Don’t waste your time in crappy startup jobs.

What I’m about to say is true now, as of July 2012. It wasn’t necessarily true 15 years ago, and it may not be true next year. Right now, for most people, it’s utterly correct– enough that I feel compelled to say it. The current VC-funded startup scene, which I’ve affectionately started calling “VC-istan”, is– not to be soft with it– a total waste of time for most of the people involved.

Startups. For all the glamour and “sexiness” associated with the concept, the truth is that startups are no more and no less than what they sound like: new, growing businesses. There are a variety of good and bad reasons to join or start businesses, but for most of human history, it wasn’t viewed as a “sexy” process. Getting incorporated, setting up a payroll system, and hiring accountants are just not inspiring duties for most people. They’re mundane tasks that people are more than willing to do in pursuit of an important goal, but starting a business has not typically been considered to be  inherently “sexy”. What changed, after about 1996, is that people started seeing “startups” as an end in themselves. Rather than an awkward growth phase for an emerging, risky business, “startup” became a lifestyle. This was all fine because, for decades, positions at established businesses were systemically overvalued by young talent, and those at growing small companies were undervalued. It made economic sense for ambitious young people to brave the risk of a startup company. Thus, the savviest talent gravitated toward the startups, where they had access to responsibilities and career options that they’d have to wait for years to get in a more traditional setting.

Now, the reverse seems to be true. In 1995, a lot of talented young people went into large corporations because they saw no other option in the private sector– when, in fact, there were credible alternatives, startups being a great option. In 2012, a lot of young talent is going into startups for the same reason: a belief that it’s the only legitimate work opportunity for top talent, and that their careers are likely to stagnate if they work in more established businesses. They’re wrong, I think, and this mistaken belief allows them to be taken advantage of. The typical equity offer for a software engineer is dismally short of what he’s giving up in terms of reduced salary, and the career path offered by startups is not always what it’s made out to be.

For all this, I don’t intend to argue that people shouldn’t join startups. If the offer’s good, and the job looks interesting, it’s worth trying out. I just don’t think that the current, unconditional “startups are awesome!” mentality serves us well. It’s not good for any of us, because there’s no tyrant worse than a peer selling himself short, and right now there are a lot of great people selling themselves very short for a shot at the “startup experience”– whatever that is.

Here are 7 misconceptions about startups that I’d like to dispel.

1. A startup will make you rich. True, for founders, whose equity shares are measured in points. Not true for most employees, who are offered dimes or pennies.

Most equity offerings for engineers are, quite frankly, tiny. A “nickel” (0.05 percent) of an 80-person business is nothing to write home about. It’s not partnership or ownership. Most engineers have the mistaken belief that the initial offering is only a teaser, and that it will be improved once they “prove themselves”, but it’s pretty rare that this actually happens.

Moreover, raises and bonuses are very uncommon in startups. It’s typical for high performers to be making the same salary after 3 years as they earned when they started. (What happens to low performers, and to high performers who fail politically? They get fired, often with no warning or severance.) Substantial equity improvements are even rarer. When things are going well in a startup, the valuation of the equity package is increasing and that is the raise. When things are going badly, that’s the wrong time to be asking for anything.

There are exceptions. One is that, if the company finds itself in very tough straits and can’t afford to pay salaries at all, it will usually grant more equity to employees in order to make up for the direct economic hardship it’s causing them by not being able to pay a salary. This isn’t a good situation, because the equity is usually offered at-valuation (more specifically, at the valuation of the last funding round, when the company was probably in better shape) and typically employees would be better off with the cash. Another is that it’s not atypical for a company to “refresh” or lengthen a vesting period with a proportionate increase. A 0.1% grant, vesting over four years, can be viewed as compensation at 0.025% per year. It’s not atypical for a company to continue that same rate in the years after that. That means that a person spending six years might get up to 0.15%. What is atypical is for an employee brought in with 0.1% to be raised to 1% because of good performance. The only time that happens is when there’s a promotion involved, and internal promotions (more on this, later) are surprisingly rare in startups.

2. The “actual” valuation is several times the official one. This is a common line, repeated both by companies in recruiting and by engineers justifying their decision to work for a startup. (“My total comp. is actually $250,000 because the startup really should be worth $5 billion.) People love to think they’re smarter than markets. Usually, they aren’t. Moreover, the few who are capable of being smarter than markets are not taking (or trying to convince others to take) junior-level positions where the equity allotment is 0.05% of an unproven business. People who’ve legitimately developed that skill (of reliably outguessing markets) deal at a much higher level than that.

So, when someone says, “the actual valuation should be… “, it’s reasonable to conclude with high probability that this person doesn’t know what the fuck he or she is talking about.

In fact, an engineer’s individual valuation should, by rights, be substantially lower than the valuation at which the round of funding is made. When a VC offers $10 million for 20% of a business, the firm is stating that it believes the company (pre-money) is worth $40 million to them. Now, startup equity is always worth strictly more (and by a substantial amount) to a VC than it is worth to an engineer. So the fair economic value (for an engineer) of a 0.1% slice is probably not $40,000. It might be $10-20,000.

There are several reasons for this disparity of value. First, the VC’s stake gives them control. It gives them board seats, influence over senior management, and the opportunity to hand out a few executive positions to their children or to people whom they owe favors. An engineer’s 0.1% slice, vesting over four years, doesn’t give him any control, respect, or prestige. It’s a lottery ticket, not a vote. Second, startup equity is a high-risk asset, and VCs have a different risk profile from average people. An average person would rather have a guarantee of $2 million than a 50% chance of earning $5 million, even though the expected value of the latter offer is higher. VCs, in general, wouldn’t, because they’re diversified enough to take the higher-expectancy, riskier choices. Third, the engineer has no protection against dilution, and will be on the losing side of any preference structure that the investors have set up (and startups rarely volunteer information pertaining to what preferences exist against common stock, which is what the engineers will have). Fourth, venture capitalists who invest in highly successful businesses get prestige and huge returns on investment, whereas mere employees might get a moderate-sized windfall, but little prestige unless they achieved an executive position. Otherwise, they just worked there.

In truth, startup employees should value equity and options at about one-fourth the valuation that VCs will give it. If they’re giving up $25,000 per year in salary, they should only do so in exchange for $100,000 per year (at current valuation) in equity. Out of a $40-million company with a four-year vesting cycle, that means they should ask for 1%.

3. If you join a startup early, you’re a shoe-in for executive positions. Nope.

Points #1-2 aren’t going to surprise many people. Most software engineers know enough math to know that they won’t get filthy rich on their equity grants, but join startups under the belief that coming into the company early will guarantee a VP-level position at the company (at which point compensation will improve) once it’s big. Not so. In fact, one of the best ways not to get a leadership position in a startup is to be there early.

Startups often involve, for engineers, very long hours, rapidly changing requirements, and tight deadlines, which means the quality of the code they write is generally very poor in comparison to what they’d be able to produce in saner conditions. It’s not that they’re bad at their jobs, but that it’s almost impossible to produce quality software under those kinds of deadlines. So code rots quickly in a typical startup environment, especially if requirements and deadlines are being set by a non-technical manager. Three years and 50 employees later, what they’ve built is now a horrific, ad-hoc, legacy system hacked by at least ten people and built under intense deadline pressure, and even the original architects don’t understand it. It may have been a heroic effort to build such a powerful system in so little time, but from an outside perspective, it becomes an embarrassment. It doesn’t make the case for a high-level position.

Those engineers should, by rights, get credit and respect for having built the system in the first place. For all its flaws, if the system works, then the company owes no small part of its success to them. Sadly, though, the “What have you done for me lately?” impulse is strong, and these engineers are typically associated with how their namesake projects end (as deadline-built legacy monstrosities) rather than what it took to produce them.

Moreover, the truth about most VC-funded startups is that they aren’t technically deep, so it seems to most people that it’s marketing rather than technical strength that determines which companies get off the ground and which don’t. The result of this is that the engineer’s job isn’t to build great infrastructure that will last 10 years… because if the company fails on the marketing front, there will be no “in 10 years”. The engineer’s job is to crank out features quickly, and keep the house of cards from falling down long enough to make the next milestone. If this means that he loads up on “technical debt”, that’s what he does.

If the company succeeds, it’s the marketers, executives, and biz-dev people who get most of the glory. The engineers? Well, they did their jobs, but they built that disliked legacy system that “just barely works” and “can’t scale”. Once the company is rich and the social-climbing mentality (of always wanting “better” people) sets in, the programmers will be replaced with more experienced engineers brought in to “scale our infrastructure”. Those new hires will do a better job, not because they’re superior, but because the requirements are better defined and they aren’t working under tight deadline pressure. When they take what the old-timers did and do it properly, with the benefit of learning from history, it looks like they’re simply superior, and managerial blessing shifts to “the new crowd”. The old engineers probably won’t be fired, but they’ll be sidelined, and more and more people will be hired above them.

Furthermore, startups are always short on cash and they rarely have the money to pay for the people they really want, so when they’re negotiating with these people in trying to hire them, they usually offer leadership roles instead. When they go into the scaling phase, they’re typically offering $100,000 to $150,000 per year for an engineer– but trying to hire people who would earn $150,000 to $200,000 at Google or on Wall Street. In order to make their deals palatable, they offer leadership roles, important titles and “freedom from legacy” (which means the political pull to scorched-earth existing infrastructure if they dislike it or it gets in their way) to make up for the difference. If new hires are being offered leadership positions, this leaves few for the old-timers. The end result of this is that the leadership positions that early engineers expect to receive are actually going to be offered away to future hires.

Frankly put, being a J.A.P. (“Just A Programmer”) in a startup is usually a shitty deal. Unless the company makes unusual cultural efforts to respect engineering talent (as Google and Facebook have) it will devolve into the sort of place where people doing hard things (i.e. software engineers) get the blame and the people who are good at marketing themselves advance.

4. In startups, there’s no boss. This one’s patently absurd, but often repeated. Those who champion startups often say that one who goes and “works for a company” ends up slaving away for “a boss” or “working for The Man”, whereas startups are a path to autonomy and financial freedom.

The truth is that almost everyone has a boss, even in startups. CEOs have the board, the VPs and C*Os have the CEO, and the rest have actual, you know, managers. That’s not always a bad thing. A competent manager can do a lot for a person’s career that he wouldn’t realistically be able to do on his own. Still, the idea that joining a startup means not having a boss is just nonsense.

Actually, I think founders often have the worst kind of “boss” in venture capitalists. To explain this, it’s important to note that the U.S. actually has a fairly low “power distance” in professional workplaces– this is not true in all cultures– by which I mean bosses aren’t typically treated as intrinsic social superiors to their direct reports. Yes, they have more power and higher salaries, but they’re also older and typically have been there for longer. A boss who openly treats his reports with contempt, as if he were innately superior, isn’t going to last for very long. Also, difficult bosses can be escaped: take another job. And the most adverse thing they can (legally) do is fire someone, which has the same effect. Beyond that, bosses can’t legally have a long-term negative effect on someone’s career.

With VCs, the power distance is much greater and the sense of social superiority is much stronger. For example, when a company receives funding it is expected to pay both parties’ legal fees. This is only a minor expenditure in most cases, but it exists to send a strong social message: you’re not our kind, dear, and this is what you’ll deal with in order to have the privilege of speaking with us at all. 

