked for never had a liquidation event that resulted in any monetary gain.
The one that did ( i was employee #97 and worked there for almost 6 years) and they finally had a 2ndary offer which allowed me to sell 15% of my shares, for about 7K, but because it's short term gains, about 4K is what I got after taxes.
The rest of the shares were completely worthless because they couldn't be sold. I am not disappointed. I never assumed the options would ever be worth anything - I choose my employment based on Salary and work life balance. Options are just a nice bonus, if they do happen.
Your argument is not making sense to me as someone who had offers from startups. I was asked to take roughly 40% pay cut now and expect 10X increase in valuation for equity over 4 years which would put me ahead by 2X to 3X in terms of total compensation over that time frame. I didn't took the offer taking to account risk of failure (~80%). If I treated options as "nice bonus" it would never make sense to take any startup offer over jobs at established companies.
That's why people say look at them like lottery tickets.
There's many factors that go into whether or not they are worth anything - dilution and whether or not the startup is successful. The successful startup part needs good management, good demand for product, competitive against competitors.
> I was asked to take roughly 40% pay cut now and expect 10X increase
Of course you were.
They are selling you on the dream, the best case scenario, etc.
The hard part is that no-one is intentionally or literally defrauding, but it is up to every person what terms they agree to.
First startup, I traded nearly all of my salary over four years for stock options: $0
Second startup, I was told I'd get 5% of the company (no contract though). I quit after a year without pushing the topic: $0
Third job was not a startup, but it was a fairly small company, and I've made nearly two million in tax deferred accounts having made a healthy salary the entire time. I'm retiring this year.
I learned a lot of great things at those first two companies, but I would never recommend a startup from a financial point of view. I almost joined a third startup, but I didn't, and they folded as well. I suspect you've got better odds going to Vegas and putting your salary on a number from the roulette table.
"Third job was not a startup, but it was a fairly small company, and I've made nearly two million in tax deferred accounts"
I would love to know how. Am I just stupid? How am I missing these opportunities? Someone above posted that 4 years at FAANG would net you $1,000,000 savings. And you're saying that a "fairly small" company netted you $2,000,000 savings?
Just to add some concrete FAANG numbers for comparison...
I started at BigCo four years ago as a SWE, after my phd in a not-cs hard science. My starting salary was $130k, with about $30k for signing bonus and moving fees. At my first full year, I received an additional $60k in vesting equity, for about $200k total.
Last year I made Senior SWE, which gave a bump to $165k base pay. Meanwhile, stock equity trickle has continued to grow, and looks like ~$100k this year. And an additional $40k from bonuses for performance, recruiting and general 'company has too much money' put the projected total for the year at about $300k pre-tax (and not including health or other benefits).
I live afaict unusually frugally. I don't drive, live in a shared house, and don't have short humans to worry about. But I occasionally travel to interesting places and give ~$8-$10k a year to stuff I care about. After four years at BigCo, I've got about $450k in the bank+investments. So, not a million, but probably way better than I would have done with the startup scene... and it sounds like the one recruitment bonus I've gotten so far is better than most people ever see from a startup exit.
I've never worked for a "big" company, much less one of FAANG. Although, I knew a kid who went to Apple, and he did well. I also had a friend from Intel, and he did well too.
My situation was much more than 4 years, but it was steady (exponential) growth at a nice rate, and I'm exiting in my mid 40s. Maybe I could've done better, but to the point of this topic, my one stable job did much better than the three startups I was exposed to.
People win the lottery. You don't ask "Am I doing something wrong. I bought a ticket too and didn't win anything".
These huge bonuses, etc are handed out to people who either have really scarce skills or get lucky.
Wikipedia[1] says there are nearly 4 million software developers in the US. If each were to receive a million dollars, then it would total up to 4 trillion USD (using US ways of naming large numbers). The GDP of the US in 2016 (same time the software developers demographics was reported) was about 18.6 trillion USD.
The idea that a million USD is reasonable for a developer is absolutely laughable.
Actually an initial grant of 600K in RSU's in a FAANG would probably net that much with 4 years of rapid growth in stock price. And don't forget the cash component isn't peanuts either.
The old guard (MS, IBM etc.) seem stingy indeed when it comes to comp (except for executives, who seem to be compensated somewhat similarly across the board).
The newer software firms are much much better at adequately compensating software engineers, and especially senior software engineers. If you are a senior software engineer you should seriously consider trying getting compensated along those lines.
He never specified how many years he worked there, and he's apparently already retiring? Maybe that's over a very long period of time so I don't see how you're "failing". Maybe you're actually doing much better.
You are also failing in life against someone who won lottery last week. You should have lot of regret about not going to that same store and not choosing those same numbers that lottery winner chose.
I wouldn't believe everything you read on the internet. I often see absurb compensation packages posted on HN and have never seen anything close to them in real life.
The fact that you are doubting the information I wrote in the previous comment, suggesting the parent poster to not necessarily believe them, is disturbing.
I can only say I truly got those packages and I’m an average engineer.
I suggest you ask to the close friends you have working at FAANG if those are true.
First of all, I didn't read your previous comment and you are not the parent post of the comment I replied to.
I am sorry you are 'disturbed' by my skepticism of random people on the internet, but I don't have friends working at FAANG so all I have to go off is my own experience and publicly available info. Based on those, I find it hard to believe how many people here post that they make 500k+.
Hiya Dyeje. My name is Patrick. I was previously the CEO of a recruiting startup, have many friends who work at AppAmaGooBookSoft, and am broadly considered credible on HN. I do not work at AppAmaGooBookSoft and my financial exposure to them is denominated in probably tens of dollars; to the extent I am biased here, my incentives are to convince people to not take their offers.
AppAmaGooBookSoft do, indeed, pay deep into the six figures. Each of them has an engineering ladder, where promotions start off like promotions in grade school. If you're not fired, you make it to level X. (They don't fire many people.) The offer at X is, depending on negotiation skill, phases of the moon, perceived competition (particularly on the initial offer stage), and slight variations in performance, about $450k.
There are promotions available after X. People get them, approximately daily.
There are many people for whom it is not in their interest to tell you this, because it will make their offers or proposed life plans less attractive by comparison. There are many HNers who prefer ignoring reality on this issue, sometimes out of jealousy, sometimes out of pride, or sometimes out of believing that they can reason from first principles what Google should pay a Senior Software Engineer and therefore ignore what Google does pay a Senior Software Engineer.
These people are wrong. The market prints the deals where the market prints the deals.
Do you know if there are any other markets other than the USA where a competent (but not necessarily celebrity-famous) dev can make 300-400k a year?
For many good devs, immigrating to the USA is close to impossible in these times. Would be nice to know if these kinds of salaries are attainable outside the states.
Plenty of those American companies hire remote developers. I spent several years working for them here in France and the UK, for market compensation as measured at the Bay Area companies being discussed here.
Some places will try to pay you less based on your location. You can't blame them for trying, but you don't have to accept their first offer, either. The market is really good now.
I suggest then you download the blind app. It’s an anonymous app where people share offers they get (especially from FAANG), mostly to ask for negotiation advice. That’s where I posted my offers back then, as a sounding board to make sure I wasn’t taken for a ride.
You’ll quickly discover that either those compensations are real and very common considering how many posters are there, or the app is literally full of trolls pretending to have those offers and ask tips to other trolls, for whatever reason (except that they need to have a valid FAANG email account to post, so go figure why they would lie).
As to why I am disturbed: people who don’t believe average software engineers can make that much are the reason why many employers don’t pay that much, so they drive down the overall compensation in the industry. If all software engineers were more aware of their market value, there would be less discrepancy in compensation, such as in other mature fields (e.g. doctors, lawyers). So, the fact you don’t believe me it’s disturbing because it’s directly affecting the job market I’m in.
The sample size for levels.fyi is small and in Jeff Atwood's reply to patio11 only 7% of responders said they make over 400k+. I don't doubt that there are people out there (or even you) making that much, I just don't believe every rando on HN that chimes in to a salary thread saying they do. Sorry ¯\_(ツ)_/¯.
That said, would love if someone made a site dedicated to collecting these offer letters. Would certainly help next time I'm job hunting.
