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More than anything, Silicon Valley believes in startups. But that belief may be wavering.
Some developers are publicly questioning whether working for a startup makes sense anymore, given the seemingly widening gulf between the salaries startups can afford and how well big tech companies like Google and Amazon currently pay. And that has others in the Valley questioning whether startups can attract the talent they need to get their concepts off the ground.
“It is obvious to almost everyone that the classic model of how you finance and build a startup team is breaking down in the current market environment, with an adverse impact on expected returns,” warns one commenter on a popular startup forum.
The comment was one of more than 350 (as of this writing in 2019) posted to Hacker News, the news forum run by the startup accelerator YCombinator, in response to a blog post by Zain Amro, a software engineer based in Berkeley, California. Amro writes:
Working at most startups (in their current form) in a world full of growing tech giants like Google, Facebook, Apple, Netflix, etc. is making less and less sense for most people who qualify for these jobs… It tells you a lot about the state of the industry when smart new grads are getting paid amounts that are out of reach for many early-stage startups. To make the situation worse, the very good engineers, the ones who could truly help build a tech company from the ground up from day 1, were getting offers so exorbitant they could not possibly fathom to turn them down.
Many of the responses on Hacker News share Amro’s view that startups are a bad deal, especially for engineers.
Large companies have long been able to offer better pay than startups, but the big tech companies’ dominance widens that gap, for a few reasons.
First, they can afford to pay increasingly exorbitant salaries. Google’s median salary is $161,254, more than even most mid-level engineers make at venture-backed startups. Second, their market dominance means their stock options can still be quite lucrative, negating the power of startups to lure employees with equity.
And third, the tech giants already own many of the most valuable businesses in tech and are able to ward off competition, whether by outspending them or acquiring them. That makes it harder for startups to grow independently and eventually to go public. As one Hacker News user put it, “the days of a scrappy upstart coming along to ‘unseat the leaders’ doesn’t seem anywhere near realistic.” And if the plan is to sell the startup to Google in a few years anyway, why not save yourself the trouble and just work there from the start?
The Hacker News thread did include lots of ideas for how startups can overcome these barriers to attract employees who might otherwise go to big tech companies. A sample:
- Pay employees more by paying founders less (in compensation or equity)
- Offer a four-day workweek or sabbaticals
- Offer remote work
- Offer more generous (and simpler) terms for stock options
- Improve the interview process
- Locate outside of the Bay Area and other expensive startup hubs
- Start a company that’s less technical and so less in competition with Big Tech for high-level tech talent
We didn’t find much discussion in the thread about using corporate culture as a way to lure away employees—despite the fact that culture is one of the top factors for developers in deciding where to work. And there had been no talk of prioritizing diversity and inclusion or mentoring as hiring tactics. (Tech workers who prioritize mentorship say they prefer larger companies, and those who prize diversity say they prefer medium-sized ones, according to a survey by Indeed.)
Of course, the grass is always greener. At one point, Amro’s blog post was ranked on Hacker News just one spot above a piece titled, “Downsides to working at a tech giant.”
Walter Frick is Membership Editor at Quartz. Before that he was an editor at Harvard Business Review for six years, most recently as Deputy Editor of HBR.org. He's also written for The Atlantic, MIT Technology Review, The Boston Globe, and the BBC, among other publications. He's based in Boston and is interested in economics, technology, and the future of media.