Every software engineer, whether fresh out of college, a few years into a job, or a seasoned professional, inevitably, at some point, starts thinking about how to advance in their careers.
One of the key questions they think about is whether to join a FAANG company or a startup.
Some of the key challenges engineers face in deciding between these two divergent, stand-out options center around -
- Understanding what each of these types of companies has to offer and how they differ.
- Making the right choice based on trade-offs, personal motivations, interests, and fitment.
- Determining when and how to join either of these types of companies.
To help software engineers with making this decision, we decided to ask some industry experts in a session on Clubhouse, the fastest growing social media app. This article is based on that session. Hosted by Ryan Valles and Soham Mehta, the co-founders of Interview Kickstart, the session featured a panel discussion comprising Interview Kickstart alumni & instructors working FAANG, tier 1 companies, and startups. The panel also fielded questions from the audience comprising software engineers from various companies including aspiring FAANG engineers.
In this article, we’ll cover:
- Character traits to thrive in a startup
- Reasons to join a startup
- How to choose the right startup
- Why FAANG companies are a better bet than startups
- Career development
- How to get recruiters’ attention at FAANGs or startups
Character traits to thrive in a startup
FAANG companies are mature organizations with clear frameworks, strategies, roadmaps, and visions working on a large scale, developing multiple products at a time. Established systems, structures, and renowned reputations characterize FAANG companies.
Working at a startup, however, is a different ballgame. Beneath their oft-romanticized facades, startups tend to have very challenging work environments, typically characterized by chaos and a general lack of direction.
Unlike FAANG companies that power the tech industry, startups are largely driven by market forces. The ups and downs of being a part of a small setup can prove thrilling or stressful depending on one’s appetite for uncertainty.
In fact, one of the key traits to thrive at a startup is the deliberate preference for uncertainty over predictability.
Startups are small, new ventures, centered around unique technologies, products, or ideas, loosely organized with dynamic processes and structures to suit the ever-changing needs of a growing company.
Flexibility and adaptability are central to functioning at a startup.
While FAANG companies function through large teams with well-defined roles, startups often require employees to don many hats and juggle multiple responsibilities; especially in early-stage startups with limited funds and manpower.
One of the most prominent characteristics of a startup vs. a FAANG company is riskiness. A risk-seeking nature is imperative to succeeding at a startup.
FAANG companies offer stability and standardized rewards and are suited to risk-averse personalities while startups have the potential for disproportionately high rewards but at greater risk. Startups are very fast-paced organizations and very prone to failure.
The startup lifestyle demands commitment before success. One has to consider a time horizon of 5 - 10 years, possibly at multiple companies, before determining whether startups are a right fit.
Reasons to join a startup
Ideally, the decision to join a startup should be based on an overarching preference for startups over other types of companies, including FAANG companies.
A strong personal connection with the company or what it has to offer is the ideal motivator to join a startup. Staying invested in a startup requires a commitment which can only be borne out of a strong belief in the company’s vision and the possibility of success.
A big draw of startups is that they solve unique problems, offering the opportunity to work on ideas, products, processes, technologies that no other companies are working on.
How to Choose The Right Startup
Finding the right startup to work for is not easy. Unlike large tech and FAANG companies where the choices are more obvious and information about the company is easily available and accessible, startups can be quite obscure.
- Key considerations in joining a startup
- Personal choice - Choosing to work at a startup is a very individual decision. One has to be sure of their reasons to go down this path vis-a-vis other opportunities, risk factors, financial considerations, etc. notwithstanding.
- Product - It’s important to be able to associate with the product and its domain. Use the product to get a proper understanding of its features, usefulness, and viability.
- People - Study the background of the investors, founders, and key employees of the organization to ensure they possess the right experience, qualifications, skills, and ability to inspire trust and drive the company to success.
- Investment - Understand the financial strength and potential of the company i.e. funding, valuation, revenue, growth, and any other related information.
- Startup stage
When deciding between FAANG companies and startups, it is important to note which stage the startup is in since startup risk diminishes as a company matures. Early-stage startups present the highest risk. Time commitments, compensation/equity, and role levels are all important aspects of joining a startup that vary based on the stage a startup is in.