This is made worse by the incestuous nature of venture capital, which leads to the worst case of groupthink ever observed in a supposedly progressive, intelligent community. VCs like a startup if other VCs like it. The most well-regarded VCs all know each other, they all talk to each other, and rather than competing for the best deals, they collude. This leaves the venture capitalists holding all the cards. A person who turns down a term sheet with multiple liquidation preferences and participating preferred (disgusting terms that I won’t get into because they border on violence, and I’d prefer this post to be work-safe) is unlikely to get another one.

A manager who presents a prospective employee with a lowball offer and says, “If you don’t take this, I’ll make a phone call and no one in the industry will hire you” is breaking the law. That’s extortion. In venture capital? They don’t have to say this. It’s unspoken that if you turn down a terrible term sheet with a 5x liquidation preference, you’re taking a serious risk that a phone call will be made and that supposedly unrelated interest will dry up as well. That’s why VCs can get away with multiple liquidation preferences and participating preferred.

People who really don’t want to have “a boss” should not be looking into VC-funded startups. There are great, ethical venture capitalists who wouldn’t go within a million miles of the extortive shenanigans I’ve described above. It’s probably true that most are. Even still, the power relationship between a founder and investor is far more lopsided than that between a typical employee and manager. No manager can legally disrupt an employee’s career outside of one firm; but venture capitalists can (and sometimes do) block people from being fundable.

Instead, those who really want not to have a boss should be thinking about smaller “lifestyle” businesses in which they’ll maintain a controlling interest. VC has absolutely no interest in funding these sorts of companies, so this is going to require angel investment or personal savings, but for those who really want that autonomy, I think this is the best way to go.

For all this, what I’ve said here about the relationship between founders and VCs isn’t applicable to typical engineers. An engineer joining a startup of larger than about 20 people will have a manager, in practice if not in reality. That’s not a bad thing. It’s no worse or better than it would be in any other company. It does make the “no boss” vs. “working for The Man” selling point of startups a bit absurd, though.

5. Engineers at startups will be “changing the world”. With some exceptions, startups are generally not vehicles for world-changing visions. Startups need to think about earning revenue within the existing world, not “changing humanity as we know it”.

“The vision thing” is an aspect of the pitch that is used to convince 22-year-old engineers to work for 65 percent of what they’d earn at a more established company, plus some laughable token equity offering. It’s not real.

The problem with changing the world is that the world doesn’t really want to change, and to the extent that it it’s willing to do so, few people who have the resources necessary to push for improvements. What fundamental change does occur is usually gradual– not revolutionary– and requires too much cooperation to be forced through by a single agent.

Scientific research changes the world. Large-scale infrastructure projects change the world. Most businesses, on the other hand, are incremental projects, and there’s nothing wrong with that. Startups are not a good vehicle for “changing the world”. What they are excellent at is finding ways to profit from inexorable, pre-existing trends by doing things that (a) have recently become possible, but that (b) no one had thought of doing (or been able to do) before. By doing so, they often improve the world incrementally: they wouldn’t survive if they didn’t provide value to someone. In other words, most of them are application-level concepts that fill out an existing world-changing trend (like the Internet) but not primary drivers. That’s fine, but people should understand that their chances of individually effecting global change, even at a startup, are very small.

6. If you work at a startup, you can be a founder next time around. What I’ve said so far is that it’s usually a shitty deal to be an employee at a startup: you’re taking high risk and low compensation for a job that (probably) won’t make you rich, lead to an executive position, bring great autonomy, or change the world. So what about being a founder? It’s a much better deal. Founders can get rich, and they will make important connections that will set up their careers. So why aren’t more people becoming founders of VC-funded startups? Well, they can’t. Venture capital acceptance rates are well below 1 percent.

The deferred dream is probably the oldest pitch in the book, so this one deserves address. A common pitch delivered to prospective employees in VC-istan is that “this position will set you up to be a founder (or executive) at your next startup”. Frankly, that’s just not true. The only thing that a job can offer that will set a person up with the access necessary to be a founder in the future is investor contact, and a software engineer who insists on investor contact when joining an already-funded startup is going to be laughed out the door as a “prima donna”.

A non-executive position without investor contact at a startup provides no more of the access that a founder will need than any other office job. People who really want to become startup founders are better off working in finance (with an aim at venture capital) or pursuing MBA programs than taking subordinate positions at startups.

7. You’ll learn more in a startup. This last one can be true; I disagree with the contention that it’s always true. Companies tend to regress to the mean as they get bigger, so the outliers on both sides are startups. And there are things that can be learned in the best small companies when they are small that can’t be learned anywhere else. In other words, there are learning opportunities that are very hard to come by outside of a startup.

What’s wrong here is the idea that startup jobs inherently more educational simply because they exist at startups. There’s genuinely interesting work going on at startups, but there’s also a hell of a lot of grunt work, just like anywhere else. On the whole, I think startups invest less in career development than more established companies. Established companies have had great people leave after 5 years, so they’ve had more than enough time to “get it” on the matter of their best people wanting more challenges. Startups are generally too busy fighting fires, marketing themselves, and expanding to have time to worry about whether their employees are learning.

So… where to go from here?

I am not trying to impart the message that people should not work for startups. Some startups are great companies. Some pay well and offer career advancement opportunities that are unparalleled. Some have really great ideas and, if they can execute, actually will make early employees rich or change the world. People should take jobs at startups, if they’re getting good deals.

Experience has led me to conclude that there isn’t much of a difference in mean quality between large and small companies, but there is a lot more variation in the small ones, for rather obvious reasons. The best and worst companies tend to be startups. The worst ones don’t usually live long enough to become big companies, so there’s a survivorship bias that leads us to think of startups as innately superior. It’s not the case.

As I said, the worst tyrant in a marketplace is a peer selling himself short. Those who take terrible deals aren’t just doing themselves a disservice to themselves, but to all the rest of us as well. The reason young engineers are being offered subordinate J.A.P. jobs with 0.03% equity and poorly-defined career tracks is because there are others who are unwise enough to take them.

In 2012, is there “a bubble” in internet startups? Yes and no. In terms of valuations, I don’t think there’s a bubble. Or, at least, it’s not obvious to me that one exists. I think it’s rare that a person who’s relatively uninformed (such as myself, when it comes to pricing technology companies) can outguess a market, and I see no evidence that the valuations assigned to these companies are unreasonable. Where there is undeniably a bubble is in the extremely high value that young talent is ascribing to subordinate positions at mediocre startups.

So what is a fair deal, and how does a person get one? I’ll give some very basic guidelines.

1. If you’re taking substantial financial risk to work at the company, you’re a Founder. Expect to be treated like one. By “substantial financial risk”, I mean earning less  than (a) the baseline cost-of-living in one’s area or (b) 75% of one’s market compensation.

If you’re taking that kind of risk, you’re an investor and you better be seen as a partner. It means you should demand the autonomy and respect given to a founder. It means not to take the job unless there’s investor contact. It means you have a right to know the entire capitalization structure (an inappropriate question for an employee, but a reasonable one for a founder) and determine if it’s fair, in the context of a four-year vesting period. (If the first technical hire gets 1% for doing all the work and the CEO gets 99% because he has the connections, that’s not fair. If the first technical hire gets 1% while the CEO gets 5% and the other 94% has been set aside for employees and investors, and the CEO has been going without salary for a year already, well, that’s much more fair.) It means you should have the right to represent yourself to the public as a Founder.

2. If you have at least 5 years of programming experience and the company isn’t thoroughly “de-risked”, get a VP-level title. An early technical hire is going to be spending most of his time programming– not managing or sitting in meetings or talking with the press as an “executive” would. Most of us (myself included) would consider that arrangement, of getting to program full-time at high productivity, quite desirable. This might make it seem like “official” job titles (except for CEO) don’t matter and that they aren’t worth negotiating for. Wrong.

Titles don’t mean much when 4 people at the company. Not in the least. So get that VP-level title locked-in now, before it’s valuable and much harder to get. Once there are more than about 25 people, titles start to have real value and for a programmer to ask for a VP title might seem like an unreasonable demand.

People may claim that titles are old-fashioned and useless and elitist, and they often have strong points behind their claims. Still, people in organizations place a high value on institutional consistency (meaning that there’s additional cognitive load for them to contradict the company’s “official” statements, through titles, about the status of its people) and the high status, however superficial and meaningless, conferred by an impressive title can easily become self-perpetuating. As the company becomes larger and more opaque, the benefit conferred by the title increases.

Another benefit of having a VP-level title is the implicit value inherent of being VP of something. It means that one will be interpreted as representing some critical component of the company. It also makes it embarrassing to the top executives and the company if this person isn’t well treated. For an example, let’s take “VP of Culture”. Doesn’t it sound like a total bullshit title? In a small company, it probably is. So meaningless, in fact, that most CEOs would be happy to give it away. “You want to be ‘VP of Culture’, but you’ll be doing the same work for the same salary? By all means.”  Yet what does it mean if a CEO berates the VP of Culture? That culture isn’t very important at this company. What about if the VP of Culture is pressured to resign or fired? From a public view, the company just “lost” its VP of Culture. That’s far more indicative than if a “J.A.P.” engineer leaves.

More relevantly, a VP title puts an implicit limit on the number of people who can be hired above a person, because most companies don’t want the image of having 50 of their 70 people being “VP” or “SVP”. It dilutes the title, and makes the company look bloated (except in finance, where “VP” is understood to represent a middling and usually not executive level.) If you’re J.A.P., the company is free to hire scads of people above you. If you’re a VP, anyone hired above you has to be at least a VP, if not an SVP, and companies tend to be conservative with those titles once they start to actually matter.

The short story to this is that, yes, titles are important and you should get one if the company’s young and not yet de-risked. People will say that titles don’t mean anything, and that “leadership is action, not position”, and there’s some truth in that, but you want the title nonetheless. Get it early when it doesn’t matter, because someday it will. And if you’re a competent mid-career (5+ years) software engineer and the company’s still establishing itself, then having some VP-level title is a perfectly reasonable term to negotiate.

3. Value your equity or options at one-fourth of the at-valuation level.  This has been discussed above. Because this very risky asset is worth much more to diversified, rich investors than it is to an employee, it should be discounted by a factor of 3-4. This means that it’s only worth it to take a job at $25,000 below market in exchange for $100,000 per year in equity or options (at valuation).

Also worth keeping in mind is that raises and bonuses are uncommon in startups, and that working at a startup can have an affect on one’s salary trajectory. Realistically, a person should assess a startup offer in the light of what he expects to earn over the next 3 to 5 years, not what he can command now.

4. If there’s deferred cash involved, get terms nailed down. This one doesn’t apply to most startups, because it’s an uncommon arrangement after a company is funded for it to be paying deferred cash. Usually, established startups pay a mix of salary and equity.

If deferred cash is involved in the package, it’s important to get a precise agreement on when this payment becomes due. Deferred cash is, in truth, zero-interest debt of the company to the employee. Left to its own devices, no rationally acting company would ever repay a zero-interest loan. So this is important to get figured out. What events make deferred cash due? (Startups never have “enough” money, so “when we have enough” is not valid.) What percentage of a VC-funding round is dedicated to pay off this debt? What about customer revenue? It’s important to get a real contract to figure this out; otherwise, the deferred payment is just a promise, and sadly those aren’t always worth much.

