In this blog post, I'm going to present what we've learned so far from this data. Technical interviewing is broken in a lot of ways. It's easy to say this. (And many blog posts do!) The hard part is coming up with what to do about it. My goal for this post is to take on that challenge, and lay out specific advice for hiring managers and CTOs. Interviewing is hard. But I think that many of the problems can be fixed by running a careful process .
The Status QuoMost interview processes includes two main steps:
- Applicant screening
- In-person final interview
In-person final interviews almost-universally consist of a series of 45-minute to 1-hour sessions, each with a different interviewer. The sessions are primarily technical (with one or two at each company focusing on culture fit and soft skills). The final hire/no hire decisions are made in a decision meeting after the candidate has left, with the hiring manager and everyone who interviewed the candidate. Essentially, a candidate needs at least one strong advocate and no strong detractors to be made an offer .
Beyond the common format, however, final interviews vary widely.
- 39% of the companies we work with run interviews with a marker on a whiteboard
- 52% allow the candidate to use their own computer (the remaining 9% are inconsistent)
- 55% let interviewers pick their own questions (the remaining 45% use a standard bank of questions)
- 40% need to see academic CS skills in a candidate to make an offer
- 15% dislike academic CS (and think that talking about CS is a sign that a candidate will not be productive)
- 80% let candidates use any language in the interview (the remaining 20% require a specific language)
- 5% explicitly evaluate language minutia during the interview
False Negatives vs. False PositivesSo, what's wrong with the status quo? Fire rates, after all, don't seem to be out of control. To see the problem, consider that there are two ways an interview can fail. An interview can result in a bad engineer being hired and later fired (a false positive). And an interview can disqualify someone who could have done that job well (a false negatives). Bad hires are very visible, and expensive to a company (in salary, management cost and morale for the entire team). A bad hire sucks the energy from a team. Candidates who could have done the job well but are not given the chance, in contrast, are invisible. Any one case is always debatable. Because of this asymmetry, companies heavily bias their interviews toward rejection.
This effect is strengthened by noise in the process. Judging programming skill in 1 hour is just fundamentally hard. Add to this a dose of pattern matching and a few gut calls as well as the complex soup of company preferences discussed above, and you're left with a very noisy signal.
In order to keep the false positive rate low in the face of this noise, companies have to bias decision ever farther toward rejection. The result is a process that misses good engineers, still often preferences credentials over real skill, and often feels capricious and frustrating to the people involved. If everyone at your company had to re-interview for their current jobs, what percentage would pass? This is a scary question. The answer is almost certainly well under 100%. Candidates are harmed when they are rejected by companies they could have done great work for, and companies are harmed when they can't find the talent they need.
To be clear, I am not saying the companies should lower the bar in interviews. Rejection is the point of interviewing! I'm not even saying that companies are wrong to fear false positives far more than false negatives. Bad hires are expensive. I am arguing that a noisy signal paired with the need to avoid bad hires results in a really high false negative rate, and this harms people. The solution is to improve the signal.
Concrete ways to reduce noise in interviews
1. Decide what skills you're looking forThere is not a single set of skills that define a good programer. Rather, there is a sea of diverse skill sets. No engineer can be strong in all off these areas. In fact, at Triplebyte we often see excellent, successful software engineers with entirely disjoint sets of skills. The first step to running a good interview, then, is deciding what skills matter for the role. I recommend you ask yourself the following questions (these are questions we ask when we onboard a new company at Triplebyte).
- Do you need fast, iterative programmers, or careful rigorous programmers?
- Do you want someone motivated by solving technical problems, or building product?
- Do you need skill with a particular technology, or can a smart programmer learn it on the job?
- Is academic CS / math / algorithm ability important or irrelevant?
- Is understanding concurrency / the C memory model / HTTP important?
2. Ask questions as close as possible to real workProfessional programmers are hired to solve large, sprawling problems over weeks and months. But interviewers don't have weeks or months to evaluate candidates. Each interviewer typically has 1 hour. So instead, interviewers look at a candidates' ability to solve small problems quickly, while under duress. This is a different skill. It is correlated (interviews are not completely random). But it's not perfectly correlated. Minimizing this difference is the goal when developing interview questions.
This is achieved by making interview question as similar as possible to the job you want the candidate to do (or to the skill you're trying to measure). For examples, if what you care about is back-end programming, asking the candidate to build a simple API endpoint and then add features is almost certainly a better question than asking them to solve a BFS word chain problem. If you care about algorithm ability, asking the candidate to apply algorithms to a problem (say, build a simple search index, perhaps backed by a BST and a hashmap for improved deletion performance) is almost certainly a better problem than asking them to determine if a point is contained in a concave polygon. And a debugging challenge, where the candidate works in a real codebase, is almost certainly better than asking the candidate to solve a small problem on a whiteboard.
That said, there is an argument for doing interviews on whiteboards. As an interviewer, I don't care if an engineer has the Python itertools module memorized. I care if they can think through how to use iterators to solve a problem. By having the candidate work on a whiteboard, I free them from having to get the exact syntax right, and let them focus on the logic. Ultimately I think this argument fails, because there's just not enough justification for the different format. You can get all the benefit by allowing the candidate to work on a computer, but telling them their code does not need to run (or even better, making it an open book interview and letting them look up anything they want with Google).
There is an important caveat to the idea that interview questions should mirror work. It is important that an interview question be free from external dependencies. For example, asking a candidate to write a simple web scraper in Ruby might seem like a good real-word problem. However, if a candidate needs to install Nokogiri (a Ruby parsing library that can be a pain to install) and they end up burning 30 minutes wrestling with the native extensions, this becomes a horrible interview. Not only has time been wasted, stress for the candidate has gone through the roof.
