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Startup jobs with low salary and negligible equity, what gives?

by 4k on 1/21/15, 3:47 PM with 133 comments

• by patio11 on 1/21/15, 5:04 PM

  Joel Spolsky had a really interesting insight [+] once about hiring pools: they're disproportionately filled with people who you don't want working for you, because if you're hireable, you exit the hiring pool fairly quickly, and the dynamics of this system quickly mean that the pool is filled full of people who aren't even FizzBuzz qualified.

  I think the other side of the market is isomorphic to this: any publicly available list of jobs is disproportionately filled with positions which qualified talent has seen, evaluated, and rejected as unsuitable.

  [+] Citation: http://www.joelonsoftware.com/articles/FindingGreatDeveloper...

• by Dalkanon on 1/21/15, 4:46 PM

  Most pre-Series A start-ups will offer (far) below market salary; they have to, since, generally (and as another poster said), they have only $X00,000 in the bank and no revenue. This is pretty typical.

  What the 0.05% equity package indicates is that the founders probably have an unrealistic expectation about how much their venture is worth at this stage. I've seen this a few times in naïve, young (23-25 years old) first-time founders that don't have significant amounts of experience working in start-ups and/or technology in general. This trivial amount of equity is a huge red flag, not only because its present value is negligible (guess what the risk-adjusted rate of return is on a start-up run by first-time founders?), but because it indicates that the work environment will likely be unpleasant (hellish hours, frequently changing requirements, no clear vision -- common in companies run by first-time founders).

  Also, keep in mind: if these founders are foolish / naïve enough to think they'll be able to hire a credible, valuable engineer with this package (they won't), they're also likely foolish / naïve to get screwed by their investors. Founders are only at the bottom-middle of the start-up hierarchy: VCs are above them and LPs are above them.

• by jacquesm on 1/21/15, 4:10 PM

  > Who would take these deals?

  People that are insecure about what they bring to the table.

  Pre series-A the risks are still huge and the stock should be priced accordingly. Say the founders think a pre series-A company is worth $2M and they offer 0.05% equity you could enter negotiations asking for 1% more if you feel like it (and walk away if it goes below 75% of your counter opening bid) if you can defend the position that there is still a 95% chance that the company won't make it unless they have you on board.

  Otherwise price the stock at 0 and ask for a market conform salary.

  They'll move. An offer is just an opening move, nothing more.

• by hkarthik on 1/21/15, 4:17 PM

  The target candidate for these startups largely doesn't exist. Most folks accepting such a salary in the Bay Area are recently out of college and living in small apartments with roommates.

  When it's all said and done, most of these startups will settle for a few offshore contractors or hire remote people who live in cheaper parts of the country where $90K goes a lot further.

  The tried and true "solution" to this problem is to import a number of H1b visa holders from other countries who are willing to work for the lower salaries and accept the lifestyle choices that it imposes in the Bay Area. For many of them, $90K in the Valley is still an upgrade from where they are coming from.

  For those of us with a decade or more of experience, it's best to focus on the post Series A startups that have the money to pay. However, many of these jobs involve cleaning up code written by those inexperienced folks who accepted less pay in the early days.

• by lambda9009 on 1/21/15, 4:13 PM

  Here's a way to counter this: interview, make them want you, and then decline any offer explicitly because of the comp.

  Startup founders are trying to go (even more) lean and cheap out on salaries, relying either on inexperienced new grads, the insecure, or on a "rah rah go team, the company is priority #1" culture of self-sacrifice. Don't play into it.

• by lsc on 1/21/15, 5:36 PM

  >I noticed some rather unsettling job adverts in the past while. Some pre series-A startups in the valley offering like $90k in salary for an experienced developer and 0.05% equity. I am just trying to understand who are their target candidates that they expect to join for such an offer (not to mention crazy working hours)?

  I had a similar experience recently. all the "startups" expected me to take a 30-40% paycut vs. the larger places, essentially because they expected me to be excited about their company.

  Which is weird, because if the startup doesn't get really big, even if it does okay, nobody is going to care it's on my resume. But the large companies? especially the large companies with a reputation for high standards? they look good on the resume.

  Another funny bit is that the same thing, as far as I can tell, is true of contract positions.

  What irritated me is that I was going through headhunters... e.g. they were already paying 30% extra for the headhunter - if they just gave me that, I'd have been happy, at least for the first year.

  The other thing was that they were weird about money. I talked to one startup and (after an 8 hour interview) they seemed super excited. the person who would be my supervisor gave me his email, and man, I thought I was in. "how much are you looking for?" I named a high number, about 10% higher than I expect to actually get, because that's what I always do. Let them talk me down. I even mentioned my bottom number "a guy who has been working for me for most of his career just landed a job at $x" - but nope, the mood immediately changed; I was hustled out the door and the company went completely dark. no response to the official or the personal emails. I finally got some bullshit answer from the recruiter, where he read back the "why you shouldn't hire me" things I give companies before any interview.

  The solution? I ended up getting a contract gig at the large advertising company in mountain view. I'm pretty happy with how things worked out; It's closer to where I live in the south bay, it looks way more impressive on the resume, and I need three people to sign paper before I do overtime.

• by eddievb on 1/21/15, 4:17 PM

  A few thoughts:

  1. The definition of an "experienced" developer is subjective and varies widely. Startups with younger management may (incorrectly or not) apply senior labels to candidates with fewer years of experience and lower compensation expectations.

