Should an experienced engineer join a startup?

Given you have achieved the means for financial security, I think a more important question to ask yourself instead of "what is the best deal I can get" is "what do I want to build?"

You have gotten to where you are by being highly-capable and applying yourself consistently. You have the personal skills and financial leverage to bring about many things in this world. What do you want to build? What needs nurturing the most? What, if any, legacy would I like to leave behind?

I believe we are in early days of a century of revolution. Pick your battle and fight it. The money will follow if your work continues to create value.

Besides that personal take, it seems like you may not have to make a breaking change. I always try to ask myself "why not both?". Given you're in the tech ecosystem, you probably have an information advantage on what startup investing opportunities exist and which may be viable. There is nothing stopping you from being a part-time angel investor and generating passive income. Certainly you have to source and work deals, but its generally a lot more passive to be a semi-silent partner than one who does it full-time, and as long as you go in with talented investors who want to take a more active role you can be somewhat assured your investment will be shepherded well. Should you find your investment(s) have traction and you feel you can add value with your specific skills, it may make sense to join the team. You can do so while being reasonably assured that you'll average $80K+ / month as a baseline, while also virtually guaranteeing things will be a bit more interesting day to day.

Best of luck to you.

You just can't justify joining a startup between series A and when they switch to RSUs. The equity amounts are usually small enough to be worthless, and if they are big they become impossible to exercise. Angel investing a smaller amount is almost always a better tradeoff.

In my last search, the series D+ and public offers were good, and the startup offers were just laughable. I couldn't justify going to any of them just to make a bunch of other people rich.

My friends in similar situations take exactly the options you described. Some become founders (getting 30-40% of a company), some are angel investing (and sometimes joining a company they've invested in "for fun"), some just can't handle the bureaucracy beyond 100 people and join startups, and the vast majority are at larger public companies or startups that are nearly there.

I really believe there's an imbalance that's due for a correction, because skilled and experienced people mostly avoid startups right now. Early valuations may need to increase, employee equity pools will need to increase, equity terms must become less confiscatory, team sizes should shrink, and timelines to exiting must decrease. Will it happen? I'm not sure. It depends on whether startups can continue to coast on the pool of less-skilled engineers joining the true believers.

I suppose the other way to look at it is if your'e making $1M/year now, and living anywhere close to like a "normal" person, you have put enough away in the bank/investments that now you can easily afford to do whatever you want without worrying about money, without getting paid at all. You are in the position where you can choose what you want to do, with the money not even being an issue. So why even worry about the pay at a startup? If it's something exciting you want to do, go for it.

But if you're happy where you are, and/or primarily motivated by money... what's even leading you to consider these offers, why even ask? If you're hoping to make even more money at a startup, the discussion here seems to say "unlikely, unless you get lucky".

Don’t forget dilution! I started with 1.X% pre Series A at a successful startup that is now valued at more than $1B, and my slice of the pie is down to roughly 0.2%, while the damn thing is still private after 10+ years and many, many diluting investment rounds. If I am lucky and the startup sells at some point, my annualized income will have been roughly $1M/y. So, it takes way more than $500M to break even! Each and every round of investment will dilute you of 15-20%+.

I am now at a FAANG with similar comp to yours, and if someone offers me a job at an early startup I will laugh in their face. For me the future choices will either be my own startup, or a pre-IPO (within a year) company. This will continue to be true even after I’ll reach financial independence, because once you go through an early startup as employee you realize you are taking exactly the same risk of the founders but orders of magnitude less potential rewards. It’s just for suckers, no other ways to put it. And I really enjoy working in small startups, so it’s sad that this is the reality.

And keep in mind my experience with the startup was extremely lucky, since it is a unicorn now. I feel like I did beat all the odds, and even then it will likely not match what I could have made in FAANG all along, with better benefits (401k anyone?) and working hours. I made peace with it, but it tormented me for quite a while.

My suggestion (which if I had not made financial mistakes in years past I would be doing now) is building my own personal accelerator - basically decide on a stack, find five cool ideas (with some audience) and build the products with at least one co-founder for each idea. When one idea completely misses kill it quick and pluck a new one out. Spread the risk of one idea failing like VCs do but keep most of the upside.

The number one rule — and I cannot emphasize this enough — is that you should not work at a startup for the money. The risk adjusted returns are not terrible if you know how to screen for good founders. It is, however, exceedingly unlikely that you make more than $10m over ten years — especially considering investment returns on your comp today over that time period.

So it depends on what you want.