3. Ask multi-part questions that can't be given awayAnother good rule of thumb for interview questions is to avoid questions that can be “given away”, i.e. avoid questions where there's some magic piece of information that the candidate could have read on Glassdoor ahead of time that would allow them to answer easily. This obviously rules out brain teasers or any question requiring a leap of insight. But it goes beyond that, and means that questions need to be a series of steps that build on each other, not a single central problem. Another useful way to think about this is to ask your self whether you can help a candidate who gets stuck, and still end the interview with a positive impression. On a one-step question, if you have to give the candidate significant help, they fail. On a multi-part problem, you can help with one step, and the candidate can then ace everything else and do well.
This is important not only because your question will leak onto Glassdoor, but also (and more importantly) because multi-part problems are less noisy. Good candidates will become stressed and get stuck. Being able to help them and see them recover is important. There is significant noise in how well a candidate solves any one nugget of programming logic, based on whether they've seen a similar problem recently, and probably just chance. Multi-part problems smooth out some of that noise. They also give candidates the opportunity to see their effort snowball. Effort applied to one step often helps them solve a subsequent step. This is an important dynamic when doing real work, and capturing it in an interview decreases noise.
To give examples, asking a candidate to implement the game Connect Four in a terminal (a series of multiple steps) is probably a better question than asking a candidate to rotate a matrix (a single step, with some easy giveaways). And implementing k-means clustering (multiple operations that build on each other) is probably better than determining the largest retangle that can fit under a histogram.
4. Avoid hard questionsIf a candidate solves a really hard question well, that tells you a lot about their skill. However, because the question is hard, most candidates will fail to solve it well. The expected amount of information gained from a question, then, is heavily impacted by the difficulty of the question. We find that the optimal difficulty level is significantly easier than most interviewers guess.
This effect is amplified by the fact that there are two sources of signal when interviewing a candidate: whether they give the “correct” answer to a question, and their process / how easily they arrive at that answer. We've gathered data on this at Triplebyte (scoring questions both on whether the candidate reached the correct answer, and how much effort it took them, and then measuring which scores predict success at companies). What we found is a tradeoff. For harder questions, whether the candidate answers correctly carries most the signal. For easier questions, in contrast, most of the signal is found in the candidate's process and how much they struggle. Considering both sources of signal, the sweet spot is toward the easier end of the spectrum.
The rule of thumb we now follow is that interviewers should be able to solve a problem in 25% of the time they expect candidates to spend. So, if I'm developing a new question for a 1-hour interview, I want my co-workers (with no warning) to be able to answer the question in 15 minutes. Paired with the fact that we use multi-part real-world problems, this means that the optimal interview question is really pretty straightforward and easy.
To be clear, I am not arguing for lowering the bar in terms of pass rate. I am arguing to ask easy questions, and then including in your evaluation how easily the candidate answered the questions. I'm arguing for asking easy questions, but then judging fairly harshly. This is what we find optimizes signal. It has the additional benefit of being lower stress for most applicants.
To give examples, asking a candidate to create a simple command line interface with commands to store and retrieve key-value pairs (and adding functionality if they do well) is probably a better problem than asking a candidate to implement a parser for arithmetic expressions. And a question involving the most common data structures (lists, hashes, maybe trees) is probably better than a question about skiplists, treaps or other more obscure data structures.
5. Ask every candidate the same questionsInterviews are about comparing candidates. The goal is to sort candidates into those who can contribute well to the company and those who can't (and in the case of hiring for a single position, select the best person who applies). Given this, there is no justification for asking different questions to different candidates. If you evaluate different candidates for the same job in different ways, you are introducing noise.
The reason it continues to be common to select questions in an ad-hoc fashion, I think, is because it's what interviewers prefer. The engineers at tech companies typically don't like interviewing. It's something they do sporadically, and it takes them away from their primary focus. In order to standardize the questions asked to every candidate, the interviewers would need to take more time to learn the questions and talk about scoring and delivery. And they would need to re-do this every time the question changed. Also, always asking the same question is just a little more tedious.
Unfortunately, the only answer here is for the interviewers to put in the effort. Consistency is key to running good interviews, and that means asking every candidates the same questions, and standardizing delivery. There's simply no alternative.
6. Consider running multiple tracksIn conflict with my previous point, consider offering several completely different versions of your interview. The first step when designing an interview is to think about what skills matter. However, some of the answers might be in conflict! It's pretty normal, for example, to want some really mathy engineers, and some very productive / iterative engineers (maybe even for the same role). In this case, consider offering multiple versions of the interview. They key point is that you need to be at enough scale that you can fully standardize each of the tracks. This is what we do at Triplebyte. What we've found is that you can simply ask each candidate which type of interview they'd prefer.
7. Don't let yourself be biased by credentialsCredentials are not meaningless. Engineers who have graduated from MIT or Stanford, or worked at Google and Apple really are better, as a group, than engineers who did not. The problem is that the vast majority of engineers (myself included) have done neither of these things. So if a company relies on these signals too heavily, they will miss the majority of skilled applicants. Giving credentials some weight in a screening step is not totally irrational. We don't do this at Triplebyte (we do all of our evaluation 100% background blind). But giving some weight to credentials when screening might make sense.
