A recent TechCrunch article said:
“Mathematically, talented individuals are certainly better off financially going into a profession or working at a large tech company, where pay is higher and more secure.”
I used to believe the same. However, in the last a couple years after seeing real examples of people I knew in person, I have become not so sure about that. Those examples include (with made-up names and gender):
- Helen used to work in Microsoft. She joined a not-too-hot startup a couple years ago. The worth of her equity doubled from <$500K to nearly 1M in less than a year.
- Frank recently took an offer from a local startup in Seattle which offer more than 10% higher base salary than what he earns in Microsoft, let alone stock options.
- Bob recently told me that he has an offer from a near-IPO company in the Puget Sound area which offers him $200K base salary, which equals to the sum of base salary and annual bonus that he can get in Microsoft.
Financially, they all seem to be better off working for a startup than staying in Microsoft. So, is the TechCrunch article wrong (at least on the “higher” part)? To me, TechCrunch has pretty good creditability on the tech startup matter. The author and editors must have a lot more data, visibility and network resource than I do. So they must have a fuller picture and maybe my data set is too small.
How can I find the truth[1]? What about the Glassdoor model? I am not sure. Glassdoor is kind of close when it comes to finding the median of Microsoft salaries in the Seattle area. But unlike the base salary which is well defined and comparable across the board, the financial return of working at startups is far more complex.
[1] The reason why I am seeking the truth regarding whether mathematically it is better off financially working at a large tech company than a startup, is just for my curiosity (“There are those who seek knowledge for the sake of knowledge; that is Curiosity.” — Saint Bernard of Clairvaux). It’s not going to make me neither more nor less lean toward a startup job. In fact, I had an offer from a late stage startup not long ago. I didn’t go, though.
[2] I found two posts interesting: Startup employees don’t earn more and Big company vs. startup work and pay
zhengziying.com 
Hi Eric, it’s been a while my friend, but I’ve been following your posts on LinkedIn.
I think the real answer to your question is something you may not like too much: It depends! :)
It’s really a trade-off between risk and reward. The reward is not about the base salary, it’s about the huge stock pay-off. And the risk is not about the company not making it big, it’s about whether or not you have a job tomorrow or whether you will spend the next 2-3 months looking for a job while not getting paid and while paying your own medical insurance premiums.
I’ve been in a startup before and the experience was amazing, but it didn’t pay off financially. I still think that move was the right move for me at the time. So it’s really about each person’s preferences and where they are in their career and personal life at the moment.
Hi Shadi, no doubt there are many other kinds of rewards. My post is purely about the financial return, which include salary, bonus, RSU and/or stock options, 401K, tax treatment, etc..
I guess it’s caused by the selection bias of our mindshare.
Let’s say a start-up offers some equity valued at X. It might turn into 10X someday or zero. But usually the 10X story is more interesting to notice and share with others.
Mathematically, the expected reward might be lower.
Plus, considering the liquidity. It’s usually take years to cash out all the equities.
Yes, I too believe that is one of the reasons.