The most important matter to address when it comes to deferred cash is termination, because being owed money by a company one has left (or been fired from) is a mess. No one ever expects to be fired, but good people get fired all the time. In fact, there’s more risk of this in a small company, where transfers tend to be impossible on account of the firm’s small size, and where politics and personality cults can be a lot more unruly than they are in established companies.

Moreover, severance payments are extremely uncommon in startups. Startups don’t fear termination lawsuits, because those take years and startups assume they will either be (a) dead, or (b) very rich by the time any such suit would end– and either way, it doesn’t much matter to them. Being fired in established companies usually involves a notice (“improvement plan”) period (in which anyone intelligent will line up another job) or severance, or both, because established companies really don’t want to deal with termination lawsuits. In startups, people who are fired usually get neither notice nor severance.

People tend to think that the risk of startups is limited to the threat of them going out of business, but the truth is that they also tend to fire a lot more people, and often with less justification for doing so. This isn’t always a bad thing (firing too few people can be just as corrosive as firing too many) but it is a risk people need to be aware of.

I wouldn’t suggest asking for a contractual severance arrangement in negotiation with a startup; that request will almost certainly be denied (and might be taken as cause to rescind the offer). However, if there’s deferred cash involved, I would ask for a contractual agreement, if there is deferred cash, that it becomes due immediately on event of involuntary termination. Day-of, full amount, with the last paycheck.

5. Until the company’s well established (e.g. IPO) don’t accept a “cliff” without a deferred-cash arrangement in event of involuntary termination. The “cliff” is a standard arrangement in VC-funded startups whereby no vesting occurs if the employee leaves or is fired in the first year. The problem with the cliff is that it creates a perverse incentive for the company to fire people before they can collect any equity.

Address the cliff as follows. If employee is involuntarily terminated, and the cliff is enforced, whatever equity would have vested is converted (at most recent valuation) to cash and due upon date of termination.

This is a non-conventional term, and many startups will flat-out refuse it. Fine. Don’t work for them. This is important; the last thing you want is for the company to have an incentive to fire you because of a badly-structured compensation package.

6. Keep moving your career forward. Just being “at a startup” is not enough. The most credible appeal of working at a startup is the opportunity to learn a lot, and one can, it’s not a guarantee. Startups tend to be more “self-serve” in terms of career development. People who go out of their way to explore and use new technologies and approaches to problems will learn a lot. People who let themselves get stuck with the bulk of the junior-level grunt work won’t.

I think it’s useful to explicitly negotiate project allocation after the first year– once the “cliff” period is over. Raises being rare at startups, the gap between an employee’s market value and actual compensation is only growing as time goes by. When the request for a raise is denied is a good time to bring up the fact that you really would like to be working on that neat machine learning project or that you’re really interested in trying out a new approach to a problem the company faces.

7. If blocked on the above, then leave. The above are reasonable demands, but they’re going to meet some refusal because there’s no shortage of young talent that is right now willing to take very unreasonable terms for the chance to work “at a startup”. So expect some percentage of these negotiations to end in denial, even to the point of rescinded job offers. For example, some startup CEOs will balk at the idea that a “mere” programmer, even if he’s the first technical hire, wants investor contact. Well, that’s a sign that he sees you as “J.A.P.” Run, don’t walk, away from him.

People tend to find negotiation to be unpleasant or even dishonorable, but everyone in business negotiates. It’s important. Negotiations are indicative, because in business politeness means little, and so only when you are negotiating with someone do you have a firm sense of how he really sees you. The CEO may pay you a million compliments and make a thousand promises about your bright future in the company, but if he’s not willing to negotiate a good deal, then he really doesn’t see you as amounting to much. So leave, instead of spending a year or two in a go-nowhere startup job.

In the light of this post’s alarmingly high word count, I think I’ll call it here. If the number of special cases and exceptions indicates a lack of a clear message, it’s because there are some startup jobs worth taking, and the last thing I want to do is categorically state that they’re all a waste of time. Don’t get me wrong, because I think most of VC-istan (especially in the so-called “social media” space) is a pointless waste of talent and energy, but there are gems out there waiting to be discovered. Probably. And if no one worked at startups, no one could found startups and there’d be no new companies, and that would suck for everyone. I guess the real message is: take good offers and work good jobs (which seems obvious to the point of uselessness) and the difficulty (as observed in the obscene length of this post) is in determining what’s “good”. That is what I, with my experience and observations, have attempted to do.

258 thoughts on “Don’t waste your time in crappy startup jobs.

    • As a graduate, I would still see people going to whatever job first in there way, since they look for practical experience, rather than waiting for big names to come.

  1. Very true, on all accounts especially both 7’s. As someone that spent 7 years at a startup that was perpetually always one step away I know all too well. Treat a startup like engineer bootcamp get in, work hard, do the grunt work, and get out if it no longer serves you. With the right amount of effort you’ll run circles around peers that went the traditional big company route.

  2. More programmers need to read this, Michael. The biggest problem I found with the startup I worked for, was that the founders were long on promises and short on details. The only people waving checks in the air when the company was bought were the ones smart enough to get those promises in writing.

  3. All totally true. One thing you left out was learning how to know when to jump ship. I worked at a startup where I was granted 15% equity and signed the LLC. A year later I had to quit because they’d been declined VC and weren’t giving up. When money dries up the only resource they can spend becomes YOUR TIME. If the VC’s drop out, you should drop out too. No matter what!

  4. I’ve worked my way through a lot of this while cutting bait with several startups, but I’ve missed several of these points, and haven’t thought all the way through others. This is genuinely useful to my career. Thank you.

  5. For engineers startups might not pay as much, but it does not mean they will not have a better experience there than a locked in job at some huge corporate conglomerate or even Google or Facebook, which are run like corporations. Corporations can screw employees just the same not only out of money but time, effort, and career advancement. Sure the latter will be more secure, with all the benefits of a well funded company, but I think most people choose to work for a startup not for security or even money, but for common vision of NOT working for a big corporation.

    Saying things like “wait for an IPO” makes no sense, facebook was greatly overvalued and many private companies are for the precise reasons mentioned. The take on VCs and ownership is off too, also somehow the JOBS act was not mentioned at all. The whole suggestion to get an MBA and work in Finance in Venture Capital arm is laughable – those jobs are extremely difficult to get and many MBAs get laid off from financial firms constantly.

    In the end, it really depends in what start up you end up in, as all founders are different, so are funding situations. And its common sense to join startups to learn from these jobs and gain experience rather than treating them as something secure. For me, I learned a whole lot more working at a startup for 10 months than I did at a big financial corporation in 3 years, but I am also not an engineer. But you can also waste your time in a corporation, yes even Google.

  6. “Those new hires will do a better job, not because they’re superior, but because the requirements are better defined and they aren’t working under tight deadline pressure”

    If this was true then the original engineers could simply pivot into these positions.

    The post has some good points but is rife with examples like this where the author is trying too hard to prove his points. I’d suggest readers take it with a grain of salt. As for commenters claiming “all true” and the like; I would hardly guess their experiences are totally representative of all startups.

    • If this was true then the original engineers could simply pivot into these positions.

      No, because their reputations are tied to the old systems, and they have professional obligations to support them.

      Some “old crew” engineers are able to play the transition to their benefit, but many are unable to do so. When you’re working 60 hours per week between bug-fixing, production support, and the early stages of maintenance, it’s rare that you have the time to solve this social engineering problem at the same time.

      • You’re absolutely right, and the problem doesn’t only affect startups. At our company we’re working on updating a 10-years mature system to current technologies and as a manager it can be really difficult to balance my desire to have the “old crew” work with the shiny new toys against my need to have them keep the current system viable in the face of evolving customer requirements. It doesn’t seem fair to bring in new faces to do the fun stuff while the old guard watches on in misery.

        This is just a fact of life, and not necessarily malice or negligence on the part of management.

        • I don’t think this is a “fact of life”. Situations are what we make them to be. If you are the manager and you are doing this, then you are creating this “fact of life”. Malice, negligence, doesn’t matter. As a manager, you made the decision to do this, take the blame and don’t scapegoat.

          • +1
            Nicely spotted the usual management excuse. It’s always some unchangeable external condition – instead of taking actions, responsibility, and blame, when it’s due to.

            I’m not saying managers are in an easy position, but then, no one is. They do owe their managees to try just as hard as everyone else is (engineers in this case).

    • I’m really having a hard time taking your comment seriously. They could ‘pivot’ into these positions? Have you ever even been on a perpetually sinking ship? I suspect you have not had to deal with the worst the startup world has to offer, or perhaps any unstable business. Worse yet, the naivete of this post could lead others clinging to false hope astray.

      It takes significant ability to produce great quality under pressure. The bar is much lower to produce quality with a large team, budget, plethora of tools, fallback systems, existing infrastructure, and plenty of time. The same person in one place spends his time solving business needs under adversity taking every shortcut and making every hack needed to avoid total failure while the system rots out underneath him and equity laden managers shout down his back. In the other he spends his time peacefully interating on the systems quality.

      If you are a manager I hope you take a long hard look at your perpective here. You basically claiming the enviroment people are working in doesn’t matter, that it is the fault of the engineers who were denied what it takes to make things work. Many managers seem to end up passing around orders like little kings, thinking thier in charge of everything. Meanwhile, engineers are working miricles behind the scenes to keep some legacy monsrosity running while being bomabarded by non-sense. Non-sense like, if its just that bad, you could just ‘pivot’.

  7. John, your idea of pivoting is pretty off base – it’s just not a realistic thing to say. As an existing programmer you have obligations that you have to meet that are unrelated to the new projects that are better defined. You can’t just drop those obligations. You have to spend time transitioning away, and most of the time that’s just not politically possible – either the existing system is still moving too fast, or it’s too buggy or it still needs substantial work for any number of possible reasons. New hires can take on the new projects without worry about existing maintenance burdens, and if your startup just received a bundle in funding it’s a good chance that people are being hired as quickly as possible.

  8. “I guess the real message is: take good offers and work good jobs (which seems obvious to the point of uselessness) and the difficulty (as observed in the obscene length of this post) is in determining what’s “good”.”

    This is the best piece to take from the post, from what I’ve seen. Staying firm when negotiating with startups may not be a core skillset of programmers, but it’s important. And the key to finding those “good” jobs is finding the companies with the right combination of good management and good product.

    Good product can be intuitive (“Would you use it?”, etc.), but good management is more than a wink and a smile. If you really want to get to know who’s side your management is on, ask them how they deal with their investors or research it yourself. A CEO who can look out for his/her workforce always finds a way to keep the investors described above at an arm’s length.

    Also, I sense some bitterness when discussing VCs…that might be a little unwarranted. But only a little. At minimum, good products NEVER have a shortage of easy funding.

    • > Staying firm when negotiating with startups may not be a core skillset of programmers, but it’s important.

      Extremely so. The variance in startup jobs is much higher. More upside, more downside. More need to negotiate. A large company isn’t going to give a ridiculous lowball offer (or an extremely generous one). Startups sometimes do.

      > Also, I sense some bitterness when discussing VCs…that might be a little unwarranted.

      My issue is not with who VCs fund or don’t fund (hell if I know if they’re making good decisions; I’m not sitting there with them) but with the implicit social superiority that comes along with simply being a VC. In a better world, VC and entrepreneur and engineer would just be different jobs and there wouldn’t be this social ranking.