Letting credentials sway final interview decision, however, does not make sense. And we have data showing that this happens. For a given level of performance on our background-blind process, candidates with a degree from a top school go on to pass their interviews at companies at a 30% higher rate than candidates without the name-brand resume. If interviewers know that candidate has a degree from MIT, they are more willing to forgive rough spots in the interview.
This is noise, and you should avoid it. The most obvious way is just to strip school and company names from resumes before giving them to your interviewers. Some candidates may mention their school or company, but we do all our interviews without knowing the candidates' backgrounds, and it's actually pretty rare for a candidate to bring it up during technical evaluation.
8. Avoid hazingOne of the ugliest ways interview can fail is that they can take on an aspect of hazing. They're not just about evaluating the skill of a candidate, they're also about a group or team admitting a member. In that second capacity, they can become a rite of passage. Yes, the interview is stressful and horrible, but we all did it so so should the candidates. This can be accentuated when a candidate is doing badly. As an interviewer, it can be frustrating to watch a candidate beat their head against a problem, when the answer seems so obvious! You can get short tempered and frustrated. This, of course, only increases the stress for the applicant in a downward spiral.
This is something you want to stay a mile away from. The solution is talking about the issue and training the interviewers. One trick that we use is, when a candidate is doing really poorly, to switch from evaluation mode, where the goal is to judge the candidate, to teaching mode, where the goal is to make the candidate understand the answer to the question. Mentally making the switch can help a lot. When you're in teaching mode, there no reason to withhold information or be anything other than friendly.
9. Make decisions based on max skill, not average or min skillSo far, I've only talked about individual questions, not the final interview decision. My advice here is to try to base the decision on the maximum level of skill that the candidate shows (across the skill areas you care about), not the average level or minimum level.
This is likely what you are already doing, intentionally or not! The way hire/no hire decisions are made is that everyone who interviewed a candidate gets together in a meeting, and an offer is made if at least one person is strongly in favor of hiring, and no one is strongly against. To get one interviewer to be strongly in favor, what a candidate needs to do is ace one section of the interview. Across our data, max skill is the attribute that's most correlated with acing at least one section of a company's interview. However, to be made an offer, a candidate also needs no one to be a strong no against them. Strong noes come when a candidate looks really stupid on a question.
Here we find just a great deal of noise. There are so many different ways to be a skilled engineer, that almost no candidates can master them all. This means if you ask the right (or wrong) question, any engineer can look stupid. Candidates get offers, then, when at least one interview lines up with an area of strength (max skill) and no areas line up with a significant weakness. The problem is that this is noisy. The same engineer who fails one interview because they looked stupid on a question about networking passes other interviews with flying colors because that topic did not come up.
The best solution, I think, is for companies to focus on max skill, and be a little more comfortable making offers to people who looked bad on parts of the interview. This is, looking for strong reasons to say yes, and not worrying so much about technical areas where the candidate was weak. I don't want to be absolute about this. There are of course technical areas that just matter to a company. And deciding that you want to have a culture where everyone on the team is at a certain level in a certain area may well make sense. But focusing more on max skill does reduce interview noise.
Why do interviews at all?A final question I should answer is why do interviews at all? I'm sure some readers have been gritting their teeth, and saying “why think so much about a broken system? Just use take-home projects! Or just use trial employment!” After all, some very successful companies use trial employment (where a candidate joins the team for a week), or totally replace in-person interviews with take-home projects. Trial employment makes a lot of sense. Spending a week working beside an engineer (or seeing how they complete a substantial project) almost certainly provides a better measure of their abilities than watching them solve interview problems for 1 hour. However, there are two problems that keep trial employment from replacing standard interviews:
- Trial employment is expensive for the company. No company can spend a full week with every person who applies. To decide who makes it to the trial, companies must use some other interview process.
- Trial employment (and large take-home projects) are expensive for the candidate. Even when they are paid, not all candidates have the time. An engineer working a full-time job, for example, may simply not be able to take the time off. And even if they can, many won't. If an engineer already has job offers in hand, they are less likely be willing to take on the uncertainty of a work trial. We see this clearly among Triplebyte candidates. Many of the best candidates (with other offers in hand) will simply not do large projects or work trials.
Talking to candidates about past experience is also sometimes put forward as a replacement for technical interviews. To see if a candidate can do good work in the future, the logic goes, just see what they've done in the past. We've tested this at Triplebyte, and unfortunately we've not had great results. Communication ability (ability to sell yourself) ended up being a stronger signal than technical ability. It's just too common to find well-spoken people who exaggerate their role (take credit for a team's work), and modest people who downplay what they did. Given enough time and enough questioning, it should be possible to get to the bottom of this. However, we found that within the time limits of a regular interview, talking about past experience is not a general replacement for interviewing. It is a great way to break the ice with a candidate and get a sense of their interests (and judge communication ability and perhaps culture fit). But it's not a viable total replacement for interviews
Good things about programming interviews!I want to end up this post on a more positive note. For everything that's wrong with interviews, there is a lot that's right about them.
Interviews are direct skill assessment. I have friends who are teachers, who tell me that teacher interviews are basically a measure of communication ability (ability to sell yourself), and a credential. This seems to be true of many many professions. Silicon Valley is not a perfect meritocracy. But we do at least try to directly measure the skills that matter, and stay open to the idea anyone with those skills, regardless of background, can be a great engineer. Credential bias often stands in the way of this. But we've been able to mostly overcome this at Triplebyte, and help a lot of people with unconventional backgrounds get great tech jobs. I don't think Triplebyte would be possible, for example, in the legal field. The reliance on credentials is just too high.