The 450k includes money for health insurance right and in lieu of stock? I heard that Netflix would allow you to select compensation based on how much risk you are willing to take.
Mostly correct, though I’m sure there were some employer subsidy for the health plan, and the ability to get some more advantage from the stock growth via something similar to ESPP.
I didn’t dig too deep into that because I recklessly opted for the startup instead of FAANG :), but the best deal was FB: everything was paid for and they were also offering a fat sign on bonus of 100k
That's about ~25 years if one is contributing ~25k a year (reasonable 3% match + 18k yearly limit) and the accounts are yielding a nominal 8%, which is not incredibly impressive (5% real give it or take).
Make the nominal interest 10% (probably more similar to the actual returns in the past two decades) and we get there in ~20 years.
Contribute more (e.g. backdoor roth and/or mega backdoor roth) and we get there much faster.
Startup 1: $50k for 1 year (in the 90s, do the math what it would be right now)
Big company for some time
Startup 2: $0 for 2 years
Startup 3: $0 for 2 years
Startup 4: $0 for 2 years
Startup 5: $500k for 4 years
Startup 6: $1m for 1 year (still somewhat in play because 3/4 of my options got converted into the options of a public company as a result of acquisition, and I got RSU handcuffs on top of that)
All numbers before tax.
I hope I'm done with my startup adventures. Lost taste for it.
Financially, based on my experience, startups do not make any sense as an employee.
Mentally, Startup 5 made me question my faith in humanity.
Serious question: Assuming most of the startup crowd is in SV - how does this make any sense at all? People do have to pay $5000 mortgages there, right?
Joined among the first 10 employees. The company grew to 200 employees and 400M valuation in 4 years. Sold last year a portion of my vested shares for 1M to investors as part of a secondary transaction, and I still have a decent amount (70%) of vested shares and unvested options, since the company hasn’t exited yet and management has no plan of doing so in the short/medium term.
I’m not counting on the rest of the equity to be worth as much because I don’t believe in the company ability to execute well at this point, too many changes diluting the quality and the mission. Unfortunately I wasn’t able to sell more as part of the secondary transaction (company rule), otherwise I would have dumped it all (the vested part that is).
Yet I consider myself lucky after having read all these comments, but had I gone to FAANG 4 years ago my financial outcome would have been very similar, if not bigger.
Seriously? 4 years at FAANG would net you $1,000,000 savings?
That seems... crazy. Can someone explain how that works? Your salary alone living in the bay area, definitely isn't goin to net you $1,000,000 in savings.
I got an offer from Netflix for 450k cash and another offer from FB for 210k cash with 600k equity over 4 years, a few years ago.
Considering how well those stocks did after such offers were made to me, and how frugal I am (avid minimalist spending <50k a year in the bay), I would have saved even more than 1M (I know most of my friends working there did).
Also, the 1M from the startup wasn’t net, but gross (taxed at long term capital gain luckily).
Could you please explain how does this work? Is it a one-time payment of 600K spread over 4 years? And afterwards you just end up with 210K base (or maybe a small increase) for the following years, with no additional bonuses/etc?
This looks like an RSU grant of 600K; there are different vesting schedules (i.e. how much of the RSU becomes actual shares in the company, owned by you which you can sell/keep). Typically its 25% every year with a 1 year cliff (i.e. you get 0 actual shares when you start, but 25% after a year and so on).
You get refreshers so, no, it's not just base once your initial grant runs out. In a normal case, especially early in your career, the refreshers are larger than the initial grant as you get promotions and raises.
This is not necessarily true if you've plateaued and is not necessarily true if your realized comp greatly exceeds your target comp. If your target comp is $500k per year but you're realizing $1000k per year due to stock growth then your refreshers will reflect the $500k rather than the $1000k.
In my case, the title was software engineer, at the time I had 6 years of experience and BS + MS in computer engineering. The offer at FB was for level E5, and I negotiated decently. I’m a very average engineer with average accomplishments, truly nothing special.
Interesting thanks - is this something recent that has changed? I don't get the sense that this was how it was even 4-5 years ago. Do you think these salaries are sustainable?
It depends on how you live. I know people whose entire expenses in NYC are $1.5k/mo, including food who make about $300k/year. I'm sure their bank balances grow like crazy.
I would not want to live that way but they seem to be pretty happy.
Depends on what career stage you are and what you will be doing. If you have 5-10 years of experience and doing distributed computing/info retrieval/AI then $1M worth of RSUs over 4 years is VERY normal and totally expected by everyone I know.
I joined as a regular non-manager, non-lead employee. Actually, I started as an intern, and was offered a full time job immediately after that. I was employee #~100. I sold 1625 shares in a secondary round for $14,000. When the company eventually exited, I sold 27,375 shares for $1.1M. I have 1000 shares remaining. If I hadn’t sold anything, my shares would be worth about $5.1M today.
FYI, in the US there is the Qualified Small Business Stock exemption, which can significantly reduce the tax owed on the sale of stock of a company that was once small. It can be publicly-traded at the time of sale.
Back when I was a tax lawyer, you could exclude 50% of your gain, though the rules may have changed. Also, if you rolled over your gains into other “qualified small businesses”, you could defer taxation altogether.
It applies only to the sale of stock, as the name implies. One can restructure an asset sale as a stock sale in order to take advantage, if the tax benefit is big enough.
Not sure what you mean about a business that has no stock (sole proprietorship?).
I am no longer employed there. I hold them mostly for nostalgic purposes. I sold all of my shares because it seemed foolish to have 100% of my net worth in one company. Holding 1000 shares feels okay. Tax bill was ~0 on the $14K and my marginal tax rate on half (I’m Canadian)
When a Canadian has $14,000 in capital gains, their tax liability is calculated as: $14,000 * 50% * marginal tax rate. The 50% is basically the Canadian way of taxing capital gains lower than earned income.
What GP was trying to convey, albeit in a slightly confusing fashion, was this:
1. He had $14,000 in capital gains
2. No tax was directly accessed against this $14,000 amount, in other word: "tax bill was ~0 on the $14K".
3. The taxable portion of his capital gains was $14,000 * 50% = $7000
4. He paid his marginal tax rate on the taxable portion of his capital gains ($7000)
Sorry, yeah, could have been a lot more clear there. I was making extremely little salary at the time of the secondary, so I paid something like 20% tax on half, for about $1400 in taxes on $14k proceeds.
Pretty standard acquisition story. Shareholders with preferred shares (VCs) got paid first. By the time they were paid there was nothing left. It just means the company was sold for too little for the employees to benefit.
This happened to a company I co-founded. My common stock was bought at about 1/3 of the lowest price given to early employees for options. (I had RSUs, not options).
I got $130k, and their options were worthless.
Luckily the acquirer offered retention bonuses that helped dull the pain, but of course those are taxed at regular income and not long term capital gains.
Oh, and like a previous comment mentioned: the VCs have preferred stock so they get their investment back 100% before any common stock sees a penny. If employees had the same stock as VCs, I estimate I would have walked away with about $400k.
As someone who has been on the purchasing side of one of these transactions, that's not really the case.
What usually happens is, say the company has received $x million in funding. Everyone is plugging away working hard, but runway starts to run short and the product isn't getting the traction originally anticipated. At that point it looks obvious the company will go bankrupt relatively soon, so the investors push for a sale to try to recoup some of the their money. Often times there is value in the team and perhaps industry knowledge to the acquiring company, but the tech itself is often worthless, so the sales price is below the $x million capital raised and only holders of preferred shares get anything.
Note that founders rarely own preferred shares. They have common stock just like employees, so they are usually wiped out, too, in cases like this.
Thanks for the insight. I had guessed that most of the aquihires price are set at (investments + $500K/employee). If this wasn't the case, I would think that employees would have no incentive to get onboard and that would basically not allow the sale to go through. Is this not the case in your experience?
I joined a successful startup about ten months before it was acquired for several hundred million. The deal somehow led to a lot of employees losing their options (myself included). There was some discussion of a lawsuit but it fizzled.
