It sucks trying to build a startup in the New York City area. But not because of what most people think. It is not the weather or the expensive lifestyle. There is no lack of experienced people, success stories, active VCs, a supportive community, or good entrepreneurs with great ideas. Before starting my own company I worked for a (Really) big bank, and like most employees in corporate America I blamed everything on my employer – nothing unusual about that. But I did surprise myself when I still blamed my former employer for everything after leaving them. Well, maybe not one particular employer but the financial services industry as a whole.
In my recent visit to San Francisco, I realized that people there have little clue as to what it is like working for a New York bank, with junior developers salaries starting at $100K, 3-4 years experience can get you $150K, and that’s before an annual bonus of anything from 20-100% or more. Most of my friends with under 10 years experience are in the $250K range total compensation. They all work hard, but not more than a typical startup in the valley. No wonder why I can’t get any of them to leave their jobs and join me. One of them who actually started working on my idea with me a year ago ended up going to another bank instead.
Startup folks are usually people in their 20’s to early 30’s. After that it gets hard to balance kids, mortgage, and walking the dog with 12-14 hours days. But when you are 25 and get offered a nice 6 digit paycheck, it is hard to say no. And of course, once you are in, it is harder to leave. You see, these big bonuses are paid part in cash and part in stock. Yeah, real equity – not those options you hear about in the valley. But you need to stay 3-5 years longer to get them. Unless you retire at 65 or leave to become a teacher, you always lose money when leaving a bank. Since Wall Street got the cash but not enough people, they do put their money where their mouth is, and they do buy you out to get you to move. If you are about to lose equity in one bank, your new employer more times than not will give you new equity to replace the one lost. Some will even pay your expected bonus to make you join in October and not wait for it.
This is knows as gold handcuffs. Get people hooked on high salaries, hold their fat bonuses hostage, and you got yourself a group of people who might leave one bank but will most likely stay in the club. This makes it very expensive for people to take a break and try something else for a little while. If you leave a job with restricted equity for a startup, that equity is gone forever. If the startup fails and you go back working for the banks, you will get a job, but not the buyout of the restricted equity. It makes startups much more expensive than just losing the salary while going for your dream.
As for me, I just closed a round of friend and family angel funding last week, and am working hard at getting Nouncer to a private beta. With a really cool platform, lots of exciting technology, and a unique take on the microblogging space, I think this will be a great experience and company. I am looking for co-founders to join me and while there are many criteria as to who the right person is, it begins with true passion for technology and a desire to build a world-class microblogging product. If you find my blog interesting and are in a position to join a startup, drop me a note. Hopefully you are not already working for a New York bank…