- Startups are a repeat game
Startups are risky by nature. There is no certainty in startups in terms of company or product viability, or growth. However, startup risks decrease the longer a company operates and the larger it grows.
Knowing which company is headed for success or failure is hard to determine. If one stays committed to the idea of working with startups, the ability to pick the right startup to work for improves.
In some cases, it’s all about being in the right place, at the right time, working on the right product. While luck and intuition play a substantial part in joining the right startup, experience working at different ventures helps develop the ability to recognize successful ventures.
Another way to better understand and learn about startups is to set up one’s own venture informally i.e. without funding or incorporation. The simple act of trying to start and sell a venture on the side can accelerate one’s learnings about how to assess a startup.
FAANG companies regularly release easily accessible information about their organizations, allowing engineers to assess and choose which company to apply to or join. Employees tend to enjoy long-term careers at a FAANG company.
Choosing the right startup is never a sure shot. Even the best venture capitalists, globally, bet on multiple companies, of which, only a few prove successful. There are many factors beyond one’s skill set, determination, and drive that determine the success of a company.
Finding the right fit requires multiple movements, refining and applying learnings from each company along the way before finding the right fit.
- Researching a startup
Considering riskiness is the standout aspect of a startup, research is imperative in deciding the right companies to work with.
For this, the ‘Wealthfront Career Launching List’ is considered to be one of the most valuable resources available online to help assess startups.
Compiled and released by Wealthfront Inc., a California-based investment firm, this is an annual list of the fastest-growing startups or career-launching companies to work with, based on inputs from top VC firms. Startups are assessed on the following three criteria -
- Startups with revenues between $30mn - $300mn
Most startups either die or become stagnant before achieving the $30mn revenue mark while compensations beyond the $300mn revenue mark become too attractive.
- Positive unit economics
Startups with positive unit economics are more likely to be profitable. Some companies show growth but are unlikely to turn profitable without achieving positive unit economics.
- Revenue growth of at least 50% year-on-year
The list doesn’t rank companies in any particular order but companies that feature on the list are those that have better odds at succeeding than most other startups. The interview processes of many of the companies on the list are similar to that of FAANG companies.
Getting information on startups can be quite a challenge. Most articles published online are either biased or offer little value in helping assess companies, especially financially. Information in the form of estimates compiled by third parties is generally unreliable. Startups don’t usually publish information on their revenue or other financials.
However, startups do divulge pertinent information to interview candidates seeking to understand the company better. One way to learn about a company, its status and potential is by asking for specific information during an interview. Companies are more open to sharing deeper information once an offer has been extended to a candidate.
Why FAANG companies are a better bet than startups
There was a time when startups commanded the attention of large companies. Smaller, more nimble setups gave them a run for their money and captured considerable market share. However, over the last decade or so, big tech companies have figured out how to counter this.
FAANG companies now offer engineers all the advantages and excitement of working at a startup along with the stability and compensation that comes with working at a big tech company. For e.g. initiatives like self-driving cars and health care initiatives were first incubated at Google before being spun out.
- Innovation and inventiveness
Big tech and FAANG companies are trumping startups with their unique ability to support innovation at scale or for large-scale systems, given their data, infrastructure, and funding capabilities. For e.g. Google open-sourcing its AI language model Switch Performer with a trillion data points is the kind of capability startups can’t compete with.
A lot of tools and systems introduced over the last decade have originated from large companies. Smaller companies with limited resources may innovate better in processes and joining disparate things e.g. Rideshare, whereas deep tech innovations are only likely to come out of big tech companies in the future.
Innovation and inventiveness have always been a big draw at startups. However, big tech and FAANG companies, having adopted a very startup-oriented culture over the years, are now better poised to innovate and invent faster than startups.
AWS or Amazon Web Services, one of the most successful startups of the decade, and Kindle, are ideal representations of the kind of innovation leading tech companies are capable of.
Multiple groups within Amazon progress along the same lines as AWS, characterized by constant innovation, calculated risks, and the willingness to fail. Amazon Live is one such example. Although a live shopping experience is not a novel idea, at Amazon, the project is run like a startup where concepts are constantly iterated and innovated to provide the best possible shopping experience to customers.
The distinct advantage FAANG companies have over startups is the financial capabilities to run multiple experimental projects and absorb losses to leverage learnings for greater success at innovation and invention.