If I understood the details I would never have signed the contract. At the time I was pretty desperate for a job (I’d moved to the US from Australia and my own company had gone belly up and I was living in Santa Barbara with a mortgage).
what needs to be explained, a several hundred million exit is LOWWWWWW. If they had a series B for 20 million or so, or a series C for close to or above 100 million, then the valuation itself was WAY more than that.
A few hundred million exit will result in ZILCH (almost $zero) for any common stock shareholder every single time, unless the company was in series A or lower.
VCs have a separate share class called Preferred, and they also negotiate "Liquidation Preferences" with a multiple. So a Liquidation Preference x1 means they get their money back, as much as possible. A Liquidation Preference x2 means they get double their money no matter what, before anybody else - like common stockholders - get paid.
And this is before your stock options' strike price matters.
Its a shitty deal, investor protection laws should be extended to cover this, because the information and transparency is lacking.
The exit was in 2005, and several hundred million was not bad (although it came after a failed effort to go public for somewhere north of a billion). I was very new to the startup game and had comparatively little at stake and didn’t understand any of the language but I was invited to some gatherings of engineers who had been screwed by the deal.
My impression is that founders or early investors often have a lot of ability to dilute the value of stock prior to making a deal (there’s description of similar shenanigans early in “Chaos Monkeys”)
I joined an already-successful ~400 person company with an already-published S-1 at around year 8 or 9, and worked there for around three years in total. I was given options representing such a small fraction of the company that it wasn't memorable (perhaps a hundredth or thousandth of one percent?). My options were underwater for several months after a lackluster IPO, but eventually the stock picked up enough steam to make me around $300,000.
Of all the companies/startups I've worked for, this one was by far the most corporate and least startup-ey, yet this was the only one that made me more than a penny after an exit, despite working at a few other startups that have had "exits."
Startup 1: $0
Startup 2: $0
Startup 3: Would’ve made ~$40k had I not left so early (left after 7 months, sold for a couple hundred million like 6 months later)
Startup 4: Publicly traded now, will see how it turns out but hopefully $100k or more
At the now public company, it wasn’t a %, but just a grant mix of options post IPO and a grant of RSUs as well because of some funny timing with the IPO.
I only planned on staying a year before moving so I didn’t negotiate any stock into the initial comp package, but later re-negotiated that into the plan which resulted in the weird timing around IPO so have a weird mix of options and RSUs.
I joined a startup in 2000. All employees starting before me were offered ~50k shares in the company as part of compensation while I was offered ~50k options. I was told options were the more correct way of doing way of doing things and other than the strike price they were essentially the same.
As a junior employee who didn't know any better (and no negotiation leverage anyway) I accepted the deal. Fast forward a couple of years and as a potential sale of the company approached it was announced that the stock was going to split 10 for 1. What this means is everyone with shares now had 10x, while option numbers were unaffected (ignoring that the stock price is now 10% of what it was).
When the company was bought the price per share was equal to the strike price of a second grant of options I had, making them worthless. I suspect most of the employee options were at this strike price.
A fellow employee with shares made 40x what I did for starting a month earlier. My payout was <$30k.
are there any situations in which it makes sense for an employee to exercise vested options "early"? namely, while still employed by the company and with no plans of leaving anytime soon. I'm curious because it sounds like shares and options were treated differently in the above scenario.
You didn't put anything away from your salary? (401k? Roth IRA?)
As someone from humble origins, it surprises me more people don't live frugally 5-10 years in the Bay then retire in luxury somewhere with lower cost of living.
I had saved nearly $1,000,000 from salary (plus subsequent investment returns) over the years. But I didn't think that's what the question was asking.
I have never worked in the Bay Area. Or anywhere on the West Coast for that matter. And most of my career has been outside of the US by this point (including the successful exit).
Yes, should have been clearer. That's what I was clarifying, since some startups vastly underpay. A disturbing number of people I meet in tech don't plan well for retirement.
I once joined a company that already had several hundred employees as an entry level software engineer. It was my least favorite job: I couldn't find a fit and I only lasted just over a year. However, during that year they IPO'd, and because I made it over the vesting cliff I was able to buy my options on my way out.
Ballpark numbers:
I had 300 options at $5.
post-IPO price was around $15.
I did the "sell to buy" thing, so I sold roughly 100 shares to pay for buying all 300.
I haven't sold the other ones yet but the stock is north of $50/share.
It seems like there's less than 20k shares total in circulation. (that's like an order of magnitude less than I expected? I took "shares held(000s)" and divided by "% Own", and rounded.)
I have the impression that most of the "old-timer" employees did quite well as long as they sold their stocks at the right time: one guy spent 6+ months traveling and then took his time finding his next job, another guy thinks he might be able to retire in his '40s.
edit: as elsewhere in this thread, I also worked at a startup that failed ($0), and I've left a couple that to my knowledge are still going ($ -4k , because both times i bought options on my way out just in case they make it)
- 20k total shares would mean a market cap of $1M, and an IPO price of $300k. Those are not viable numbers.
- 20k total shares vs. you having 300 options means you would have been given 1.5% of the company in one year. That's totally absurd given you worked there for a year as an entry-level engineer and the company had several hundred employees.
I agree that I must have misunderstood the reporting of the numbers of shares. the numbers i'm sure of are the rough number of options that i had vested after 1+ year.
I've never heard of an IPO'd company--meaning one that's listed on a public market like the NYSE or NASDAQ--with such thin trading, nor have I ever heard of option grants measured in hundreds...
I think the original grant (4-year vesting etc) must have been for around 1,000 shares. and I joined pre-IPO. but I agree it was not a large grant, even for an entry-level position. Nonetheless it's the only one I've gotten that's worth anything right now!
I was co-founder of a software company’s old during internet bubble. My partner funded everything so we split shares 80-20. Then we both got substantially diluted by two rounds of investment and 140 employee share packages. I think i had 5% at the end.
When sold we got 15% in cash, and 85% in stock in the public internet company, that was locked up for one year. The cash was a $800,000+ check. A year later i sold the stock for maybe $150k.
Made 1 million on a company exit of about 100 million as technical co-founder. Started with 15% but got diluted to 1% after several rounds of funding including down rounds.
While I don't disagree with your comment much (if the technical cofounder was diluted down to 1%, guessing pretty much all employees received well under $100k), it's weird that you linked to that "tech bubble" video from 2007. If anything, Peter Thiel was exactly right, and he understood that winner-take-all tech leaders would become insanely valuable. That video is arguing 2007 Facebook was a bubble at a $15 billion valuation. It's worth $470 billion today.
The current company I’m at just sold about a month ago for $140mil. I was one of the first engineers (the three of us originals all started at the same time) and started a few months after initial funding was raised. Between my purchased options and non-purchased vested options I made about $130k and have another about $40k in remaining options that are converting over. I was kept on by the acquiring company and given a new company package with about $40k of additional RSUs that vest over 4 years.
My original option grant was for 0.00225%. I optimized for salary when I was hired, due to the stock at my previous two startups being worthless, and didn’t fight for more. Between series A and B we were going through some rough times as a company and I was granted a second grant of the same number of shares but not sure what the percentage turned into.
Employee # 3 at a startup, my first full time jr dev job. Eventually talked my way into .33% equity.
$6M exit, our shares were bought with the acquiring company's publicly traded shares. Those shares had a 6 month cliff before we could sell them.
~$9 a share at the time of acquisition, ~$4 a share at the end of the 6 months. Sold about 1 year after acquisition for ~$10/share, now at ~$17 a share and climbing.
Made $11k pretax in the end. (+$4k cash gift from founder that got a bigger payout, due to the board not approving more equity for employees pre-acquisition)
It's really interesting to see $100M+ exits that have resulted in trivial sums for founders and early employees after multiple rounds of dilution and/or VCs with preferred shares taking home the spoils.
I have always optimised for salary although I can see why a young engineer with no dependants might opt for the gamble of a big payday instead, likely without really understanding their true chances.
Too much industry focus is heaped on 'unicorns' when these kind of companies really are a drop in the ocean.
> It's really interesting to see $100M+ exits that have resulted in trivial sums for founders and early employees after multiple rounds of dilution and/or VCs with preferred shares taking home the spoils.
