A software engineer friend was wondering what to do about his career. He’s at a startup company that has been moderately successful (funds raise, product launched, first customers paying) but not successful enough to justify hiring a team. So he’s working by himself. I suggested working for Google or Facebook: “They’ve already got the users so whatever you build will be significant. They’ve got ready-made teams of competent people for you to work with.” I told him about a senior programmer friend who gets up every morning in the Boston suburbs, dons his biking gear, and rides down to Kendall Square to the Google office, works on some interesting problems with competent peers, then clocks out at roughly 5 pm to bike home. “Every month they direct deposit a massive paycheck into his bank account.” We agreed that it was hard to beat that programmer’s lifestyle.
Startups are in the news constantly. It feels as though you can’t spit in the street without hitting a 21-year-old college dropout who is negotiating to sell his second company. But does the news stream reflect the average? “Obama’s Legacy: Trump and Bernie” (WSJ) is a boring “Obama should be criticized for delivering to Americans the centrally planned economy that they said they wanted” article, but it happens to include some relevant data:
According to the U.S. Bureau of Labor Statistics, the number of business establishments less than one year old rose steadily from 550,000 in 1997, peaked at about 650,000 in 2006, and then has gone straight down. The Kauffman Foundation’s 2015 entrepreneurship report puts startups in 2012 at just over 400,000.
The Brookings Institution in a 2014 report noted that since 2008 businesses closing annually have exceeded startups for the first time. Their yearly analysis dates to 1978.
For example, Kauffman’s report also notes that the rate of entrepreneurship among people age 20-34—who hire employees like themselves, new breadwinners—began dropping fast in 2011. The president said Tuesday that ObamaCare would help new-business formation. It is doing the opposite. Millennials, assumed to be the Obama base, have entered adulthood to endure a decade of slow growth.
Perhaps tech is an exception but it seems that overall Americans have gotten the message that it is best to be a W-2 employee of a larger enterprise. This makes sense when you think about the following:
- bigger companies have more access to corporate welfare, e.g., tax breaks handed out by states in exchange for locating facilities in particular places
- bigger companies pay a much lower tax rate because they can shift profits to divisions in countries other than the U.S., e.g., the U.K., Ireland, the Netherlands, Switzerland, or Singapore
- bigger companies can grow as long as there is growth anywhere in the world because they sell products all over the world
The downside of a Google or Facebook is that one can get stuck building a tiny irrelevant piece of something big. This seems particularly bad for a young person trying to build up a resume of accomplishments.
Readers: If you’ve been in a big company versus a startup recently, what can you say about the pluses and minuses?
I’m working for a startup, and it’s very challenging to assign a value to the equity they grant you (and I think they like it that way). After a year or two, I did some back-of-the-envelope calculations, and, even if my options are worth the full value attributed to the underlying shares from the last round of funding (I.E. their price to a savvy investor), I’d still need to be getting grants 4-10 times the size I am for the delta to equal a reasonable salary I could get elsewhere. Even if this startup experiences a “revenue event” that I can participate in, I fear I will have been better of with a steady, higher paying job. Note that talking about this stuff publicly is a great way to get tagged as “not a team player”. Senior management is generous with themselves when it comes to salary, cash bonuses, and continuing equity grants. Also, they sluice money into the sales team like it’s going out of style. Their theory is that the tech stuff can generally be moved somewhere cheaper.
Plus, at a startup of limited size, you will likely end up doing something that desperately needs to be done, versus something you really excel at. Does putting out the fire of the day for two years look good on a resume?
On the plus side, we have a ping-pong table.
Phil suggested working for Google or Facebook.
If it’s really that easy for a would-be employee to pick, and convince a specific large US employer to hire one, then surely it must be equally easy for that employer to fire one. Hence, unlike being the entire R&D team of a neer-do-well startup, that programmer would at best be a cog, not even a cogwheel, in/of a coding assembly plant.
Think Modern Times by Charlie Chaplin (1936).
I have worked at startups for the past 32 years. Some have had “revenue events” while others flamed out. The “revenue events” were modest affairs. Senior management always ate up the lion’s share of the profits by awarding themselves large bonuses and special stock grants. Still, it has been an interesting ride. I’ve learned a lot and gotten do do things I would never have been able to do at a large corporation. My colleagues have been an inspiring bunch of dreamers and doers. I’d do it again if I had another 30 years of working life ahead of me.
But definitely, do something else if you want to get rich.
How old is your friend? My general impression is that the Google/FB/Uber, etc companies of the world are extremely biased towards recent college grads from brand-name schools.
I’ve worked for a number of startups, and worked for large companies like Google and Microsoft. Both have their good and bad parts.
At big companies I had fat, steady paychecks, but equity in startups paid off far more.
In terms of satisfaction, the startups I’ve worked at were much more fun than the large companies where, though the problems being solved were engaging, the teams were less interesting and the stakes lower. The higher stakes in startups lend an exciting edge to everything.
In terms of resume building, both have been attractive to prospective employers.
Generally speaking, at large companies push for larger salaries and benefits because their ability and willingness to grant equity is limited; at startups, the opposite.
Practicing programmers get rusty on the stuff Google+FB like to quiz @interviews but I haven’t heard any credible accusation of age or degree-brand discrimination. See “google code jam” for the level of difficulty you’ll likely be hit with on a whiteboard. If you find practicing such algorithm-problems diverting (I used to) then there’s no reason you can’t outperform a recent CS grad.
