It's pretty standard for (non-executive) startup employees to receive about 0.25% equity in the company. That equity usually vests over 4 years. This is true even for very early employees. So, if your startup is acquired by Google for $20MM, which is a pretty favorable outcome, you get $50k. Considering the vesting, that's less than $13k per year. If you instead went to work for a Big Company, heaven forbid, the difference in your salary and bonus would probably more than make up for that equity.
The far more common outcome, of course, is that your equity is worth nothing. The incredibly uncommon outcome is that your 0.25% is worth a million dollars or more.
In almost all cases (these days, at least), the only people to win big in the startup lottery are the founders and the VCs.
That said, founding a company is very risky and difficult, and there's a high probability of failure. Previous startup experience can go a long way to increase your odds of success if you ever do decide to found your own. It's much easier to learn all the hard lessons while building someone else's company. Then you can take that knowledge and swing for the fences yourself.
To expand on your last point there: if you do work for a startup, pay attention to everything, and learn from all the things that get done well and all the things that don't. There's a lot to learn and a lot to screw up. For example: Did you hire well? Did you grow the team too slowly or too quickly? Did your development process work well? Did it adapt as your product and team matured? Was the management transparent in the right ways? If the company grew, how did it handle the addition of new employees, new customers to support, and new or larger product offerings? How was your employee retention and burnout? And so on . . .
There are invaluable lessons that you can really only learn by going through those things, and you can still learn them (and perhaps even be more objective about it) when you're not a founder.
And if your startup isn't transparent enough that you can learn those sorts of lessons, you should consider that a major strike against it.
> you can still learn them (and perhaps even be more objective about it) when you're not a founder.
I wonder, sometimes, how true that is.
I went into the startup world for exactly that reason: I wanted to start my own company eventually, knew that I didn't have the knowledge or experience to do it immediately, so I figured I'd learn the ropes on somebody else's dime. I picked companies that would give me a lot of responsibility, and ones where I could directly observe what the founders did and why they did it. And I took careful mental notes whenever something worked well or didn't work well, and resolved to do the same thing (or not do it) when I started my own company.
And then I actually did start my own company, and found that I made nearly every mistake that my old bosses had made, I just made them in new ways, and stopped making them a little quicker.
I found there're three main problems with the "learn how to start your own company by working at someone else's company" school of thought:
1.) There are many more ways to fail than there are to succeed. Therefore, if you pick any random strategy out of a random company, and you don't yet know whether the company is failing or succeeding, it's probably a failing strategy. Orson Scott Card once said, "There are a million wrong ways to tell a story, and a thousand right ways." That's probably true of entrepreneurship too, just multiply the numbers by a few orders of magnitude.
2.) If you haven't yet worked at a successful company, you probably don't know how to tell the difference between a successful strategy and a failing one. A lot of the things I respected most about my past employers turned out to be mistakes. For example, one of them was big on code ownership, and seeing how hard coders worked at getting their code running, I thought it was a great way to encourage people to take pride in the code they produce. Another was building a platform for financial apps, and I thought they were geniuses for their strategic insight - after all, they get recurring revenue and their customers can't easily switch away. It was only after I tried building a platform myself that this reached the top of the list for "things startups should never do" - and given the number of YC startups that get funded with their own webapp platforms, I guess lots of other founders haven't yet learned that either.
3.) Many times mistakes don't look like mistakes, because the circumstances that surround them are different. Very occasionally, they aren't mistakes, because the circumstances that surround them are different. For example, while I was building my platform to create casual games, I thought I'd sidestep all the complexity & adoption problems my financial employer had faced, because I was purposely limiting the scope of my platform to games and wasn't trying to have it do everything. I found that no, the platform part really was the problem, and no matter how much I polished it up, that approach just didn't work.
>Another was building a platform for financial apps...It was only after I tried building a platform myself that this reached the top of the list for "things startups should never do"...I guess lots of other founders haven't yet learned that either.
You're saying that startups should never create platforms, should never create webapp platforms, or what?
Personally, I would say that startups should never start off by building a platform. They should build a service, which can be expanded / redesigned into a platform later, as more services are discovered that work well with it. But at all stages, you must have income paying the way and / or customer feedback justifying it.
I think they should never create platforms. But your phrasing is fine too: it's fine (good, even) to evolve into a platform, but you should start out by solving a specific problem and only expand to a general problem once you master that.
For the past several years I've been thinking about spotting startup errors like chess. You make a trivial-seeming decision early on, and a smart player can tell you that you've probably lost the game, but you don't know it for another 20 moves or so, and by the time you fail the key mistake is obscured by all the other bad things that happened as a result of it.
I might suggest that the longer you're with a company the easier it is to discern success from failure, at least. Something that looks like a good idea in year one might look terrible by year three or four. I have no idea how that applies to your personal experiences, though. I haven't yet left my first startup-employee experience (after more than 7 years), so perhaps it's too early for me to say I've learned that much, since I haven't really had to put that knowledge to the test (except when it comes to correcting problems and making forward-looking decisions). I certainly feel like I've seen a lot of things done well and a lot of things done not so well, and like I've been around long enough to see many of those decisions play out for a fairly long time. I don't think I would be able to say that if I'd only been here for one or two years.
On some level, though, you personally often have to make mistakes in order to learn from them; as much as we all want to learn from the mistakes of others, it's hard.
So perhaps I'm being overly optimistic and will be doomed to a future of repeating mistakes that I should theoretically know better than to make . . . ask me again in ten years, I guess . . .
