UPDATE: Startup vs. Corporate and how that relates to Happiness vs. FIRE

[COEE]

[UPDATE: Someone asked me for an update - a little over a year later - see it below]

Long time lurker - first time poster.

Background.  I'm an EE in Colorado.  I currently work for a very large corporation that is consistently in the top 100 of the Fortune 500, and I'm pretty miserable, not with the day-to-day work, but with the climate of the company.  I have been looking around the CO Front Range for quite some time for my next opportunity, both internal to my company and external to my company trying to get to a happier place.  And I think I have finally found a place that will be a great match.  I am hopeful that I will be given an offer in the next week or two for a small startup (in Longmont, of all places).  I am a little behind the 8 ball on my knowledge of how a startup works, but I have been doing a lot of research, and am excited about the opportunity.

The pluses of switching paths:  I will be working in a small engineering team with more experience than I on a daily basis.  Which will be HUGE for my skill level.  The group really seems to be a good group of folks that seem to get along.  The company is in a hiring mode, so they seem to be growing rapidly (about 50%/year).  They have been in business for over 10 years now and the Engineering Manager has a lot of experience in management, engineering, and startups.  The engineering group seems to be having a lot of fun, and don't appear to be overworked.  The company has also had a recent $10M+ investment round, so they appear to be trending for the positive.

The downside:  I know that I will be up for a promotion in the 6 -12 months with my current company that will increase my salary by at least 10% - not to mention my 10% 401k match.  Whereas, the new company has no 401k match, but does offer equity in the company.  I also expect that my salary will go down because my experience level for what they want specifically is not fantastic.  I'm a good engineer and I have no doubt that I will succeed technically, but right now I have limited experience in the areas they need.  But the bottom line is that I expect to be guaranteed at least 20% less money with the startup than what I'll make at the big corporation, probably closer to 30%.  I might make some extra cash if the company is acquired, but that's no guarantee, and it seems that there are too many variables (strike price, taxes, option depreciation, acquire price, etc) to very accurately determine what my equity will be worth if the company is acquired or bought out.

So my question:  Do I chase happiness now at the small company with more fun work, or do I stay with my current company which is very stable company, and my FIRE being very attainable without much question, for pretty much guaranteed retirement happiness in a short time-frame, possibly even early 40's.  It seems that I will make a lot more cash and will be much more likely to actually achieve a 45 retirement with my corporate gig, but that job is draining, long hours, and low moral, and little of what I really enjoy doing (design).

Other pertinent information:
My wife is starting to bring home money from her own business.  She expects to bring home significantly more money starting within the next 6 months which will basically offset any reduction in salary that I'd attain.  Her company is about 3 years old and is still highly volatile, but they continue to grow while being debt free.
We are debt free, as of this month (so long student loans!!!), except my house.
My current savings rate is about 30% (Including my house principle payments, my 401k and company match, and student loan 'savings' which I will be stashing instead of paying to the student loans.)  I realize that I need to improve this a bit if I want to achieve FIRE.
I am 33 and wish to be FIRE by 45.
My net worth is about $0.25M
I do wish to continue engineering work after FIRE, assuming I'm still having fun and am learning new things, but I want the flexibility to be able do what I want to do as well.
I don't completely subscribe to MMM, YMOL, YNAB, or DR, but I take a bit from all of them and at least move in the right direction, even if I don't achieve all of my goals in the timeframe that I'd like to.

Seems that this is a bit of brain bender for me.  Happiness now, or happiness later, and what is more mustachian?  I know what I WANT to do, but am struggling with the retirement scenario that it will leave me in.  Also, the new job would leave my family with significantly more risk because both my wife and I will both be in high risk work environments.

I know these are pretty personal questions that only I can answer, but maybe someone here has been through the same things and can offer my wife and I some advise.  I really wish I could have my cake and eat it to.

[Bicycle_B]

How about itemizing yourself a set of "Mustachian" changes in lifestyle that cover the income difference that you're anticipating? 