      It might be different if these VCs were all visionary, self-made billionaires. This would give them the credibility that might actually justify a sense of superiority (but the actually brilliant ones tend to be the least arrogant). However, a large number of them are MBA grads who peddled influence and connections (often inherited family connections) until they got a king-making job. I’ve met plenty of brilliant startup founders and venture capitalists, but for every one of them I’ve encountered, I’ve met two or three unimpressive people who just got those positions because they were from rich families.

  9. Since there seems to be a lot of discussion on this blog entry, as someone who started out working at a startup and successfully founding and selling a startup afterwards, I’d like to form a rebuttal.
    #1. A startup will make you rich.
    The main reason why I started working for a startup was to carefully watch and learn from the founders. Coming out of college, I knew I wanted to start a company in the future and chose to work at a startup founded by seasoned entrepreneurs to learn how they interacted with their employees and investors. As a result of what I learned, I was able to successfully exit my first company this year. I fundamentally agree that for the most part, working at a startup as an employee won’t make you rich, but the lessons you take from it while you are there can. A big part of being part of a startup is learning that you can accomplish great things when you put your mind to it. I grew substantially as a programmer when I was able to inherently understand that the buck stopped with me and no one else was going to do the work if I didn’t take it head on. The discipline and endurance that’s required at working at a well managed startup is one of the great learnings I had while I was there.
    #2. The “actual” valuation is several times the official one.
    The author here makes a blanket statement about valuations which I would agree with depending on when the last round of financing is. The valuations of companies are typically determined by the last round of financing. If you’re coming on board several months afterwards as a company is beginning to raise their next round, theoretically the company should be valued higher. I would point out though that equity doesn’t really mean much in the larger realm of things if the company you are working for isn’t going to successfully exit.
    #3. If you join a startup early, you’re a shoe-in for executive positions.
    As a programmer, this really depends on the type of startup you’re working for. When I founded my company, I placed a heavy emphasis on engineering and many of my initial engineers I hired took on senior positions as my company grew. Of course, if you’re working under founders with less technical backgrounds, I can see how engineers could be undervalued.
    #4. In startups, there’s no boss.
    I think there’s a bit heavy emphasis on the point that VCs are the boss. Technically VCs are not the top of the totem pole, money is the final decider. Without money, the company goes bankrupt. Without revenue, the company will eventually go bankrupt. The entire long term goal of a startup is to make revenue and eventually large profits. VCs will only get aggressive (unless they are amateurs) if the pool of money is drying up and there is no reasonable path to profitability or growth.
    Overall though, I would agree that the idea of not having a boss is misguided. I disagree with the author when he states that working at a lifestyle business with a controlling interest is the way to go for those who don’t want a boss. There is no job in the world period where you do not have a boss. Even if you are starting a company on your own capital, the customers are your boss. You are always working for someone period.
    #5. Engineers at startups will be “changing the world”.
    Not going to argue with this point here, but I would say that I don’t think criticism of this is fair in the context of companies at large. All companies have mission statements and often they are quite lofty. Some people buy it, and some people don’t. I’d look instead at the problem the company is solving – do you believe in what the company is trying to do?
    #6. If you work at a startup, you can be a founder next time around.
    From my own personal experience, this is true. I strongly disagree with the author’s entire entry here. I will say, it’s important to take notes and carefully watch how a startup operates and grows. I learned a lot around the operations and how the business justified itself by working with my teammates, sales staff and management. At a startup, everyone is working hard to justify and grow the business, so it is not difficult to learn a lot in this environment. The top level management and sales teams are all working on their pitches to an extent and picking up how they pitch the company to you is a great way to learn how to pitch investors.
    Working at a startup will help you learn how to operate and grow a company. Working at a startup will not give you the next great idea. No experience anywhere is going to help with the next great idea.
    I STRONGLY disagree with the author that working in finance/pursuing an MBA program will help with entrepreneurship. From my perspective, my finance friends typically come up with ideas that work from a numbers perspective, but would never ever actually functionally operate in the real world. It is nice to learn how to do an ebitda,dcf, and cap tables, but these are things that can be picked up.
    In fact, many vcs will ignore funding companies that are founded by finance types.
    #7. You’ll learn more in a startup.
    I found that this was the case in my experience. What was really important and what really made the experience a lot better was that the founders of the startup had previously started and exited companies prior to it.
    So… where to go from here? #1 If you’re taking substantial financial risk to work at the company, you’re a Founder. Expect to be treated like one.
    I’d say it really depends on the size of the startup when you join. If it’s sub 5 employees, I could see how this could work. However, if you’re a junior level employee, don’t expect to see the cap table. Frankly, from a founder’s perspective, I could easily find someone to replace you; if you weren’t replaceable, your equity stake would obviously be higher. Be careful with how you play this game because founders do not want to have employees that already have loyalty problems at the start. Openness and transparency are key with negotiations here.
    #2. If you have at least 5 years of programming experience and the company isn’t thoroughly “de-risked”, get a VP-level title.
    Depends on how great that 5 years of experience was. I’ve been surprised with how little people with 5 years of experience have sometimes. With engineers at a large company, 5 years of experience can actually be a detriment since the pace at larger companies tends to be quite sow. Additionally, at a larger organization, there’s more room to pass the buck which is not something I look for when I hire.
    Frankly, the approach I’d take here is to be highly attuned to the organizational structure as the company is growing and making sure that you’re speaking up when shifts are occurring. With savvy founders, employees that should be promoted will get promoted if they speak up – so speak up.
    #3. Value your equity or options at one-fourth of the at-valuation level.
    I’d actually phrase this differently. Value your options or equity based on the likelihood of the company exiting or turning a profit. If the company doesn’t have any long term potential from a business perspective, your options aren’t going to mean anything anyways.
    #4. If there’s deferred cash involved, get terms nailed down.
    I would say if there is deferred cash, don’t get involved. The only reason why I could see a deferred cash component would be if the company was just launching – in which case you should be considered a cofounder or have a larger equity stake. Frankly, any deferred cash is probably peanuts in the relative scale of things so I’d probably go for equity if there is a choice (and if you believe in the idea).
    #5. Until the company’s well established (e.g. IPO) don’t accept a “cliff” without a deferred-cash arrangement in event of involuntary termination.
    This isn’t going to be negotiable and I would disagree with the author. If a startup actually doesn’t have a cliff, I’d say they are amateurs.
    If you are doing your work and you are a valuable engineer, no founder in their right mind would fire you before the cliff especially in this current hiring environment. Smart talent is difficult to find right now and smart engineers are valuable. If you aren’t a talented engineer, then you have no bargaining position to begin with.
    #6. Keep moving your career forward. Just being “at a startup” is not enough.
    Don’t disagree here. Be active with networking at startup events and programming meetups. It’s important to build relationships. Try to learn as much as you can period.
    Also, if you are to try and take on new projects as the author suggests, take on projects that are on business model (are aligned with increasing revenue etc) and you will be more successful at moving up within the company.
    #7. If blocked on the above, then leave.
    Disagree with the author here, I would never have a programmer have investor contact unless they are savvy business wise. It’s not a problem of trust, it’s a problem of maintaining a consistent vision with an investor. If a programmer doesn’t understand the larger vision, it can turn things sour with an investor. If you were employee #5, maybe. Employee #15, probably not.
    I agree with the author in that negotiations are important. Several of my employees should of argued for more options which I would of given if they had simply asked for them.

    • I’m leaving college this summer and have a job from a well established MNC. But I want to start my own company in the future and hence have decided to work at a startup and learn. I was skeptical about some of the things the author said like getting an mba or working in finance if u want to be a founder. I’ve to say your comment really helped it reinforced my trust on the path I’m choosing. I’m saving your comment for future reference. Thank you :)

  10. As the first hired engineer, (aside from the original co-founder), of a start up that is now 100 employees and growing strong, I have to say this post rings true to the exact issues I’ve encountered. If only this was posted years ago so my younger self knew better what to expect! Take heed. This post speaks 100% truth. Thanks!!

  11. Man, oh man, I wish you had written this when I was still in college… I have suddenly become nervous about my, I’ve learned, J.A.P. position. I’m going to be sending some job applications out like crazy hereon.

  12. This is great advice.

    For the past several months I was working at a startup and in retrospect it wasn’t as great as I thought it would be (or should’ve been).

    Not everything you said resonated with me, but some of it did, and generally I agree with your conclusion.

    First of all, there was definitely a boss. We were 3 engineers, but one of us was “the boss”; he called all the shots and was very forceful about his demands. It wasn’t that bad at first but gradually he was programming less and less until he stopped writing any code, and then things started going downhill for me.

    Second, you’re more than a cog in a wheel. But don’t be flattered! You’re a wheel in a machine. I don’t know if all startups are like that, but there are certain types of founders/bosses who view employees as components in a machine. They only want you because you’re a good wheel. This kind of founder/boss views the company as *his* vehicle: he’s driving it manually, and if some wheel is not moving exactly to the motion of his arms, then it’s a bad wheel and needs to be replaced.

    Coincidentally, when I read Paul Graham’s descriptions of the ideal founders he would like to fund, they seem to match almost 100% with this type of boss/founder I just described.

    I definitely feel like I was taken advantage of .. as cheap labor. I never made any demands (titles, benefits, or anything). I was in it for the experience and I wanted to be a part of a great team.

    Also the point about learning new stuff. I don’t feel like I learned much. I almost never had any time to really absorb any new ideas. It was always tight deadlines and gettings things done then throwing them away and moving on to the next thing. Sometimes I had to do something new, but still I don’t feel like I learned much from it. To say that I learned something new requires (to me anyway) that I spend a considerable amount of time and going deep into it, but this almost never happened.

    • Founder’s Syndrome is a real problem in startups and, yeah, it can be nasty.

      You can learn a lot in startups, but also in more traditional companies. A lot of the benefits of startups (high autonomy) are not always delivered, and they’re things that you get even *more* on your own projects. So if it’s really that important to you to control your full stack, then get up at 4:00 am and code up your own thing, and keep building it until it can support you.

      For the record, one value in working in bigger companies is that you get a sense of the client’s perspective. VC-istan (which is what I’m criticizing here; not all small businesses) is only a small percentage of new business activity. Most of the good small companies are going to be looking for first clients, not investors, and it’s useful to have a sense of what the other side is thinking.

    • “Just A Programmer”. Engineer assigned low social status in companies where only “executives” are seen as real players. Pretty common in VC-istan.

      To be frank about it, a lot of these VC darling startups are worse (in terms of being dickish, baselessly elitist, and organizationally ineffective) than the much-maligned “big corporations”. Those supposedly “stodgy” F-500’s are learning (from the Valley and Wall Street) what they have to do in order to retain talent… but there are plenty of hot-shit 50-person startups where the only way to get respect is to be “an executive”.

    • I agree, there is often little choice for some. But perspective is important, and you won’t try to leave a bad situation if you don’t know it is bad.

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    • Serial Entrepreneur leaves a bad taste in my mouth. It’s really a joke. It also means it’s not a real business person. It’s not even an entrepreneur. More like an investor who doesn’t have the money or desire to invest him/herself.

      If you think of a person who opens a pizza parlor, suddenly sells or leaves, opens up another pizza parlor, sells or leaves, opens up an italian restaurant because it’s kind of like a pizza parlor, leaves, opens up a mexican restaurant, sells it or leaves, opens up a French Bistro, sells or leaves, and suddenly opens up a Car dealership…. That’s what it’s like. They really aren’t good at anything they start and they probably don’t make or create anything valuable for anybody.