I find that I'm a lot more confident technically than I was beforehand. Like many younger founders, I spent a lot of time worrying about what I'd do if I had to scale, if I had to internationalize, how to deploy to multiple servers, what should I log, etc. I knew intellectually how those things worked (and that I shouldn't worry about them), but I'd never had firsthand experience with a product that needed them. And now I have, and it's not really a big deal. Plus I've got a bunch more experience with algorithms and data collection, and the quality standards at Google are higher than at many of the startups I've worked at.
I'm also a lot less scared of big companies, having worked in one and having some sense of how they operate. I certainly wouldn't challenge a big company head-on in its core competency, but knowing how hard it is to gain executive attention for little market niches, I wouldn't be scared at all of them as a startup.
OTOH, there're some things that if you just naively copy from Google, you'll fail miserably in the startup world. There're different tradeoffs for risk vs. reward, and for quality vs. time to market. And I'm much more comfortable with ambiguity having worked in startups. I feel like I'm a better programmer through having worked at Google, but a better entrepreneur through having worked at startups. Moreover, the time in startups taught me that being a good programmer/marketer/salesman is more important than being a good entrepreneur when you're starting a company. Worry about the product, not the trappings.
If you have the chance, I'd really recommend working in both a large, well-functioning company and a couple startups before starting your own. They're both really important perspectives.
This, in a nutshell, is why I have turned down every offer so far to leave my corp job (attained through acquisition, amusingly) for a startup. The equity offered was simply inadequate to make up for the massive increase in effort required.
Plot the compensation over time, and I'm much better off now, especially considering the other things I've been able to accomplish while not being on a 90-hour week startup deathmarch.
For most people I know who join or start companies, the primary goal is not to get rich – it is to work on something they love
i began my first startup with the sole motive of getting rich. yes i enjoyed the challenge of a startup and believed the product had potential but the overwhelming motivation was getting rich.
it was only after actually doing a startup and realizing how hard it is to get rich through that path, i realized i still wanted to do another startup but that my motivations had changed. the get rich motivation isn't enough 'fuel' to make me go through the stress of another startup. the only motivation that will work now is working on something i'm truly passionate about and enjoy.
What's missing here is the idea that you want to be able to grow with your startup over time.
Being solely involved in startups -- especially since most fail -- only lets you see how an organization is run up to the size of the startup. It's the organizational equivalent of the Peter Principle.
A larger organization is going to let you see more sizes (since they are typically organized as subunits) and the issues that arise in each size.
As examples:
1. Do you know how to manage a team of 3? 10? 50?
2. Do you know how to hire 10 engineers (ie, after you've asked all of your friends)?
3. Do you know how to budget/spend $100k? $1M? $5M?
If not, then investors may be less willing to put money into your venture. Gaining those skills, especially the first two, has you situated to more successfully manage growth.
I believe that spending some time at a large, successful company can be very beneficial.
Disclosure: I recently joined TripAdvisor for just this reason. And I'm hiring into my team, thereby gaining experience in 1, 2 and 3!
I work at a big corporation now, but have recently considered the idea of founding/working for a startup. The more I read into articles like this, the more I lean towards the startup world.
I have job security right now (I've made myself valuable as the software guy in a hardware testing department) but my job leaves me unfulfilled. The startup world seems much more exciting and the opportunities for growth seem endless.
I thought they way I would get into startups would be by founding my own, but this article highlights the benefits of working for a startup before potentially starting one
I was working for a big corporate when I had a start up idea. The route I took was to jump ship to a smallish start up for as long as it would take to feel comfortable (I figured around two years, it actually took a bit longer than a year).
There were several good things about doing it that way:
- I got a lot closer to customers and the sales/marketing process and saw product development cycles much more akin to the kind of thing I would be doing on my own.
- I met a lot of people and made some great connections.
- I picked up some related skills and qualifications and contacts (on my own time) which have cut ~£1k+ off my business admin costs and made me more competent technically.
- I saved up a nice healthy seed fund at the same time as moving (myself) to a city that's better for start ups.
There were some negatives to go with it as well.
- I burned out a little bit on the really long days, which made it hard to work in the evenings. Oddly enough that's no longer the case now I'm doing my own thing - it's too much fun.
- I couldn't carry on with product development for contract reasons. It did give me time give the product a serious review and to pick up some other skills I would need though.
- I lost a year's first mover advantage. It's a big market though, and a year hasn't radically changed the competitive picture. The niche I want to steal is still under-served and stuffed full of people with money.
On the whole it was a good idea for me, but everyone's circumstances vary.
It's pretty standard for (non-executive) startup employees to receive about 0.25% equity in the company. That equity usually vests over 4 years. This is true even for very early employees. So, if your startup is acquired by Google for $20MM, which is a pretty favorable outcome, you get $50k. Considering the vesting, that's less than $13k per year. If you instead went to work for a Big Company, heaven forbid, the difference in your salary and bonus would probably more than make up for that equity.
The far more common outcome, of course, is that your equity is worth nothing. The incredibly uncommon outcome is that your 0.25% is worth a million dollars or more.
In almost all cases (these days, at least), the only people to win big in the startup lottery are the founders and the VCs.
That said, founding a company is very risky and difficult, and there's a high probability of failure. Previous startup experience can go a long way to increase your odds of success if you ever do decide to found your own. It's much easier to learn all the hard lessons while building someone else's company. Then you can take that knowledge and swing for the fences yourself.