Then, by implementing those changes, you can have your fun job and still invest at the same pace as before.  With your expenses lower, you'll also need less of "stash" to retire on, so you can retire before 45 and have fun on the way.  Then any extra income you get from your presumed equity stake will just accelerate you further.

If your costs are low, you have total freedom to find high quality work and still be on a reliable path to FI/RE.

[Ziggurat]

I hear a lot of excitement in your tone about the other job.  The only downside seems to be the money, which is fact is likely to be covered anyway by your wife's business.  Another point is the huge experience you mention at the other job, consider whether that can realistically translate to much higher pay down the road anyway.

So I would only suggest that you research the other job a little more ... talk with people there, etc.  You don't want to be in a place where you took the cut in pay and it turns out to be as unfulfilling as the current job.  Otherwise, it sounds to me like you really do want to take the leap.

[The Beacon]

I am 33 and wish to be FIRE by 45.

You should chase happiness  since you are too far from FIRE . 

[myzamboni]

Startups typically pay more than established companies, and you make a bigger impact as an employee, and are much more visible to E-staff.  Having worked in both environments I prefer startups.

[bacchi]

Go for the startup. When the funding comes in, you'll probably get to market rate. You have a good attitude about it -- choose to be surprised if you make anything from the equity.

For what it's worth, I'm pretty much 0-for-6 with startup equity and I'll retire before 45.

[NaturallyHappier]

Chase happiness!

Never stay somewhere where you are not happy.  It's never worth the time lost being happier. 

Remember that you have limited time on to live.  Don't waste a moment of it.

[mm1970]

Go for the startup. When the funding comes in, you'll probably get to market rate. You have a good attitude about it -- choose to be surprised if you make anything from the equity.

For what it's worth, I'm pretty much 0-for-6 with startup equity and I'll retire before 45.

Ha ha ha ha!!  NEver got market rate.

[COEE]

How about itemizing yourself a set of "Mustachian" changes in lifestyle that cover the income difference that you're anticipating? 

Funny you mention this - biking and/or walking distance to the new house will be at the top of the list.  My wife will need to commute to the city at least a couple times a week for her business - I see no way around that.

I hear a lot of excitement in your tone about the other job.  The only downside seems to be the money, which is fact is likely to be covered anyway by your wife's business.  Another point is the huge experience you mention at the other job, consider whether that can realistically translate to much higher pay down the road anyway.

So I would only suggest that you research the other job a little more ... talk with people there, etc.  You don't want to be in a place where you took the cut in pay and it turns out to be as unfulfilling as the current job.  Otherwise, it sounds to me like you really do want to take the leap.

I really think our mind is made up, assuming any offer is reasonable... The experience alone will be the primary reason for taking the new possition, and will eventually lead to higher pay rates eventually.  I spoke with the electrical engineering department quite a bit (about 3 hours) and I really felt like it was a good group of guys that meshed well and that I thought I'd fit into easily.  I have a good friend with an MBA that's been in a few startups that is going to help me evaluate my offer and see if it's reasonable and help me with negotiation techniques if needed.

Startups typically pay more than established companies, and you make a bigger impact as an employee, and are much more visible to E-staff.  Having worked in both environments I prefer startups.

Really?  Everything I've read has said that you'll make less at a startup because they offer you equity in the company.  More risk - more reward.  I will like the feeling of doing something really good for the company and having the exec's see that I pushed it through.  Will that lead to additional pay?  I wish my crystal ball would tell me...

I am 33 and wish to be FIRE by 45.

You should chase happiness  since you are too far from FIRE . 

That's the thing - If I stay with my corporate gig I wouldn't be surprised to hit FIRE in my 30's with my wife's income... hell, I'm already about 1/4 of the way there with my net worth.  So do I suck it up and work another 7 years in corporate hell for an extra 7 years of retirement?

