HACKER Q&A
📣 koolherc

Why did you take a first engineer role in a startup in the Bay Area?


It seems pretty common that first employees of a startup get ~1% of equity in the new company. That 1% is easily diluted to ~0.5% after a few funding rounds, and even if the startup has an exit of 100m (within an optimistic 3-4 years), those first employees get ~500k, before taxes, and probably not all-cash. An even bigger exit is highly unlikely, but let's say 5%.

So my math says that a quite optimistic return is ~125-175k/year in 3-4 years (+ startup salary), for a 100m exit.

Assuming that really good engineers can get a senior/staff job at Google or other large corp, they can easily(?) get an offer that's 250-300k per year and that is guaranteed.

Working probably crazy hours for a startup, having more responsibility, and having only <5% chance of a financial win vs large corp doesn't really make sense to me, or at least doesn't seem rational.

So my question to first employees is what was the reason behind your decision? Is it only the small-company startup culture that's much more appealing, or is my math wrong?

disclaimer: I'm working as a first engineer in a European country, where salaries are nowhere close to the Bay Area salaries, but startup returns could be similar, probably chances are thinner. Also I'm well above 1% in the startup.

  👤 larrykubin Accepted Answer ✓
I did this before and it made sense and was fun at the time.

1) I wasn’t able to get a job at Google, was a freelancer working out of coffee shops in Portland, would fail any algo test. A six figure windfall was a big deal to me at the time (2012), and still is.

2) Got an opportunity to work on a startup with a close knit group who was easy to work with, fun to party with, was able to work remotely and fly to SF periodically to sync up and go out. The people involved had a great track record. No BS.

3) The hours weren’t that crazy, the project was not that complicated, and it only took a couple years. It was an overall fun experience that I have fond memories of. YMMV.

👤 gshdg
Remember that also the company has a 98%+ chance of failing or exiting without a huge growth in valuation.

Unless you’re spectacularly good at picking them, doing this on a repeated basis is not going to give good financial returns. But that’s not the only reason people choose to do things.

Taking a first employee role once or twice is a great way to learn a LOT about business and leadership and architecture and a ton of other things. It’s also a great way to get a title on your resume that you might not otherwise.

Some folks do so repeatedly because they prefer the environment or the green-field work or would rather build MVPs and explore new possibilities than extend or polish software that needs to be stable and well tested, etc.

Occasionally someone deeply buys into the mission.

👤 trcarney
I haven't done it but I would say dreaming of a scenario like this, https://www.businessinsider.com/ryan-graves-uber-tweet-caree..., would motivate a lot of people.

Also when you are building something new, there is a rush that is hard to quantify.

👤 matisoffn
The order of magnitude is important. In your example it's a windfall. But considering the dilution with exits at 1b or 10b it's a different story - the exit will surely be millions.
👤 askafriend
1% is not common. 1% is quite the upper band.