Self Development January 22, 2020

Early stage startup employee vs Large company employee with project on the side

Sterling729

Recently, I've been given two offers. One is a large company that pays 90k/year for 6 months, with option to be made as regular employee with higher pay. The other is an early stage startup with the CTO and his dad whose started several businesses in the past. It pays 65k plus 5% equity.

I don't know what the better route is. With the large company, I can make a personal project on the side of my own. But with the startup, even if it fails, I can potentially jump onto another one (and hope for that nice payout later hehe). The CTO's dad is very well connected with businesses who are interested in the current MVP.

  1. 4

    If the startup CEO is Peter Thiel, choose that. Otherwise take the other option.

  2. 2

    There are many ways to look at this:

    • One common is to say the younger and less financially dependent you are the more you would rather incline to take a higher risk higher return, ie. work for equity.

    • If you do have a business and investing mindset and want a rational, financial way to look at this, think of you as investing money into that company, would you want to invest in it? the offer is to put 25k a year (for how many years? 2/4?) to get 5% of the company, would you invest that money in it? would you like to research the company and people more to see if it's a good investment, like a due diligence for a private investment..

    • If you are entrepreneurship inclined and thing you might start your own startup some day, would this position and these people provide a good learning experience for you so you can do better in that next personal move of yours? "The most important thing to ask on the job is now what I'm getting, but what I'm becoming"

    • Is that difference in money after taxes and such, measurable to you? would it affect your lifestyle long terms? not like yea it's more money for retirement or I can take that vacation... would seed money for your own project matter? say you just work that 6 months and then go do something on your own, would you money make it count?... if you'r not sure, it probably doesn't.

    • If this is an early position for you, did you think about your next ones? would you like to work more in corporate or more in smaller companies? while amount of reward changes to each side based on location and time, the 1st tends to have calmer life where the 2nd tends to be more meaningful but also more time and energy consuming... that's another reason you might favour the 2nd early in life and the 1st later... both sides would judge you working for the other side a bit on your CV... non blocker, but important to note IMHO.

  3. 1

    startups are a better alternatives if

    • they got investment from a reputable VC

    • or profitable

    • or founder has exits. (one exist does not qualify since it might be luck)

    • you know they might exit in 2-5 years. or else your 5% equity will never materialize.

    your startup offer fails in all these.

  4. 1

    Thanks for the overwhelming responses everyone. I guess with the larger company, I can still indie hack my personal project.

    1. 2

      Just make sure to read and abide with fine print of your employment agreement about moonlighting. Do not talk about it to your teammates, big corps are about politics and finding negatives in others to pull down(more than people pushing themselves up :) .

  5. 1

    Are you the first employee? 5% is too low for that. Are you employee #5-10? 65k is too low pay. Value equity at what it's currently worth: $0. Get a real salary from them, and accept equity on top as a bonus. Most equity is never worth anything.

    The startup deal is awful: You'll be at the whims of a family managed business, and the way they over-estimate the worth of their own business they're either duping you in order to pay you less, or are clueless. Possibly both. Neither situation is worthwhile.

    Supposing the startup makes it to IPO and you get to cash out your equity, how many additional investment rounds will they have gone through? Early employees get screwed over every day by having what they thought was 5% equity watered down in subsequent fundraising rounds, where the big investors ensure they have preferential treatment.

    Even supposing the equity is worth anything one day, you're weakening your overall wealth by reducing the diversity of your portfolio. You're holding equity in the same entity that pays your salary. What happens if it goes under? You lose your income AND equity. Take the equivalent income and invest it in something completely unrelated to the startup, ideally unrelated to the tech sector.

  6. 1

    What is your long term goal?

    Five years down the line, do you want to be working for someone else (and probably making way more money than you need) or working for yourself (and make enough to live comfortably)?

    If the latter, then I recommend choosing the option which lets you work as much as possible on your side projects.

  7. 1

    Startup all the way. Golden handcuffs should be off of the table. There is nothing like the feeling of being part of a team that is creating. In my opinion comparing being a creator at a large company and at a startup is the same as comparing karaoke to a live musical performance of a song you wrote; one is beyond gratifying, the other, not so much.

  8. 1

    Do you have responsibilities (kids etc)? Then take the secure job and build on the side.

    Are you young with no ties? Then startup all the way.

  9. 1

    You will get a lot more interesting experience at an early stage startup, especially if you join wanting to learn. If you're early in your career, I'd go for the startup.

  10. 1

    It's really a risk/reward type thing, the startup has more potential for long term gains but 5% of 0 is still 0.

    How likely is the startup to succeed and do you believe in what they're doing. You'll be working more for less money, so without that potential payout at the end it's easy to pick; and you'll also certainly need some type of passion for the project to get through the early stages.

    25k difference isn't small change either. Can you live without it? Even if so, imagine how much better off you'd be in 10 years if you took that extra chunk and invested it.

    There's also the question of culture, where do you think you'll fit in better. Some people are happy to take a pay cut to work in a small company.

    Only you can answer these questions for yourself.

  11. 1

    It really depends on your goals. I imagine in a startup environment it'd be hard to do any indie hacking. I would also consider how much the company would need to be valued for the 5% equity to be a factor.

    The benefits of the startup is that you can network with a lot more people that are doing interesting things. Opportunity may arise. At a large company, you'll find yourself mostly alone in your indie hacking ambitions, but you'll be able to easily do your indie hacking.

    Connections are a big determinant of success. In order for those startup connections to pay out though, you would need to push harder to do indie hacking and start-up work. Otherwise, well, it may be that you will never cash out on those connections.

    1. 1

      Well, for a startup I'd be willing to replace my indie hacking with the job if the equity won't be too devalued...

      1. 1

        Seriously... don't even think about the equity. Right now it means nothing and is worth nothing. By the time it's ever relevant to your life the whole landscape could have changed regards the equity. When investors come in you WILL be diluted for example.

        Take the 5% equity and put it to the back of your mind. You need to think about the here and now - and the next few years.