Programmers also choose interviews. While this is a very controversial topic (there are certainly programmers who feel differently), when we've run experiments offering different types of evaluation, we find that most programmer still pick a regular interview. And we find that only a minority of programmers are interested in companies that use trial employment or take-home projects. For better or worse, programming interviews seem to be here to say. Other types of evaluation are great supplements, but they seem unlikely to replace interviews as the primary way engineers are evaluated. To misquote Churchill, “Interviews are the worst way to evaluate engineers, except for all the other ways that have been tried from time to time.”
ConclusionInterviewing is hard. Human beings are hopelessly complex. On some level, judging human ability in a 4-hour interview is just a fool's errand. I think it's important to stay humble about this. Any interview process is bound to fail a lot of the time. People are just too complex.
But that's not an argument for giving up. Trying to run a meritocratic process is better than not trying. At Triplebyte, our interview is our product. We brainstorm ideas, we test them, and we improve over time. This, I think, is the approach that's needed to improve how engineers are hired. In this post, I've shared some of the big things we've learned over the last two years. I'd love to get feedback, and hear if these ideas are helpful for people. Send me an email at firstname.lastname@example.org
If you're a company looking for engineers, we'd also love to help you hire. You can send me an email, or check out our companies page.
Thanks to Adora Cheung and Jared Friedman for reading earlier drafts of this post.
 I'm limiting this blog post to technical skill assessment. I'll be writing a future post about culture fit, behavioral interviews and non-technical evaluation. ↩
 There is of course variation here. At opposite ends of the spectrum we see companies that require a unanimous yes from every interviewer to make a hire, and companies where the hiring manager is solely responsible for the decision. ↩
 These numbers are what companies report about their internal candidates. And the numbers vary widely between companies (they report fire rates, for example, as low as 1% and as high as 30%). The numbers are significantly better for Triplebyte candidates. So far, our candidates at companies have received offers after 53% of interviews, and 2% have been fired. ↩
Today, we're launching new versions of the Triplebyte process for front-end and mobile engineers. We started Triplebyte to try to fix some of the problems with programming interviews. Over the last two years, we've built a background-blind interview process, and helped hundreds of engineers get jobs. We've worked with people trying to break into their first job (we helped a pizza delivery person get an engineering job at Instacart), and we've worked with credentialed engineers looking for new opportunities (and helped startups hire their first employee). I'm proud of the process we built. We've convinced major companies to waive their phone screens for our candidates, and globally our candidates receive job offers after 1 out of every 2 interviews they do. (This is about twice the average rate in the industry.)But I have a confession to make. Our interviews do not work well for specialists. We built our process by interviewing thousands of engineers, and empirically testing which questions are most predictive of engineering skill. Because most engineers are generalists (and most companies hire primarily generalists), general web engineering has come to dominate what we look for. We do work with front-end and mobile engineers. But until today, we've required that they pass a process dominated by general programming and back-end web concepts.
Today we're changing this. We've spent the last two months repeating the process that we went through when we launched Triplebyte. We've interviewed hundreds of candidates, tested questions, and are now launching background-blind front-end and mobile interviews!
ConclusionIf you want to give our front-end or mobile (or generalist) process a try, you can create an account here. After entering your details, you can pick which track you want to try (you can go back and try multiple as well). The front-end and mobile processes are new. I'm sure we'll be making tweaks / fixing issues. I'd love any feedback you have on the process (or on this blog post). Send me an email at email@example.com.
If you’re a programmer considering a move to the Bay Area, you probably know at least two basic facts: 1) tech salaries are higher here than elsewhere, and 2) living here is really expensive. Both facts have been true for a long time, but they have become especially true in the past four years. Since 2012 home prices have risen by about 60% and rents by about 70% in both the San Francisco and San Jose metro areas. The absence of any apparent upper limit to these increases has given rise to a new journalistic subgenre, the Bay Area Housing Horror Story. Maybe you’ve heard about the cheapest house in San Francisco, a $350,000 “decomposing wooden shack” whose interior is “unlivable in its current condition”? Or the tent next to Google X that was renting for $895 a month? Or the guy on Reddit who calculated that it would be cheaper to commute daily to the Bay Area from Las Vegas by plane than to rent an apartment in San Francisco?
It’s easy to hear data and stories like these and conclude that programmers moving to the Bay Area are suckers. After all, salaries have not risen by 70% in the past four years. But what this analysis misses is the extent to which this place and time is exceptional. The Bay Area in the early 21st century has produced an astounding number of successful tech companies. Uber was valued at $60 million in 2011 and at around $68 billion in late 2015 ; Stripe at around $500 million in 2012 and $9 billion during its most recent funding round; and Twitch at just under $99 million in September 2013, before Amazon acquired it for $970 million less than a year later. There have been many additional large-scale successes during the current boom, along with hundreds of smaller-scale successes that would be considered enormous in other local economies. Of course, Bay Area companies also fail spectacularly (Theranos, Good Technology). But an outsized percentage of tech's biggest successes happen here, and this creates opportunities that simply don't exist in other locations.
So does it still make sense for programmers to move to the Bay Area? The answer of course is that it depends. SF is very expensive! And there are many other great places to be a programmer. At Triplebyte, we help engineers around the country (and world) get jobs at top Bay Area companies, so we talk to a lot of people facing exactly this calculation. In this blog post, I'm going to go over the publicly available data as well as our internal data, and try to better answer that question. I am going to focus specifically on people looking to work at tech companies, not people trying to found startups (much has already been written about the latter).