MMM promotes early retirement and happiness... trying to figure out how to get both.... BarrettSun probably has the right idea, which is not out of reach, but will be a stretch and need some lifestyle changes in both me and my wife.

[larmando]

MMM promotes early retirement and happiness... trying to figure out how to get both.... BarrettSun probably has the right idea, which is not out of reach, but will be a stretch and need some lifestyle changes in both me and my wife.

Well MMM definitely promotes lifestyle changes, too. :) :)

[mak1277]

What about your current job makes you unhappy?

What about the start-up do you *think* will make you more happy?

I guess I'm wondering if you're sure that the start-up is a better fit for you (forgetting about money), or if this is just a "grass is greener" situation.

[COEE]

Great questions...

The things that makes me displeased with my current position:

• I am told I can't do things, when I should be able to. Example 1: I tried to order parts the other day and was told that I can't order parts without released engineering, but I can't release my engineering without verifying the design.  These sort of catch 22s have been driving me nuts and are deeply rooted in the politics of the company.  It always seems that they want you to do something, but they don't want to give you the tools you need to get the things done.  These are the sort of dumb things that big companies do that make my line of work so expensive.
• Lack of team atmosphere.  This is rampant in everything.  I have a EE group that I work with, and we are a team in one sense... on the other hand, they have us compete for promotions, new work, and transfers.  I just recently had a few interviews within my corporation where my competition was my coworkers.  We don't do anything outside of work together either... forget beers after work, we can't even go to lunch together.
• I am overworked... some of that has been self inflicted... and I'm learning to not be the man.
• stressful... incredibly stressful
• Total lack of mentorship - I am consistently the most senior EE in my group doing any actual design work.  I'm an okay engineer, but I could also learn a lot from working with a tight group of EE's with some with more experience.  About once every 2 months I get help from an engineer with more experience than I have which is invaluable, but I don't get much technical oversight - just when something is going horribly wrong.

I'm hoping all of these things improve with the new job - well, maybe not the stress.  The only reason I don't think I'll be overworked is because I specifically asked about this and the manager said that if he had someone working consistently 55-60 hours a week that they are overworked and need help, or that they aren't the right engineer for that job.

I do think that profit margins and marketing will be the newest big challenges for me at the new job.  These are things that I don't think about much right now.

[COEE]

I will also miss having oscilloscopes that are worth more than my house.  Sounds like they give you adequate test gear, but that's it.  That will be something that I'll have to get used to.  I currently have a piece of test gear that is worth 30k.  It took an act of congress, but I made good business reasons to get it, they had 'surplus' funds available at the end of last year, and they bought it for me.  Sounds like it would be a little more difficult to acquire such a nice piece of gear without strong technical justification for why I can't do my job without it at the startup.

[MonkeyJenga]

I would vote for the startup, assuming you have a good grasp on the environment there. 7 years is a long time to be miserable and hate everything about your work. Plus, you said you would probably want to keep working in the same field after hitting FI, so is early retirement even really your goal? Or is your goal to find a company you could be happy at for decades, even after technically being able to quit? I don't see a lot of risk in accepting the (hypothetical) offer. You'll learn more, be more inspired, and if the company goes under you'll be even more marketable than you are now.

As far as the lifestyle changes go, if you're happier in the new job, there's a good chance you'll be more willing to make changes in other parts of your life. Do you have any sense how much of your current spending is due to stress or lack of time?

[COEE]

Or is your goal to find a company you could be happy at for decades, even after technically being able to quit?

I think FI is really the goal... I'll only RE if I'm bored.  I really love doing EE work... I don't know that I'll ever tire of it, assuming I continue to do new and challenging things.

Do you have any sense how much of your current spending is due to stress or lack of time?

I'm not quite following you here.  So I guess I don't have any idea.

[MonkeyJenga]

Do you have any sense how much of your current spending is due to stress or lack of time?

I'm not quite following you here.  So I guess I don't have any idea.