Startups offer flexibility, opportunity to shape a company and its culture, building a team, incredibly fast growth (both personal and company), and the opportunity to touch many-if-not-all parts of the company.

The downsides are lower comp, longer hours (if you’re actually going to see returns), less support. For engineering, for example, big company employees drastically underestimate how much they rely on homegrown tooling.

Whether that’s worth it to you isn’t something I can answer. You will make less money. Probably a lot less. There are things you get that might be worth more than money, especially when you already have a lot. But also maybe they’re not to you and that’s okay!

"I make around $0.9M-$1.2M per year today"

A startup is like a lottery when it comes to that kind of money. 99.99% chance you will not make that money with the startup. So if money is the main factor, you are better off staying with the current company. If you were making like 200K/Year, even then it is a tough call but at least was worth a discussion. 1M a year is not even worth a discussion.

No, you pretty much nailed it, except for two things:

1) You're critical to getting the company from PowerPoint pitch to shipping product, but you won't be treated this way.

2) You'll be diluted to almost nothing if the company got to a .5 Billion exit.

If you want the excitement and experience? Go for it. If you want the money? Buy a lottery ticket.

IMHO, stay put. At your compensation, it's going to be nearly impossible to join a startup and have the opportunity cost make sense.

Do what you're doing for as long as you reasonably want to, or until the comp drops off. Hopefully you're saving, and then you can either be a founder or an investor/advisor once you want to get involved with a startup and have it be better worth your time.

>- If I accept a position with 1% equity, the company exit would need to be at least $500M just to match my previous comp.

Layer in some assumptions here and I think it needs to be a lot more than that. I think, currently, it's on average 5-7 years between first funding and IPO, with let's say 5 fundraising rounds. [0] Being optimistic and assuming 10% dilution each round, maybe you have 0.6% at IPO time. To cover that 7M of opportunity cost, you need closer to a $1.2B exit.

This isn't even factoring the odds of picking a winner that actually exits! Unless you really don't like what you're doing right now, it makes sense to keep that going as long as possible, then exit to the couch and do whatever you want.

(Also, someone tell me if I did bad math. I do bad math.)

[0]: https://about.crunchbase.com/blog/how-many-rounds-of-funding...

Why are you using very optimistic scenarios instead of realistic ones? Do you know that most startups don't see an exit at all let alone one that can be measured in the hundreds of millions?

> I make around $0.9M-$1.2M per year today

Wow, can I ask how you make that much per year?

I am not in that position but to me it sounds like you should not go with the startup. The chance of failure is very high

EDIT: One thing I thought you go do is invest in startups. That way you're into the startup world with less risk.

If you want to give up your $1M salary (seriously WTF) and you want to have much more control over a technology stack, sure.

I halved my salary and worked in startups for quite a few years, some things were fantastic. For example, bootstrapping a bank from scratch. I left all that chaos for an established large firm and it totally sucked the life out of me.

The chances of getting a million dollar a year income, in stock or salary in a new startup is next to nil. It is like being a muso and saying you want to be a rock star or actor.

I worked for 4 startups over 9 years. Three are gone completely and the one that may be successful has diluted my equity so much it is now near worthless. Basically I will never get the salary cut I took back, ever.

Do you need that million a year for anything? Not being facetious; for many people earning that sort of money, their lifestyle wouldn't change if it was cut in half or more.

If you want to work in a startup, then realistically, yeah, you probably wouldn't make as much money. But, well, particularly at that level, money isn't everything. All depends on what you prioritise.

I worked in startups in the 5 people to 100 people range for a decade or so; I now work in a big company, but I'm glad I did the startup thing. That said, it's probably a lot easier to go startups -> big companies than vice versa, from a "what are you giving up" point of view.

It seems like you are very interested in the making money aspect of a startup, from that view point, it doesn't make sense to leave 1 mm on the table to have a slim chance at a big payoff. IMO people who work at startups are either people who are extremely passionate about their work or people who couldn't make it into big tech companies.

Your financial analysis is correct. However, if you have enough money you can choose to do things you enjoy. That is why a startup makes sense for experienced people, in many circumstances.

The strongest case for startup equity as compensation is made by Ben Kuhn, in my opinion, and it amounts to: you can diversify your equity exposure in more companies than you could as an angel because (i) the best companies will want to hire you and (ii) you can quit your company as soon as it appears to not be a rocketship, something you'll have insider knowledge of. https://www.benkuhn.net/optopt/

> around $0.9M-$1.2M per year today

Like others have said this salary should make not want to leave.

I make around $1.5M at a startup. I think I can get around $350k at regular job. Even if you consider a generous 20% of startups that gonna to make it, I need to make more than $1.75M in income to justify the risk of a startup.