The Baseline: Salary vs. RentTo begin answering our question, let’s look at the best available data on salaries and rents in the Bay Area (San Francisco and Silicon Valley) and see how they compare both to national figures and to data for another metro area that attracts elite tech talent. Seattle is the obvious choice for our “other metro area” for a number of reasons. It’s home to leading tech companies, and it’s a West Coast city with high living standards, making it an appealing destination for many people who like the Bay Area. Finally, housing costs there are cheaper than in the Bay Area, so it’s got a key competitive advantage when it comes to attracting talent.
In any case, our interpretation of the BLS data is broadly corroborated by the Indeed data, which show that San Jose developer salaries are on average $6,000 higher than San Francisco salaries and that San Francisco developer salaries are on average $27,000 higher than Seattle developer salaries. Salary figures for specific companies self-reported at Glassdoor suggest a similar pattern. For example, according to Glassdoor, software engineers working at companies like Google, Facebook, Twitter, Airbnb, and Uber start out at around $115,000 a year, and earn north of $150,000 as senior engineers, regardless of whether they are located in the Valley or San Francisco. The numbers at each career stage are roughly $15,000-20,000 lower at Amazon and Microsoft in Seattle.
Putting all of these data sources together, then, we can estimate that engineers at top tech companies in the Bay Area stand to make between $15,000 and $33,000 more per year than engineers at top tech companies in Seattle.
What happens when we factor in cost of living? The chart below, derived from Zillow’s August 2016 Local Market Reports on the three metro areas, shows that median rent is about $1400-$1500 a month (or roughly $17,000-$18,000 a year) higher in the Bay Area than in the Seattle metro area .
Buying a HouseAs our careers and lives progress, however, many of us will want to buy rather than rent homes, whether out of a desire to build equity or out of necessity, because we need room for our families. It is here that the advantages of a place like Seattle become noticeable. The median home value (again, from Zillow) across the San Francisco metro area is $807,800, and the median home value in the San Jose metro area is $948,600. The Seattle metro area’s median home value is well short of half both Bay Area metros’, at $394,600.
Beyond the Salary/Housing BaselineIf you see yourself wanting to buy a house relatively early in life, the salary and housing data above indicated it might make sense to start your career in Seattle rather than San Francisco. However, this does not consider equity and career progression. And on these fronts, the Bay Area tech ecosystem seems to bring benefits.
A 2015 report by Hired found that when engineers from the Bay Area relocate to other areas, they out-earn engineers on the local market. Experience in the Bay Area seems to advance careers. Engineers moving from San Francisco to Seattle make an average of $9,000 more than others who get offers in Seattle. This Bay Area premium is even higher in other cities: $16,000 in Boston, $17,000 in Chicago, and $19,000 in San Diego.
Another data set crowd-sourced by the startup Step in early 2016 suggests that for at least a subset of talented developers, working in the Bay Area brings more equity than working in other locations. The Step study compares total compensation at the two dominant Seattle tech companies, Amazon and Microsoft, with compensation at Silicon Valley leaders Google and Facebook. The study finds that compensation is comparable for junior engineers in both locations, with those in the Valley getting paid slightly higher, roughly as you would predict based on the BLS, Indeed, and Glassdoor data. But with increasing experience, total compensation at Google and Facebook comfortably outpaces that at Amazon and Microsoft, largely as a result of much more generous cash and stock bonuses. For comparable job titles in Step’s Level 3 engineer category, for example, total annual compensation is $180,000 at Amazon, $199,000 at Microsoft, $249,700 at Facebook, and $306,500 at Google. That is, senior engineers in the Bay Area appear to earn a $50K to $126K yearly premium in total comp.
This difference in equity does not apply directly to jobs at smaller startups, where equity is likely to come in the form of illiquid options. But here an argument can be made for the Bay Area as well. Startup equity is high variance. In most cases it's worth little (most early-stage startups fail) but in a percentage of cases the startups succeed spectacularly, and their equity is highly valuable. If you want to make money from startup equity, it's all about joining a company that succeeds. The Bay Area both has an outsized percentage of startup success, and also just has more startups on the ground (making it easier to be picky and search for a startup that is doing well) .
Summing UpThe Bay Area in 2016 is to technology as 1930s Detroit was to automobiles or 14th-century Venice was to the European spice trade, except that these and all other historical analogies are unable to capture the magnitude and speed of local tech growth. It only took Uber about five and a half years to exceed the valuations of all but four of the world's top automakers. In 2016, its eighth year of existence, Airbnb was about 25% more valuable than the world's most valuable hotel company (Hilton, founded in 1919). No precedent exists for growth like this, occurring among so many companies and concentrated in such a small geographical area.
This growth creates opportunity. Startup jobs, big company jobs, drone programming in Clojure —the Bay Area has them all. There are simply more tech companies and tech investors here than in any other single location. However, the tech growth has also raised prices and raised tensions. San Francisco is among the most expensive cities in the US (and many people here are not happy about that). If you get a good job, your salary increase will probably cover the costs. But paying exorbitantly for an apartment may feel burdensome no matter how big your income is.
So should you move the Bay Area? Not all startups succeed, and not everyone lands a senior engineer position at a name-brand company. And you may have lifestyle ambitions that simply won't fit with what's available here. If a comfortable house with a big lawn is a non-negotiable part of your vision for yourself, you probably shouldn’t move to the Bay Area. You also may just prefer to live somewhere else!
If, however, you're looking to maximize your probability of joining the next Google (or Google itself), moving to the Bay Area probably makes sense. The salaries here do cover the higher cost of living, and if you are able to capitalize on the additional opportunities that are uniquely available here, you could end up doing much more than covering costs. This is the heart of the industry, and it's an exciting time to live and work in the Bay Area.