One of the concepts in YMOYL is figuring out what your real hourly rate is. Subtract taxes, add in the hours you spend getting ready, commuting, and decompressing, and subtract all the ancillary spending that goes with the job. That spending could include a new fancy suit every year, lunches out with coworkers, expensive vacations because you "deserve" it, ordering in dinner because no time to cook, drinks at the bar because your day sucked, etc. Money that you otherwise wouldn't feel compelled to spend if you didn't have a completely miserable job that took up all your time. If you examine your spending in detail, you can figure out how much is related to that job, and that's all taking away from the large salary.

Might be useful to you to run that exercise.

[minority_finance_mo]

First of all, startups love to give away equity to employees, because something like 1 in 10 times they actually have to pay out. Unless the company sells in the time you're there, your equity is completely worthless, so take that out of the equation.

That said, make it clear that you expect to be paid market rate for your work. There's no reason you should take a pay cut, except that you're willing to accept one. It seems like it may be too late now, but it's important to set expectations in the interview process. When they told you there would be no match, you should have pushed back by letting them know in your past company you were matched to 10% of salary, and asked what they can do in terms of bonus/salary to make up that difference.

[freebeer]

First of all, startups love to give away equity to employees, because something like 1 in 10 times they actually have to pay out. Unless the company sells in the time you're there, your equity is completely worthless, so take that out of the equation.

That said, make it clear that you expect to be paid market rate for your work. There's no reason you should take a pay cut...

That is baloney.

First of all you can leave a company with vested options and get rich later, lots of ex-Facebook folks did so for example. You are at substantially more risk if you've left as if there's a "down round" prior equity holders may get "washed out" and only current employees re-upped with new grants, but equity in a prior company is far from worthless. I know one guy who had vested stock in a company bought by Microsoft a couple decades ago and he had a stock certificate in a dresser drawer that ended up worth millions. Another guy I know more recently had worked for Demand Media, he was broke and working as an hourly contractor but then they had their IPO and he built a new house. So startup management hates to give out equity because it dilutes founders and investors.

And, if you are working at a startup you shouldn't expect to get paid "market rate" (i.e. same as at a MegaCorp). You have the upside of a potential option payout and also most startups are cash misers. Startup base pay is often 75% of MegaCorp base pay, with fewer "dependable" fringe benefits. Of course this depends on the specific location and its job market, your specific skills, and the particular MegaCorp (some "brand name" MegaCorps try to cheap out because they are giving you resume value).

[minority_finance_mo]

First of all, startups love to give away equity to employees, because something like 1 in 10 times they actually have to pay out. Unless the company sells in the time you're there, your equity is completely worthless, so take that out of the equation.

That said, make it clear that you expect to be paid market rate for your work. There's no reason you should take a pay cut...

That is baloney.

As a muslim, your choice of deli meat flavored idioms sicken me.

Most vesting periods I've seen are mid- to long-term (3-5 years), which means the employee would have to accept below market wages for up to 5 years before fully vesting. Not really sure what you're arguing here, since my argument that start-up equity is worthless in the majority of cases is pretty much fool- (and pork-) proof. Obviously, there are exceptions to the rule, but they are just that: exceptions.

Back to OP: if you consider the stock options, make sure you discount them accordingly. If something like 20% of start-up stock options retain value (made up number), you should discount the options to 1/5th their current stated value to compensate for your risk, at the very least.

[NorCal]

I've worked for the government, big companies, and small tech startups.  It took me a long time to realize that the question you're asking is the wrong question.

Some startups are great, some are horrible.  Same with big companies.  What really matters is the quality of your boss and your coworkers.  Focus on the individuals you'll be working with, and you'll end up with a better result.

For the career oriented, I recommend working at both a big and small company during your life.  You'll learn things at each that are important and don't exist in the other world.

Always insist on a fair cash value for your work.  You can choose to make slightly less total comp at a smaller company, but you have to honestly believe that it is a fair wage for what they're asking.  Don't let them pull the stock options card.