      The pizza shop probably closed because it sucked. The Italian restaurant had bad waiters who weren’t paid well. Reading a blog or listening to the serial entrepreneur though and you’d think, wow, this guy has done so much. The truth is, they knew the right people and they are good cons. They know how to con people into investing in their crap and they know who to con people into buying their crap.

      Are Serial Entrepreneurs always cons or bad CEOs? No. But many serial entrepreneurs are closer to Bernie Madoff and not a Steve Jobs, Bill gates, Mark Zuckerberg, or Sergey Brin. Somebody who starts a business just to sell it, probably won’t be a very good person to work for.

  14. Thanks for the article. The comment that VCs require the startup to the pay legal fees around funding as a way to send a message isn’t accurate. They do it because of the way VCs are compensated. Most VC firms get paid a small percentage of the funds under management, say 2%, and a large amount of any gains the fund makes, say 20%. If the startups pay all the legal fees that money comes out of the funds invested rather than the 2% management fee which goes into the VCs pocket.

  15. I’ve worked at a number of startups as well and this rings very true to me.

    The one thing I’d add that goes a bit against the grain here is simply the satisfaction that comes from ‘creating’ something that didn’t exist. Many of us by nature are ‘creators’, not meant to add minor and incremental value to a large organization. That’s just not us.

    And the satisfaction I’ve pulled from ‘inventing’ my job and writing code to do things that no one else has yet done is arguable the greatest satisfaction I’ve gotten.

    As an hiring manager as well, the main thing I hear from programmers I interview is what they say about the ‘projects’ they were on. They rarely talk about salary or managers at past positions — but they always want to talk about the things they built. To me, this is — or should be — the main reason for a non-founder to join a startup: to work on a brilliant, challenging project to do something that’s not been done before.

  16. Interesting post. Regarding your myths, I’d agree that 6 of them are not true – but do you think a great deal of mature people really still believe the 7 myths you listed? I think most people are much more realistic about start-ups than you are giving them credit for.

    I’ve been recruiting engineers for software companies for about 15 years, and many of my clients are start up or growth firms. When we discuss stock options, most candidates refer to them as ‘lottery tickets’ for the most part – and I assume when these same people actually buy lottery tickets, they are aware of the odds against winning. There was a time (98/99) when people did seem to believe that they would get rich and change the world, but I don’t hear that from anybody anymore.

    I do disagree with myth 7 (re: not learning more at start-ups). While it’s true that large companies do stereotypically invest more in their employees development and education, I seem to see engineers learning quicker by being in the trenches than by being given training programs by corporations.

    The engineers I’ve seen who take start-up jobs generally have no expectation of getting rich or changing the world. But I’m sure they do realize that they may have the opportunity to do both, and that opportunity simply isn’t afforded to them by a large established company.

  17. michaelochurch
    Founder’s Syndrome is a real problem in startups and, yeah, it can be nasty.

    Please can you expand on “Founders Syndrome?”

    Many thanks for the piece it’s extremely interesting

    • Founder’s Syndrome is the pattern in which the company turns into a personality cult where the Founders are revered as gods. Often the people who don’t drink the Kool-Aid are ostracized and fired. This swells the Founders’ egos and eventually they get solipsistic and stop making products actually worth caring about.

      A lot of people forget that they’re running a business and that the objective is to be successful (which, for all of us, means you need to listen to people who disagree strongly and who might be huge pains in the ass) and instead make it their own little lunch-on-the-upper-steps club of yes-men.

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  19. I’ve worked at many startups and I have also worked at large companies. I’ve even worked at companies while they made the transition from small to large and observed the cultural shifts that required. This post is excellent; if I’d known back in 1995 what I know now, then my compensation negotiation meetings would have looked very different.

  20. i always advise people that if you are < employee #5 at a < $1mm convertible note startup, always take no less than 75% market value, and insist on 4% equity with immediate vesting, or the vest acceleration on termination before cliff.

    otherwise, you are being clowned upon, perhaps unintentionally, but … doesn't matter, got clowned.

  21. What a great post Michael! Very enlightening to the many engineers/potentials out there considering start-ups. Really does paint a realistic picture.

  22. T
    It is rare to read an article that is so spot on. Point 3 is painfully true and perhaps not obvious from the outside. Hopefully your article provokes younger programmers into think carefully before jumping in.

    • Point 3 (about the very low likelihood of promotion to a leadership role) is actually the one that I think is most interesting, because it’s the one on which there’s the most deliberate misinformation and self-deception. The CTOs at these companies don’t go out and say that 0.1% of the company is going to make anyone a billionaire, because that’s flatly untrue and obviously untrue. Most of the overt lying that goes on is focused on long-term career opportunities– leadership positions (given away to later hires) and the opportunity to be a founder some day (nonexistent without investor contact).

  23. (Tangential, but: throw a few of us ladies who code a bone and change some of those “he”s to “she”s in your article, wouldja? :)

    • Maybe less tangential than you think…a good additional point for the article would have been to note that it’s highly likely that as a junior startup employee, your colleagues will likely be overwhelmingly male, with what few women there are relegated to poorly-valued non-technical positions (marketing and customer service). Add to that the fact that many of the folks defining the culture in these places have grown up more comfortable relating to computers than women (and often tend to think of women as less competent, in part due to women’s under-representation in the technical fields they value most) and you often end up with a pretty toxic stew in terms of what the environment is like for women.

      The same points Michael makes about start-ups being willing to fire because they don’t fear lawsuits apply to their likelihood (or lack thereof) to fear the law in other areas as well, including sexual harassment. A cohort of colleagues whose primary, formative exposure to women consisted of video game cartoons and porn can make for a very unpleasant (or unsafe) working experience.

  24. Thanks for this article. I’ve been thinking of joining a startup for a long time. This post has given me a lot of things to look out for when looking for a startup job.

  25. Although working in a startup is hard and not well paid, the experience will be more valuable if you’re working on a product instead of doing consulting or outsourcing.

    Instead of looking at a startup we should evaluate at the project the startup is into. Product development is much more enriching than doing maintainance or solution development.

    Maybe developing in a specific area like computer graphics, IA, games, multimedia or mobile is much more enriching than information systems. Or vice-versa.

    Engineers should focus more on what they like, what they want to explore and innovate than what career path they should take.

  26. There were many excellent points in this article. I would have like to have seen more data beyond what is ostensibly your personal experience to back up the assertions of “most” and “usually”. There is an aftertaste of bitterness and disillusionment permeating this article, as if one or more start-ups has just chewed you up and spit you out. Welcome to the real world, kid!

    • It’s better than that.

      Two startups. First one failed for non-technical reasons. Common, boring story that, although it taught me a lot, doesn’t deserve rehash. As angry as I was at the CEO at one time for bungling it, it’s over and I’ve moved on.

      Second startup brought me in to resolve a conflict between an “old” and “new” team (the inspiration for point #3, about startup old-timers rarely getting the leadership positions they’re promised). The old team had worked under intense deadline pressure, so there were some code-quality problems, but not because they were bad developers. Still, as the technical debt mounted, they were mostly pushed aside, despite having worked their asses off to build the company.

      The old team had fallen far out of favor by the time I started, but since I was brought in specifically to resolve the conflict, I did what I could to be fair, and I realized that there were some really solid engineers on both “sides”. When I had the gall to speak to senior management and say that both the old and new crews had great people worth taking seriously, that the code quality problems were an obvious byproduct of tight deadlines, and that, while those problems needed to be addressed, no one deserved to be punished over them, it ended badly. I was brought into a meeting by a couple senior executives and told that I would either sign a bunch of disparaging and outright false documentation about the old team or that I’d have to resign. So I ended up leaving, rather suddenly.

      The way the executives let that old/new cleavage fester (and even encouraged it) really pissed me off. Did the old team make some mistakes? Of course they did, as would anyone. But it was sickening to me that, after taking on all that risk and working their asses off to build that system, they were then thrown under the bus in a disastrous scorched-earth “rearchitecture” for what were largely cosmetic issues (such as a CTO’s-protege/Joffrey-Baratheon type 25-year-old just plain not liking Python).

  27. startups create jobs, large corporations cut them thousands at a time to tweak the balance sheet.

    But hey, if working for a company that makes soap and shampoo while others build the future floats your boat, knock yourself out.

    • To state a bunch of obvious things: New companies are new so they of course create new jobs by definition. Small companies create jobs as they grow into bigger companies. But all big companies used to be small companies.

      so in the end the whole “small companies drive the economy forward” memes is mostly just fun with math and tautologies. It’s not that small growing companies aren’t important, it’s more like OF COURSE they are and they are especially important since many of them turn into big companies.

  28. This was a good read – as a designer who went from corporate to start up to corporate, I’ve gone through the same sort of experiences. I even came on with tons of experience, ready to learn more, only to be shoved into a peon spot, worked to death, and told I wasn’t committed because I wouldn’t sell my soul to the company. #7 in your “what to do” section is exactly what I did!

  29. I’ve worked as a the first or second tech employee at a few start-ups over the years, and looking back, most of your comments are spot-on. In particular, developers, including me, are very naive about the financials and power structures at these companies, and very bad at negotiations over the many forms of compensation that start-ups offer (cliff, no cliff, deferred compensation, etc etc). In the past I too have joined companies as a founding engineer, compensated with too little equity and too small a salary (all my fault), fully expecting to be treated as a *partner*. On this last point, I’ve been completely disillusioned. Devs really ARE JAPs in the eyes of 99% of the start-up founders out there. It’s difficult to imagine working somewhere other than at a start-up, but in the future I’m going to go into negotiations only after reviewing this posting of yours.
    On a side note: I’ve had incredible autonomy at some of these start-ups and really have learned a ton of stuff because I’ve had the freedom to do so. While, at start-ups, you ARE working for The Man, it’s a different sort of Man than most people work for, one who’s less interested in -how- the product is created and more in just getting it created at all.

  30. You’ve got a lot of good advice here, Michael, but there are two recommendations that I just don’t think will fly in Silicon Valley:

    “If you have at least 5 years of programming experience, get a VP title.”

    This is mind-boggling. If you’re actually running a functional department, fine. But no startup would ever give an individual contributor a VP title.

    “Until a company IPOs, don’t accept cliff vesting.”

    Any person who follows this advice simply won’t work in Silicon Valley. I did know one founder who would fire executives before they hit their cliff, but he was a very rare exception.

    I think much of your advice is spot on, but these two items stick out for me.

    • I’m going to second this – both of these points are bit absurd.

      In the case that a company will give you a VP title that easily without having additional responsibilities, I would guess either the management is pretty bad/inexperienced or they’re desperate for talent due to poor resources or a sub-par product/execution. In either case, you should be absolutely sure the company is worth your time.

      And cliff vesting is a simple fact of equity compensation at startups. If you don’t plan on being at a company for a year, don’t factor equity into your compensation. For that matter, don’t join in the first place – joining a startup should not be seen as “testing the water”. You either dive in ready to stay with the team for a couple of years, or not at all. The thought that an exec would fire you before a cliff just to save his options pool is simply paranoid.

  31. Some of these issues can happen to founders too. At a previous start-up, thinking I was a co-founder, I discovered that my co-founders saw me as a “just-a-programmer”, and nothing I was going to do would convince them otherwise. You can have equity and titles, but if you don’t have the respect of your co-founders you can find yourself as J.A.P.