If you are interested in moving to the Bay Area and joining a successful company or a tiny startup, Triplebyte can help you find a job. Give our process a try here.
We launched Triplebyte with the goal of building the first credentials blind hiring process for engineers. Our mission is to give anyone who has the right skills, the opportunity to work at the best technology companies in the world regardless of what school they went to or which companies they've worked at.
We've now evaluated over 12,000 engineers without using their resumes. We've done this by designing a two step process. The first is an online programming test. If you do well on the test, the next step is a technical interview with our interviewing team where the interviewer knows nothing about your background. We've now interviewed over 2,000 engineers and 15% made it through to the final step of being introduced to the companies we work with.
To put that into context, companies at the size of Airbnb or Dropbox would expect to do technical interviews with approximately 50 engineers a month. We're already interviewing 3x that number every month and we've built software to track every tiny detail of what happens during these technical interviews. This means we're getting data on how to accurately interview an engineer, faster than anyone. In total we've now done over 3,000 hours of technical interviewing, or 127 full days.
Once an engineer makes it through our process, we match them with companies they'll be a good technical fit for. As we wrote before companies disagree significantly about the types of engineers they want to hire. We're optimizing our matching process for accuracy so we gather as much data about the technical preferences of the current engineering team and use that to match engineers with them. We get this by having the current engineering team complete a technical questionnaire that gives us a fingerprint of their hiring preferences. This matching model is working really well. At our partner companies like Dropbox and Cruise, we're seeing offer rates on our candidates of over 60%. That's more than 2x better than the average they see on their own candidates (the industry average is about 25-30% onsite to offer rate i.e. about 1 in 4 engineers who make it to onsite will receive an offer) and our candidates are going straight to an onsite interview, skipping recruiter and phone screens.
What's really exciting about such a high offer rate is that we're achieving it without doing any culture fit screening. Our process *only* looks at technical skills and that's the data we use for matching engineers to companies. That shows the way for companies to hire more engineers is to get better at identifying candidates with the right skills early on, not doing more culture fit screening early on.
We can also beat companies on the most important metric of all - the number of internal engineering hours they have to spend per new engineering hires. Sequoia recently estimated that it takes a company 82.5 total hours to hire an engineer. Around 30-35 of these are engineering hours. We're able to deliver an engineering hire at an average “cost” of 15 internal engineering hours.
We're only able to interview so many engineers each month because our programming test can accurately identify good engineers. After many iterations our test now has 70% precision (precision means of the engineers our test identifies as being good, how many of them actually are). This means we can identify great programmers with much higher accuracy than a resume screen and only interview the good ones.
What's unique about the programming test is that we've iterated on the questions we ask using actual data from interview outcomes at the companies we work with (i.e. we correlate performance on specific questions with performance on the onsite interviews at companies like Dropbox). We only keep the questions that have high signal and continually replace low signal questions with new ones. This process is the only way you can build a test that is actually accurate at screening for what companies want.
The data set we're building is unique and we use it to improve the accuracy of our process over time. The data set is unique because:
- we track a lot more data from each interview than a typical company would. We've built specialized software to track data points like how long it takes to complete each section of a problem and what the interviewer is thinking every 5 minutes throughout the interview.
- We also get data on how our engineers perform on the onsite interviews at the companies we work with. We use this data to build a predictive model specific to each company, based on our engineering genome, which we continually update over time.
It's really exciting for us to see that a credentials blind technical evaluation can work at identifying good engineers and matching them to the right companies.
Programming bootcamps seem to make an impossible claim. Instead of spending four years in university, they say, you can learn how to be a software engineer in a three month program. On the face of it, this sounds more like an ad for Trump University than a plausible educational model.
Bootcamp grads are junior programmers. They have a lot to learn, and represent an investment on the part of a company that hires them. That said, this is also true of recent college graduates. We’ve found bootcamp grads as a group to be better than college grads at web programming and writing clean, modular code, and worse at algorithms and understanding how computers work. All in all, we’ve had roughly equivalent success working with the two groups.
In this post, I'm going to try to shed some light on how this can be true. I’ll dig more into the differences that we see between the two groups, and hopefully explain how some people can become competitive junior programmers in under a year.
The AnalysisOur technical interview at Triplebyte is about two and a half hours long, and is broken into four main parts, focusing on practical programming, web architecture, low-level system understanding, and algorithmic understanding. Not every engineer completes every question (we let programmers focus on their strengths), but the process gives us a good measure of the relative strengths of each engineer in each of these areas.
To get a better idea of how bootcamp grads and college grads compare, I graphed the two groups’ average performance in each of these areas. The y axis is the score on each problem (where 1 = strong no, 2 = weak no, 3 = weak yes, 4 = strong yes). For reference, I also included the entire population of applicants, and also all engineers who pass our interview.
A similar pattern holds on the design questions. Bootcamp grads do better on web questions involving web servers, databases and load balancers. College grads do better on low-level design questions involving bit/bytes, threading, memory allocation, and understanding how a computer actually works.
Triplebyte sees a biased sample of both bootcamp grads and college grads. We do background-blind screening via an online programming test, and only interview engineers who pass this test. Thus we have no way to know what percentage of bootcamp grads and college grads fail early in our process, and the graph above reflects only people who pass our test. Still, a significant number of bootcamp grads pass our test and go on to do as well as college grads on our interviews.
