Gmail Peter Burgess
[newtech-1] Scoping out a budget range for a lead developer (Python)
10 messages
Connie Wed, May 7, 2014 at 5:48 PM
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Hi everyone!
I've just jumped on board an app start-up where we have seed funding but lack technical backgrounds, so we are looking to bring on board a strong lead developer who would be able to work with large datasets (hence, Python expertise) and has some experience with mobile development.
Given our lack of experience, I'd like to ask for insights on the salary and equity stakes we might expect to offer. What kind of range should we be carving out in our budget?
My other question would be regarding where we can best conduct our hiring search - are there sites for hiring a really good local developer who'd be interested in leading a startup? I've used the large freelancing sites like odesk, elance, guru etc. before to contract out web development work, but we're really looking to bring someone on board the team (i.e. someone who'd really be invested in our project long-term) rather than a freelancer or a contractor halfway across the world.
Thanks so much for your time!
Best,
Connie
Rick Richardson
Wed, May 7, 2014 at 5:57 PM
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Why python, out of curiosity?
Do you have an existing codebase?
Is it web Dev? Algorithms/computer-science? Machine Learning? Will they need to know/do systems engineering to build out an infrastructure in addition tov their coding tasks? I would expect to pay different amounts for each of these.
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Jonathan Peters
Wed, May 7, 2014 at 6:05 PM
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Hi Connie,
For a strong lead Python developer, you should budget $130k - $175k, depending on the level of seniority necessary. Equity should be at least ¼ of a point and typically up to 1 point or 1 ¼.
The best way to conduct the search would certainly be by utilizing a recruiter that understands your business, its goals and will be a strategic partner in identifying the talent you need. If that is not within budget for this hire, you should heavily rely on your network and try to hire through referrals. I highly recommend attending meetups as well. The more specific they are to your requirement, the better you’ll be able to network with individuals who may be able to refer. Services with the developer auction mode (i.e. hired.com) may be interesting for your need, however most of my clients have had little success going this route.
Hope that’s helpful and if you have any additional questions, please feel free to ask.
JP
Jonathan Peters
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Klaus Sonnenleiter
Wed, May 7, 2014 at 7:13 PM
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Hi Connie,
What you need to budget depends to a large extent on the domain expertise you require. Python expertise usually commands a premium since it’s in high demand. Since you mention large datasets, I suspect you are not looking for someone who read a few blog posts on Django and now graduated to web development “expert”. You’ll probably need someone who understands Python’s way of slicing arrays and what it means for performance, plus has a good understanding of the field you’re in. I don’t think you’ll find anybody worth hiring for less than $100k, likely more depending on the area of specialization.
On how to hire, the best way is always to hire from within your network. If you know someone from working with them in the past, it always beats any filtering expertise a recruiter could bring to the table. If you don’t have anybody in your network who has the required expertise and none of your co-founders do either, you might want to reconsider your specs - not that you can’t succeed, but it’s just much harder, if you have never worked with people similar to the ones you think you need to hire.
Good luck
Klaus
Klaus Sonnenleiter
PrintedArt
klaus@printedart.com
klaus@sonnenleiter.com
Jonathan Vanasco
Wed, May 7, 2014 at 7:52 PM
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I'm reading this as 'We raised money for our business plan, but have no one technical on staff'
You mention 'Python' , but only talk about 'large datasets' as the reason why. You also talk about 'mobile development' and someone to be 'leading a startup'.
That raises a lot of warning signs and flags to me :
1- You need a technical co-founder on board. Someone who can manage the processes and decisions, and can also get their hands dirty to code and lead.
2. Since you're talking about Mobile and Large Data Sets, you would probably be better off with a co-founder who is a generalist and can oversee Backend and Mobile development -- and actively take part -- but is not responsible for both. They will require 1 if not 2 developers to work under them initially. You will run into numerous issues if you try to pull things off with 1 developer , either in-house or contract. They're different skillsets and there will be technical planning & waterfalls to account for.