FAANGs are also known to hire engineers who are driven rather than engineers who are domain experts, a preferred choice of startups.
- Compensation and wealth creation
While startups are prone to failure, the chance to create disproportionate, multi-generational wealth has been one of the strongest lures of startups. This has gained more significance with the rising popularity of the FIRE (Financial Independence Retire Early) and Fat FIRE movements, especially among fresh engineering graduates.
Switching companies often to be a part of an IPO is considered a worthy trade-off for the risks undertaken.
It’s a common misconception that startups, when successful, offer better opportunities than FAANG companies to generate life-changing wealth.
In terms of compensation, startups can rarely compete with FAANG companies.
The possibility of earning high rewards does exist at startups, but only by undertaking higher risks. For e.g. earning a 100x - 500x return is more of a possibility at a startup than a FAANG company but such success is not commonplace, and more likely as a founder than an early member.
The risk and time involved to achieve this outcome, considering very few startups make it big in the short-run, doesn’t always compare to the surety of compensation and wealth creation at FAANG companies, at low risk, in the long-run.
Lower compensation for a chance at higher equity returns is the norm at startups. FAANG companies have the ability to offer great starting compensations with the potential for high growth along with attractive equity. Over a period of time, these compensation packages at FAANG companies lead to better rewards than one would make even at a successful startup.
Comparing equity components alone, back-of-the-envelope calculations reveal equity offered at FAANG companies actually delivers more returns than at startups. This can be attributed to very high growth rates (some with CAGRs @ 25%), high compounding values, ease of trading shares, and excellent performance in public markets.
Let’s take the example of an engineer who joins a Series A startup with a $50mn valuation i.e. a typical Series A investment of $10mn at 5x, as the VP of Engineering with a generous 1% equity stake.
Let’s consider the company achieves unicorn status ($1bn valuation) in the typical timeframe of 6 - 10 years, that it has diluted its stock by 80% during this period, and the engineer’s stake has diminished to 0.2%.
This means the engineer now has a holding, or made earnings, of $2mn at the end of 10 years.
Let’s now consider that, instead of joining the startup, the engineer had joined a FAANG company as a Senior Director or VP with a conservative compensation of $600k comprising a $300k cash component and a $300k equity component.
Based on past performance and returns typical of FAANG companies, which have the advantage of already being present and established in the market, the engineer stands to earn $3mn at the end of a 10 year period.
Refresher grants notwithstanding, FAANG companies prove to be a better bet even in terms of returns on equity.
- Brand Signaling
FAANG companies, being globally renowned brands, carry a lot of weightage when featured on a resume. Startups cannot compete in terms of brand value and recognition. Companies are considered more important from a signaling perspective than universities. For e.g. being associated with a FAANG company is a better signaling device than any top university.
- Becoming a better engineer
What makes for a better engineer depends on whether one values breadth or depth of skills.
FAANG companies tend to impart more depth in learning and development of engineering skills. Being at a large tech company makes for a very well-rounded, disciplined software engineer.
A software engineer straight out of college may know how to code but at a big tech company one learns all about software fundamentals and the discipline of the entire software development life cycle. FAANG companies have the best environments to fine-tune engineering skills.
Increasingly, a lot of emphasis is placed on engineers taking end-to-end ownership of projects. They are exposed to various areas of engineering and gain reasonable degrees of knowledge on a breadth of skills even at large companies.
In the chaotic, fast-paced, dynamic environments of startups, with limited manpower, software engineers are often required to work on different areas allowing them to develop a breadth of skills.
Startup environments are the most conducive to developing an engineer’s entrepreneurial skills. At startups, software engineers can jump from working on CSS and Java in UI to APIs to backend to infrastructure, tuning them into generalists very quickly.
It is considered far easier to grow and move up career levels at startups. However, unlike many big tech companies, FAANG companies tend to place a lot of importance on growth within levels.
At Amazon, engineers are expected to meet a ‘bar’ i.e. a prescribed level of skill at each engineering level. An effective way to keep stagnation at bay, this compels engineers to constantly develop and grow, not just to move up levels but to survive within the organization.
