Big companies vs Startups

Auren Hoffman recently blogged about Why big high tech companies are losing the talent war and I agree with his general premise of why would you would not join a big company when you can join a startup. The points he touches on with my thoughts as someone making the transition from big company (Microsoft) to startup (Redfin):

Job security is a wash: This I disagree with. There is a non-trivial risk that Redfin will fail and I will be out of a job. On the other hand, while at Microsoft I saw very few people get fired or managed out. It essentially takes a year to move an under performer out of the company so barring a melt down in Redmond or a radical change in my work ethic, I always would have had a job somewhere at Microsoft.

Cash compensation: His example is that you’ll earn say 10% less at a startup. In my case I’m earning a tiny bit more and my benefits are pretty similar. Sure I no longer have a ProClub membership but I never used it anyway. The way I understand it is that in the Seattle area the startups are competing with Amazon, Google and Microsoft for talent and need to be very competitive in terms of base salary. In terms of stock compensation, at Microsoft I was receiving stock awards but assuming I sold them off as soon as I received them they were a very small percentage of my overall compensation package and were effectively meaningless (this is not necessarily the case for my friends at Amazon who receive fairly large stock awards but have relatively small cash bonuses as compared to Microsoft). At Redfin I have stock options which if we get acquired/IPO will *fingers crossed* be a large percentage of my compensation.

Corporate bureaucracy can stifle innovation: So true. My last project, essentially an Apple compete project, was mired in bureaucracy and was never ‘funded’. We spent months going in circles trying to get approval for various things only to be blocked by VPs in other groups. It was also frustrating to watch during my time at Microsoft a good number of companies form, launch and become successful in areas we could have been successful in but we were too busy futzing with Vista. We later looked at acquiring some of these companies to get back in the game in those markets only to be stymied by their high market valuations. From a personal perspective it would have been much more rewarding working at a company defining a new market instead of working at a company managing dependencies for a project moving no faster than a glacier. Unless you have worked on Vista you have no concept of just how much bureaucracy is involved in getting a bug fast tracked from a dependent team’s code branch up into the main trunk and then down into your branch and then doing it all over again when you find out there is a bug with the bug.

Dare Obasanjo of Microsoft responded with a post about the The Risk Averse and the Indentured. I agree on the risk averse point but disagree on the indentured point. When starting at Microsoft on an H1B I thought I was indentured but it turns out it is very easy to transfer an H1B to a startup. The startup needs two weeks to transfer your Visa before you start and the cost is around $5000. A small price for them to pay or for you to negotiate. That leaves the risk averse at a large company and for the most part I believe that’s true. It feels like a majority of the folks at Microsoft now have kids and are more interested in health benefits, sending their kids to private schools and work/life balance then they are in changing the world through technology.

Another difference I believe is that at a startup the employees are ‘hungry’. Hungry for the opportunity, hungry for the reward. We put in long hours not because we’re asked, but because we want to. In my experience, at Microsoft the employees need to be cajoled into working one or two weekends a year. That’s when they’re working. It felt like a large percentage of my time at Microsoft was sitting around waiting for devs to free up. I feel that a large part of this problem was that the PM team in my group was over staffed but still, Microsoft can afford to have highly paid individuals effectively doing nothing for large stretches of time while a startup cannot. There is always more work to do at the startup whether it’s writing another spec or pitching in on recruiting talent.

I know many of you work at a big company and would curious to know, are you risk averse or indentured? Or is there another reason not to make the switch to a startup during bubble 2.0?

And with that, I better get back to work :).

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6 Responses to Big companies vs Startups

  1. Glenn Kelman says:

    Great post Matt. But I have to say, I’m always mystified by concerns over job security, at least for technical people.

    The question isn’t whether Redfin could go out of business (like any startup it could, not to mention that it is easier to be fired from a startup, especially if it is run by maniacs). The question is how long you would be unemployed if it did. It seems hard to believe that you couldn’t get a job in four weeks, probably at Microsoft or, if the company is backed by a good investor, by another startup in the investor’s portfolio.

    One item I would add to the list is career growth/scope of responsibility. The big thing that has always motivated me is that you get to do more cool stuff at a startup, which means you can get promoted more quickly.


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  3. Debasish says:

    Same here at Oracle. There are 101 reasons to leave the biggies which are too slow in their poor policies & processes. I was i Microsoft India, thought Orcale would be better. What I found is a CarbonCopy. Then finally got down to a VoIP startup and filed two patents within 3 months.

  4. Debasish says:

    Same here at Oracle. There are 101 reasons to leave the biggies which are too slow in their poor policies & processes. I was i Microsoft India, thought Orcale would be better. What I found is a CarbonCopy. Then finally got down to a VoIP startup and filed two patents within 3 months. Amazing even to myself that how “hungry” one can be given proper ambience.

    I like to ask one question to you, is getting H1B transfer to startups tough there at US?

  5. JK says:

    Actually there is a difference for you as a Canadian on a H1 and most of the others. You can stay in/visit the US even if your company collapses or you lose your job as Canadians can travel visa free to the US. For most of the rest we would have had to pack and leave the country to the other side of the world within a few days leaving behind all the investments/friends etc overnight.
    This is why you dont see many immigrant entrepreneurs in their 20s but quite a few in their 30s and 40s which is when they have obtained their greencard.

  6. SR says:

    Beautiful article, and this just made up my confused mind on choosing my path….

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