A senior at FAANG is worth sometimes well north of 500K/yr. There are plenty of folks strewn about small software companies that do similar work to a senior or even staff/principal at a faang at wildly huge discounts.
It's hard to find numbers for the value of small software businesses (OP's quote), but this article [1] puts the number at $667k. If that's true, the engineer is SUBSTANTIALLY more expensive than the business (you're not just renting the business for a year).
[1] In the period between 2013 and 2016, the average sale was $667,000. While some sales were obviously much higher, and some were actually a bit lower, this must be an encouraging figure for a business owner to see.
> A senior at FAANG is worth sometimes well north of 500K/yr. There are plenty of folks strewn about small software companies that do similar work to a senior or even staff/principal at a faang at wildly huge discounts.
Those discounts are why it's easier to poach the employees.
If a company has 10 engineers earning $200K/year, why would you buy the company for $667K per person and then pay the employees on top of that?
Just offer the employees $500K/year and they'll stream right over.
And when acquiring an existing company, the buyer is typically interested in keeping a lot of the engineering staff. I've only seen a few acquisitions where there was no interest in keeping the engineering staff (North comes to mind; this one was strictly for Google to get its hands on the patent the company had acquired from Intel).
There are only so many $500k spots available. If every engineer in the world said “I’m moving to SF and applying to Google” and assuming visa allowed that you’d see Google paying a lot less for talent! Which means that while some people earning 200k are underpaid, they can’t all be underpaid.
Big Tech and most established companies make billions in profits off software products developed by engineers. Engineering Software Products is a highly specialized skill and absolutely isn’t compensated to the same degree as its impact; Silicon Valley was the first to realize and reward this somewhat adequately (IMO still not enough).
It’s really great for management types that they’ve managed to restrict the median compensation at fairly low levels; this is also the case for software outside of the well known tech hubs.
This might be true, and I agree SWE should always push for getting a decent slice of the pie. However how much of the 'value' is establishing a monopoly in some area of tech, rather than the tech itself. The mysterious "good will" or "intangible assets" of the brand value, institutional knowledge, having the right software and hardware in one place etc.
There is only one Google, but there are plenty of bright people who are capable of learning SWE.
If all the little tech companies were making $1m revenue per SWE too, then yes you'd probably see tech wages raise in line with that.
However those little tech companies haven't solved traction and growth yet (if they are aiming to at all), so they can't compete with SV and stay profitable. They don't have $100M in funding to throw into salaries.
Or from another angle - a individual SWE starting their own mini SaaS makes $2k a month. They are happy for this as a start, but on the other hand they are extremely underpaid!
An analogy - shouldn't Amazon warehouse workers be on double what they are paid, as without them Amazon can't ship anything!
At the extreme, workers getting the full value of what they are putting in would be something different to a corp, more like a co-op.
Amazon warehouses is not a good example. Amazon can and does build warehouses where it can get cheap labor. Whereas most Big Tech firms are based in high CoL cities. Why? High skilled labor has much better leverage due to being in short supply.
I do agree with the point that many of these firms are operating under monopoly conditions. However, for them to be continue to be monopolies requires them to either hire or acquire the best talent that’s possible. The monopoly cannot run itself, and that’s the leverage that software professionals aren’t utilizing fully yet.
The larger worry for petite capitalists is not competition with large tech, but rather the possibility that senior engineers at small firms realize that they are the firm and have enough savings to jump ship, build an mvp, and cannibalize the old business.
Salary is per year, buying a company is a one time cost. Retention agreements are a part of the purchase so they know the employees they got will be forced to stick around if the purchase goes through.
A senior at FAANG is worth sometimes well north of 500K/yr. There are plenty of folks strewn about small software companies that do similar work to a senior or even staff/principal at a faang at wildly huge discounts.
It's hard to find numbers for the value of small software businesses (OP's quote), but this article [1] puts the number at $667k. If that's true, the engineer is SUBSTANTIALLY more expensive than the business (you're not just renting the business for a year).
[1] In the period between 2013 and 2016, the average sale was $667,000. While some sales were obviously much higher, and some were actually a bit lower, this must be an encouraging figure for a business owner to see.