In regards to startup stock options, value them at $0.  Always.  Being on the finance side of startups, I see all the misinformation and misconceptions.  As a rank-and-file employee, you will NEVER have enough information to properly value your options.  This isn't like public markets where one share is the same as any other.  Venture investors have preferred stock that hold superior economics to your common options.  And they won't tell you what those preferences are.  For example, you could have a successful startup sell for $50M.  But if the venture investors have a combined $70M liquidation preference, you still won't see a dime.

Also, stock option grants for rank-and-file employees are typically large enough to sound big, but not big enough to be worth much.  I did the math on the options at my first startup.  Had they been super successful with a 10X massive exit (rare), I might have made $10,000 on my options.  This is pretty typical of option plans in the market.

[COEE]

Well, I decided to take the plunge - turned in my 2 weeks notice to the corporate gig yesterday.  I'm excited, scared, and everything else.  The plan is to move into a house within biking distance to work and my daughters new school.  Hoping to run into MMM himself at some point.

Real Estate in this area is crazy.  The how to sell your house post is good timing for us.  I think we're going to rent a house for 6mo to a year to make sure things are going to work out at the new job and to let the market cool a bit. 

Thanks for everyone's advise.  I think this certainly is the happiest decision we could have made.  And I don't think it will postpone our retirement much - the goal is 10 years.  Hopefully sooner.

[golden1]

My husband worked a corporate job and was miserable for years.  At the time, I wasn't working and we both made me being home with the kids a priority so he had to stick with it.  As the kids got older, an opportunity came up for my DH to start his own business, but at a 15% reduced salary and no benefits.  Since I had started a job by then with benefits, he decided to go for it, and it ended up being a great decision.  He is far and away happier, and that pays off in a lot of ways.  He has energy at the end of the day to spend with the kids, and work on side projects around the house.   Our income stagnated for a few years, but now it is growing again, and there is an opportunity to have a big payday sometime in the future, although I don't count on it. 

[COEE]

My husband worked a corporate job and was miserable for years.  At the time, I wasn't working and we both made me being home with the kids a priority so he had to stick with it.  As the kids got older, an opportunity came up for my DH to start his own business, but at a 15% reduced salary and no benefits.  Since I had started a job by then with benefits, he decided to go for it, and it ended up being a great decision.  He is far and away happier, and that pays off in a lot of ways.  He has energy at the end of the day to spend with the kids, and work on side projects around the house.   Our income stagnated for a few years, but now it is growing again, and there is an opportunity to have a big payday sometime in the future, although I don't count on it.

Funny - I'm going up there with ~15% reduced salary after considering loss of 401k matching and their poor benefits package.  Base salary is actually just a hair higher actually.  My equity stake is pretty crappy too.  I might get a few thousand bucks if they get acquired - but that was pretty low on the priority list for me too.  I'm going up for the work experience, the lifestyle changes, and to learn as much as I can - and because my wife told me to!  Sounds like it worked out for you - and I'm guessing it will work out for me too in the end.

[AZDude]

I've worked at a small start-up(about 8 people when I first got there) and I have worked at a fortune 500 company. The start-up was a lot of fun at first, but when things started to sour financially(had a hard time getting funding, no one wanted to buy the product), the work environment turned into a nightmare. 60 hour weeks, founder yelling at his employees, promised bonuses getting rescinded, etc...

Not just that, but when I saw the writing on the wall and left for greener pastures, the development manager was extremely pissed off at me, thinking I was abandoning the company or something. Not totally sure. Anyway, the point was that if the company makes it, its going to fun and a good career move, but that most don't. You are youngish, and as long as you are OK with the risk, I would try it out.

Like I said, I also worked for a fortune 500 company. Much better benefits. Never asked to work 60 hour weeks. Pay was a little below what I could get elsewhere, but the benefits more than made up for it(6 weeks pto vs 2 weeks, cheaper health insurance, 401K matching, etc...).