I want to specifically draw attention to the performance of college grads on algorithm problems. They are not only better than bootcamp grads, they are a lot better. They are significantly better than the average programmer making it to our interview (most of whom have 2+ years of experience), and almost as good at the average engineers who we pass. This is interesting. It backs up the assertion that algorithm skills are not used on the job by most programmers, and atrophy over time.
How is this possible?Our data aside, it still just seems hard to believe that 3 months can compete with a 4-year university degree. The time scales just seem off. The first thing to note is that the difference in instructional time is not as large as it seems. Bootcamps, are intense. Students complete 8 hours of work daily, and many stay late and work on the weekends (one popular bootcamp runs 6 days per week). TAs are working with the students during this entire time. What bootcamps lack in duration they perhaps make up in intensity.
The second point is that bootcamps teach practical skills. Traditional CS programmers spend significant amounts of time on concepts like NP-completeness and programming in Scheme. Now, I in no sense mean to belittle this material. I love academic CS (and the Cook–Levin theorem). It’s beautiful, fascinating stuff, and I got a lot out of learning it. But it is not directly applicable to what most programmers do most of the time. Bootcamps are able to show outsized results by relentlessly focusing on practical skills. Bootcamp TAs continually critique each student's coding style. They teach testing. They teach their students how to use their editors. How to use an editor is something that a traditional CS degree program would never think of teaching.
This does not leave bootcamp grads equivalently skilled to university grads. If you want to do hard algorithmic or low-level programming, you’re still better served by a traditional CS eduction. But it does leave the best of them surprisingly competitive for many entry-level development positions.
ConclusionThere are two ways to interpret the results in this blog post. One way is to say that bootcamps are window dressing. They teach inexperienced programers what they need to know to look like good programmers, but skimp on the heart of the discipline. However, I think this view is too cynical. The other way to view this post is as evidence that bootcamps focus on totally different areas than CS programs. They focus intensely on the practical skills required to be a productive programmer. These are skills that CS programs expect students to pick up around the edges of their course work. By being this pragmatic and giving students an intense workload, bootcamps are able to match the practical skills of CS grads.
Bootcamp grads don’t make sense for all companies. Just like recent college grads, they are an investment for a company that hires them. They have much to learn. And they are clearly worse at algorithms and low level systems than engineers with academic training. A database or self-driving car company should probably stick to folks with CS degrees. But the significant majority of companies need programers to solve practical problems on the web. On this axis, we’ve found bootcamp grads totally competitive.
Triplebyte is one year old. In that time, we’ve both placed bootcamp grads at top companies, and also watched them grow. We’ve watched them learn some of the CS skills that they lack on graduation. We’ve watched them learn about large-scale production systems. We’ve watched them take on leadership positions. It’s really incredible how quickly and how well the best bootcamp grads learn. It’s been a pleasure to work with them, and we’ll definitely keep working with bootcamp grads.
If you’re a bootcamp grad (or a college grad, or anyone else), and are interested in a way to find companies where you’re a strong technical match, give our process a try. I'm also interested in your thoughts on this post! Send me an email at firstname.lastname@example.org.
Thanks to Jared Friedman and Daniel Gackle for reading drafts of this, and Buck Shlegeris for major help writing it.
To make the process of finding the right company better for engineers, we're announcing the Triplebyte Engineer Genome project. Using the data we've gathered through our technical interviews, we've mapped out the engineering attributes that technology companies care most, and measured how the companies we work with weigh these attributes differently. We've used this data to build software to intelligently match engineers with the companies where they're the best technical fit, and we're using this software with engineers who go through our process.
Intelligent matching with software is how hiring should work. Failed technical interviews are a big loss for both sides. They cost companies their most valuable resource, engineering time. Applicants lose time they could have spent interviewing with another company that would have been a better fit.
Moving skills assessment and company matching into software also has another important consequence. It increases diversity in the hiring pool. If companies can trust that an applicant has the technical skills they're looking for, it gives them confidence to speak with candidates who lack the usual credentials of attending a top school or working at a prestigious company.
We've built up the list of engineering attributes in the Triplebyte Engineer Genome by collecting a large amount of data from the thousands of blind technical interviews we've completed ourselves. We've then tracked how the data we've collected about each engineer matches with their interview performance at top technology companies we work with. This has been a huge schlep but it's the only way to build a matching system that actually works.
By evaluating this many engineers and working with over a hundred companies, we've seen how little consensus there is on what a "great engineer" means to any single company. We’ve calculated statistically the extent to which interviewers at different companies agree about which candidates are good and which are bad (for the statistics nerds, we calculated the inter-rater reliability), and found it to be about the same as the extent to which people agree on which movies on Netflix are best.
Recruiting services today avoid tacking this problem altogether. Mapping what companies actually want is a much harder problem than scaling the traditional recruiting agency model of spamming companies and candidates. There are so many different engineering attributes you could conceivably look for it's hard to narrow it down to a concise list. Even if you could cleanly identify these attributes, assigning the right weight to each one adds another layer of complexity. It's too much to expect a single person or team making hiring decisions to do this well.
Zooming out, it's too much to expect a single company to be capable of solving this problem either. Google arguably does the best job and their data is still limited to (1) engineers who applied to Google (2) finding which attributes are most important for success at Google. Most companies are bad at identifying what a great engineer looks like. Even the famous ones get it badly wrong, like Facebook rejecting WhatsApp founder Jan Koum (they did eventually hire him but the price went up a bit).