    Scalable infrastructure is a specialised task, and you might need to bring in specialists to work on it, but if a founding engineer is a good enough engineer to build the working system under low budget and massive time constraints, they’re almost certainly good enough to work with the specialists on scaling it up, and they come with a whole lot of product knowledge and company experience which should be acknowledged.

    For those hoping to be a successful founder, there’s a lot of useful take-aways here – including how to motivate your engineers.

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  33. From a point of view of co-founder, I agree to everything here. Startup is a hard money. I am doing it in favor of potential reward. It’s risky, it’s painful and consumes the people inside. Unless you are fortunate enough to get an early exit :)

  34. My initial reaction echoes KarenSmith’s response. While you bring up some interesting points, your tone suggests you’re motivation is more axe to grind than thoughtful advice.

    Startups aren’t for everyone. Some personalities are better suited to the more stable environment that corporate jobs tend to provide. Others are looking for more direct impact, adventure, place to learn how to become their own entrepreneur, etc.

    A more useful article might have spent more time on ways to choose the right startup (i.e., visionary founders? scalable? micro-manager VCs?).

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  36. Not my personal case. It really depends on the kind of people you are working for, just as much as it does for well established companies. I believe the text generalizes too much.

  37. I read somewhere that you worked at Jane Street. I am scheduled for a phone interview and was wondering if I could ask you about a few things. My email is in the comment field.

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  41. I was planning to job an early stage startup and wasnt sure whether to or not.. But this post helped me realized that my compensation package was way off below the bar.. Thanks for the post..

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  43. Great post. Someone needs to do something about the VC industry.

    Even their own high church, the Kaufman Foundation, released a scathing reports recently saying the model is broken and they are not worth their money.

    People like Doerr are sailing around in 200m yachts while delivering sub- SP500 returns and looking for a quick flip which leads to many of the wrongs described in your post.

  44. I think you should said “Don’t waste your time with people who say “startups are awesome!””.

    Economically, if the market not indicate to this big space of economic possibilities, the entusiasm will be a bit less. But, there is, serendipity. Most big companhie buy small ones, and doing so, maintain some months in the field sooner another big swan come and destroy everything. Maybe with this startup culture we are in critical mass. To me, a conservative strategy is good when the uncertainty or risk is not aceptable.

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  56. Michael, I’m sure you’re just hedging yourself by saying this is only true “right now”, but all of what you say has been my experience as a software engineer (until I wised up and became a VP) in three startups from 1993 to 2011, the third of which finally worked out because I applied these lessons. I think your advice will prove to be timeless.

    What’s maybe different today is that many large companies now try to imitate the startup environment with incubators, labs, tiger teams, etc., which offer some of the same experiences, at least as J.A.P. Especially as a first job out of college, these places may be just as enriching as startups.

    But control is the other big reason to be a founder or exec. An equity stake is an investment like any other. Better to actively manage your investment with some decision-making authority than leave it entirely to the whims of others.

  57. Yeah, working for startup but not being a co-founder sucks.
    Michael, your article get a lot of buzz in Russian, because most developers don’t have even 0.05% :)

  58. Thank you so much for speaking from the heart for us badly treated, and oppressed “J.A.Ps”.
    You are 100% correct – speaking from my own 10+ years of bad life experience working with good intentions for bad guys. It sucks to see 10+ years wasted making others rich. Is there a rewind button in life? How I wish!

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  60. It’s all about who you do business with.
    Remember the “Woz Plan” of Steve
    Wozniak of Apple? In 1980, when Apple
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    so the “other” Steve shared his options
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  63. Interesting Sunday morning read. I don’t support the bottom line, but many points have some rationale and are worth reading.
    I think the major misses that lead to a wrong conclusion are:
    a) points 1, 5 – while I agree in most cases you won’t be changing the world and getting rich at a startup, but at least you’ll have a decent chance for it, and an opportunity to influence it, while at a big company your chance for it is a bold zero.
    b) points 6, 7 – at a startup you’ll definitely learn all those things that actually matter and aren’t taught at universities – teamwork and stresswork, your real capabilities, weaknesses and strengths, as well as those of your profession, how work gets done (or not done) on a larger scale, what it means to get to overall success and what actually matters for it. All the above you won’t get at a big company, as you won’t see anything beyond your group or department. All those are of extreme value, and after your (even failed) startup tenure you’ll be miles more prepared for your next endeavor, be it a job at a big company, a job at a startup, or founding your own.
    c) point 4 – with VCs I know and am fond of, VC-founder relationship is not about power, but about support and empowerment. All the successful startup companies are driven by their founders with VCs providing the resources and environment for the founders to enrich their skills and assets. Don’t go to a VC that’s about power.

    • I disagree, and here’s why.

      At “big companies”, one won’t be changing the world, and the $10+ million payouts are extremely rare. Big companies understand this. So do the people who work for them. So they tend to make up for it in other ways. In small companies, you can’t have 4 different jobs over 10 years. In large companies you can. There are pluses and minuses to both. The best thing to do is not to focus on company size either way but to move according to the quality of the opportunity.

      In large companies, you’re unlikely to “change the world” but you can work on important projects that matter to the functioning of the business, and learn from that experience and become better. I think it’s actually easier to become a 2.0+ engineer at Google or a bank (if you gravitate to the right projects) than by hopping around startups hoping to find one that actually needs high-level technical skill.

      Regarding 6 and 7, I’ve seen that one play both ways. You can learn a lot at a startup, or you can get pigeonholed and just get stuck with a lot of grunt work. Once people are being hired above you, then unless those people are internationally famous (e.g. Eric Schmidt when hired as Google’s CEO) it’s time to get out. If you’re the most senior technical founder and you aren’t given investor contact, get out.

      On VCs and power relationships, most people don’t get to pick who funds them. The herd mentality is so strong among VCs that turning down one is going to burn out other opportunities. That’s a big part of the problem. People are usually stuck with the first term sheet they get, because any VC can pick up a phone and close out a dozen other opportunities and supposedly “competing” firms.

  64. Why join the navy if you can be a pirate ? You are advocating that joining the navy is a better choice, it is legitimate but not desirable for all. In my opinion you are missing in the discussion an important point about negotiation power: I am convinced that talent and leadership, creativity and true execution capabilities are rare and have high negotiation power. You are suggesting that technical staff and even founders have little negotiation power but frankly this is true for “commodity” employees and may be true for first time inexperienced founders but it is not true for “stars”. It is a tough world and competition is global, but it is full of opportunities. Risk averse people should – given the choice – join the navy, adventuresome others be a pirate.

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  70. One thing that is left out. The operations at large companies are usually very mediocre and slow. If you find satisfaction in shipping code, you may not find it there. Spend a few years slowly and painfully going no where only to have the project cancelled, a very common experience in large companies.

    Start ups must place more emphasis on engineering skill and productivity. If they don’t they die. A big company can run along for years like the Titanic, producing nothing while slowly sinking.

    Lets say your mid 40s as I am:

    a) You’ve spent the last 20 years at a handful of start ups. You’ve written and shipped over 500K lines of production code. You’ve kept up on technology, in some cases as first mover.

    b) You’ve spent the last 20 years sitting at a desk filling out paper work about cost overruns, and delays you’ve become great at explaining why minor bugs never get fixed. You’ve rarely actually coded anything. Most skills you’ve learned had to do with the specific policies of your large company.

    Your suddenly laid off, who will get hired? Who can easily find temp and contract gigs in a tight market?

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  76. Everytime I hear the word “engineer”, I just cringe. Heh, I don’t program computers, I “software engineer” them. Like, you know when I sit down to build a website and hook it up to a database backend, I “engineer”, dude!

    Anyway, a “startup” just means some guy that started a company. It loses a lot of allure if you just say “I work for this guy that started a company”, though doesn’t it?

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  78. Little late to this particular party, but as a more than 20 year veteran of various sorts of tech startups, all of this post is excellent advice and encapsulates a huge amount of wisdom into a very small space. It also applies to any sort of role — not just engineering positions. Ignore it at your peril.

    Startups can be extremely rewarding on multiple fronts, but caveats apply and this post does a great job of pointing out some of the biggest “gotchas.” Michael, you’re doing a great service to future startup generations here!

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  80. I’m a founder of a startup. The terms you advise on (1% equity in a startup with a 50M-post, no cliff, direct access to investors and knowledge of the cap table, etc) might make you waste your time interviewing. Personally, I don’t know of any startup (beyond “two guys in a garage”) that would agree to these terms. If you want these terms, make it known upfront, before starting the interviewing process, so you don’t waste yours (and mine) time.
    Full disclosure: my employees are the very top notch, have gotten multiple raises over the time, get advanced from within, work on really hard engineering and scientific problems (not marketing), and have none of the terms you mention.

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  82. Good article but I have to disagree with point #5. I think that startups more often than not do “change the world”. I could have taken a job with a trucking company optimize their routing software but that sounds hella boring. I would rather build a useful taxi app (or anything else) that provides real people with useful apps rather than a project that has to go through 13 levels of approval and absurd coding requirements.

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  86. Hi,

    I found this article very interesting. As I am on the verge of deciding if to go for a startup or a well established company, I had a question for you.
    – I am being given 0.2% of stocks in startup of 15 people with good VCs and experienced founders.
    I am having only 3 years of coding experience but I liked the profile.
    I have other companies like Apple / Google offers with the same basic salary as offered by startup but obviously more RSUs / bonus etc benefits.

    What do you think about the % of stocks given to me. Should i be taking this risk? I am willing to take risk for worth money as I liked the profile (work) a lot.
    As I have very less experience compared to other 10-12 people, I cant even ask for big titles but I know that the team is really very good and I will grow professionally for sure.

    Kindly help

    • 0.2% of what? What’s the valuation of the company?

      Even if the salary is equal, the prestige is not, and raises are rare in startups. Convert the equity package into an annual salary and expect $25,000 per year as a minimum. (So, on a 4-year vesting cycle, the break-even point for 0.2% is $50 million, which would put that equity allotment at $100k.)

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  88. As a startup refugee, I whole heartedly agree with this article.

    As a person 13 years into their career I would say that it’s better to work your way up in a place like Google, Amazon, Facebook, Twitter, Cisco or some other big respected tech company first, that is, unless you have the idea and opportunity to found your own company. Stay there until you get stuck and no longer progress. if you wait until later in your career to move into one of these big companies it gets harder – for instance most of their interview processes reward fresh computer science academic knowledge rather than professional engineering experience – your in a perfect place to win this game right at graduation (and if you don’t get in – get a masters degree right away and try again).

    Ironically, as a software engineer you’ll likely not be on the fast track at the startup and after a number of years running on that treadmill you’ll leave with few feathers in your cap with a company that may soon me nonexistent on your resume. By contrast, getting a google, cisco, facebook, twitter, amazon etc on your resume early on will put that on your resume for ever and give you more leverage when you do find the startup you want to join. You’ll likely be offered the better title and autonomy (and the better compensation) and maybe even founder-respect without the extensive risk that an early engineer assumes.

  89. Couldn’t have found a better post on this topic! Recently quit my start-up which I worked for 4 years. I was very proud of my “varied experience” and leadership position and friendly founder who made us believe that we’ll be the next big thing! Almost all points resonates with me… After coming out of the company I have realised that I have hardly learnt anything in-depth, so getting a new job has been extremely difficult.
    But I have seen some difficult times in the company, so I guess I will sail through this situation.

    Thanks for the post.

