"That's actually a very reasonable salary and keeps out the guys who are looking to collect fat paychecks working 35 hours/week. You want work/life balance and 100k+ per year? fine, go work at Google. If you want the upside that comes with working at a startup you need to be willing to take on some of the risk."
That's just a steaming pile of horseshit. I'm sorry to be so blunt, but I've been in this world for a while now, and nothing infuriates me more than when entrepreneurs try to delude employees (particularly younger employees) into working for far below market in exchange for promises of fairy farts and equity dreams.
In a city where a one-bedroom apartment costs >$2,000 a month, $100k isn't a "fat" paycheck. It's right about average. And even if you choose to work below market, the <1% equity stake that most funded startups are going to offer you won't make it worth the opportunity cost in anything less than the most exceptional outcome. You say you're working for $60k a year in San Francisco? Yeah, I hope you're getting a founder-level equity, because you're living with roommates and eating ramen.
I suppose the only plus side to this kind of nonsense is that any developer worth her salt will be poached within months by any one of the dozens of local startups that are looking for engineers and willing to pay market wages.
Don't fall for it, kids: you deserve to be fairly paid, and get some equity.
The problem with equity is that at most venture backed companies, rank and file employees don't know what percentage of the company their equity package represents, or could represent in the future. Naive employees (most of them younger) chasing startup riches often like to think in terms of "If I own 1% of the company and it sells for $500 million I'll be rich!" but if you ask them what ownership interest their 75,000 stock options might represent, they won't be able to tell you.
Employees who think "it's all about equity" would be wise to consider the following:
1. It should go without saying that if you're granted stock options, which is typical unless you're a founder, you don't actually own any portion of the company. A stock option is, obviously, simply an option to purchase stock at a fixed price at a future date.
2. Assuming your employment is at-will, you do not have control over the vesting of your stock options. You could be terminated at any time, including before a large portion (or even all) of your options vest.
3. Dilution is a fact of life at venture backed companies. If you join a company early, your expectation should be that you will be diluted, and significantly. This dilution can also be rapid (i.e. a dilutive new round of funding closes a month after you join the company).
4. There are plenty of ways the value of any equity you own (or may one day own) could be diminished. If your company is acquired, for instance, but the acquisition results in the exercise of a liquidation preference, it's conceivable that your equity will be be worthless, or of such minimal value as to be effectively worthless.
Bottom line: if you're not making six-figures and aren't already independently wealthy, which covers most of the young folks who think equity is an apples-to-apples substitute for salary, accepting a significant pay cut for "equity" is sort of like planning your financial future around the assumption that you'll one day win the lottery.
As they say, "one in the hand is worth two in the bush."
I think your statement is pretty outlandish. How many people make over 100k in general regardless of your location. I live in Manhattan (probably the worst bang for your buck possible cities) and started as staff making 62K and that was pretty good.
The national average is well below 60k for entire families.
No one deserves anything. You need to work for what you want and equity is earned through sacrifice. You're not sacrificing anything if you're getting paid fairly by market wages. So please don't act so high and mighty.
I have nothing against paying people high salaries for great talent, but I don't appreciate anyone thinking that they're earned the right to everything by simply being present at the moment.
If you want equity then you should be sacrificing like founders do.
Funny how virtually zero successful startups have followed your model of paying people 100k+ at the beginning (first 1-2 years, pre-series A, or pre-profitability.) Probably just a coincidence though.
Early-stage employees are often compensated with huge amounts of equity. I'm a fairly senior-level guy, and would happily trade a bigger salary for a large equity chunk at a startup, but we're talking a large chunk, bigger than a lot of companies are willing to give to non-founders.
Let's say that I usually make $160k/year, and I'm willing to work for half that at a startup for four years, which means that I'm giving up $320k in income.
I'm not going to do that for a chance at earning $320k, but I'll definitely do so for a 10% chance at earning $3.2M.
Which means that if the company exits four years later at $50MM, I'd need a 6.4% equity stake to make my target. If the company exits for any less than $5M, I've lost money.
Naturally, this is a simplified analysis of the situation, but it illustrates an important point. I know of a lot of startups that want to pay their employees peanuts, while at the same time giving them a tiny slice of the pie.
None of these companies have been massively successful either, in part due to the best talent having zero interest in committing to a company where they aren't valued.
This is exactly the reason why I've never been interested in working for a startup. Learning experience? Yeah, I've got that working during the dotcom boom/bust cycle.
Your reasoning is spot on but the numbers get even more unappealing once dilution in future rounds of financing kicks in.
If you have the experience, be a co-founder at a startup with pretty big upside. If you can't find that, the 150K/year salaries are a much better deal than <5% equities.
At least in NYC, you can easily, easily, easily live on 60k yearly, quite comfortably (your own one bedroom, eating out often, etc.) You can't live in Manhattan, but that is a pretty small sacrifice. I can't imagine SF is so much more expensive.
If your attitude towards the startup is that cynical, then you shouldn't be working for a startup. Go to bigco where they will pay you lots for doing nothing.
Startups are difficult and need people who want to work hard and sacrifice in exchange for greenfield technical development, high responsibility, and high upside. By all means ask for more equity. But a startup is about the future, not about huge comfy salaries in the present day.
This is especially true given that the economy is now headed back into the toilet. Tide is going out and many startups will die. Those that survive will be those in which neither founders nor employees are unduly greedy.
'If your attitude towards the startup is that cynical, then you shouldn't be working for a startup. Go to bigco where they will pay you lots for doing nothing.'
That's just as cynical. There are bigcos that have fantastic projects AND pay you, as well as startups that offer poor pay and little equity in exchange for lots of hot air.
Unless it's Google or Facebook (or any other mature startup), I'd better be getting more than 2% if I'm being paid less than 50% of standard market rate. Otherwise, the equity is more of a nice bonus than the main selling point.
You're right, many startups will die. All the more reason why people have to be careful about exchanging salary for equity.
If your attitude towards the startup is that cynical, then you shouldn't be working for a startup. Go to bigco where they will pay you lots for doing nothing.
This is just reality. Why make 60-65k at a given startup when you can make market wages at another startup?
But what are the upsides of working for a startup? Working hard and long hours is not really sounding that attractive to me. Maybe it lures kids who want to test their limits?
That's just a steaming pile of horseshit. I'm sorry to be so blunt, but I've been in this world for a while now, and nothing infuriates me more than when entrepreneurs try to delude employees (particularly younger employees) into working for far below market in exchange for promises of fairy farts and equity dreams.
In a city where a one-bedroom apartment costs >$2,000 a month, $100k isn't a "fat" paycheck. It's right about average. And even if you choose to work below market, the <1% equity stake that most funded startups are going to offer you won't make it worth the opportunity cost in anything less than the most exceptional outcome. You say you're working for $60k a year in San Francisco? Yeah, I hope you're getting a founder-level equity, because you're living with roommates and eating ramen.
I suppose the only plus side to this kind of nonsense is that any developer worth her salt will be poached within months by any one of the dozens of local startups that are looking for engineers and willing to pay market wages.
Don't fall for it, kids: you deserve to be fairly paid, and get some equity.