SaaS Startups

Why If You Quit Every Year You Won’t Ever Make Any Money

echojason@gmail.com'

Jason Lemkin

If you squint as you read TechCrunch, you’ll notice a pattern.  “Bob worked at Pinterest for 8 months before he …” or “after a stint as senior something engineer at Facebook [12 months], Bill joined …” etc. etc.  It’s the new one-year job culture.

The rise of the engineer with highly portable job skills, and essentially zero percent unemployment for any top 20% developer, is in many ways a great thing.  While not so great for employers, this one-year-job culture is seemingly a win for engineers — it has empowered especially younger engineers in many new ways, created an implicit safety net which enables risk taking (not a huge deal to quit if you’ll only be unemployed for negative 7 days), led to salary growth, etc.  Even talent auctions, apparently, to the highest bidder.  And doing something new every year, especially when you are young or young at heart, can be exciting.  And because talent is so over hired (Google hiring 3,000 new engineers a year, Facebook over a 1,000, every hot startup hiring like mad) — the stigma to job hopping has been lost.

But it comes with a negative side.  Yes, if you stay for a year, you may vest into a bit of stock.  And it might even seem like, if you quit after you hit your cliff, and do another start-up, you’re collecting more stock from more companies, and you might do better this way.  But that’s wrong:

  • First, obviously if you leave before Year 1, you get no stock at all.  Keep leaving and leaving and you may get nothing.
  • More importantly, even if you leave at Day 366 (i.e., getting to your cliff), you won’t really get 25% of your stock.  That’s because if you are good, as long as the company you are at is under a few hundred employees — you’ll get more options.  Either you’ll get promoted and get more options (promotions are quick in a start-up if you are a rockstar), or you’ll get more options because in a start-up, you can easily be appreciated if you rock.   So really if you leave after Year 1, you’re probably only getting 15% of your total expected options.
  • If the basis/strike price is other than nominal, you have to pay to buy your stock.  And it may be too expensive to buy all of it when you leave.  This is a downside of the monster, high valuation rounds these days (combined with the relatively modest discounts for common stock to preferred since the mid’00s).  In which case, you’ll end up with nothing.  If you stay through a liquidity event, this issue goes away.  More on this problem here.
  • If you get RSUs instead of options, in some cases, you may get nothing when you leave anyway pre-liquidity event.

We could easily make a longer list of other reasons to stay longer than a year (notice you never see sales guys — who run on cash — that are killing it leave after a year).  And if you have a stupid boss, or are at a losing company, you gotta go.  But if you always leave after a year … not only will you never grow in your career … you’ll never make any money …

Published on September 7, 2012
Share This