Do newly funded startups offer salaries which are comparable to market rate?
There was some talk in the media about how it is hard to find talent. There were some comments that actually the real problem is that salaries offered by new startups are way under market, thus a lot of talented engineers rather stay at or go to bigger companies such as Oracle, Intel, Informatica, etc.
Is that true? Does anybody have inside information on what salary is offered by startups compared to salary in established companies?
4 Answers
Startups are risky. They attract a certain kind of talent - those that aren't risk-averse and are happy to take a bit of a gamble. The job is less secure than with an established company (not that any job is secure these days - it's all relative), and probably pays less as well.
Many startups will offset the reduced pay by offering share-options. Not everyone understands how much of an upside there is to receiving share-options as an early employee of a company. If the company succeeds and makes it to flotation/exit the shares will be worth a lot of money. Far more money than the difference in pay in the early years by several orders of magnitude. It's a risk/reward thing.
To answer your question yes, salaries are often under market rates in a startup company. Often by up to 20-30% lower. But overlooked are the share incentive plans - which years later will make the employee wish he'd taken even more of a pay cut in exchange for share options :) ....
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But look the recent story from Skype. And that story is not so uncommon: it happens to two people I know. In both cases, common stocks owners (early employees) got screwed. – User10483 13 years ago
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The vast majority of people employed at startups that may benefit from options etc are not working at Skype/Facebook/Zynga/etc. When something happens in a high-profile startup-success it doesn't mean that's the norm. The practices alleged against Skype and their employee terminations reflect the nature of the companies in question which will always vary depending on the morality of the leadership. – Edralph 13 years ago
No. No one should become an employee of a start-up because they are seeking a market comparable salary. If that is a prerequisite for yourself, don't go into working with start-ups. If that is a motivating factor of somone you are considering hiring -- then there isn't a fit.
Just saying . . .
Yes, it is true, and to a large degree, for the employees startups are snake oil. You won't get rich, and chances are you loose out on the options (most startups never strike it). Depending on HOW good you are, the salary startups offer is a joke, especially compared to the financial industry - not even Intel etc. My last startup salary offer was about 25% of what I was offered last week by an established company.
The share plan is, as I said, not worth a dime. It is a big lottery. The "snake oil" startups sell but the statistics really don't say the employees get rich. Ok, SOME do, but as an employee you don't have 20 chances to strike rich once.
Being an entrepreneur has no salary guarantees, so working for entrepreneurs is a more volatile proposition. I'm not sure if the poster has an interest in going to work for an entrepreneur, but if he/she does, I'd suggest looking at the opportunity and the ability to solve problems and do work that's a lot more dynamic than what's available at a more regimented, mature company.