3. Depending on the exact skillsets and their aptitude, going market rates for a Sr Engineer are in the 120-240 range as base salary. For someone in the management side, it's 180-350. For cash-compensation with equity stock, the averages drop into the 100-180 range. those come with the 1/4 - 1% stocks like the other J mentioned, but for a much more stable company than you have.
The equity compensation for early stage employees varies. For your first technical person, who will be taking a leadership role on the company , you should expect to spend anywhere from 10-20% of equity. the person you need will be turning down 35% co-founder roles and job offers from big tech / stable startups that end up at 300k yearly cash and stocks. If you want to motivate them to build your company and stay, you're spending double-digits on them. it doesn't matter who you are or what you think you can sell -- good developers have heard all the pitches and turned them down already.
After that hire, it's common to spend around 10% total on your first 5 hires; probably 3 of them in engineering; and another 10% reserved for later employees. most plans i see reserve some of that for early hires in the range the other J mentioned, and the rest for a later hiring pool.
There have been a handful of articles on the vs & angel blogs that outline typical early-stage options packages.
// Jonathan Vanasco
Consulting Technology, Product, and Operations Executive to Media Publishers and Innovative Startups.
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e. jonathan@2xlp.com
linkedin. http://linkedin.com/in/jonathanvanasco
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Hank Williams
Wed, May 7, 2014 at 9:03 PM
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'For someone in the management side, it's 180-350 (for base salary)'
Not bonus, not equity, but base? I think throwing those kinds of numbers around is misleading. Peter Thiel has a rule at all of his companies that *no one* at any early stage company should be paid more that 125k, and that in his experience, that there is an inverse correlation between top salaries that go above this range and success. I am not sure I totally agree but the point is that there are folks vastly more successful than either of us who would vehemently disagree with you on what companies can and should pay. For example At Palantir (one of peters companies) no one, including the CEO makes more that 125, and they have a market cap of something like 9B.
Peter Bell
Wed, May 7, 2014 at 11:18 PM
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On May 7, 2014, at 9:04 PM, Hank Williams wrote:
> 'For someone in the management side, it's 180-350 (for base salary)'
> Not bonus, not equity, but base? I think throwing those kinds of numbers around is misleading.
It’s not that misleading. I made in that range at my last real full time gig and know plenty of CTO’s who make the same in startups. There’s a big difference between seed and a series A or B and also a big difference between co-founder with 20%+ before dilution and someone brought in as a hired gun with at best 3% and possibly a fraction of that before dilution.
If you’re really great at getting teams of developers to deliver real business value, attracting the best developers, managing them effectively and architecting effective and scalable solutions that’s a $350k+/yr skill set. Early stage companies provide a bigger potential upside, but by the time you risk adjust everything, it’s really hard to justify taking $150k or below (less than you’d make as a really senior engineer) for the responsibility and effort of a CTO gig unless (a) you really believe and (b) you’re looking at a life changing event, after multiple rounds of dilution plus taxes on a $20-$100m exit. Anything bigger than that in terms of exit is so rare as to be statistically really unlikely to occur in any given persons career, so doing the math based on getting a taste of the next Facebook isn’t worth it.
The one thing I notice is that most CTO’s who’ve done a few startups tend to favor cash over equity. There are exceptions and all of us take a run working for free or at a substantial discount to market once in a while for a project we really believe in and founded or have a really meaningful equity stake (or for other reasons - perhaps something mission oriented like Charity::Water or DonorsChoose), but I don’t think $180k+ cash comp for adult supervision in a series A fast growing company is either misleading or inappropriate.
I’ll admit that I wouldn’t expect to see much over $220k in a “real” startup. That’s later stage Google or Facebook money . . . although if you’ve got enough cash and are having a hard enough time attracting talent . . .
Best Wishes,
Peter
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Jonathan Vanasco
Wed, May 7, 2014 at 11:23 PM
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Those are market rates in NYC for corporate companies.