    • You’ve probably learned more than you think, and you can market the experience pretty well if you step back and look at what you have accomplished. No one learns anything in-depth in paid work these days. You’re not worse off than the competition.

      I don’t mean to say that people don’t learn anything in startups, but only that they can learn as much in a traditional job. You rarely learn much from the actual work itself (because if you’re in your early or mid-20s, you’re probably not senior enough to get the interesting stuff) but you can glean a lot of knowledge from the people around you and the books on their desks (which they never actually have time to read).

      Right now, I’m not at a startup. I work 9-to-5 and that leaves ~2 hours per day to learn about machine learning. That is, at least right now, of more use to me than whatever I’d learn building another CRUD app.

      Getting to build from scratch is great. Now that is a learning experience. But coming in as Employee #35 means that you’re going to be implementing other peoples’ ideas anyway; might as well, in that case, get a job at a more established company and have real health insurance.

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  95. Hi Michael, my name is Ricardo and I’m a developer wasting my time in a crappy startup job. I believe your post opened many eyes, and I would like to keep it doing its best purpose: I would like to ask your permission to translate your post into brazilian (portuguese).
    I promise to give you all the credits, keep a link to this page and send you the translated post when finished :)
    So, what do you say?

  96. Nicely put.

    I’ve always urged entrepreneurs and startup employees to get paid well, with options and benefits being paid out on top of a excellent salary. Venture capital is a big institutional business, and it’s absurd for startup personnel to subsidize VCs.

    I’ve also happily re-blogged your excellent post, Michael.

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  98. By far the best article I’ve ever read on start ups. Your article will save a lot of good people a lot of grief and disrespect. Thank you so much for being a highly respectable fellow human being and in sharing your exceptional ability at communicating.

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  102. Incredible post. Filled a lot of gaps in my experience.

    Been observing a lot of these trends from within one of the now bigger social media companies.

    I have the least experience with the VC and early-stage startup dynamics, but the rest is spot on.

  103. Michael, after having slogged my balls off for four years at a startup, taking home a salary – 40% below industry standards, putting up with hurtful taunts/barbs from people (It doesn’t help that every CEO thinks he can be an asshole like Steve Jobs. Doesn’t help also that you live in a service economy where shitheads earn more than you!), and having been reneged my rightful stake in the company on very dubious grounds, I know what you’re talking about. Every word of it! I only wish I had known this early enough. I had stopped feeling hurt, but this just brought it all back. I hope enough people see this.. I’m doing my bit to promote the post.

    Cheers, mate!

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  106. I can’t recall the last time I worked at a “low risk” job. I’m lucky if jobs last more than 3 years and that’s with “well established” companies. Takeaway is that there is NO avoiding instabillity and risk as an engineer. Just go with the job you like most and damn the risk.

  107. Nice article. Just ran into this as I’m being offered 1% of a pre-series A company with seed funding valuing them at $5 mil. and below standard salary. To top it off, I’m old with house and family.

  108. Excellent read, I’ve been in a start up on the UK now for about 6 months. This has helped me to understand all of the issues with working for a start up

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  110. I’ve worked at 4 different early-stage Silicon Valley startups with 1 big exit (current one is first one as founder) and unlike all the other fawning comments on this post I’m going to have to disagree. You make some good points but you paint with too broad a brush.

    Every startup I’ve worked at has respected engineers immensely. One of them was especially lavish with Engineering salaries while the other 2 were not.

    Instead of a giant rant about the perils of VCs the engineers reading this post would be better served with simpler advice: pick companies solving real problems for real customers, ensure that there’s an actual business model (or at least very-fast-growing userbase but only accept with a pinch of salt), look for an executive team with an Engineering bent both via resume and conversation, make sure the company has a culture of learning and iterating before you join (as in, ask pointed questions about how they use customer feedback, what books the employees read when they get there), negotiate the best contract you can get and walk away if you can’t get a good deal and finally – jump right in.

    There are certainly lots of crappy startups out there with lots of crappy bobblehead managers but instead of really helping people differentiate good from bad this post takes a bunch of potshots and pretends to know more than it does.

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  117. Actually, that Google position is much more likely to land you in a founder position at your next job. Speaking from experience; as soon as Google was on my resume, the pitching for positions on founding teams began (that doesn’t necessarily mean that the startups were worth working for, but the options were there).

  118. I usually do not comment, but after reading through a bunch of comments on this page Dont waste your time in crappy startup jobs.
    | Michael O. Church. I do have 2 questions for you if you don’t mind. Could it be just me or does it appear like a few of the comments appear like they are left by brain dead folks? :-P And, if you are writing at additional online sites, I would like to keep up with everything new you have to post. Could you make a list of all of your public sites like your Facebook page, twitter feed, or linkedin profile?

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  121. I absolutely agree whatever explained above. Same thing happened with me .For 1 year ,
    I did lot of grunt work , did bug fixing delivered code so fast that even appreciated for my work speed. At appraisal time i was told that i did not take any initiative in new technology and i delivered buggy code. Company is hiring at very high package but we old employees are getting very minimal rise.
    Its time to move out.
    I am feeling cheated and exploited.

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  123. Thanks for the information. As a cs student in his last year, the start up mantra is overwhelming. Seems like everyone’s chanting the same mantra. This information is a great reference!

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  125. I worked in a startup once. I would never again for just one reason:
    I was making about 10 dollars per hour because of unpaid overtime, unpaid nights and unpaid weekends work.

    Went to a big financial company. Startup guys screwed me when I was leaving because a lot was promised but not everything was on paper. But I was happy to just escape. Now getting paid 90 dollars per hour. Get respect, 9-5 work, a set of projects to choose from, normal teammates (who have no idea what NODE.JS is and why “fail fast” is so cool – thank god) and enjoy it like I never did before.

    There are plenty of well paid interesting work around for programmers, no need to go to crappy “startup” companies that will use you as a toilet paper. Banks, telcos, insurance companies pay well, give benefits, bonuses and normal human lifestyle. Don’t make mistake.

  126. Spot on! Most people are rushing to startup jobs with no brains. Is writing css or html or python to run a web site revolutionary? Its always the same thing and almost all of the work involves only web or mobile development. You rather try your hand at being an author of a book or starting a small retail shop than being a startup employee. I’d rather not waste my decade of 20s on a crap job and regret it later when I’m 30 or even 40.

    To me, I’d have more ‘impact’ (whatever that means) if I had the skills to build houses than build web pages. I would take startup oppertunities as a good learning source and nothing more.

  127. I am afraid I will have to disagree with all this negativity. The author seems to be too bitter and thankless. A job is a job. First it pays the bills. Second, you may actually enjoy what you are doing. Third, you may actually enrich your skills and experience, i.e. grow as a professional, which should open more doors for you. The salary should be treated the same way, no matter the size of the company. You should be paid a fair salary based on your skills and going rates. In a startup you may be paid on the lower side of the scale but you get other rewards, such as EXPERIENCE. I won’t even go to any additional financial rewards. The author should keep in mind that the founders are risking a lot, including their own health for making sure the company has money to pay YOUR paycheck every month. Many of them are putting their own money in including money from credit cards, mortgages, from friends, from family. They are the ones who quit their job to found the startup. They are the ones who bring the money in. Very often, they are the ones who had the idea along with the first prototype that convinced the investors to put their money in. You want to do the same? Why don’t you give it a try? You will then realize why 9/10 startups fail, why the founders lose their sleep, their health, their wives and 2-5 years of their life. Wake up! You can’t expect to get rich without taking any risks. Simply working for a startup doesn’t make you a “founder”. It makes you an employee. If you are a good one, you will advance with the company. If you suck, you will be sucked. If you don’t like the salary, do not accept the job. Startups can be really exciting but apparently they are not for you. I am not going to list the advantages because you have already made up your mind. All I will say is that working in a startup can be an enlightening / enriching experience. If you want to be a shareholder, put your money in. Do not confuse employment with ownership or entitlement. Good luck.

    • I think the author originally intended this article to be a caution for star-eyed engineers / young graduates willing to sacrifice too much for the “privilege” of startup life. Personally, I think Michael succeeded in highlighting the major risks of startups, but I ultimately agree with your comment, the last line in particular. Startups are simply high-risk, high-reward employment, not a contractual guarantee of wealth or success.

      If you’re a talented worker and choose a good startup employer (emphasis on “good”), the payoff will generally be much higher than a corporate job, both in term of financial reward and career development (I’m enjoying both right now). Even if the startup doesn’t play out as you’d hoped, there’s a good chance you’ll have work experience far above what you’d find in an entry-level job elsewhere.

      That said, there’s a lot of truth to the cautions presented here – be careful where you choose to work. Life isn’t all sunshine and rainbows in the land of startups. I have worked in the seamy underbelly of startups (i.e., bad ones), I have experienced startup failure, and I can say that sometimes all there is to learn is that you had no idea what you were getting into.

      Kudos to Michael Church for putting this together. To any talented young grads reading this, don’t be afraid to find and join the right young company, but be sure to look before you leap!

    • But engineers are putting the money in. Their time, their skills, their extremely hard won expertise. In return, if they’re naive and trusting – which is what engineers are inadvertently trained to be, since engineering necessarily requires groups of engineers to collaborate – then they get ripped off by sociopathic ‘founders’, whose actual risks aren’t any greater than the engineer’s, who are borrowing money from other people rather than risking their own capital, and whose skills are significantly less.

      Ideas? Ideas are cheap. Any good engineer has 5 new product ideas before breakfast, and can eliminate four of them on practicality grounds before lunch – which is the critical skill missing from the founders in 8 out of the 10 startups that fail. The skill to implement ideas is 5-10 years of hard training and practice.

      Which the current silicon valley startup structure, as Michael documents here, is essentially set up as a way for people who didn’t have the ability and work effect to acquire to steal from those who did.

    • World traveler, frankly you are the one who is bitter and negative – not the blogger. You offer no counter arguments to the blogger’s thesis but spend most of your post whining about how hard things are for founders This is completely irrelevant bitter whining. The article is not written for founders – it’s written for young people starting a career and trying to decide what career path is best. The blogger merely argues (correctly in my opinion) that much of the information and many of arguments young people hear today in favor of joining startups are not completely accurate. If a job applicant uses a realistic and accurate assessment of pay / experience / work-life balance / excitement / risk /etc. I think most people in 2015 (or 2012 when the blog was written) would come to the conclusion that joining a startup is usually not the best job opportunity available for a highly talented young tech professional.

      Of course conditions could change – during 1995-2000 joining a startup was usually a good decision for most young employees so perhaps conditions will return someday.

  128. This is an interesting article. I recently worked at an early stage technology company. I was an employee that was responsible for selling a software product into a new marketplace. I was dedicated and managed to set-up a number of solid meetings with decision makers in the space. I wanted to see the company, team and product succeed. However, after attending meeting after meeting no one was buying. I knew that it wasn’t my ability to get a meeting and sell new products since I’ve done it with other companies in the past.
    I realized that there was a concrete problem with the product. The product was a LEMON (which was sucking all the juice out of me). I would tell my boss that clients are looking for a different type of product but he would always say “that’s not how the product works.” After being with the company for over a year, we mutually decided to part ways. When I look back and my experience, I really regret joining the start-up with a product that wasn’t proven in the marketplace. If anyone is looking to join a start-up review and test out the product.

  129. This is the most longest post that I have ever read. It took me a lot of time to get to the bottom. To the point and insanely useful.

