https://finbold.com/shopify-reportedly-buys-over-350-million...
I have heard that the average equity grant is ~40k of value. I suspect the median is in a very weird place towards the low end though, if that number is true to begin with.
Options are complicated and timing is crucial. They carry real and meaningful risk.
levels.fyi is pretty accurate. A staff engineer at Stripe gets around 260k base, 55k bonus and 360k in stock per year. I strongly doubt 40k is the average - $200k RSUs a year seems a lot more likely (unless they count commission-only sales people in the average, which would be weird).
I work at a FAANG, not coasting and make a lot of money and have made a lot of money every year for nearly a decade. I'll continue to make a lot of money and not worry about whether my startup will or won't succeed.
You’re right: if you’re going to work hard, you may as well choose the path with the highest rewards. If Stripe can’t make it worthwhile, is there a good reason to trade away what you’d get at FAANG?
So the hard workers have a lucrative path (FAANG), and the ones who want to spend more time away from work have a more lucrative path (BigCo). That doesn’t leave a lot of reasons to choose to be an early startup employee.
My RSUs are deposited into my account every six months and I can sell and diversify them.
I’m not one of those people who keep my RSUs after they vest. I diversify over six months. I wouldn’t buy 30% of my company’s stock with cash if I were getting paid in cash , why would I keep my RSUs instead of diversify?
Of course that doesn’t mean I think the company I work for is going to disappear anytime soon.
And it's good to remember, that while RSUs are nice for the reasons you state, companies that give them out tend to pay a lower cash salary because of that, and if those stock prices go down, so does your TC, and it could be quite a big drop.
I’ll know myself in a couple of months.
I’m in my 3rd year and my first full year of base + RSUs instead of base + 2 years prorated signing bonus + back heavy vesting schedule.
(Yeah I know, how do I say where I work without saying where I work)
Also, since our division is mostly remote (even pre-Covid) and most of us are established in our career, we have much more optionality, a larger network, and hopefully a larger nest egg.
Anywhere else in the world that has those kinds of options? China maybe?
If you’re going to use that sort of reasoning, then you don’t get free anything other than air.
Yes, it’s paid for by taxes (or through insurance depending on country; yes we have cheap private insurance here). Thank you for bringing that to our attention, our feeble European brains were unable to deduce that on our own.
On the other hand, the insurance costs ~15% of income with a cap, so it has an element of solidarity to it - if you earn less, you pay less, and children and non-working spouse get covered without extra cost.
There's also Medicaid if you're poor of course.
Your public health insurance rate in Germany is based on your annual income up to €59,850 (i.e. you pay the same whether you make €59,850 per year or €200,000 per year). At the maximum rate, you usually pay €807.99 per month for health insurance (including the average extra fee of 1.6%, which varies slightly by insurer) if you're a salaried employee.
In addition to the public health insurance you also pay for public nursing care insurance, the rate of which depends on whether you have children or not and are older than 23. Assuming both of you are self-employed, have no children, are older than 23 and have not opted out of public sick pay (which for employed people giving birth includes a combined 14 weeks of pre and post-natal leave known as "maternity protection", or a combined 18 weeks for early births or twins) and assuming the same average of 1.6% for the extra fee, you indeed pay €977.50 or just above $1000 per month each.
For the record, if you're self-employed, the absolute minimum you have to pay for public health insurance is €158.43 (without sick pay) plus public nursing care insurance plus the variable extra fee. This basically assumes your income is at least €1131.67 in any given month even if you make less than that: you can't pay less than that as long as you're self-employed unless you switch to a private insurer instead.
Another issue for self-employed people is that because your insurance rate is paid by you in full (unlike salaried employees where 50% of it is paid by your employer and your rate is adjusted automatically if your salary changes in either direction) your rate is much less dynamic and will often have to be adjusted retroactively. Public health insurers are legally only allowed to adjust your insurance rate based on your tax returns which means even if you magically manage to file your taxes in January of the following year and the tax agency immediately processes it, you may end up having to backpay (or be refunded) the difference for an entire year if your rate changes. If you are self-employed and not incorporated, you can file quarterly tax advances and the insurers are allowed to use these to temporarily adjust your rate until the final tax return is available but once you incorporate you're stuck in the worst of both worlds.
As this hopefully illustrates, there are many problems with how the public health insurance system works, especially for self-employed people and founders (and especially people who can get pregnant as it's not common knowledge that "sick pay" includes "maternity protection" and self-employed people often opt out of sick pay because it's an easy way to cut costs), but pretending our public health insurance is "not cheap" is a bit dishonest.
To reiterate for emphasis: if you pay a combined 2000 USD together per month that means the two of you each make at least 60k USD per year and you will not pay a single cent more for health insurance no matter how much more money you make. Arguably this ceiling is the main problem and if it were abolished, the rates could be considerably lowered for everyone else. The insurance rate is very painful if you're self-employed and make less than 60k EUR per year. It becomes increasingly less painful the more you make beyond that and that doesn't seem very fair.