My unscientific impression is that in 9 figure exits the founders typically do make money, because they typically retain enough equity even after significant dilution.
However, I have heard of high 9 figure exits in which nobody but the founders and VCs made any significant money.
CTO on founding team. Started out with 10% equity. Co. is now 6 years old. After a merger (diluted by 40%), $10m investment (diluted more), $4m strategic investment (diluted more), then investors taking money off the table first for an exit event - I stand to make $100k if we sell at $20m and $600k if we sell at $40m (currently valued at $20mish). That's pre tax.
Well that’s what you get when you go for VC money. VC’s want the least risk possible for their money. So they will put themselves the first. Always. As an entrepreneur, your choice is to go with another VC. However VCs are short in supply, so the best option is to bootstrap and take the least amount of money
I was employee 30 at a startup. I worked there about 3.5 years, and then left. The company was acquired a year later. I made about $115,000, which frankly is a lot less than I would have made at a public company. My friend at Twitter during the same timeframe made close to $1M, and my friend I worked with at the startup left to join Facebook and also made over $1M.
At a startup that folded, $0. (Failing is an exit!) At a startup acquired by a larger company, about $20k. Neither made up for the delta vs market rate salary.
Was young and stupid. Joined a startup (Kno formely Kakai) as #12 employee. Made $0. Would have been negative amount if I hadn't ripped up my early exercise papers before leaving. Company took O($xxxM) and due to mismanagement & nepotism sold for O($xM). Nobody made any money. Some lost a lot.
Started at a company that technically was not a startup at the point I joined (10 years old — 300 employees). I got lucky and 6 months in the company was acquired and all my stock vested immediately. Made about $15k but was given $200k in RSUs at the new company. I can’t complain.
I got lucky; they had a successful IPO and I made around 150k based on working there 1.5 years. I joined fairly late (employee 400-something) at a startup that was very secretive about their finances and customers, but clearly doing well, if you were paying attention:
They had taken on a relatively small amount of VC funding when I joined, so just doing the math on the number of high-quality employees and the fact that they were making market-rate salary offers made it obvious that they had been successfully running on their business model for a long time, even though they wouldn't disclose finances or customer numbers to non-employees. And sure enough, they eventually IPO'ed as a company that had been (mostly) profitable for a while.
About $2500. It was basically a lousy tip for about 14 months work.
Some context: The initial offer was either higher salary and lower equity, or lower salary and higher equity. The difference in pay was $5000 / year. Given the nature of the exit, I felt like a decent thing to do was at least make up the difference in pay. (The terms of the deal were confidential.)
Things were eventually "made right" by the new owner.
The problem with startup equity is that employees almost always have little bargaining power and always are kept in the dark about the real value of the equity. It almost always turns into a lottery ticket... Some people make out well, others don't, and always for reasons out of the employees control.
> always are kept in the dark about the real value of the equity
Why would shareholders stay in the dark? Is it because these employees-shareholders are not curious enough to request information about the company they own?
Because employee-shareholders are NOT owners. The system is compensation, and in practice is designed to keep employee-shareholders out of all "ownership" tasks.
Equity is really a benefit that's part of compensation; it's not the same as voting rights. I like equity because I feel like I have "skin in the game," but I never consider it ownership.
A simpler way is: you are only an owner if you have >= 1% and some kind of voting rights.
I joined a company which had already IPO'd, 1 year before I joined. And had had 14 years of its runway. They gave me some options, which would mature in 5 years. During that period, the stock exploded. Which the company founders, themselves never expected, else they would have given off much less to employees. Some other employees who had the stock matured, sold it.
They gave me stock options worth 300 $ but it increased 2000 times, in a span of 10 years. It increased so much, that I sold it eventually(to avoid all eggs in one basket). Got myself a house. Loan free. And started my own startup. Which I run till date.
First company if I had chosen to exercise when I left maybe 10k. A second company I chose to give up 5k in salary to get some shares which I opted not to exercise when I left. Now, I follow these rules:
1) optimize for cash. Stock is cherry on top.
2) if weighing two offers the one with RSUs should be weighted more. No "handcuffs" needing to pay to exercise if you leave.
Number 2 is referring to later stage private company. I haven't worked at a company where strike price is pennies or whatever, or a public company where you can sell at time of exercise. Then handcuffs may be worth it.
I've worked for around 10-15 startups now over the years. Only one meaningful exit or equity:
NEWR from 2009 to 2011, employee #20 or so, 20k shares (0.05%), exercised most of my vested ~10k before leaving, sold post-IPO-lockup at ~$36/share for a gross of around $385k . Would have gone up if I had waited to sell, to around $1m now. Most of my former coworkers are independently wealthy now, solid folks who all absolutely deserve it. Should have negotiated for more shares or cash, stayed longer, and exercised all vested shares. Live and learn I guess.
I probably lost about $3,500-4,000. Startup was having financial issues, and got last minute funding. People were asking to give up salary for more equity. I was employee #1, and really enjoyed working there, so I took the deal. I truly believed with had a great product, but that's not enough for a company to succeed. Company went out of business 6 months later.
Not a huge financial loss, but I learnt a valuable lesson.
Five out of seven startups were zero. One was $17K, another was $2K. At all but one place the salaries were not great.
I have done far, far better at larger companies in terms of salary and stock programs. If I'd stayed one of the big companies, I'd likely be able to retire right now (not that I will -- I like writing software and I plan to continue doing it as long as I can, ideally well into my 70s).
I made about $75k when my last company IPOed. I had worked there for 2 years before and had a relatively junior salary and not many options. I had a range of options at different strike prices, they averaged out to about 100% gain, but some were more and some were less.
People who had been there long had both lower option prices and more options and made quite a bit.
This is the one startup I worked for that exited. I was only there for a little over a year. But for a few months, they couldn't make payroll and issued stock instead.
Ironically it was the project that I was working on which ultimately led to the acquisition. Not really because I was writing brilliant code though, so I'm not bitter about that.
first job out of school, started as an entry level at a startup with ~$20MM in funding, employee #60 or so. Stuck around six years through an additional hundred $MM and an exit for $3-400MM and was the most senior director at the time.
One of the first employees, the company got sold in about 3 years from starting, enterprise space but very little revenue and a frankly half baked product. I think of it as a team acquisition, made about 5k and 40k in RSUs to vest over 4 years.
$0 at one and $80,000 at another. I spent several thousand on something I wanted, and banked the rest. My boss bought a nice car. Oh, and a third sold and the buyer had a clause where if you quit you got shit.
startup1: $0 (company went bankrupt, wiped out stock holders, reformed, went bankrupt again.)
startup2: $0 (acquired, but all common holders were wiped out since it all went to preferred stockholders.)
startup3: $0 (did not exercise my options. company is still going, has not been acquired.)
startup4: $10K (did not make up for my salary decrease when I joined.)
startup5: still working on it... not optimistic.
The good news: none of this has mattered. After 20 years of work, I've done well through traditional savings and investment.
40k and it was small for how long I was there. I heard others got more for being with the company less time I was. A bit of wisdom here. Be selfish. Get everything you reasonably can.
Employee #40 at a medical device company after working as a contractor for one year and then asked me to join. Received a first round of ESOP options a bit under the valuation price ($20 at the time). Then RSUs as bonuses for the next 5 years. After company started to ship, shares went up and even reached over $100 at one point. Sold half of my stock between $70 and $90 and made around $450k before taxes. We were partially lucky that those were the recession years and investors were looking to put their money in less risky ventures, and as far away as possible from real estate.
I quit a couple of years before the company got bought by a major player, leaving my remaining unvested stock which would have been worth another $300k at the moment of the acquisition. Good money for me as my first job in the US, although not as good as a bunch of colleagues before me that were turned into senior management and made millions. Loved the job, and I would have stayed if they hadn't assigned me a new boss that, albeit not a bad person, his professional demeanor was awful.
Have worked for 3 other startups since then. The next one, also a medical device company, looked promising. Joined as their first contractor/employee but I could not secure equity. They also changed directions on their development so I left. Salary was not terribly low but half of what I usually make. They are currently supposedly doing well and are shipping product after 5 years, and received around $30M funding mostly from a Silicon Valley VC last year to accelerate their growth. I know other employees left after me for similar reasons. They got compensated even less than me.
