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Do Startup Employees Earn A Lot?



Since the average startup founder who makes it to Series A earns more than a large company employee, many believe that early-stage startup employees also earn more (albeit less than founders). Some have even claimed that startup early employees have better earnings prospects than founders.

We’ve looked at the data, and this does not seem to be true on average. There are strong reasons why people might want to work at a startup (e.g. career capital), and it’s true the employees of the most successful startups will earn more; but someone deciding between working at a startup vs. a bigger company should rarely be making the decision based on income. On average, startup early employees earn at most only a little more than developers at larger companies.

Three estimates of how much startup early employees earn, including both equity and salary

According to AngelList, early-stage backend developers, for example, generally get about $110,000 in salary and .7% equity (salary data from Riviera is similar).1

While the startup salary data is fairly clear, it’s hard to know how to value the equity portion of their compensation. Below are three different methods for doing so, which all show that developers at early-stage startups at most earn only a little more than they would at a large tech company.

1) Using average exit values

Let’s assume the 0.7% equity stake will eventually get diluted down to .35% at time of exit (a typical amount of dilution from Series A to exit). Average startup exit value is $240m, eight years into the life of the company. On an amortized basis, .35% equity is $105,000 per year.

On average, about 20% of companies that make it to Series A successfully exit, which makes the expected value of the equity portion $21,000 per year. This means that, in total, the average early startup employee earns $131,000 per year.

The average developer in Mountain View makes $106,000 per year, so the early startup employee has a 24% edge. However, it’s likely the early employees work harder, and are be more skilled than average. Rather than comparing averages to averages, it seems more accurate to compare startup employees with a more experienced subset of developers. A level II developer at Google in the Bay Area makes $150,000 per year, while a senior developer at Google makes $250,000 per year. From this perspective, if you’re turning down a job at a top company in order to work at a typical startup, then you can expect to earn less than similarly qualified and hardworking peers.

2) Using typical seed round valuations

A second way to estimate the value of early-employee equity is to use average seed round valuations. Early employees usually come in shortly after a seed round, and seed round valuations average about $5.3m. If you own .7% of the company at this time, then your shares are worth around $37,000. It’s unclear exactly how you should amortize this value, but this method again gives you a value in the low 5 figures.

3) Using estimates of founder exit value

A third method is to note that early-stage employees generally get between 1 and 5% as much equity as a founder (early stage employees will get usually .5-1% and founders, at the time they are giving out those large equity stakes, will have 20-50%).

Current research into startups found that founders average $1.4m per year, which means that the employee’s equity stake will be $14-70,000. Only the upper end of this approaches what engineers make at Google.

Wrapping up

These methods are all very rough, but taken together, they seem fairly compelling: on average early stage employees earn at most only a little more than a junior Google engineer.

This also fits with what we should expect if the market in developers is efficient. And it fits with my personal experience: I run a startup, and the developers I’ve hired have usually had similarly well-paid options at larger companies.

Responses and further discussion

In case you aren’t already convinced, I discuss below (i) some changes to securities laws which make the obscene payoffs of dot-com-boom startup employees unlikely to happen again, (ii) the argument that start up employees should get significantly higher compensation due to their risk and (iii) an argument that start up employees earn more than founders.

Option pricing changes

An additional complication to the estimates is that startups often issue equity as options, instead of as straight equity grants. During the dot-com boom days this had little impact: startups would set the strike near $0, so the value of the option was essentially the same as the value of the share.

In 2004, the SEC got wise to this practice and Congress passed the American Job Creation Act, which required companies to set the strike price of options at the fair market value. In less technical terms, this means:

“The equity portion of a startup employee’s compensation must legally be structured so that, if the options were exercised immediately, they would have a fair market value of $0.”

The fair market value isn’t always correct, but this is an additional hurdle for anyone who wants to get rich as a startup employee, and is a secret that most startups won’t tell you.

Risk aversion

One reason that people think startup employees should make more money than developers at large companies is because they bear more risk. Since the riskiness of entrepreneurship is part of the reason why entrepreneurs receive above market returns, it might seem that startup employees should analogously make significantly above market returns.