My point is that the German system is not a magical system of free healthcare. Rather, it's financially backed by charging a considerable chunk of earnings.
As a side note, the idea that the employer pays 50% of the contribution is a political slight of hand - an employee's labor covers 100% of the health insurance payment.
There IS No healthcare in this dump of a country. I am looking at flying to Barcelona to have her seen, and moving out of this dysfunction as soon as possible while I'm at it.
In Europe you don't go bankrupt on healthcare because you just die.
Yeah, yeah, anecdata, but right now I'm liking the "I get an appointment quickly and pay lots of money but that's OK because I earn lots of money" model more and more.
True, but there's no stress due to possible crazy variations in prices, "in network" - "out of network" garbage, etc. When people talk about "free healthcare", what they're really saying is: "out of pocket healthcare expenses are very small and always capped at a decent level, and I have access to healthcare even without a job".
> At least there is a chance in the US to make generational wealth for a middle class, but no way in hell in Europe.
https://www.oecd.org/economy/growth/49849281.pdf
TL;DR: The US has worse social mobility that many equivalent Western European countries.
What the US does is amazing marketing for their big outliers (and amazing marketing for everything, even piles of rocks in a desert, for that matter). I.e. 1 person in 100 million becomes a billionaire and suddenly you'd think 1 in 10 000 people did it :-)
Also:
https://en.wikipedia.org/wiki/Global_Social_Mobility_Index
The US is in 27th spot, after 21 (!) European countries.
But the quintiles aren't the same.
A good example is Canada vs the US vs the UK.
The top US income quintile is 153,000 USD.
Canada is 131,000 CAD (98,000 USD).
The UK is 87,000 GBP (105,000 USD).
So you could have less social mobility in the US (going from 1st to 4th quintile) than Canada (1st to 5th), but end up better off financially.
But the WEF reference for the grandparent uses a "social mobility index" which includes such factors as: "Adolescent birth rate per 1,000 women", "Pupils per teacher in pre-primary education (%)", "Extent of staff training (1–7 best)", "Internet users (%)", "Meritocracy at work (1–7 best)", so it's clearly quite subjective when it comes to "social mobility".
Sorry, I'm European but this is just silly.
There's no way $40k in Sweden buys you equivalent quality of life as $350k in the US, even when taking all the welfare state factors into account.
¯\_(ツ)_/¯
Sweden for the most part sucks these days but part of that is the idea that you can lounge through some average free education and then get $350k while leaving early on Fridays.
Yes, some Americans are born wealthy and some have a lot of privilege. Everyone else, at least that I've known, works at it. Often for 15 years. Then they might get $350k, or laid off.
The impact of unions is far-reaching and can be seen in everything from the salaries of grocery chain CEOs to startup stock option allocation for early employees.
Here in the UK, it's not uncommon to come across articles in major publications about a CEO's pay being multiple times higher than the average employee and you look at the number its peanuts compared to the US.
Like some people like working hard so they can up front all their work and retire earlier.
And others like coasting so they can live their 20s before it’s gone.
Different strokes.
Always include the odds in these calculations :-)
Startups are not a reliable path to riches, anymore than the casino is.
Additionally, at the time they joined FAANG those companies weren't as big and they might prefer that environment (I know I do, at least).
This isn't tech related but I have a friend that buys failing retail businesses and fixes them. She could just chill and make a lot of money but that's just not her thing.
Not all roles in these big companies are viewed as equal when it comes to how leadership views the value your team/department/org plays within the companies bigger picture. Be business smart, not just engineering smart and layoffs likely don’t come your way.
Further this with being non-financially illiterate, save money, don’t live beyond your means, treat your stock RSUs as bonus income and life will start to look a lot different.
It sounds mistaken, but exponential curves are hard to reason about.
50 x $15m + 100 x $5m = 1.25B post-tax, so probably north of $1.7B pre tax. Stripe had a post-money valuation of $10B+ in March 2021, so that’s around 15% of the company. I guess that’s in the right ballpark.
Hmm. Thank you for the concrete numbers. That’s a nice payoff for four years of work, even if you do have to wait ten years for it.
Happy to hear the startup reward structure still makes sense in 2023. In that case, it might be a good idea to join one that seems promising. The payoff is rare, but it’s a lot less rare than the lottery: there have been n YC startups, so the odds are around 10 in n. And I think n is something like 2k to 5k. (Edit: yeah, 4k according to Wikipedia.)
1 in 400 chance of $5m is still pretty low odds, though. But you do learn a lot, and you meet a lot of people that have a higher than average chance of being a future founder, so the benefits still seem to make sense. Interesting.
At least for people who joined a successful one ten years ago.
After Series A most should be paying competitive salaries.
Are you saying the cash component of post series A offer should be competitive with $200k, $230k, $305k, or $330k?
Of course it's not a fair comparison because google stock is liquid
The question is whether it is a no brainer to work for such a company because you get a competitive offer plus lottery tickets.
