Beware of the Silicon Valley cult

There’s a cult calling, and it’s located in Northern California. Usually, you get the call from a recruiter, attempting to convince you to join their company because it’s Special and Unique.

If you accept their offer, here are some of the benefits:

For the privilege of being a member of the cult, you get to take half of your market rate in salary in exchange for equity that will most likely be worthless. And you’re supposed to feel good about it – you’re working on Important Stuff™ that is interesting and can’t be found anywhere else.

If you’re especially lucky, the recruiter will ask you to move across the country for a role as a contractor with no equity and no guarantees. It seems like a good idea after all, everyone is doing it. Everyone knows you have to live in Silicon Valley if you want to succeed within the cult.

You get to work with amazing company culture that was invented 2 weeks ago, after the previous company culture failed, and you get to work with people who are all so dedicated to the same mission that they are too busy to think for themselves.

The cult is self reinforcing. The media endlessly praises the big successes and glosses over the losses. Northern California is the envy of the rest of the world, with other countries and states trying to produce their own versions of the cult.

It’s so popular it even has its own TV show. Nevermind that the entire thing is satire, the cult is way too serious to ever take such a TV show seriously.

Sarcasm aside, Dan Luu wrote a great piece comparing the financial payoff between startups and big companies.

His thesis: the meme that startups will make you rich is false. I’ve written much of the same thing before, so I agree with Dan.

My question is why more engineers don’t realize that being an employee at a startup usually means getting financially screwed. My theory: there is a cult like atmosphere surrounding silicon valley.

I’ve had countless friends who fell into the trap, and I fell into it myself.

Founding a company is the only thing that makes sense, and even then, your chances for success are much lower than you think they are.

I left Google to found startups for 2.5 years. I remember reading TechCrunch before I left, and I remember being consciously aware of how I was only reading the success stories, and that I couldn’t see all the people struggling and failing.

Even being consciously aware, I was still surprised 2 years later when my founder and I had to crawl back to the big companies we left with our tails between our legs. We had a rockstar team with backgrounds from top tier companies and engineering schools, but no aqui-hire materialized out of thin air like I thought it might. We built kick-ass technology, but nobody was interested.

Granted, we were entitled, and we did 1000 things wrong. We didn’t have a very good network, and we lived in the wrong places. My point is that we had blatantly wrong expectations.

The friends I’ve had who joined startups as employees had even bigger issues. Recently, a friend accepted an offer to work in sales for half of his salary. The recruiter convinced him that his stock options would be worth pure gold in a couple of years time.

When I worked through the numbers with him, and we calculated how much he would make at various exit points, it became clear the recruiter was full of crap.

Unfortunately, a couple of weeks later, that company appeared in the news with significant problems.

I’ve had recruiters try to make the same arguments with me. I usually stop talking to them.

It’s not that I believe anyone in the startup eco-system is doing anything wrong. They’re just following their self-interest. The recruiters who convince you to join a company for less than you’re worth are just doing their jobs. They’re making their package look as attractive as possible so they can make their commission when you join. If I were in their shoes, I’d be doing the same thing.

But I believe there are many forces that cause would-be employees to make poorer than average decisions. The entire world seems to believe that joining startups is dramatically better than working for a big company. You see it all over the media, and you see it from prominent venture capitalists, not to mention the founders of successful companies.

Even if you’re consciously aware that there are thousands of failures out there that you never hear about, and tens of thousands of employees that never got rich, you still have the perception that the startup world is better than it actually is.

Furthermore, I follow all of the usual tech venture capitalists and founders, just like everyone else in the startup world. I like a lot of the advice they give, and I admire many of them.

But you have to realize that when these people tell you to join startups, they’re inherently part of the system that they’re encouraging you to join. You can still learn from them, but following their advice won’t take your best interest into account. Only you can know what is best for you. Like any advice, you need to parse through the bullshit to get at the pieces that apply to you.

Of course, there are also issues with Dan’s argument.

He’s using Google, Facebook, Apple, etc to generalize for the rest of the market. Those 3 companies are in the top 5% of the tech world, and they pay in the 90th percentile. When you use the average salaries at those companies, then Dan’s argument is absolutely correct.

But the problem is that the average salary for a senior software engineer in the United States is right around $100K not $250k like it is at Google, etc. $150K is a huge difference, even if your cost of living is dramatically cheaper than the San Francisco Bay Area.

So I would add a caveat to Dan’s argument: if you can work for a top tier company, then working for a startup probably doesn’t make sense. If you can’t, then it might.

The best reply I’ve seen to Dan’s article appeared over at Startups and Shit, titled How to get rich in tech, guaranteed.

He agrees with Dan that joining a startup is not he best way to get rich. Instead, you should join one because

Startups are the only way to get 20 years of experience in five. The reason to join a startup is because you are awesome, you’re willing to work hard, and you don’t want to wait 20 years to be making decisions that impact the business.

To this I agree and disagree. Yes, you’ll get a ton of experience working for a startup. The problem is that many future employers won’t care.

Google’s not going to hire you into a VP position because you had a stint at a failed startup. If your startup is successful, then that’s another matter, and it could very well happen if/when Google acquires you. But again, then you’re playing the lottery, just like you are with the finances.

A company hires you to do a specific job, and they typically don’t care if you have a bunch of experience in unrelated areas. When I was going back into the software engineering work force, nobody cared that I now had a bunch of experience in marketing, sales, and building landing pages. That wasn’t relevant to what the company needed me for.

Personally, I’m glad I had all of that experience because I’m sure I will use it some day starting more companies. But I’m not going to delude myself into thinking that I’m now eligible for a VP position at a Fortune 500 company just because I gathered a bunch of experience working for my own, unsuccessful, small company.

In summary, my advice remains the same as always: working as an employee for an underfunded startup is usually a bad deal. If you have to join a startup, you should found one. Ignore recruiters when they start talking about equity when they’re trying to convince you to take a lower salary. Unless of course, they’re talking about a shit-ton of equity, but do your own math, calculate various exit points, and try to plan for dilution events in the future.

Finally, If you want to work for a big company, then try to join the top-tier. The salaries at the Googles and Facebooks of the world are dramatically better than average.

Good luck and use your brain. There’s a lot of bullshit out there.

Photo Credit: Kevin Dooley