I think this argument is sketchier than it seems at first glance – a lot of the reasons why founders get paid so much have to do with the relationship between the founders and the investors, rather than risk per se. (Executives at any company with investors, large or small, will have a lot of golden handcuffs because the investors need to retain control of the executive team.)

Even taking the argument at face value though, startup employees don’t just bear slightly less risk, they bear a ton less risk. Therefore, they don’t need to be given higher compensation to offset the risk they assume.

Hall and Woodward give guaranteed income equivalents for founders who have various levels of risk aversion (as measured by CRRA). Guaranteed income equivalents are the amount of money the founder would be willing to take annually instead of founding the company and hoping for a higher, risky payoff years later. I used the same method to calculate guaranteed income equivalents for the hypothetical startup employee listed above who makes a guaranteed base of $110,000 and owns 5% as much of the company as a founder does:

Hall and Woodward list a CRRA of 2.0 as “reasonable”, and with that in mind, two things stand out about this table:

  1. For a “reasonable” person, it is better to be an early stage employee than to be a founder. This fits with advice given by people.
  2. Risk-neutral startup employees don’t have that much of an advantage over risk-averse ones. Among founders, a hypothetical risk-neutral employee with a CRRA of 0 gets an order of magnitude more value out of their founding than a “reasonable” person does. Among startup employees, it’s only about a 15% advantage.

Because there isn’t that much of a risk premium, we shouldn’t expect risk-neutral people (such as those primarily motivated by social impact) to get massively more value out of being a startup employee, even ignoring the empirical data listed in the previous section.

Can you just work at the best startups?

Some commentators have pointed out that the 100th employee at Facebook and dropbox both made more than the founders of billion-dollar companies. Arguably it’s easier to be the 100th employee of an amazingly awesome company than it is to be the founder of a good company, so even though the averagestartup might be worse than the average large company, if you seek out just the best startup you will do better than if you seek out the best large company.

If you can really pick the startups that will succeed better than average, then you’ll earn much more than average, and you should probably go do that.

But on average this isn’t possible. Moreover, it’s very hard to predict which startups will succeed, and easy to be overconfident in your skills. In hindsight being employee 100 at Facebook was a great idea, but how would you know at the time? Only a handful of VC funds seem to be able to pick winners with any amount of regularity, and even if this is due to skill instead of luck, the fact that the vast majority of experts whose full-time job is to choose winning startups repeatedly fail at this task should make us wary of assuming an engineer with minimal business understanding could succeed.

It goes without saying that you should investigate any prospective employer, and if you are considering working at a startup that due diligence process should include understanding their business model and chance of success, but it seems doubtful that you should expect massively above market returns.

Conclusion: What are startups good for?

I tell my prospective employees that compensation is approximately the same on expectation between big companies and small: a senior developer at Google will probably make about as much money as a senior developer at a startup. The difference is that startups enable you to move through the ranks much more rapidly: a skillful developer will move from “entry-level” to “senior” more rapidly at (some) startups than Google.

As with everything else about startups, there is no free lunch and you have to do your due diligence before joining a startup – many founders are running as fast as they can just to keep their company afloat, and have no time for helping their employees. Don’t work at those companies.


About the Author

This article was written by a 80,000 Hours member, Ben West.

Did you enjoy it? Read more of Ben’s work, here.


Women on Top in Tech – Dr. Sanna Gaspard, Founder and CEO of Rubitection



(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Dr. Sanna Gaspard is the Founder and CEO of Rubitection, a medical device start-up developing a diagnostic tool for early stage pressure detection, assessment, and management. She is an Entrepreneur, inventor, and biomedical engineer with a passion for innovation, entrepreneurship, healthcare and medical devices. She has received recognition and awards including being selected as a finalist for the Cartier Women’s Initiative Awards(’13), a semi-finalist for the Big C competition (’14), a finalist for the Mass Challenge Business accelerator in Boston, and taking 1st place at the 3 Rivers Investment Venture Fair’s Technology showcase (‘11). Her vision is to make the Rubitect Assessment System the global standard solution for early bedsore detection and management.

