Big Tech and startups are different hiring markets
I saw a LinkedIn post recently where a founder complained “The best developers are either at Google, work for themselves, or too expensive.” Two thirds of that represent a common misconception that Big Tech and startupland are the same hiring market. They’re not. To the extent it was ever true, that was yet another zero interest rate phenomenon.
Even in these subdued times, the numbers Big Tech offers are bigger than anyone outside of Wall Street. Those numbers translate into either cold hard cash or the mostly as good as liquifiable shares. Your startup has less cash to pay out right now, so you offer equity. Obviously that may never be worth anything, but even if it does add up to something, it’s going to take a long time. That equity is going to have to be valued at a steep discount given its risk and illiquidity.
Given those facts, how do you match Big Tech salaries? Simple: you don’t. Big Tech and early stage startups are two different hiring markets. If you’re a startup trying to hire from the same pool as Google, you’ll have a bad time. You’ll pay out too much scarce cash, hire the wrong people, or both.
The salary is an obvious cost. Less obvious is how that might be the wrong person. Being a successful employee in a four year old Series A startup with 55 employees is pretty different from being a successful employee at a 100,000 person public tech company old enough to need reading glasses. They’re superficially similar, but the responsibilities, cultures, personalities, and more are different. Yes, there are candidates who can move between the two worlds. There are also birds that can swim and fish that can fly.
It could be a good thing if a candidate is turned off because they can’t take a single number from your offer and compare it to a single number in a Big Tech offer. That indicates someone who doesn’t understand what a startup is*. They’re probably thinking it’s just Big Tech scaled down. Someone with that kind of expectation is probably not going to be happy or successful at your company.
This isn’t a justification for underpaying. The mismatch is mostly structure. You should still expect to pay well for good people. Just don’t define “pay well” according to companies that live in a different world. Anyone who expects you to produce an offer comparable to a Big Tech offer doesn't understand startup. You’re probably better off without them.
* and also has trouble with nuanced and ambiguous decisions, another indicator of misfit with a startup
One step further, what can startups offer besides equity to attract the right candidates?
That is an interesting take on how to filter out unsuitable candidates for a startup!
Also, the statement "The best developers are either at Google, work for themselves, or too expensive" has a couple of clues in it.
1. You do not need all your developers to be best. For example, in early stages of an idea, it could be beneficial to have a developer who can execute fast by making suboptimal choices, consciously or otherwise, learn from the usage patterns and iterate - than someone who can deliberate for days and aim for perfection.
2. You are not Google. And you cannot afford expensive engineers. So provide opportunity to 'work for themselves'. Granting and vesting equity like Google does not work. I think a nuance here is 'work for themselves' vs 'work for their own idea'. I would reckon such 'best' engineers would be willing to work on an interesting idea not their own, if they are shared sufficient ownership in it.