Analyzing AngelList Job Postings, Part 2: Salary and Equity Benchmarks: Not Everyone's Leaving San Francisco

Analyzing AngelList Job Postings, Part 2: Salary and Equity Benchmarks: Not Everyone's Leaving San Francisco

The tech industry is notorious for its generosity when it comes to equity and salaries for employees. However, this generosity can sometimes come at a cost. In the early stages of a startup, founders often give away more equity than necessary, which could be better utilized for future hires, raising funds, or retaining decision-making power. It is important for founders to be mindful of these benchmarks and make informed decisions when it comes to compensation.

Based on a medium-sized sample of engineering job postings on AngelList in Silicon Valley, the following salary ranges were observed:

• 20th percentile salary range: $75k - $100k
• 50th percentile salary range: $85k - $125k
• 80th percentile salary range: $100k - $150k

These figures indicate that salaries increase for higher paying jobs. It is crucial for founders to be aware of these benchmarks and offer competitive salaries to attract and retain top talent.

Equity distribution in startups also follows a similar pattern. The first few hires typically receive a larger percentage of equity, while subsequent hires receive smaller percentages. The following equity benchmarks were observed:

• Hire 1: 2% - 3% of equity
• Hires 2 through 5: 1% - 2%
• Hires 6 and 7: 0.5% - 1%
• Hires 8 through 14: 0.4% - 0.8%
• Hires 15 through 19: 0.3% - 0.7%
• Hires 21 through 27: 0.25% - 0.6%
• Hires 28 through 34: 0.25% - 0.5%

It's important to note that these benchmarks are not hard-and-fast rules but serve as guidelines for founders. By framing these numbers as "up to" before each range, founders can better communicate the potential equity allocation to candidates during the hiring process.

In addition to salary and equity benchmarks, it is crucial for founders to be mindful of candidates' expectations. Unrealistically high expectations can lead to a wasted interview process and missed opportunities for both the candidate and the startup. On the other hand, exploiting candidates with low expectations can harm long-term retention and create resentment among employees. It is essential for founders to strike a balance and ensure that expectations align with the startup's resources and growth potential.

While there may be concerns about the exodus of tech talent from Silicon Valley, it is evident that startups are still thriving in the area. Founders, driven by their passion for their startups, are not deterred by California's high top marginal tax rate. Startups in the greater San Francisco and San Jose areas have raised over $56 billion this year, significantly surpassing other tech hubs like the greater New York Area and greater Boston.

The Bay Area's unique experimentation mindset also plays a crucial role in its continued success. Having individuals with technical expertise and experience in building companies is invaluable. This mindset, which is still somewhat unique to the Bay Area, fosters innovation and drives the growth of startups in the region.

Venture capitalists are also showing increased interest in startups, with investments projected to reach over $140 billion this year, a significant increase from $85 billion five years ago. While cities like Miami are experiencing growth in startup investments, they still lag behind cities like Denver and Minneapolis.

In conclusion, founders should be mindful of salary and equity benchmarks when hiring to ensure competitiveness and long-term success. Additionally, managing candidate expectations is crucial for a smooth hiring process and employee satisfaction. Lastly, embracing the unique characteristics and mindset of the Bay Area can contribute to the growth and success of startups in the region.

Actionable Advice:

1. Research salary benchmarks and ensure that your startup offers competitive compensation packages to attract and retain top talent.

2. When negotiating equity with candidates, consider the benchmarks provided and communicate the potential allocation clearly to manage expectations.

3. Foster an experimentation mindset within your startup by hiring individuals with technical expertise and experience in building companies. Encourage innovation and embrace the unique traits of your region to drive growth and success.

By incorporating these strategies, founders can make informed decisions, create a positive work environment, and position their startups for long-term success in the ever-evolving tech industry.