The first company I worked for was one of the largest consumer packaged goods companies in the world. Today, that company has a market cap of nearly 48 billion USD. But it isn’t just a large company based on valuation, it is large by the sheer number of employees it has globally. We’re talking nearly 40 thousand spread across hundreds of countries. And with that sheer size, came a lot of bureaucracy.
Towards the end of my tenure at that company, I vowed to find a job in a different type of environment. I wanted to be in an environment that was less bureaucratic, less middle management heavy, and less archaic. So, tech start-ups sounded like the perfect place to be. I wanted more ownership of my work, more autonomy, and more collaboration. I no longer wanted to be working in a stuffy office job with little perks. I wanted to be at a place that valued me as an individual contributor and showed that they cared.
From the outside looking in, I saw flashy perks like bean bags in the office, unlimited snacks, and free books. With the onset of the pandemic, the perks became work-from-anywhere flexibility and home office equipment reimbursements. And upon further research, I saw generous compensation packages with stock options. It was easy to get mesmerized by all that tech start-ups offered. However, here’s what I wished I knew as I made to transition to a tech start-up.
Total Compensation Packages
Traditionally, most people would think of total compensation as the following:
- Annual base salary
- Annual bonus (usually using some equation of how the company performs and your own performance)
- 401K or DCPP employer contribution
- Stock options or restricted stock units
However, there are other aspects to consider such as:
- Vacation and/or personal days
- Allowances or reimbursements (home office setup, cell phone, etc.)
- Health benefits (Dental, Vision, etc.)
- Free products
When I transitioned to a tech start-up, my annual base salary was 44% higher, but I no longer had my 20% bonus. I no longer had DCPP employer contributions, but I ended up receiving stock options. I had gone from 17 days of paid vacation where I was guaranteed a payout of unused days to unlimited time off. I ended up getting a monthly cell phone plan allowance but didn’t get as many free products. Although tricky, I encourage anyone looking at switching jobs to look beyond the annual base salary when comparing compensation. Also, consider any costs you could be saving when you switch to another job i.e. are you commuting less, therefore spending less on gas?
As an aside, the topic of stock options can be quite contentious, but my personal viewpoint is to treat stock options as nil. Stock options are the right to purchase equity at a certain discounted price, but aren’t valuable unless the company IPOs are gets acquired.
Job Security
Over the last year, we’ve seen countless layoffs from companies of all shapes and sizes. Start-ups, especially those in the early stages, aren’t typically profitable and usually depend on some sort of debt financing or venture capital funding or both to finance growth. With higher interest rates, investors aren’t just looking at revenue growth. They want to see a path toward profitability. Many start-ups have taken the layoff route to reduce costs. Luckily, there are websites such as layoffs.fyi that track which companies have conducted a layoff, how many were laid off, and when. If a company has performed multiple rounds of layoffs in a short amount of time, that may be a red flag for more to come.
There are so many other considerations to consider, from company culture to performance reviews. I’ll be talking about these other aspects to consider in my next blog post. Stay tuned!
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