  2. Anecdotally, I have seen startups in SF/NY take advantage of the lower earning expectations of candidates who are relocating into those metros and aren't prepared for the sharply different cost of living. There are places in the US where $90K goes much further and is a more competitive offering, especially for those who are willing to take less cash for the opportunity to work on something exciting.

  3. "Developer" is a huge category. Some technical skills are far more scarce than others.

• by carsongross on 1/21/15, 4:12 PM

  Low salaries and negligible equity are the natural consequence of there not being enough technical talent in the Bay Area.

  ...

• by UK-AL on 1/21/15, 4:00 PM

  You'd think developers would be good with numbers. But put $ signs in front of those numbers, and suddenly they're not very good. Trading away hard cash for gimmicks, and a tiny amount of equity in early stage startups.

• by untog on 1/21/15, 4:57 PM

  In short: you know too much. These salaries are taken by fresh college grads who don't know better, and think the adventure of "a startup" is better than working for a larger company (it can be, but there's no guarantee).

  Many startup CEOs would like you to believe they are the only ones doing interesting work, but there are plenty of larger organisations that are still fun to work for, and more likely to value you as an employee.

• by snorkel on 1/21/15, 4:21 PM

  Bachelors. Not as in Bachelors degree, but literally bachelors: They're young, cheap, work crazy hours, and easily seduced by free pizza - the ideal startup employee.

• by OliverJones on 1/21/15, 5:15 PM

  Don't worry about playing hardball in the negotiation. You can preface your negotiation by saying something like this.

  "As long as we're on opposite sides of the negotiating table, I am going to do my best to get a fair share of possible upside from your company, and a decent salary. When we conclude this negotiation fairly, we'll be on the same side of the table and working towards the same goals."

  "Now, I want half a percent and $110K."

  Keep in mind that your BATNA (best alternative to a negotiated agreement) is to say, "No thanks. Good luck." They need to hire somebody: time is money at their stage of business. You don't need to jump into their job.

  But don't have this conversation at all unless you think their business idea is worth five years of your life.

• by bryanlarsen on 1/21/15, 4:15 PM

  Equity positions are very negotiable. Ask for more equity, a lot more, like 1 or 2 percent.

• by 7Figures2Commas on 1/21/15, 4:30 PM

  What are you expecting from pre-Series A startups? There are lots of pre-Series A startups with six figures in funding and little to no revenue. For obvious reasons, most of them are not going to be paying $140,000/year and if they are, you might not be comfortable with the runway risk.

  In terms of equity, since you mentioned that you are the breadwinner for your family, why are you sweating the equity? A lot of folks here will no doubt suggest that you negotiate for more equity, but equity won't pay your bills. If cash is your biggest concern, negotiating around equity is pointless.

  It sounds like you want a very early-stage startup job with BigCo-like pay, meaningful equity and reasonable hours. For the most part, this is a dream.

• by alain94040 on 1/21/15, 4:45 PM

  $90k in salary for an experienced developer and 0.05% equity

  Yes, that looks wrong. Equity should be 10X more (0.5%). Whether it's a good deal for your situation or not is a different discussion, but at least that would be more in line with typical deals.

• by beat on 1/21/15, 4:55 PM

  Are you living in the Bay area now? If you're not, and you're living in a city with any sort of active startup community at all (like any big city in the midwest, for example), try finding a startup at home. It'll be cheaper, you don't have to uproot your family, and you might get a much better deal.

• by wildpeaks on 1/21/15, 6:52 PM

  90k is "low" ? Don't ever leave the Valley, you'll be even more disappointed

• by minimaxir on 1/21/15, 5:25 PM

  Relevant to this discussion: A startup job ad for $40k salary in SF.

  https://news.ycombinator.com/item?id=8880544

• by pjdemers1 on 1/21/15, 6:27 PM

  I read this as "this is the worst job at a 'startup' that's never going to have big exit"

• by tarr11 on 1/21/15, 4:29 PM

  They are fishing. All they need is one developer to take this deal, not all of them. Just ignore it and move on.

• by klochner on 1/21/15, 4:53 PM

  They're offering you the comp of someone who just graduated, they may not realize that though.

• by endeavour on 1/21/15, 4:12 PM

  It's even worse in Europe.

• by eyeareque on 1/21/15, 5:25 PM

  You can always negotiate more, if you can convince them you are worth the investment. They might be willing to shell out more compensation if they really want you.

  And not all corporate jobs are boring. Find one that fits what you like to do.

• by qodeninja on 1/21/15, 4:07 PM

  If youve got a job already just hold tight, Q1 isn't even over yet. Most hiring kicks up again right before the spring when the sun is out again

  If startups aren't willing to provide the means they don't deserve good engineers.

• by bubba_sparks on 1/23/15, 3:12 PM

  Was this site used in your search? It seems geared toward sf startups: https://www.startupers.com/

• by MyNameIsMK on 1/21/15, 6:26 PM

  Here's a suggestion, as an experienced developer, why don't you take a risk on yourself and start your own company?

• by hyperbot on 1/21/15, 5:02 PM

  If the pay is not high enough for your needs, you shouldn't bother looking at startups, or at least you shouldn't be looking at pre-series-A startups. Everybody has their own motivations for why they choose to work somewhere, and money/compensation isn't always the top consideration. At early-stage startups where money is tight, salary will usually be difficult to negotiate too much, but equity can be negotiated more easily.

• by malditojavi on 1/21/15, 4:49 PM

  Startup jobs are the new corp jobs.

• by informatimago on 1/21/15, 4:08 PM

  You missed H1B.