Should Earners-to-Give Work at Startups Instead of Big Companies?
Summary
Confidence: Likely.
Cross-posted to the Effective Altruism Forum.
Effective altruist earners-to-give might be able to donate more money if, instead of working at big companies for high salaries, they work at startups and get paid in equity. Startups are riskier than big companies, but EAs care less about risk than most people.
Working at a startup is easier than starting one. It doesn’t pay as well, but based on my research, it looks like EA startup employees can earn more than big company employees in expectation.
Does the optimal EA investment portfolio include a significant allocation to startups? To answer that question, I estimated the expected return and risk of startups by adding up the following considerations:
- Find a baseline of startup performance by looking at historical data on VC firm returns.
- VC performance is somewhat persistent. EAs can beat the average by working at startups that the top VC firms invest in.
- Startup employees get worse equity terms than VCs, but they also don’t have to pay management fees, and they get meta-options. Overall, employees come out looking better than VCs.
- Current market conditions suggest that future performance will be worse than past performance.
- Startups are much riskier than publicly-traded stocks, and the startup market is moderately correlated with stocks (r=0.7).
All things considered, my best guess is that more earners-to-give should consider working at startups.
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