Engineers are increasingly puzzled by the flood of outreach from startup recruit...

Engineers are increasingly puzzled by the flood of outreach from startup recruiters. Here’s an efficient market question: why are there so many?

If startup equity were genuinely undervalued, candidates would be eager to join. The necessity for extensive selling and persuasion indicates that the market has already accounted for this. Candidates are understandably skeptical, and recruiters serve as a reflection of that sentiment.

When transitioning from a $300k liquid compensation role to a $200k startup offer, it’s essential to reframe this as a $100k annual investment in the startup, rather than a pay cut. Consider this: if a startup offers $80k/year in equity on paper, the numbers only add up if you believe:

• The exit multiple exceeds 1.25x to break even on your investment.

• The exit probability is sufficiently high to justify the expected value.

If you truly believe in a 5x or 10x return, it would make sense to liquidate your index funds and invest fully. However, no one would do so, recognizing that the S&P 500 offers approximately 10% annual returns with minimal risk, while startup outcomes often follow a power law, where many yield nothing. You’re essentially claiming to have insights that professional VCs, who possess far more information, struggle to achieve.

Reflecting on the past, Windsurf employees witnessed a $3B OpenAI acquisition collapse and a subsequent $2.4B acqui-hire by Google, leaving many employees behind. While some cashed out vested equity, the dream outcome vanished.

It’s crucial to consider the following:

• The base rate of startup success leading to a meaningful exit is around 5-10%.

• Your ability to select winners compared to random chance is uncertain.

• The liquidity timeline spans 7-10 years, if it materializes at all.

The current landscape expects employees to act as investors without the protections typically afforded to investors—no liquidity preferences, no board seats, and no diversification. This approach concentrates risk like a VC but without the portfolio. Maybe it’s time to rethink this?