[NorCal]

Congrats!  Sounds like that will be a good move for you.  Good luck with the transition.

[Bicycle_B]

Way to go COEE!

Best of luck in your new adventure

[COEE]

Update Post - 1 Year Later

It's always fun to hear a bit about how a story ended on these types of forums.  Someone in another post asked how my situation turned out, and I thought I'd give a more in depth answer here.  All too often someone asks for advise, a few people give some advise, but you never really hear what happened.  Well, it's been a little over a year since my original post.  I've been at the new job for about 10 months now.  I am SOOO glad I made this change for my family.

Last summer was pretty miserable.  We spent all summer fixing up our house to sell.  New stain on the exterior, new master bath, new carpet, some landscaping, paint throughout, new fixtures, and LOTS of little things that I kept putting off (door bell, heavy cleaning, new door, etc).  We finally listed the house in October.  It took until February to sell.  This was a very stressful 6 months or so for me.  We made a terrific profit on the house.  We would have maybe made more if we sold this spring, but we were ready to sell and move on with our lives.  There were some good lessons here though.  I'll shoot for selling in the spring from now on and not procrastinate on those small chores so much.  We made a killing on the house which also helps.

In September we also signed a month-to-month lease on a townhome.  This was a terrific move.  We knew the property manager personally or else we probably wouldn't have been given the m2m option.  It was tough with two housing payments for a while, but it has worked out wonderfully in the end. This has allowed us to begin shopping for a new home once our old home sold.

With this move we have decided to reduce our cost of living even though we only moved across town.  We were able to do this because we made a good profit on the old house (It was in a yuppy neighborhood and we bought it as a foreclosure back in 08), and we were planning to buy in a lower cost of living neighborhood than our last house.  The housing market in Longmont, CO is ridiculous.  We put offers on 3 homes the same weekend that they listed.  All three were good offers but we were beat out each time by more expensive CASH offers.  I exchanged emails several times with MMM about this craziness - he pointed me to some houses that were in my price range a few times and a couple of them my wife and I went to look at even - but nothing was working out and we were extremely frustrated.

I was ready to wait until the elections were over and winter to return to start the house hunting again, and we got a phone call from our realtor.  Another broker in town was listing a house in the neighborhood I wanted to be in, and we had a chance to offer a high, but fair offer, before the house hit the market.  No bidding war, no fighting, no heartbreak, no crazy prices.  We are suppose to close on this new (to us) house on June 8th.  Assuming everything goes smoothly and we close, we will have reduced our house payment ~$600/mo from our last house.  Reduced our loan terms by 7 years.  Increased our principal payment by $250/mo.  This alone saves us the 401k match that my previous company gave me that I was so concerned about loosing.

The new house is 1 mile from my new office.  My daughters school is 1 block from my office.  The community park is 1 block from the house.  The rec center is 1/4 mile from the house.  Groceries are about 2.5 miles away.  It is the perfect setup. 

The new job is awesome.  The people are great.  We all work pretty well together and are all generally pretty happy.  The work is a bit bland compared to what I'm used to, but it pays the bills and is interesting enough to keep me entertained.  Their is FAR less stress than my previous job.  The business isn't growing as much as expected when I hired on.  Still making money - just not as much growth as expected.  We just debuted the project I'm working on at a major conference a few weeks ago, so we're all hopeful business will start to pick up significantly now.

Anyway - life is good.  I'm so glad we chose happiness and chose to work in a small business.  It's a really good match for me.  Assuming business continues to be good, I can see myself working there for quite some time.  This summer is the Summer of FUN!  We're going to makeup for last summer.

There's really only two downsides... my wife does have a long commute ~45 minutes each way, 2 to 3 times a week.  The new job is a little less flexible with 3 weeks PTO - with no sick time (sick time is taken as PTO).  These are small prices to pay for such an improved standard of living.

Thanks for the help making this decision!

[Bicycle_B]

Thanks for posting again, COEE.  Glad the job and the move have both been working out.