Doing the same math for your $1M salary, it means you need to make at least $5M per year to adjust for risk.

I've seen a bunch of people saying your financial calculations are correct, but I disagree. One person pointed out "why are you saying the optimistic side?"

This _can_ be calculated, and it doesn't seem like you are applying realistic probabilities. This is pretty routine in value investing when you are trying to value a company.

In essence, you multiply the probability of each possible valuation by the valuation, and then sum them up over the expected number of years.

Here's a quick calculator I threw together with possible scenarios what you can modify: https://docs.google.com/spreadsheets/d/e/2PACX-1vTox68rXDr1r...

At the end of the day, it's a risk reward tradeoff, this can help put things in the correct picture for what you're after. Startups have been said a number of times _do not_ give you the best odds for making money.

Investors, often because they start earlier in the company, are trading more risk for higher possible payoff.

Make sure that you don't delude yourself with probabilities, get actual base rates (how many startups fail in 5 years? How many go public?), and if you have insight to believe this is different, then you should modify that base rate.

Some places don't even offer a full percent for early employees.

As someone on the other side of you I would stay put, angel invest or found.

lol wtf.. you make a million a year.. i have worked at startups my whole career and the best one, that succeeded big and turned my options into valuable stock years later, the annual comp was like $350k. No, you're probably never ever going to get even close to a $1M/year at a startup. If money is your main motivation, a startup will probably never make sense.

I do agree early engineers get pretty terrible deals w.r.t equity compared to founders or investors, but that's to be expected IMO. A startup does not have the structure in place to plug in an engineer and crank out tens of millions of extra revenue. They typically don't have extremely complex technical problems that need a highly specialized engineer. They need to solve simple problems quickly and a $1M engineer no matter how good is not going to outcompete a team of 5 $200k engineers.

Are there other ways for you to find what you're looking for without leaving your position? It seems to me you're wanting a challenge but not wanting to take the financial hit. Have you considered alternative solutions to fulfill these two requirements?

Everything you wrote is correct, and there's previous writing available about this, e.g. https://danluu.com/startup-tradeoffs/

> Become an angel investor, since they are getting a much better deal, I might as well join them.

I think yeah. Dan Luu was also getting at this on twitter.

Are you a VP? How the duck do you make $1M a year, liquid, otherwise?

A $500M exit isn't so strange if you join a legit and successful company though. You can leverage the equity by puting it in your Roth IRA, this avoids tax liabilities (although it's inaccessible till you get old). Even still, equity is taxed as capital gains, not income.

Like others have said, you need to build something you love, otherwise you will just have a different pair of poorer handcuffs.

Make sure your 1%are not common shares that can be diluted,although I suspect you already know that.

I'd make enough to retire, and afterwards work part time for fun.

I would never join a startup to get rich. Just doesn't work out most of the time.

I think your estimate is correct. 0.9 -1.2 million isn't likely gonna be met risk-adjusted by startup exit unless you are a founder.

Only if you want to have fun

No. Having done a startup I wouldn’t ever do another. They usually fail.

The first question to ask yourself is whether you want to be an:

1. Entrepreneur, or

2. Investor

I don't really get why you'd be asking this question. Especially if you're making that much money a year.

Do the math.

https://tldroptions.io/

In just about every case, you're rolling dice for what? A faster paced environment and sleepless nights?

I get it, the hedonic treadmill is real. Happiness isn't bought with money, but couldn't you just save enough money to semi-retire and do something different at that point?

After working for large organizations, compensation will be the least of your problems in a startup.

It looks like you have a solid financial cushion already. Maybe try working for a year or so, in the worst case, you're likely quite senior that you probably wouldn't have much difficulty boomeranging back (or to a comparable big tech)

Honest question - what do you do with all that money?

You raise a great point: does it make sense for highly compensated tech talent to bet on startups with their time / labor?

Ultimately, decision depends on what you are solving for. If it's purely about $ in the hand, startups never make sense.

If it's about participating in potential massive upside, investing is a perfectly good choice.

Difference between investing vs. joining startup is that you get to build stuff from scratch and operate more like a business owner. You'll do more and learn more in a shorter period of time. This makes a ton of sense IF you like that sort of adventure. Also allows you learn on someone else's dime before you start your own business

If you're joining VC-backed startup, the outcome they'll be shooting for is $1B+ exits, and you can get 2-3% equity if you join early.... so there's that

You can find comparable salary and equity offers here: https://topstartups.io/startup-salary-equity-database/