Why Joining a Startup May Not Be a Good Idea Financially
And why startups are still amazing
You are a software engineer, probably making $500k a year already. Startups, from large to small, are trying to poach you to join them. Before you decide to make a move, I would like to help you understand the financial impact of joining a startup, so you can make an informed decision.
If you believe in the company and wish you may hit a Jackpot later, I can tell you - The likelihood of a startup having a successful exit is extremely low — around 10%. 90% of the time the employees may not see 1 dime of their equity. The likelihood for you as the Xth employee to have significant financial gain at a successful exit event is also extremely low.
Let me walk you through a real-life example and explain the numbers for you. Here is a screenshot of a job search on AngelList -
You may notice a trend here — the more percentage of the equity the job offers, the more discounted the salary is. It makes sense, right? The company offers more shares to you, and you will get less salary in return.
Does the 5% equity here mean I would own 5% of the company?
The answer is yes, momentarily.