The following one again as a first contractor/employee in the connected home space with some promises for equity if the company soared (founders had done that before and were successful, with strong ties to Apple). Salary was not superb considering my skills, but above market. However after 2 years the founders could not do a buyback and the company was absorbed by their single investor, a big security business that was just in the process of rolling their IPO. They only offered us employees options at market price with a lot of restrictions. They were also going to reduce my salary and obviously I didn't like the terms.
Currently almost two years at a SF startup, with all the pains of working and living in the preposterous SF zeitgeist under a small startup company salary. Own more than 1% of the company but I know it will get diluted after we receive our series A, and where I don't have much control of the circumstances.
Before all these deeds, founded my own startup with a friend right out of college, mainly building industrial systems. We were naive and business inept, never made serious money but managed to stay alive for five years doing some cool customer projects, having fun and learning a lot. Plus the gratifying feeling of having control over our destiny, even if it was a bit for a small period of time. Hands down one of the best experiences of my life.
There is a reason startups - technology startups in particular - are declining in number, specially in the US. The field is too mature, consolidated and institutionalized now. There are some niches and pockets of opportunity, however competition is intense. Sadly most affairs and regulations are rigged against employees, and if you are not being compensated at market level with all the associated perks, you will never get rewarded as you deserve as an employee compared to a founder or investor in the minuscule event that the business is successful.
If you really want to be part of a startup, first try to work at a FAANG type of company even if the idea does not appeal to you. Leverage their massive resources to learn and grow your wealth. Save enough to a point that you are comfortable and don't need to worry about money anymore, whatever that means to you. Then, and only then, if you still feel the need to scratch your entrepreneurial itch, make your move. The full monty - not as an employee but a founder. Your increased experience and business network will further increase your chances of success. And you will also have come across real industry problems that desperately need solutions. Win-win.
In this age where work is changing so fast and the future of security for workers is uncertain, hoping for the best and planning for the worst has more relevance than ever.
This is pretty late, but I was feeling retrospective on a sunday evening so let's see... the tldr;
#0 = 0
#1 = 0, ~500k options on day 1 eventually underwater and unexercised
#2 = 0
#3 = 25k
#4 = 0, but left unexercised options that were worth 500k about 8 years later
#5 = 0
#6 = 100k with additional options exercised and held
#7 = current gig, tbd
Background: I'm a software developer first, a good architect and team-lead but a reluctant manager.
startup #0 was a summer gig doing "web consulting" before my last year of college. I got put on a huge e-commerce project with tight deadlines (in C++). Slept under my desk for a few weeks and got it shipped. I rearranged my double major to a single degree to graduate early and the bigger company hired me away from the consulting gig. They had just gone public and were pretty flush. Turned out the web consulting shop actually got acquired and staying would have been more lucrative. Oh well.
startup #1 went public shortly before I was hired, ended up with approx $500k in options which were underwater by the time I could vest. Learned a lot about options, it was the first dot com bust. Had some great experiences, went to India, went to Japan, went to SF. Learned a lot about running software dev projects with global teams.
startup #2 was a combination consulting + java middleware/framework company, which was kind of a new idea at the time (again, post dot com crisis, pre-rails, java was new). We were building VB6 for the web, basically. Doing consulting work to eat our own dog food using our own tools. A few dry months led to missing a few paychecks here and there, and it would always take a really long time to get re-paid. Eventually our largest customer left and that wasn't enough work to sustain the whole company. Learned a lot though, especially about software schedule estimation (it's not THAT hard if you really put the prep work in).
startup #3 I was a co-founder, we were aqui-hired for zero up front but future promises/profit share etc. Ran as a small subsidiary of the parent company so we stayed independent and sank/swam on our own merits. After a year of zero salary (credit cards) we could eventually pay ourselves and got up to 6 employees and generated enough profit to be sustainable but I lost my interest in the product space. Sold my fraction for about @25k and moved on. Also learned a lot on that project. Parent company is still around and from what I can tell, very profitable.
startup #4 was a job offer from someone I met at startup #1. It was Ad-tech, which I have come to loathe, but I grinded it out there for a few years. When I left, I was so burned out I didn't exercise any of my shares which if I remember would have been about a $1k check. Of course, a mere 8 years later they were quite successful and those shares would have been worth about $500k.
I never took vacation at any of those previous companies, a span of about 10 years. At that point I was able to take a year off. Unlike #2 and #3, #4 were solidly profitable and paid well and I was able to save a bunch of money. Paid off all credit cards and will aim to never have debt again.
startup #5 was a facebook game company. Some kind of farming game thing, but not the famous one, a ripoff of a ripoff. Still, I met a bunch of great people there and learned a lot about cranking out content to pay the bills. At one point, there was a rumor of an acquisition by the famous farming game company, but that never came to pass.
startup #6 was a good experience, I worked with talented folks, got to travel to Europe for work, had the 401k etc. That's the place I worked the longest and it was managed the best out of all of the various dysfunctional places I've worked. Got to go to conferences, travel, work on open source projects, company wide hackathons that actually ended up in the product. Good work/life balance. After 6 or so years a new leadership team came on board and things started to change. I got an offer from #7 and decided to take it. I was able to exercise some options before they expired. Sold some and held the rest. The experience from #4 informed that choice. In the past I let a lot of options expire when I'd leave a place because I wasn't that personally enthusiastic about any more. Now I see it as leaving the bet on the table that might hit in 10 years, but if/when it does it will be worth it.
startup #7 is tbd. It's an interesting project, but it's back to the 60 hour / week grind with a bad commute and much less work/life balance.
I'm in my mid 40's now and I've pretty much decided that I'm done with the startup thing after this. If #7 doesn't hit then my next gig I'll go to some BigCo and apply all this weird knowledge and experience making software engineering teams function.
I do have savings, more than most, but definitely not enough to retire yet. Startups tend to underpay on salary. One side effect of all this is that I also have no family/kids/etc. I think that's partly due to choice but also partly due to having worked my ass off for the last 20+ years. I worked weekends, holidays, and 100+ hour weeks. I bought tickets for shows and never went. I've had my laptop open on Christmas day troubleshooting something or other that I don't even remember now. I was always able to do that because I never had a family. In the long run, I don't think the companies I worked for were any better off for that sacrifice. In the short term it always seemed necessary but in retrospect, the forces that made these companies successful or not were always much bigger than me.
I really have only one question... why did you kept doing more startups as employee? I totally understand people doing this as a founder but just don't get it otherwise.
I have done the "founder" thing once (at #3), and at one point I had to lay off employees that I had just hired. That sucked. I think when I'm just the technical lead, I can work hard on that and let revenue be someone else's problem. Also, most of the companies I've worked for have been founded by people that I know who asked me to come on board and take a senior technical role. Ultimately that's led to relatively low pay and low ownership stakes and a couple of decades of wasted time. So... don't do what I did?
I always joined as employee #1, and interviewed literally 100s of startups before making a choice, and then only joined when there was a clear MVP and "an idea of product market fit with incredibly strong proof."
6 out 7 start ups I worked for never had a liquidation event that resulted in any monetary gain.
The one that did ( i was employee #97 and worked there for almost 6 years) and they finally had a 2ndary offer which allowed me to sell 15% of my shares, for about 7K, but because it's short term gains, about 4K is what I got after taxes.
The rest of the shares were completely worthless because they couldn't be sold. I am not disappointed. I never assumed the options would ever be worth anything - I choose my employment based on Salary and work life balance. Options are just a nice bonus, if they do happen.
> I was asked to take roughly 40% pay cut now and expect 10X increase
Of course you were. They are selling you on the dream, the best case scenario, etc. The hard part is that no-one is intentionally or literally defrauding, but it is up to every person what terms they agree to.
It doesn't, from a financial perspective.
Second startup, I was told I'd get 5% of the company (no contract though). I quit after a year without pushing the topic: $0
Third job was not a startup, but it was a fairly small company, and I've made nearly two million in tax deferred accounts having made a healthy salary the entire time. I'm retiring this year.