I should say I don’t expect anyone to whiteboard-solve a medium “code jam” type problem. I’ve used such a problem to interview at my PhD-compsci-level shop and nobody gets it 100% in 1hr – what’s interesting is to see who’s even capable of making partial progress on a scaled back version of the problem; many freeze (“don’t worry about solving the whole thing – no one has yet” and some still seem unable to think under ego threat + time pressure + no outside help)
I’ve done both. The startups generally have significant payoff only if you’re at the kitchen table at day zero. The first one I was in ended well. We got acquired before taking any outside investors, so all the $$ went to us (and the IRS).
Despite all the hype you see on TechCrunch, most tech startups fail or fizzle (e.g., engineering team is aqui-hired). The lower stress level & extra benefits of a large corporate job are definitely welcome if you’re raising kids.
When I worked for start-ups I got screwed at “revenue event” time and then I realized everyone outside the top three execs got screwed too, including the seed-money and angel investors. The VC’s take all of the money. So there is no good reason to work for a startup– the effort required is high and the equity participation is illusory. In fact, equity bonuses from larger established firms pay much better!
A close family member has worked for ten years in upper mid-level level management, not in high-tech or a start-up, but in a large 150-year old insurance company, and he’s cashed in over $1 million in stock grants.
Based on what I’ve seen from my friends, working for a startup versus a large company is largely based on personal preference, rather than some objective choice based on the pros and cons of either choice.
Startups appeal more to those who like to gamble on long shots for a chance at a big win. They are willing to put up with the low likelihood of success, the uncertainty, the stress, and the long hours that a startup requires. Or more likely they don’t estimate the odds of success well, or how easy it is for other stakeholders to take all the cream off the deal, leaving little for the individual contributors. See other comments.
Those who like a steady paycheck, more specialization, and better benefits generally lean towards large companies.
So it depends on your friend, mostly.
In general, if you want to make a lot of money over your career with a high degree of certainty, I wouldn’t really recommend being a software developer. The odds are poor, compared to investment, medicine or law, for an individual contributor.
For a lot of people doing the same thing every day for years becomes very stressful regardless of hours. So the guy who bikes to Google everyday is a bit less envy worthy than you may realize. I’ve always started to go nuts at about the 3.5 year mark of any particular study or work arrangement.
The grass always looks greener on the other side. Jobs with convenient commutes & more stability have been more boring. Jobs with the worst commutes & higher risk have been more interesting. There are former coworkers at Goog who are now financially independent 20 hour work weekers, but still doing what was big 20 years ago while the world passed them by. The number of startups is decreasing because of the boom in acquisitions fueled by free credit, but crowdfunding has made quite a bit more than long ago & made them less obligated to report anything to the IRS. Practically the only way into a big company is to be acquired.
A big company is a better place to encounter women & start a family, however. Startups don’t have enough money for executive assistants, marketing departments, & operations managers, still the main female constituent in a large company.
@jack crossfile: executive assistants, marketing departments, & operations managers, still the main female constituent in a large company.
Don’t forget project managers (aka box tickers) and diversity managers. And the HR and Accounting Departments at my employer has been 100% female for twenty years.
I read your article, and I’m totally agree with you, in fact, the advantages of startups or small companies have over the big companies, however, just like a corporation or those you have mentioned “Google or Facebook” have disadvantages, startups also have a disadvantages, so, it’s depend on what sort of position at a small company compared with a position at a big company, what kind of benefits or experience he may get and the achievements he may accomplished, the skills of teamwork he may learn with his new team and of course the salary.
put that all in mind he will make it, and best wishes with his new career.
@jack crossfire: A big company is a better place to encounter women & start a family
Fraternizing with a female coworker could be hazardous to one’s job.
I only worked for large companies for the past 17 years but I have to say that even for this modest engineer the stock-based compensation has been way beyond expectations. Not enough to retire, but still very good.
The benefits have also been excellent. For example, I had a lot of vacation, a lot of work schedule flexibility and outstanding tolerance to telecommuting. I was recently laid off and the compensation package was extremely generous.
In terms of work, I had the pleasure to work with competent and with outstanding engineers and the projects have been really interesting so I don’t regret it one bit.
I’ve twice run a small startup and then run the same startup within a larger company, and the biggest difference is the stress level. While nothing about my work on or dedication to the business changed, doing the same thing as an employee feels completely different.
Whether this is good or bad depends on the situation and the person. For me, once I got used to the roller-coaster of running a startup, it was usually at least entertaining and sometimes fun. When it was fun, it was still all-consuming.
My experience is specific to being a founder, or really, to having responsibility for and a lot of influence on the success of the company (and often, defining what success is). The amount of effort one can invest and still see company-wide benefit is unbounded.
I think the stress level of being an salaried employee at a small startup is a lot closer to being a salaried employee at a large company. From the outside, the difference comes down to how comfortable someone is knowing they’ll need to work for their whole adult life (or finding other ways to not do so, like saving aggressively and investing thoughtfully), versus a startup’s small but non-zero chance of work freedom or retirement.
As other commenters have alluded to, the 2016 equivalent of http://tech.slashdot.org/story/00/04/27/107235/philip-greenspun-answers (“to get a high-paying job .. learn to be an Oracle DBA”) is learning to code and doing so for a large company. While Google and Facebook get all the attention, plenty of other larger companies pay a bit less, which is still a very healthy income.
I think there’s one reason to start a company: you want to (try to) create a product or solve a problem that no one else will.
I too get the impression that the startup spoils don’t go to the engineers anymore, if they ever really did. The profit-maximizing choice is to work for Big Tech for a steady and substantial salary with various perks, hopefully at a steadily ascending path.
I’m wondering about whether a startup sales position would make sense though? Psychologically more stressful and certainly not for all engineers, but “you eat what you kill” is good if you kill a lot.
Also, RFI: What’s it like on Wall Street these days?