What makes you do what you do? 
I am driven to have impact and improve healthcare as I have a strong drive to problem solve, comes up with new ideas, and see them come to life.

How did you rise in the industry you are in? 
I first focused on getting the educational background and then I pursued the goals I have for myself. I got my PhD in Biomedical Engineering with a specialization in medical device development. Having the educational background is important as a woman and minority to assist people in taking your seriously.  After completing my PhD, I focused on bringing my invention for a medical device for early bedsore detection and prevention called the Rubitect Assessment System to market to help save lives and improve care.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
I started my startup, Rubitection , because I felt it was the best way to bring the technology to market. I knew that if I did not try to commercialize the technology, it would not make it to the doctors and nurses. I also have confidence that I could manage developing the technology since I had taken classes on entrepreneurship and had my PhD in biomedical engineering with a specialization in medical devices.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? How did you make a match if you did, and how did you end up being mentored by him/her?
No, I don’t have a specific mentor in my field. I am looking for one at the moment. However, I do look up to Steve Jobs and Oprah as examples of how one can start with nothing and work their way up and build a successful, global, and reputable business and brand.

Now as a leader how do you spot, develop, keep, grow and support your talent?  
I first try to find people who have fundamental technical or work experience to be competent to complete the work. I then evaluate the person for intangible skills like independent thinking, reliability, leadership, resilience, organizational skills, strong work ethic, open mindedness/flexibility, and good communication skills.

Do you consciously or unconsciously support diversity and why? 
I consciously make an effort as a minority woman in tech, I intimately understand the need to promote diversity within my business and outside my business. I first hire the best people for the job and also make a point to hire women and minorities qualified for the position.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?  
It takes resilience, vision, being a team player, an ability to inspire others and delegate work, knowing your weakness, and knowing when to put your business or yourself first.

Advice for others?
My advice to others is to take calculated risks, pursue every opportunity, surround yourself with supporters, build your team with smart dedicated people, and stay focused on your vision. I am striving to implement this advice myself as I work towards commercializing my technology for early bedsore detection, grow my team, and recruit clinical partners to address an $11 billion US healthcare problem which affects millions around the world.

If anyone is interested in learning more about our work or company, please contact us at [email protected].

To learn more about Dr. Sanna Gaspard, CEO of Rubitection visit:

If you’d like to get in touch with Dr. Sanna Gaspard, please feel free to reach out to her on LinkedIn:

To learn more about Rubitection, please click here.

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Women on Top in Tech – Suzanne Wisse-Huiskes, Founder of MatchBox Consultancy and an Advocate at the Global Tech Advocates Network



(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Suzanne Wisse-Huiskes is a Strategic Consultant and Founder at MatchBox Consultancy with offices in the United Kingdom and Nigeria. MatchBox provides expert advise in Impact Investing, Alternative Finance, Venture Capital, Fundraising, Women Leadership, Business Development, and Economic Empowerment. She is also an Advocate at the Global Tech Advocates Network. Dedicated to challenging talented entrepreneurs, Suzanne is an official mentor at startup/accelerator programs in Africa, Europe, and Asia. She was awarded top 400 most successful women in the Netherlands for two years in a row.

What makes you do what you do?
My drive is to enable entrepreneurs to grow their businesses by improving their access to funding. This can elevate an entire community. I believe that Alternative Finance can potentially be a powerful catalyst for shifting the way our financial markets work.

I love the ingredients of the alternative finance market: the innovative nature of the industry; the global playing field; the turbo speed of change. The market is booming and shows little sign of slowing down.

I founded MatchBox to support highly motivated entrepreneurs and investors in their mission to create profitable businesses with impact. MatchBox has become a trusted partner to these clients: they value our strategic and operational expertise, as well as our strong global network used to consult and connect. The requests vary from developing large investing programs to ensure access to capital for SME’s, to developing funding strategies for entrepreneurs. What works in one country may not work in others. We understand the local players and the local markets. This work is fully aligned with what is important to me.