I learned a lot of great things at those first two companies, but I would never recommend a startup from a financial point of view. I almost joined a third startup, but I didn't, and they folded as well. I suspect you've got better odds going to Vegas and putting your salary on a number from the roulette table.
I would love to know how. Am I just stupid? How am I missing these opportunities? Someone above posted that 4 years at FAANG would net you $1,000,000 savings. And you're saying that a "fairly small" company netted you $2,000,000 savings?
I am failing at life, apparently.
I started at BigCo four years ago as a SWE, after my phd in a not-cs hard science. My starting salary was $130k, with about $30k for signing bonus and moving fees. At my first full year, I received an additional $60k in vesting equity, for about $200k total.
Last year I made Senior SWE, which gave a bump to $165k base pay. Meanwhile, stock equity trickle has continued to grow, and looks like ~$100k this year. And an additional $40k from bonuses for performance, recruiting and general 'company has too much money' put the projected total for the year at about $300k pre-tax (and not including health or other benefits).
I live afaict unusually frugally. I don't drive, live in a shared house, and don't have short humans to worry about. But I occasionally travel to interesting places and give ~$8-$10k a year to stuff I care about. After four years at BigCo, I've got about $450k in the bank+investments. So, not a million, but probably way better than I would have done with the startup scene... and it sounds like the one recruitment bonus I've gotten so far is better than most people ever see from a startup exit.
Insofar as you seem to be "keeping score" against anyone but yourself, maybe a little. Otherwise, not really.
My situation was much more than 4 years, but it was steady (exponential) growth at a nice rate, and I'm exiting in my mid 40s. Maybe I could've done better, but to the point of this topic, my one stable job did much better than the three startups I was exposed to.
These huge bonuses, etc are handed out to people who either have really scarce skills or get lucky.
Wikipedia[1] says there are nearly 4 million software developers in the US. If each were to receive a million dollars, then it would total up to 4 trillion USD (using US ways of naming large numbers). The GDP of the US in 2016 (same time the software developers demographics was reported) was about 18.6 trillion USD.
The idea that a million USD is reasonable for a developer is absolutely laughable.
[1] - https://en.wikipedia.org/wiki/Software_engineering_demograph...
That’s a ridiculous amount of money. Microsoft feels very stingy if this is the normal.
The newer software firms are much much better at adequately compensating software engineers, and especially senior software engineers. If you are a senior software engineer you should seriously consider trying getting compensated along those lines.
I can only say I truly got those packages and I’m an average engineer.
I suggest you ask to the close friends you have working at FAANG if those are true.
I am sorry you are 'disturbed' by my skepticism of random people on the internet, but I don't have friends working at FAANG so all I have to go off is my own experience and publicly available info. Based on those, I find it hard to believe how many people here post that they make 500k+.
AppAmaGooBookSoft do, indeed, pay deep into the six figures. Each of them has an engineering ladder, where promotions start off like promotions in grade school. If you're not fired, you make it to level X. (They don't fire many people.) The offer at X is, depending on negotiation skill, phases of the moon, perceived competition (particularly on the initial offer stage), and slight variations in performance, about $450k.
There are promotions available after X. People get them, approximately daily.
There are many people for whom it is not in their interest to tell you this, because it will make their offers or proposed life plans less attractive by comparison. There are many HNers who prefer ignoring reality on this issue, sometimes out of jealousy, sometimes out of pride, or sometimes out of believing that they can reason from first principles what Google should pay a Senior Software Engineer and therefore ignore what Google does pay a Senior Software Engineer.
These people are wrong. The market prints the deals where the market prints the deals.
For many good devs, immigrating to the USA is close to impossible in these times. Would be nice to know if these kinds of salaries are attainable outside the states.
Some places will try to pay you less based on your location. You can't blame them for trying, but you don't have to accept their first offer, either. The market is really good now.
You’ll quickly discover that either those compensations are real and very common considering how many posters are there, or the app is literally full of trolls pretending to have those offers and ask tips to other trolls, for whatever reason (except that they need to have a valid FAANG email account to post, so go figure why they would lie).
And there are many other resources to vet those numbers, such as http://levels.fyi or advice from “trusted” folks in the software community like patio11: https://mobile.twitter.com/patio11/status/100632191192687001...
As to why I am disturbed: people who don’t believe average software engineers can make that much are the reason why many employers don’t pay that much, so they drive down the overall compensation in the industry. If all software engineers were more aware of their market value, there would be less discrepancy in compensation, such as in other mature fields (e.g. doctors, lawyers). So, the fact you don’t believe me it’s disturbing because it’s directly affecting the job market I’m in.
That said, would love if someone made a site dedicated to collecting these offer letters. Would certainly help next time I'm job hunting.
I didn’t dig too deep into that because I recklessly opted for the startup instead of FAANG :), but the best deal was FB: everything was paid for and they were also offering a fat sign on bonus of 100k
What kind of tax-deferred accounts allow $2M in deposits in less than 50 years?
Make the nominal interest 10% (probably more similar to the actual returns in the past two decades) and we get there in ~20 years.
Contribute more (e.g. backdoor roth and/or mega backdoor roth) and we get there much faster.
Big company for some time
Startup 2: $0 for 2 years
Startup 3: $0 for 2 years
Startup 4: $0 for 2 years
Startup 5: $500k for 4 years
Startup 6: $1m for 1 year (still somewhat in play because 3/4 of my options got converted into the options of a public company as a result of acquisition, and I got RSU handcuffs on top of that)
All numbers before tax. I hope I'm done with my startup adventures. Lost taste for it.
Financially, based on my experience, startups do not make any sense as an employee.
Mentally, Startup 5 made me question my faith in humanity.
Absolutely. Also note that you are an extreme outlier for having had a 7 figure payoff.
Most people who spent their entire career in startups will be lucky to see a 6 figure payoff at any point.
I’m not counting on the rest of the equity to be worth as much because I don’t believe in the company ability to execute well at this point, too many changes diluting the quality and the mission. Unfortunately I wasn’t able to sell more as part of the secondary transaction (company rule), otherwise I would have dumped it all (the vested part that is).
Yet I consider myself lucky after having read all these comments, but had I gone to FAANG 4 years ago my financial outcome would have been very similar, if not bigger.
That seems... crazy. Can someone explain how that works? Your salary alone living in the bay area, definitely isn't goin to net you $1,000,000 in savings.
Considering how well those stocks did after such offers were made to me, and how frugal I am (avid minimalist spending <50k a year in the bay), I would have saved even more than 1M (I know most of my friends working there did).
Also, the 1M from the startup wasn’t net, but gross (taxed at long term capital gain luckily).
Could you please explain how does this work? Is it a one-time payment of 600K spread over 4 years? And afterwards you just end up with 210K base (or maybe a small increase) for the following years, with no additional bonuses/etc?
This looks like an RSU grant of 600K; there are different vesting schedules (i.e. how much of the RSU becomes actual shares in the company, owned by you which you can sell/keep). Typically its 25% every year with a 1 year cliff (i.e. you get 0 actual shares when you start, but 25% after a year and so on).
This is not necessarily true if you've plateaued and is not necessarily true if your realized comp greatly exceeds your target comp. If your target comp is $500k per year but you're realizing $1000k per year due to stock growth then your refreshers will reflect the $500k rather than the $1000k.
I would not want to live that way but they seem to be pretty happy.
Also, what was the tax bill on the $14k and $1.1M in terms of percentage? Was it long term capital gains 15% fixed?
Back when I was a tax lawyer, you could exclude 50% of your gain, though the rules may have changed. Also, if you rolled over your gains into other “qualified small businesses”, you could defer taxation altogether.
Not sure what you mean about a business that has no stock (sole proprietorship?).
20% earned in a probability friendly way, is much better than 100% in a low probability way (as very high chances would have been of it nearing 0%)
What GP was trying to convey, albeit in a slightly confusing fashion, was this:
1. He had $14,000 in capital gains
2. No tax was directly accessed against this $14,000 amount, in other word: "tax bill was ~0 on the $14K".
3. The taxable portion of his capital gains was $14,000 * 50% = $7000
4. He paid his marginal tax rate on the taxable portion of his capital gains ($7000)
I got $130k, and their options were worthless.
