Image by Sebastiaan ter Burg. License: CC-BY-SA 2.0
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). Dustin Moskovitz has 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).
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).