How did you rise in the industry you are in?
I’ve been in the crowdfunding industry since 2008. Back then, Facebook only had a 100 million active users as opposed to the 2.000 million users today. Kickstarter, one of the world’s largest funding platforms, was yet to launch. Joining the industry that early in the game, allowed me to rise with it. I was fortunate to be part of initiatives that pushed the Alternative Finance ecosystem, first in Amsterdam, then on a broader European level.

Then later on other emerging markets began to interest me. I moved to Nigeria, to work in Africa’s fastest growing economy and home to exciting trends in capital and fintech. I familiarized myself with the investing ecosystems in African countries. Today, I work in alternative finance ecosystems in Asia, Africa and Europe. Being able to learn, share and compare best practices from different economies to me is key in the rise of the industry. Currently, the crowdfunding market in Asia alone is worth over 200 billion Euros. That’s huge!

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
I’ve always followed my heart in my professional life. I focus on work that I am passionate about and am not afraid to take the path less travelled. So leadership, demographics never held me back. With my experience and skills I am well positioned to successfully get the job done. For me it doesn’t feel like it’s a stretch.

Even more so, my clients see it as a big advantage to have women on the job. I recently worked on an impact investing program in West Africa focussing on women-led SME’s and experienced the benefits of a diverse team. Women entrepreneurs see the world through a different lens and, in turn, do things differently.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? How did you make a match if you did, and how did you end up being mentored by him/her?
The industry was completely new when I started, with no seniors to learn from. As a strong believer in mentorship, I do reach out to people in other industries for feedback and to bounce ideas.

I also learn a lot from working with various entrepreneurs. Collaborating with Sir Richard Branson in the beginning of my career was encouraging. We did a successful Crowdfunding Campaign for the elephants in Botswana. But I’m equally impressed by entrepreneurs that make a huge impact on their community no matter the circumstances. I’ve seen exceptional people grow businesses in the poorest regions of Nigeria. One can only admire their leadership.

Now as a leader how do you spot, develop, keep, grow and support your talent?
For me, mentoring young entrepreneurs is a great way to develop and grow talent. My focus is usually on two mentees at a time to ensure there is enough time to discuss ideas and challenges. I worked at fintech startups for almost 10 years before founding MatchBox. So there are plenty of stories to share and learn from, both on failures as well as on successes.

Do you consciously or unconsciously support diversity and why?
I’m very vocal on the need for diversity. I’ve always found myself in the male dominated groups. First at University, then in my first corporate position, and later as a Board Member. At some of my MBA Finance classes, I was the only woman in a room of 50 men. It never bothered or intimidated me. It just made me work a little harder.

Nonetheless, diversity is much needed. I strongly believe the industry is missing out on many brilliant women. That is why I dedicate a great deal of time mentoring female entrepreneurs. We discuss the tools their businesses require to grow and attract the right type of capital. Investors still have a different approach towards female founders. This year, we are launching an initiative called ‘the Republic of Female Founders’, to provide practical tools and guidelines that are specific for this group.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
My general rule of thumb: If you want to go fast, go alone. If you want to go far, go together. For me, it’s all about collaborative leadership. My industry is becoming increasingly complex, so sharing best practices will bring us far. That’s why I became an Advocate of the Tech Shanghai Advocates, part of the Global Tech Advocates. This group of senior leaders in the tech community is created to champion and accelerate the growth of the local technology sector.

I am also a fan of the CrowdfundingHub and Crowddialog in Europe, and Ingressive in Africa for similar reasons: Ordinary people doing extraordinary things because they believe in the positive impact of innovation in finance. My peers are all trailblazers in the alternative finance industry, I consider myself to be in great company.

Advice for others?
I strongly believe in collaboration, so building business relationships is key. I truly foster my relations. To me it doesn’t feel like work, but rather like building bonds. Seek opportunities to connect and reach out. It really pays off to have a strong network. At MatchBox, I work with a network of exceptional local experts. If you need advice and consulting on your funding strategy, impact investing program or crowdfunding strategy, we will gladly work with you. Contact us at MatchBox.

If you’d like to get in touch with Suzanne Wisse – Huiskes, please feel free to reach out to her on LinkedIn:

To learn more about MatchBox Consultancy, please click here.

To learn more about  Global Tech Advocates Network, please click here.

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