Luckily the acquirer offered retention bonuses that helped dull the pain, but of course those are taxed at regular income and not long term capital gains.
Oh, and like a previous comment mentioned: the VCs have preferred stock so they get their investment back 100% before any common stock sees a penny. If employees had the same stock as VCs, I estimate I would have walked away with about $400k.
What usually happens is, say the company has received $x million in funding. Everyone is plugging away working hard, but runway starts to run short and the product isn't getting the traction originally anticipated. At that point it looks obvious the company will go bankrupt relatively soon, so the investors push for a sale to try to recoup some of the their money. Often times there is value in the team and perhaps industry knowledge to the acquiring company, but the tech itself is often worthless, so the sales price is below the $x million capital raised and only holders of preferred shares get anything.
Note that founders rarely own preferred shares. They have common stock just like employees, so they are usually wiped out, too, in cases like this.
A few hundred million exit will result in ZILCH (almost $zero) for any common stock shareholder every single time, unless the company was in series A or lower.
VCs have a separate share class called Preferred, and they also negotiate "Liquidation Preferences" with a multiple. So a Liquidation Preference x1 means they get their money back, as much as possible. A Liquidation Preference x2 means they get double their money no matter what, before anybody else - like common stockholders - get paid.
And this is before your stock options' strike price matters.
Its a shitty deal, investor protection laws should be extended to cover this, because the information and transparency is lacking.
My impression is that founders or early investors often have a lot of ability to dilute the value of stock prior to making a deal (there’s description of similar shenanigans early in “Chaos Monkeys”)
Of all the companies/startups I've worked for, this one was by far the most corporate and least startup-ey, yet this was the only one that made me more than a penny after an exit, despite working at a few other startups that have had "exits."
Overall, simply bank on it being nothing
I only planned on staying a year before moving so I didn’t negotiate any stock into the initial comp package, but later re-negotiated that into the plan which resulted in the weird timing around IPO so have a weird mix of options and RSUs.
As a junior employee who didn't know any better (and no negotiation leverage anyway) I accepted the deal. Fast forward a couple of years and as a potential sale of the company approached it was announced that the stock was going to split 10 for 1. What this means is everyone with shares now had 10x, while option numbers were unaffected (ignoring that the stock price is now 10% of what it was).
When the company was bought the price per share was equal to the strike price of a second grant of options I had, making them worthless. I suspect most of the employee options were at this strike price.
A fellow employee with shares made 40x what I did for starting a month earlier. My payout was <$30k.
Startup 2: $0
Startup 3: $3,000,000
Startup 4: $0
That's over the course of 25 years, with a few stints at non-startups as well.
As someone from humble origins, it surprises me more people don't live frugally 5-10 years in the Bay then retire in luxury somewhere with lower cost of living.
I have never worked in the Bay Area. Or anywhere on the West Coast for that matter. And most of my career has been outside of the US by this point (including the successful exit).
Ballpark numbers: I had 300 options at $5. post-IPO price was around $15. I did the "sell to buy" thing, so I sold roughly 100 shares to pay for buying all 300. I haven't sold the other ones yet but the stock is north of $50/share. It seems like there's less than 20k shares total in circulation. (that's like an order of magnitude less than I expected? I took "shares held(000s)" and divided by "% Own", and rounded.)
I have the impression that most of the "old-timer" employees did quite well as long as they sold their stocks at the right time: one guy spent 6+ months traveling and then took his time finding his next job, another guy thinks he might be able to retire in his '40s.
edit: as elsewhere in this thread, I also worked at a startup that failed ($0), and I've left a couple that to my knowledge are still going ($ -4k , because both times i bought options on my way out just in case they make it)
- 20k total shares would mean a market cap of $1M, and an IPO price of $300k. Those are not viable numbers.
- 20k total shares vs. you having 300 options means you would have been given 1.5% of the company in one year. That's totally absurd given you worked there for a year as an entry-level engineer and the company had several hundred employees.
When sold we got 15% in cash, and 85% in stock in the public internet company, that was locked up for one year. The cash was a $800,000+ check. A year later i sold the stock for maybe $150k.
If I could have sold earlier I would have. Even then i understood a near revenue-less business couldn’t be worth $500M+.
haha WOW oh my god, and the software engineers getting a fraction of a fraction of a percent and being "reassured" that its a generous offer!
https://www.youtube.com/watch?v=I6IQ_FOCE6I
extremely relevant and the 2007, in italics for emphasis, is irrelevant ... or is it timeless
Peter Thiel? yeah I'm going to go with "'Missed the Point', for $10,000"
Startup 2: 2M$ (Joined as a mid level engineer, built the product ground up to scaling it to millions of users and hundreds of customers)
$6M exit, our shares were bought with the acquiring company's publicly traded shares. Those shares had a 6 month cliff before we could sell them.
~$9 a share at the time of acquisition, ~$4 a share at the end of the 6 months. Sold about 1 year after acquisition for ~$10/share, now at ~$17 a share and climbing.
Made $11k pretax in the end. (+$4k cash gift from founder that got a bigger payout, due to the board not approving more equity for employees pre-acquisition)
I have always optimised for salary although I can see why a young engineer with no dependants might opt for the gamble of a big payday instead, likely without really understanding their true chances.
Too much industry focus is heaped on 'unicorns' when these kind of companies really are a drop in the ocean.
My unscientific impression is that in 9 figure exits the founders typically do make money, because they typically retain enough equity even after significant dilution.
However, I have heard of high 9 figure exits in which nobody but the founders and VCs made any significant money.
They had taken on a relatively small amount of VC funding when I joined, so just doing the math on the number of high-quality employees and the fact that they were making market-rate salary offers made it obvious that they had been successfully running on their business model for a long time, even though they wouldn't disclose finances or customer numbers to non-employees. And sure enough, they eventually IPO'ed as a company that had been (mostly) profitable for a while.
Some context: The initial offer was either higher salary and lower equity, or lower salary and higher equity. The difference in pay was $5000 / year. Given the nature of the exit, I felt like a decent thing to do was at least make up the difference in pay. (The terms of the deal were confidential.)
Things were eventually "made right" by the new owner.
The problem with startup equity is that employees almost always have little bargaining power and always are kept in the dark about the real value of the equity. It almost always turns into a lottery ticket... Some people make out well, others don't, and always for reasons out of the employees control.
Why would shareholders stay in the dark? Is it because these employees-shareholders are not curious enough to request information about the company they own?
Equity is really a benefit that's part of compensation; it's not the same as voting rights. I like equity because I feel like I have "skin in the game," but I never consider it ownership.
A simpler way is: you are only an owner if you have >= 1% and some kind of voting rights.
They gave me stock options worth 300 $ but it increased 2000 times, in a span of 10 years. It increased so much, that I sold it eventually(to avoid all eggs in one basket). Got myself a house. Loan free. And started my own startup. Which I run till date.
1) optimize for cash. Stock is cherry on top. 2) if weighing two offers the one with RSUs should be weighted more. No "handcuffs" needing to pay to exercise if you leave.
Number 2 is referring to later stage private company. I haven't worked at a company where strike price is pennies or whatever, or a public company where you can sell at time of exercise. Then handcuffs may be worth it.
NEWR from 2009 to 2011, employee #20 or so, 20k shares (0.05%), exercised most of my vested ~10k before leaving, sold post-IPO-lockup at ~$36/share for a gross of around $385k . Would have gone up if I had waited to sell, to around $1m now. Most of my former coworkers are independently wealthy now, solid folks who all absolutely deserve it. Should have negotiated for more shares or cash, stayed longer, and exercised all vested shares. Live and learn I guess.
Not a huge financial loss, but I learnt a valuable lesson.
I have done far, far better at larger companies in terms of salary and stock programs. If I'd stayed one of the big companies, I'd likely be able to retire right now (not that I will -- I like writing software and I plan to continue doing it as long as I can, ideally well into my 70s).
$2.95m before taxes.
People who had been there long had both lower option prices and more options and made quite a bit.