- Security / Stability
Stability and security are important considerations in deciding which companies to work for. The risk of getting laid-off at FAANG companies is low whereas the risk of getting laid-off / the risk of business failure is inherent in startups.
This doesn’t apply in the case of poor job performance, though, in which case, continuity at both a FAANG company or a startup would be questionable.
FAANG companies run multiple projects and initiatives at a time, of which, some succeed and others fail. In case of a failed initiative, engineers are easily absorbed into another team or unit within the organization.
However, at a startup, there is little security, given the dynamic nature of startups. Irrespective of how talented an engineer is or how well they perform, the chances of becoming redundant or being laid off are high if the business pivots or fails.
Moving on from a FAANG company is relatively easy. The experience of having worked at a FAANG company is much revered in the tech industry. Exiting from a FAANG company on a failed project still carries a lot of weightage in landing a role at another company.
However, startups are not easily recognized in the industry and experience at these companies does little in terms of sending the right signals to hiring companies.
- Internal mobility
Internal mobility is an important aspect of career development for engineers without having to switch organizations. Lateral movements provide employees the option to define their career paths. The ability to be a part of new and exciting initiatives within the company allows engineers to deepen or broaden skill sets
FAANG culture focuses on nurturing talent and fostering innovation. Given that they function at a large scale, FAANG companies are constantly working on multiple projects at the same time.
Experimenting and innovating with new initiatives in various domains, presents multiple opportunities for engineers to switch between teams.
While all companies provide flexibility in moving between teams, the way internal transfers are navigated differs at each company.
At Amazon, which has a strong startup-oriented culture, interviews are not an uncommon requirement to join a new team. These interviews are not as rigorous for an internal movement as for a new hire but one is expected to meet the bar set by the team to ensure proper fitment.
At Facebook, lateral movements are easily executed for strong performers. One can either communicate directly with managers of other teams or use the internal job tool to find and apply for open positions. Facebook’s ‘Hackamonth’ initiative, is an internal mobility program that allows engineers to leave their current teams for a month, to work on new and unrelated projects.
At Google, a great deal of focus is placed on learning and engineers are encouraged to work on projects that interest them. One can find and apply to different teams via an internal job tool. Teams usually have an interview process for internal hires. Internal movements are relatively easy and encouraged.
How to get recruiters’ attention at FAANGs or startups
If one is open to considering both startups and FAANG companies as career choices, reaching out and connecting with each type of company will be a different experience, requiring different approaches.
The recruitment processes at big tech or FAANG companies are quite rigid. Candidates have to go through dedicated recruitment channels based on their experience and roles applied for.
FAANG companies usually field very large hiring teams servicing a continuous stream of applicants and interview candidates. With pipelines of candidates and hiring staff running into the thousands, the recruitment engines at FAANG companies are akin to small companies.
Referrals at FAANG companies also follow a defined process with managers or other employees possessing limited or no influence on the recruitment process.
The recruitment process at big tech and FAANG companies are largely standardized in nature. Identification of potential candidates or applying to a FAANG company also happens through multiple and formal portals e.g. the company website, LinkedIn, etc.
FAANG companies also have a pulse on the talent in the market. They have strong data mining capabilities and far-reaching abilities to find potential candidates for open positions. By crafting the right resume and making it accessible, one can easily be found by FAANG companies.
Recruitment in startups is generally flexible with networking and informal referrals forming a part of the hiring process.
It is easier to connect with startups via employees at varying levels who can set up interviews or move resumes to relevant managers / hiring authorities without having to follow a predefined or time-bound process.
To work at a startup of choice, one would have to reach out to the company vs. being hunted by the company. Startups are usually small-sized organizations with limited funds and resources. Startups do not process a large number of applications. They do not have large hiring teams or the infrastructure or tools to scope the market for talent. As such, startups reach out to a limited number of engineers.
Finding startups of choice to apply to requires effort on the part of aspirants themselves. Sites like Crunchbase list startups by their field of operations from which companies can be filtered. Once the right companies have been identified, one would have to proactively reach out to these companies through available channels.
Making the right choice
As personal priorities evolve so does one’s career path. Given this, there can be no right answer to the FAANG vs startup conundrum. The key to deciding the right fit lies entirely in weighing the pros and cons of both options and considering how they hold up against one’s career goals.