My sense is that this isn’t true. The claim of competitiveness is setting to zero the value of liquid google RSUs. But I’m open to being corrected.
In every case, the stock that the employees holds gets reclassified and diluted until it’s a funky employee-only stock that’s only saleable back to the company at nominal value, but the company isn’t buying.
So sure, maybe there’s some kind of nominal value, but actual cash money? $0.
I hold 10% of a business valued at £150M. My holding is worth £0 because I can never sell it to anyone.
Especially for pre-IPO companies that are beholden to fewer financial regulations.
Either you have power, or you have a promise.
... And promises depend on how much you trust your counterparty.
Also why pay $3.5bn of tax on $0 of value? Given how sharp tech is about tax minimization you would think they would have better tax people.
Adam Neumann even managed an extraordinary scam of being currently worth 2x the company that made him all his money ...
When joining any early startup, you really want to be able to do an early exercise of your options immediately when you join. If this is not possible for whatever reason, I consider it too risky to join.
When joining a startup one already knows it can fail the traditional way (bankrupcy), so that's the risk we take. But getting stuck in the position of having hit it big on paper but you can never leave the company because there is no liquidity, or having them expire.. just too painful.
If you are joining a company and taking less than 1% of equity in the company the best way to think about the equity is "This may end up being a yearly bonus of 50-150k, but probably will be worth nothing"
I will say that I think these conversations tend to be a little distorted because people who have had positive experiences feel awkward about saying “i made $xxMM from employee stock” but people who haven’t seem comfortable saying “stock based compensation was worthless”.
Also tbh a lot of people are just really bad at judging companies and wind up working at startups that are obviously going to fail. You really do have to make an honest assessment of if you are good at picking winners.
Yes, if you where one of the first 50 employees at Google you probably made low $xxMM, but it’s a long wait until IPO and the overwhelming majority of people at Google didn’t get anything close to that much. Worse the overwhelming majority of companies aren’t Google style success stories.
Also, don’t forget nobody at Stripe has gotten to cash out yet. Your looking for very early employees, at wildly successful startups, who started 10+ years ago, and are still poking around online forms, and willing to talk about it.
It’s not like they where handing out stock options like that to secretaries in 2013.
Grants that size don’t represent a typical employee either. It’s closer to a 2-30% annual bonus that happened to appreciate rather than some life changing payday.
That said, the double digit examples were “software engineer 2” and “first 10 employees”.
It's luck, not good judgement. No-one knows how to accurately assess whether an early-stage startup is going to succeed or fail.
If it was possible, accelerators would have better-than-background rates of success. Even YC, who get their pick of pretty much every startup, has barely better than background rates of success.
If it was possible, VC's would have better than background rates of success. They don't. They rely on the successes being much bigger than the failures because the failures are limited by bankruptcy while the successes have no limits.
I think blaming people for being bad at judging early stage startup success likelihood is poor form when no-one else in the entire industry has any idea how to do this.
I think luck is a big part of it absolutely, I just don't think it's the only piece. But I also know that IME some engineers looking at new roles think about likelihood of company success way less than they should relative to "do I like the technology/culture/whatever" and so it is not surprising if they don't end up at successful companies.
If you hate it there, you'll probably leave and never vest your equity. Even if you hang on and suffer through it to get your equity, it'll damage you in ways that money won't help with.
If you hate it, chances are that everyone else does too, which means the good people will leave and the startup is less likely to succeed even if everything else is good.
Most engineers enjoy interesting challenges, and this can be a big factor in choosing a role. If the startup is providing interesting challenges then it's doing interesting/difficult stuff. This is a factor in success - startups that aren't doing interesting/difficult stuff are easier to copy and have less barriers to entry for competitors.
Even if you don't get lucky and win the equity lottery, you had a good job and probably learned some interesting things.
Regardless, being able to identify "company success" is something that's always been taught as luck/lottery so I'd love to improve my ability here.
I'd say the mid-growth time (series B and nearby but of course depends on the company) is a particularly bad time to join a startup. It is too late to get favorable stock options but too early to tell if it's going to be a home run. So for individual contributors it's pretty much all blind risk with low probability of reward.
Good times to join a startup are very early when the valuation is a couple pennies or less so you can get meaningful percentage of stock and you can early exercise all of it for little money and file 83b.
Or join late in the game startups that are big hits and clearly going to the IPO. Way less stock, but risk of failure is now small.
My problem with equity grants is that everyone treats them like they’re so valuable, when in fact the EV is usually close to zero. That wouldn’t be so bad if the upside was really good, but dealing with nonsense like this makes them even less attractive.
The whole point of working at a startup — of working very hard, instead of coasting — is to increase your standing in life. Some people care about skill set (you learn a lot more in a startup) but you end up a lot more stressed.
Stripe’s early employees are in the best possible scenario, short of winning the lottery: they joined a unicorn early. If they don’t come out of it with lots of after-tax cash, then that calls into question why to even work at one. Unless you really love hard work without proportional reward, logically you wouldn’t choose that path — pg said as much in many of his essays.