This is the one startup I worked for that exited. I was only there for a little over a year. But for a few months, they couldn't make payroll and issued stock instead.
Ironically it was the project that I was working on which ultimately led to the acquisition. Not really because I was writing brilliant code though, so I'm not bitter about that.
Walked away with $140k after taxes
Startup 2 (6 months): $10k. Mainly from the profit-sharing of the startup incubator, not from actual equity.
The good news: none of this has mattered. After 20 years of work, I've done well through traditional savings and investment.
I quit a couple of years before the company got bought by a major player, leaving my remaining unvested stock which would have been worth another $300k at the moment of the acquisition. Good money for me as my first job in the US, although not as good as a bunch of colleagues before me that were turned into senior management and made millions. Loved the job, and I would have stayed if they hadn't assigned me a new boss that, albeit not a bad person, his professional demeanor was awful.
Have worked for 3 other startups since then. The next one, also a medical device company, looked promising. Joined as their first contractor/employee but I could not secure equity. They also changed directions on their development so I left. Salary was not terribly low but half of what I usually make. They are currently supposedly doing well and are shipping product after 5 years, and received around $30M funding mostly from a Silicon Valley VC last year to accelerate their growth. I know other employees left after me for similar reasons. They got compensated even less than me.
The following one again as a first contractor/employee in the connected home space with some promises for equity if the company soared (founders had done that before and were successful, with strong ties to Apple). Salary was not superb considering my skills, but above market. However after 2 years the founders could not do a buyback and the company was absorbed by their single investor, a big security business that was just in the process of rolling their IPO. They only offered us employees options at market price with a lot of restrictions. They were also going to reduce my salary and obviously I didn't like the terms.
Currently almost two years at a SF startup, with all the pains of working and living in the preposterous SF zeitgeist under a small startup company salary. Own more than 1% of the company but I know it will get diluted after we receive our series A, and where I don't have much control of the circumstances.
Before all these deeds, founded my own startup with a friend right out of college, mainly building industrial systems. We were naive and business inept, never made serious money but managed to stay alive for five years doing some cool customer projects, having fun and learning a lot. Plus the gratifying feeling of having control over our destiny, even if it was a bit for a small period of time. Hands down one of the best experiences of my life.
There is a reason startups - technology startups in particular - are declining in number, specially in the US. The field is too mature, consolidated and institutionalized now. There are some niches and pockets of opportunity, however competition is intense. Sadly most affairs and regulations are rigged against employees, and if you are not being compensated at market level with all the associated perks, you will never get rewarded as you deserve as an employee compared to a founder or investor in the minuscule event that the business is successful.
If you really want to be part of a startup, first try to work at a FAANG type of company even if the idea does not appeal to you. Leverage their massive resources to learn and grow your wealth. Save enough to a point that you are comfortable and don't need to worry about money anymore, whatever that means to you. Then, and only then, if you still feel the need to scratch your entrepreneurial itch, make your move. The full monty - not as an employee but a founder. Your increased experience and business network will further increase your chances of success. And you will also have come across real industry problems that desperately need solutions. Win-win.
In this age where work is changing so fast and the future of security for workers is uncertain, hoping for the best and planning for the worst has more relevance than ever.
My 2c.
I was the 2nd employee too.
#0 = 0
#1 = 0, ~500k options on day 1 eventually underwater and unexercised
#2 = 0
#3 = 25k
#4 = 0, but left unexercised options that were worth 500k about 8 years later
#5 = 0
#6 = 100k with additional options exercised and held
#7 = current gig, tbd
Background: I'm a software developer first, a good architect and team-lead but a reluctant manager.
startup #0 was a summer gig doing "web consulting" before my last year of college. I got put on a huge e-commerce project with tight deadlines (in C++). Slept under my desk for a few weeks and got it shipped. I rearranged my double major to a single degree to graduate early and the bigger company hired me away from the consulting gig. They had just gone public and were pretty flush. Turned out the web consulting shop actually got acquired and staying would have been more lucrative. Oh well.
startup #1 went public shortly before I was hired, ended up with approx $500k in options which were underwater by the time I could vest. Learned a lot about options, it was the first dot com bust. Had some great experiences, went to India, went to Japan, went to SF. Learned a lot about running software dev projects with global teams.
startup #2 was a combination consulting + java middleware/framework company, which was kind of a new idea at the time (again, post dot com crisis, pre-rails, java was new). We were building VB6 for the web, basically. Doing consulting work to eat our own dog food using our own tools. A few dry months led to missing a few paychecks here and there, and it would always take a really long time to get re-paid. Eventually our largest customer left and that wasn't enough work to sustain the whole company. Learned a lot though, especially about software schedule estimation (it's not THAT hard if you really put the prep work in).
startup #3 I was a co-founder, we were aqui-hired for zero up front but future promises/profit share etc. Ran as a small subsidiary of the parent company so we stayed independent and sank/swam on our own merits. After a year of zero salary (credit cards) we could eventually pay ourselves and got up to 6 employees and generated enough profit to be sustainable but I lost my interest in the product space. Sold my fraction for about @25k and moved on. Also learned a lot on that project. Parent company is still around and from what I can tell, very profitable.
startup #4 was a job offer from someone I met at startup #1. It was Ad-tech, which I have come to loathe, but I grinded it out there for a few years. When I left, I was so burned out I didn't exercise any of my shares which if I remember would have been about a $1k check. Of course, a mere 8 years later they were quite successful and those shares would have been worth about $500k.
I never took vacation at any of those previous companies, a span of about 10 years. At that point I was able to take a year off. Unlike #2 and #3, #4 were solidly profitable and paid well and I was able to save a bunch of money. Paid off all credit cards and will aim to never have debt again.
startup #5 was a facebook game company. Some kind of farming game thing, but not the famous one, a ripoff of a ripoff. Still, I met a bunch of great people there and learned a lot about cranking out content to pay the bills. At one point, there was a rumor of an acquisition by the famous farming game company, but that never came to pass.
startup #6 was a good experience, I worked with talented folks, got to travel to Europe for work, had the 401k etc. That's the place I worked the longest and it was managed the best out of all of the various dysfunctional places I've worked. Got to go to conferences, travel, work on open source projects, company wide hackathons that actually ended up in the product. Good work/life balance. After 6 or so years a new leadership team came on board and things started to change. I got an offer from #7 and decided to take it. I was able to exercise some options before they expired. Sold some and held the rest. The experience from #4 informed that choice. In the past I let a lot of options expire when I'd leave a place because I wasn't that personally enthusiastic about any more. Now I see it as leaving the bet on the table that might hit in 10 years, but if/when it does it will be worth it.
startup #7 is tbd. It's an interesting project, but it's back to the 60 hour / week grind with a bad commute and much less work/life balance.
I'm in my mid 40's now and I've pretty much decided that I'm done with the startup thing after this. If #7 doesn't hit then my next gig I'll go to some BigCo and apply all this weird knowledge and experience making software engineering teams function.
I do have savings, more than most, but definitely not enough to retire yet. Startups tend to underpay on salary. One side effect of all this is that I also have no family/kids/etc. I think that's partly due to choice but also partly due to having worked my ass off for the last 20+ years. I worked weekends, holidays, and 100+ hour weeks. I bought tickets for shows and never went. I've had my laptop open on Christmas day troubleshooting something or other that I don't even remember now. I was always able to do that because I never had a family. In the long run, I don't think the companies I worked for were any better off for that sacrifice. In the short term it always seemed necessary but in retrospect, the forces that made these companies successful or not were always much bigger than me.
I have done the "founder" thing once (at #3), and at one point I had to lay off employees that I had just hired. That sucked. I think when I'm just the technical lead, I can work hard on that and let revenue be someone else's problem. Also, most of the companies I've worked for have been founded by people that I know who asked me to come on board and take a senior technical role. Ultimately that's led to relatively low pay and low ownership stakes and a couple of decades of wasted time. So... don't do what I did?
startup2: 0$
startup3: 20000$
I always joined as employee #1, and interviewed literally 100s of startups before making a choice, and then only joined when there was a clear MVP and "an idea of product market fit with incredibly strong proof."