Don’t work at a startup that will overpay you.
You can do better, or they can.
A recruiter-friend of Scoop passed me a resume today. We’re looking for a mid-level Android engineer to continue growing our engineering team. The resume (okay, LinkedIn profile) was really solid. Master’s degree from a reputable foreign university. Just under four years of Android experience at a top Bay Area tech firm.
That’s when it got interesting. Here’s the rest of the conversation:
Recruiter: He’s looking for 250k comp including bonus.
Me: lol
Me: like, 250k cash comp? or 250k including equity value?
Recruiter: cash comp :)
Me: No reasonable startup will pay him that.
What’s a “reasonable startup”?
Let’s start with this question: what’s the high-level goal of a startup, roughly?
To create a profitable business that solves a real-world problem and/or unmet customer need. If a startup wants to be successfully, than it logically should make decisions that help is accomplish that goal.
Next, let’s define the word “reasonable”:
(1) having sound judgment; fair and sensible.
(2) as much as is appropriate or fair; moderate.
Put the two together and a “reasonable startup” should be a startup that will use sound judgment + take the appropriate actions that are most likely to lead to its success.
Is paying an engineer with four years of experience $250,000/year a reasonable decision? No.
Why not?
At this point you might say “isn’t this just a case of an engineer who misunderstands their market value?” Maybe, but it’s also possible companies (larger ones) would pay this much. So theoretically it could be market.
You might also say, “a great engineer can change a company and is worth it to a startup!” There’s merit here, yes. But, doesn’t every engineering team want to only hire great engineers? No one goes out of their way to hire bad engineers. So by this logic, you can rationalize paying every engineer huge sums because they might transform the company.
So this isn’t about market value or upside. The actual problem here is how the engineer thinks about joining a startup. Sure, they may not know market trends, but I’d bet they’re good enough at simple math.
Let’s say we ONLY hire great engineers and pay them $250k (all-in). Scoop is on record as having raised just over $5M. At $250k, we could hire ~20 engineers and last one year.
Of course, most startups want 18–24 months of runway. And we have two founders. And a couple sales people. And marketing and support and ops. And while you might be creating revenue, in Seed/Series A land, you’re very unlikely to be profitable yet.
You see where I’m going. There’s no planet where paying an engineer $250k makes any sense.*
*Only exception being C-level/executive-level leadership as your team grows, but for the vast majority of early-stage startups this is not relevant yet. And as my friend Danny would say, then they’re a *former* engineer!
Ask yourself: why do you really want to join a startup?
So, now we’re at the core of the problem. It’s not about a bad assessment of market value. This engineer isn’t really considering why he wants to join a startup. What should he want the startup he joins to say to this compensation expectation?
He should not join a startup willing to overpay him like this. It’s a signal of bad team management and bad cash management. Not to mention: how will you motivate this employee going forward? How do you stop them from going to another company who decides they can afford $300k? The chance of this person staying >2 years is very low.
My advice: before deciding you want to “join a startup” be realistic about what you really want in your career.
If you want to make a lot of cash, work at a big company. Stay at Google or Facebook. They are amazing places to be. You’ll have to accept and deal with the trade-offs on team size, career opportunity, and bureaucracy. But you’ll get your cash without putting the company at risk.
If you really think you want to join a startup, start thinking like an owner. If you think like an owner, you’d never want someone to pay you this much. You’d care deeply about team motivation and alignment. You’d think about cash management and runway. You’d want someone to take a healthy equity stake and have a long-term committment to the company’s success.
And if you’re thinking of joining a startup, you probably are eager to have one or more of the following: a mission that inspires you, more input and control, a bigger impact, new problems, chances to manage people, etc.
Thinking like an owner will also help you evaluate a company’s approach to providing these benefits and development opportunities.
To begin with, the startup should believe that making good on providing these personal/professional benefits is more important than paying too much.
One last thing: not overpaying != not well-paying
Just to be clear: Scoop pays well. My co-founder Rob and I made a decision that we wanted to be in the upper percentages of market compensation — both for equity and salary. We participated in a massive market study of startups to ensure we aligned appropriately with what the market looks like for employees at startups of our size/stage/financing.
My point is: my reaction does not mean we’re cheap. We do our best to offer exciting compensation opportunities in a reasonable manner. Everyone at Scoop knows and believes that if the company is successful, we will all benefit in more ways than we can count. They expect reasonable. In fact, they demand reasonable.
And so should candidates looking to work here, or at any startup.
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Questions/comments? Would love to hear them.
Jon Sadow is the Co-Founder and Chief Product Officer at Scoop, the fully-automated carpooling solution for your daily commute. Prior to founding Scoop, Jon spent 5 years at Google in both Product Management and Business Development. Jon is a graduate of the George Washington University in Washington DC, and now lives in San Francisco with his wife, Michelle, and their dog — and Scoop mascot — Kugel.