  130. I saved this article a year ago, read it 3 times, and still view it as one of the most important pieces of career advice for young people I’ve seen so far. It also ascends our time — it is true for 1999 and probably in the future as well.

  131. It’s a long but useful post. However you left out the effect of “terms”. You should also know what happens if the company is sold? Do you get acceleration or nothing for your equity? (I founded a startup where the employees had no acceleration on acquisition. Why not? Because I didn’t know to put that in. We got bought (yeah) and the purchaser gave the founders full acceleration. We, being VERY kind, gave up some ownership to accelerate our employees — something that will almost never happen). Also, right for early exercise? Better tax treatment. Are you getting shares right before a dilutive round? Are they quoting you % from pre or post money?

  132. As a former employee of a startup, I feel like this article is right in so many aspects.

    The money-side, while true, might not be the no.1 thing a graduate might look for (and he shouldn’t). Let’s say that in the first 4-5 years of your career the most important thing is to acquire knowledge.

    What about acquiring knowledge at a startup? From my own experience it’s quite difficult to learn in a hectic 10-hour-a-day schedule where deadlines are very very tight. At startups you’re comming as an expert in a niche and work with pretty much the same tools for many years. No workshops, no conferences, nothing more than a huge backlog. The long hours mess with your personal life and when you don’t put overtime the management tries guide you towards that.

    The thing with startups from a learning perspective is that you should be confortable working on one project for years with pretty much the same technologies. Surely there are exceptions to this but what I said is based on my personal experience.

    My advice: Between a startup job and a well estiblished company job, someone should strive towards being respected as a human, not used. And that, unfortunately, is not something startups care much about.

  133. Excellent article thank you. I as lucky enough to startup at Stratacom in ’95. I was an excellent engineer. But I did so well in money terms because of the tech bubble and watered down stock which I sold early and made a mint. It was pure luck during a time of wild speculation brought on by real genuine order of magnitude innovation, which was real, yet only lasted till around 99 in terms of its ability to increase the productive power of the economy. After that it was melt down time back to real value.

    The startup worked then because it was based on genuine innovative power. That condition is nowhere to be seen today, the Apple and Google keep marketing it as if it does. The question for you is, what are you engineers going to do about it? Are you going to sit around awaiting for someone to “create jobs” for you. Or are you going to put you code where your mouth is and be bold? And do something truly radical as happened in the early 90’s.

    To say Google philosophy is better is only to say that Google’s monopoly position, locking out the market from real innovation, raising prices artificially from free market clearing price, means they can pay higher wages, relative to those who have no monopoly. Google are protected by the state through IP rights for which they pay nothing. Google actually “needs help” to maintain their enterprise. Hardly an innovator. (notice how Google keeps cranking out the same kind of thing with a different name, no order of change in innovation is made by them any more). The only thing Google did was the search algorithm, which is their key monopoly. The rest is just junk or drugs for wages slaves masquerading as economically useful.

    The moral of the Google story is the same as it was for Cisco one complete business cycle ago: do not work for innovators, get a job at a monopoly corporation, and you will never struggle.

  134. There is an overwhelming amount of information and sentiment biased towards the potential success of a startup. Even when the discussion touches on the 75% likelihood of failure, it tends to be biased to those who stick around for good and bad reasons.

    This post touches on the rarely discussed side…what if you do see issues with the startup that places it in the 75% side of the failure rate, what symptoms are there, and what are the dynamics that got it there. Using large stats to say that startup create jobs and other holistic reasoning as to why someone ought to give a startup a try, undermines the issues that complicates an individual’s issues of being trapped in a non-founder, non-inverstor side of a startup.

    Sure everyone in this readership may want to give it a shot, as did I, but be aware there are lots of individuals who tried and got trapped in the vortex. Some discussions on how to move on, and the dynamics at play in this article is really helpful.

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  143. I disagree. Companies when they get large take the beer away, flex on the idea of delivering the best possible product, and sorta forget why they started or why they existed originally. There’s no exclusivity to a job with too many people and it hurts the atmosphere. Not to mention the sociopaths running politics, the firing people as pawns on a chess board for business strategy and always hoping to drive out those with a unique perspective or opinion on things that sits outside of “groupthink.”

    • What you say surely happens. However, the post touches on the side of things that is rarely talked about.

      I’d like to state my experience. I got enrolled in a small, early stage startup where there were young and inexperienced guys. Because the manager (who was also a founder) did many things at the same time, we were left to manage ourselves.This was a very sad experience. There were some guys that were hired before that were constantly underestimating the work that had to be done. They, too, never got it done in the time they said they would. We basically worked extremely long hours and the work being delivered was full of defects and poor decision making. Because we had no definition of done we ended up producing quite different results with no emphasis being put on quality. If you moved the task to done you were ok no matter the bugs.

      In the end I got into trouble. We were estimating tasks based on business value not technical complexity and I happen to get 3 features in a row that were poorly estimated. Needless to say that I was inexperienced in managing teams so I didn’t push enough for a change (although I presented ideas for improvement that weren’t considered).

      The bad streak ended with me being fired. It left scars that won’t heal. I try not to be biased against startups because I’m sure there are great small companies out there. However, I felt that lack of competence was teeming more than anywhere at the startup I worked.

      No that is what I call the other side of a romanticized story.

      • Just to make things clear: the work was usually underestimated. However, from time to time there were some new things that posed even greater problems so what was expected compared to what was done was off by ~300%. Anyone could get to work on something like that and from time to time anyone did. But when that happened 3 times in a row it raised red flags on my side without the context being considered. It was a complicated environment where goals and objectives were left at anyone’s guess.

  144. It’s really a great and useful piece of information. I’m satisfied that you just shared this useful information with us.
    Please keep us up to date like this. Thanks for sharing.

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  149. The writer of this article has forgotten that all so called “Multi Nationals” were once startups. Startup brings the new things to the world, not multinationals in most cases. Whoever wrote this has never invented anything and surely didn’t risk anything. Shame on my self for reading this article which is written to promote “stay inside box. Never go outside.”

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  152. Article is absolutely correct – at least in semiconductor industry (my field).

    It is much, much, much harder for a company to get acquired now than it was in 1995-2000. Pre dot-com crash any company that had zero revenue but a barely working chip in an emerging standard (GSM, Bluetooth, Wi-Fi) etc could get snatched up for an absurdlly overvalued price ($100M +).

    Nowadays small semiconductor companies with proven revenue growth and actual products have a hard time getting acquired for more than $30M.

    Result – as an employee unless you are a founder it is not worth it to work for a startup in semiconductors.

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  157. “People who really want to become startup founders are better off working in finance (with an aim at venture capital) or pursuing MBA programs than taking subordinate positions at startups.”

    Rubbish. More and more people getting into VC come without a finance background. Many are now former product people, engineers, ad-executives, exceptionally strong research analysts or former founders who failed but made v good progress etc.

    MBAs should just focus on going back into another traditional corporate career not startups. So this is actually terrible honestly.

  158. Michael,

    Genius article here (and great writing to boot). I’ve just discovered your blog and I have to say it’s incredibly insightful. Whether the reader agrees with your premise or not, it certainly provides lots of food for thought.

  159. Worked in a start up for 5 years as one of the first employees.

    5 years later;

    – office politics means they are trying to ruin my career, written warnings

    – they have not invested in my career development. Outside of not having a pay rise, not sending me to professional courses. I now have go pay for this myself.

    – they hide behind a lack of money, but have the money to expand the team from 3 to 7

    – the experience is not strong enough, due to the unstructured nature of a start up

    – no equity stake

    – blame culture. If you are a junior at something – they will blame you for not getting it.

    I am thinking about resigning now. Go corporate anyone reading this.

  160. The article is spot on. I was the first employee and engineer and got canned as soon as we raised series A and the founders/investors could now get a new head of engineering for 1/3 of my price. To those that might think “there had to be some other reason” – possibly, but I was fired out of the blue (after a raise, mind you), with no explanation, right before my first vacation, with a barely passable severance, and no offer to “save face” (eg let me resign). Never mind that I was the sole developer for 6 months and built all the technology the company boasted on the most venerable news outlets. Thus, at the very least, the company had an ethical obligation to explain and thank me for the job well done. Obligation? Ha! Right… Not going to put any names here (as I am a shareholder and obviously want the company to succeed), but both the founders and all investors (especially the investors) are the crème de la crème of Silicon Valley.

    • A business has ethical obligations to customers, employees, investors, and potential buyers. From what I’ve seen some startup founders take one or 2 of those obligations seriously – I’ve never seen a startup founder who takes all those obligations seriously. There is a long litany of rationalizations founders use to justify skirting ethical obligations.

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  162. This is literally the best article I’ve ever read about working at startups. I’ve learned a’lot and I’m look at my fourth startup job. Reading this put many things into perspective. I really liked the part about “Equity is a risky asset”. You don’t usually learn this until it’s too late! :)

    Great job!

  163. This is great stuff! Thank you
    I worked at a part time start up for a bit, I expected to to learn and grow connections so that I could start up my own business one day. It was horrible, they didn’t even pay me! All I did was solder stuff and they intentionally hid their meetings from the engineers, even though they knew I requested as a condition. Lastly, the amounth they were “paying” was about 50$ an hour if they were very successful in 10 years. What a joke, I could work for 15$ an hour, invest it and make more than that. I quit after 3 weeks. I decided to simply do it and figure it out as I go, can’t be that bad.

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  166. Can’t agree with this article more. Good stuff on figuring out how much more equity you need to accept below rate pay.

    I wrote an updated article in 2015 about what’s going on nowadays with real income and equity stats. People are underpaid.


  167. This is a great article and highlights a lot of the less-talked-about cons of working at a startup. I wish I would have read this 3 years ago.

    From my own personal and very relatable experience of working at a startup as an engineer I would say this article is pretty spot on. I took a job at a startup out of desperation more than anything else (very little experience). I even left for six months only to come back because I felt like a mere cog in a huge company machine at the non-startup.

    If there was one piece of advice I could offer to anyone other engineers reading this blog post is that look at a startup as a temporary position that you could get rare design experience reserved for engineers that have been at company’s for years. Myself as an automation engineer working at a medical instrument startup, I’ve had the opportunity to do things I know I would never even have been considered for in a large corporation.

    I was blinded by the opportunity to change the world and have stayed with the startup for several years now. What Michael had written in this post about tight deadlines and legacy systems is so painfully true that I’m kicking myself for not realizing it earlier. Hopefully I haven’t de-railed my career too much by staying at this startup for so long.

    My advice: proceed with caution. Thanks for the awesome post Michael!

  168. While I have no direct experience in start-ups, this post rings very true to me. Maybe it should be emphasis also that a work environment with only super ambitious 20-something is far from the best one. I have been working in such environments in consulting companies, and they are more aggressive, and in my opinion, less smart, than more balanced places with a few “old and wise” guys and ladies.

    However, I think this does not mean that the “big companies” should be idealized either. I have seen a lot of middle management politics and absurd organizations that can stuck you for years. In my experience, at least in Europe, spending half of one’s time dealing with those problems is typical.

    Also, many small companies, even recent ones, are different from VC-financed consumer internet start-ups. I know of small young software companies, many of them bootstrapped, who sell products or services to businesses, and who seem quite different, and in my opinion, more balanced.

    I may have more to say in a few years, as I am now pondering developing some personal research into a bootstrapped venture in the next months.

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