For startups, I said prices were lower -- in the other J's range, which is comparable to yours.
My point is that someone who will work for StartupX in a senior role is taking it instead of a market rate job. Their cash/stock package needs to be lucrative and rewarding for them to join.
If you have a bunch of high profile backers who are committed, then you can get people on board for much less cash and stock. The products might suck, but the investors can ensure a higher round or acquisition exit. The vast majority of startups in NYC are not financed by those a-list angels and firms; many will try to offer 1/3 market rate and a pittance of equity which will never offset the losses. Junior programmers fall for that; senior talent doesn't.
If you have a good CTO, they can hire in the 70-120 range and do staff development. If you don't have a CTO, you're either going to have to pay a lot of cash or give up a lot of equity.
Two years ago, I saw a few companies capped at 160 cash for all positions including management.
Also, a lot of people post here about needing a 'Lead Developer' when they need a technical cofounder (no in house experience); and others post for a CTO when they really need a lead developer (they have enough tech talent or direction already, and just need more hands to build -- but don't realize the value of their in house resources).
Hank Williams
Thu, May 8, 2014 at 4:33 AM
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But Peter, we are talking about a seed first hire here not a 'b' round company.
The simple point is that neither you nor any of those people you refer to would be hired by a Peter Thiel funded company at even the 220k salary. That is a fact. And while he's the highest profile and most strident investor I've heard say that, he's *by far* not the only one to express similar sentiments at the seed level. Certainly IMHO at the seed level I agree no one should be paying anyone anywhere near that, regardless of their awesomeness. And I don't know many angel investors who are going to fund that kind of first hire salary, regardless of the breathless justifications that one might make. If an entrepreneur can't build a team that believes, they just don't have a company. But maybe all this leads to is just aggressively avoiding the 35+ Y.O. been-around-the-block-and-jaded folks in such situations. Just maybe.
Peter Bell
Thu, May 8, 2014 at 8:35 AM
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Firstly, agree with you - for seed, first in the door, going over $150k is tough - probably over $125k is hard to justify. It’s why most people who’ve done a few startups won’t do seed stage except in very unusual circumstances. They let an A round do some more filtering and come in when the original lead is overwhelmed by trying to scale from 3-5 to 20-40 engineers after the series A (at the cost of having a lower upside).
I don’t think the Peter Thiel thing is that relevant. I’m a fan, I mentor for the 20 under 20 program, and there’s real value in getting well known money in, but one of the benefits of being a well known investor is that you can promote terms that are good for the money but not necessarily as good for the employees. I have no problem with him using his soapbox for that, but there are plenty of smart VC’s that pay market for post-series A CTO’s.
I actually think a lot of people try to hire a CTO when they really need a lead developer. If you’re seed round, most of the time, a CTO with experience scaling an engineering team isn’t what you need - it’s a hungry developer with maybe a little team lead experience and at least a couple of years development experience in a quality team under a good CTO or VP Eng. Whatever happens such a hire can write the code you need and hopefully they can grow with the position. If not, you can always bring someone in above them after the next round if they get overwhelmed.
Personally I’d replace “jaded” with “realistic” - or perhaps even “not batsh*t crazy”, and I’d strongly recommend against anyone actually having a hiring policy that directly takes into account age because it’s illegal (you’re probably not gonna get sued as a seed round company, but if things go well, the lawsuits tend to crawl out of the woodwork), but I do agree that you should hire the right amount of CTO for the job today - rather than preemptively hiring someone with a bunch of skills you haven’t proven you can raise enough money to need yet. That said, if someone is senior, really believes, will take the low cash comp and still knows how to program and is willing to do that 40 hours a week, all other things being equal, a more experienced engineer will have wasted more of other peoples time and money making mistakes already so they’ll waste less of your time and money making those mistakes than someone with less experience.
Best Wishes,
Peter
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