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

[4k]

Hi HN, I am a developer in my 30s with over a decade of experience. Being on a lookout for a new job, I have been researching lots of jobs lately (since I don't mind moving, been looking in most parts of the US). I am divided at the moment between finding a startup job or finding a rather drab big corp job with good money.

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 have a small family with SO not working. So, I'd be at best manage to make ends meet at that kinda salary in SF, plus the equity is negligible, and the work hours... seriously, am I missing something here? Who would take these deals? And then I often find popular posts on HN where founders are giving out about how tough it is to get good engineers!

[patio11]

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...

[fivedogit]

Note: I originally posted this reply about 2 hours ago and then deleted it. But actually, I think it's worth leaving up.

I really respect Joel Spolsky's accomplishments (I've mentioned him recently in my own comments), but I found the blog post you cited wrong at best and offensive at worst. It perpetuates one of the most frustrating things I experienced while job hunting: the stigma of unemployment.

Even though I voluntarily left my last position, companies looked at my candidacy very skeptically. Things I was told by companies:

- "To be honest, we think you're an entrepreneur just looking to make enough runway to move on to the next thing."

- "Well, we're really impressed with you and you have the technical chops, but we're concerned that you like to think on a higher level and might tire of the daily nitty gritty." (Not true, and basically the same as above.)

- "You did well on your coding interview, but we've got enough candidates in our local area that we've decided to restrict our search to it." (i.e. relocation jitters. Not coincidentally, when I finally found a position, it was in my city.)

There are also people who are competent programmers, but come from strange backgrounds, like the music major-turned-coder who posted the other day. I, personally, am almost entirely self taught, haven't worked with other engineers and have only coded on my own projects (you can see my github if you want). People making hiring decisions are scared for their own jobs: they don't want to be the guy who hires the guy who never had a "real" coding job before. If it doesn't work out, I can see where that would come back on them pretty hard. (Conversely, having worked at Google or Apple is a major bonus for the opposite reason.)

Oh, and plenty of people underperform in on-the-spot coding interviews. Some people are affected much more strongly than others by anxiety. It goes both ways. I've read hiring managers on here gripe that they hired someone who interviewed well but sucked in reality. And my guess is it goes the other way, too.

So I find his assertion that people actively looking for work aren't the ones you want to hire incredibly naive, elitist and just plain wrong.

[JSeymourATL]

Indeed-- Spolsky's solid hiring advice could readily apply in reverse for job seekers. Go to the Mountain, build your own community*. But that's hard, and surfing job boards is easy.

[ef4]

Yes, definitely this.

Don't go through the front door. At most, use publicly listed job ads as a form of research. Never assume they represent all the jobs that are actually available to you.

There is no substitute for actually talking to people and getting to know them. Make your own wishlist of companies you'd like to work for. People running startups who are even minimally competent know they need to network a lot, so they're easy to find and network with.

[percept]

Framework fetish foils FizzBuzz facility.

[Dalkanon]

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.

[beat]

Probably the same founders who are on Quora, asking why their programmers won't work 80 hour weeks.

[jacquesm]

> 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.

[brudgers]

1% isn't enough equity to justify a below market salary for something with a 10% chance of a $100,000,000 exit in five years...and if only the outlook were that good and imagining no dilution and benevolent actions by controlling shareholders.

If the equity is important, then it should have some chance of producing fuck-you-money at liquidation. 0.05% is only fuck-you-money if there's a Google IPO size liquidation and there's been no dilution ($11,500,000 @ $23billion). That ain't significantly more likely to happen to a software developer than a chef.

[mrgriscom]

If they're so stingy with the equity upfront, won't that make you suspicious they'll just try to screw you out of it later?

[4k]

This is definitely a great negotiation advice. I probably could negotiate better terms. But still it'd still start us (employee and employer) on the wrong foot. They'd think I am being greedy and I'd think this is a place where founders would always try to screw me over - breaking mutual trust - effectively ruining the positive spirit of working together.

[hkarthik]

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.

[codescorrectly]

Even H1's would scoff at that. The pay discrepancy is largely overstated.

[api]

"accept the lifestyle choices that it imposes in the Bay Area"

https://www.youtube.com/watch?v=m8BDpqekENQ

[im_asl]

H1's working for lower pay seems like a fallacy. Part of the visa process involves paying prevailing wages.

[lambda9009]

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.

[lsc]

>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.

[debacle]

> "why you shouldn't hire me"

Care to share this?

[eddievb]

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.

[carsongross]

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

...

[UK-AL]

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.

[untog]

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.

[lsc]

>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).

While you are right, you make it sound like $90K is underpaid for someone right out of college. $90K is pretty good for a promising kid with a fresh degree but no real experience. More than fair; they are unlikely to get much more at a real company. It's kinda silly for someone with 10+ years experience, but those 10+ years are worth something.

[snorkel]

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.

[OliverJones]

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.

[bryanlarsen]

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

[4k]

To be honest, I am half-scared of taking equity instead of cash pay. The reason is, I don't understand it as well as I should. It always scares me to think that through some VC-magic, whatever equity I have could end up nearly worthless (possibly an irrational fear since I don't understand the whole mechanism).

[7Figures2Commas]

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.

[geebee]

I'd like to start by saying that in many ways, your post is grounded in reality. If you want a well paid, stable job, then yeah, early stage startups with equity probably aren't the best thing for you.

Here's the problem - almost all silicon valley hiring, compensation, equity, and work conditions are now viewed in the context of an absolute insistence from employers that there is a critical shortage of software engineers (remarkably, a claim that is made with absolutely no data on compensation, equity, work conditions, and long term career opportunities offered relative to the jobs available to highly educated and hard working people in other segments of the economy).

So you say that the idea of a well paid job with substantial equity in an early stage startup is a dream, but to a lot of us watching this, it seems like the people being outrageously unrealistic are the ones trying to hire talented programmers for ludicrously low wages and equity. The difference is, I'm not going to congress claiming someone owes me a job on the terms I've decided are fair. But these employers seem to think that if they can't hire under their conditions (in this case, in a company that may be gone in 6 months, at a salary far too low to support a family with a child, with equity too low to be worth much under almost any outcome other than a few shoot-the-moon scenarios), congress needs to get involved in increasing the number of programmers available for hire.

[ebiester]

So, why the hell would anyone leave that much money on the table? If you're asking me to do something crazy, you better be willing to pay for it.

.5% equity, especially when it will end up being diluted, is a fool's game.

[alain94040]

$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.

[beat]

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.

[wildpeaks]

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

[xenosapien]

It's definitely low, even outside of the valley. Probably not low in the mid-west.

[minimaxir]

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

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

[aledalgrande]

disgusting