Triplebyte is uniquely positioned to fix this. Over the past year, we've collected both quantitative (e.g. time to complete milestones within programming problems) and qualitative (e.g. problem solving approaches or code quality) data from several thousand technical interviews and have use it to create a list of the engineering skills most important to technology companies - the Triplebyte Engineer Genome. These are:
- Applied problem solving
- Algorithms knowledge
- Professional code
- Communication skill
- Architecture Skill
- Low-level systems understanding
- Back-end web understanding
We expect the list of attributes in our Engineer Genome to continue evolving over time as we gather more data on what companies are looking for. We'd welcome your thoughts or feedback on the project and thanks to everyone who has completed the Triplebyte technical evaluation.
This post started as the preparation material we send to our candidates, but we decided to post it publicly.
Being a good programmer has a surprisingly small role in passing programming interviews. To be a productive programmer, you need to be able to solve large, sprawling problems over weeks and months. Each question in an interview, in contrast, lasts less than one hour. To do well in an interview, then, you need to be able to solve small problems quickly, under duress, while explaining your thoughts clearly. This is a different skill . On top of this, interviewers are often poorly trained and inattentive (they would rather be programming), and ask questions far removed from actual work. They bring bias, pattern matching, and a lack of standardization.
Running Triplebyte, I see this clearly. We interview engineers without looking at resumes, and fast-track them to on-sites at YC companies. We’ve interviewed over 1000 programmers in the last nine months. We focus heavily on practical programming, and let candidates pick one of several ways to be evaluated. This means we work with many (very talented) programmers without formal CS training. Many of these people do poorly on interviews. They eat large sprawling problems for breakfast, but they balk at 45-min algorithm challenges.
The good news is that interviewing is a skill that can be learned. We’ve had success teaching candidates to do better on interviews. Indeed, the quality that most correlates with a Triplebyte candidate passing interviews at YC companies is not raw talent, but rather diligence.I fundamentally do not believe that good programmers should have to learn special interviewing skills to do well on interviews. But the status quo is what it is. We’re working at Triplebyte to change this. If you’re interested in what we’re doing, we’d love you to check out our process. In the meantime, if you do want to get better at interviewing, this blog post describes how we think you can most effectively do so.
1. Be enthusiastic
Enthusiasm has a huge impact on interview results. About 50% of the Triplebyte candidates who fail interviews at companies fail for non-technical reasons. This is usually described by the company as a “poor culture fit”. Nine times out of ten, however, culture fit just means enthusiasm for what a company does. Companies want candidates who are excited about their mission. This carries as much weight at many companies as technical skill. This makes sense. Excited employees will be happier and work harder.
The problem is that this can be faked. Some candidates manage to convince every company they talk to that it’s their dream job, while others (who are genuinely excited) fail to convince anyone. We’ve seen this again and again. The solution is for everyone to get better at showing their enthusiasm. This is not permission to lie. But interviewing is like dating. No one wants to be told on a first date that they are one option among many, even though this is usually the case. Similarly, most programmers just want a good job with a good paycheck. But stating this in an interview is a mistake. The best approach is to prepare notes before an interview about what you find exciting about the company, and bring this up with each interviewer when they ask if you have any questions. A good source of ideas is to read the company’s recent blog posts and press releases and note the ones you find exciting.
This idea seems facile. I imagine you are nodding along as you read this. But (as anyone who has ever interviewed can tell you) a surprisingly small percentage of applicants do this. Carefully preparing notes on why you find a company exciting really will increase your pass rate. You can even reference the notes during the interview. Bringing prepared notes shows preparation.
2. Study common interview concepts
A large percentage of interview questions feature data structures and algorithms. For better or worse, this is the truth. We gather question details from our candidates who interview at YC companies (we’ll be doing a in-depth analysis of this data in a future article), and algorithm questions make up over 70% of the questions that are asked. You do not need to be an expert, but knowing the following list of algorithms and data structures will help at most companies.
- Hash tables
- Linked lists
- Breadth-first search, depth-first search
- Quicksort, merge sort
- Binary search
- 2D arrays
- Dynamic arrays
- Binary search trees
- Dynamic programming
- Big-O analysis
Depending on your background, this list may look trivial, or may look totally intimidating. That’s exactly the point. These are concepts that are far more common in interviews than they are in production web programming. If you’re self-taught or years out of school and these concepts are not familiar to you, you will do better in interviews if you study them. Even if you do know these things, refreshing your knowledge will help. A startlingly high percentage of interview questions reduce to breadth-first search or the use of a hash table to count uniques. You need to be able to write a BFS cold, and you need to understand how a hash table is implemented.
Learning these things is not as hard as many of the people we talk to fear. Algorithms are usually described in academic language, and this can be off-putting. But at its core, nothing on this list is more complicated than the architecture of a modern web app. If you can build a web app (well), you can learn these things. The resource that I recommend is the book The Algorithm Design Manual by Steven Skiena. Chapters 3 through 5 do a great job of going over this material, in a straightforward way. It does use C and some math syntax, but it explains the material well. Coursera also has several good algorithms courses. This one, in particular, focuses on the concepts that are important in interviews.
Studying algorithms and data structures helps not only because the material comes up in interviews, but also because the approach to problems taken in an algorithm course is the same approach that works best in interviews. Studying algorithms will get you in an interview mindset.
3. Get help from your interviewer
Interviewers help candidates. They give hints, they respond to ideas, and they generally guide the process. But they don’t help all candidates equally. Some programmers are able to extract significant help, without the interviewer holding it against them. Others are judged harshly for any hints they are given. You want to be helped.
This comes down to process and communication. If the interviewer likes your process and you communicate well with them, they will not mind helping. You can make this more likely by following a careful process. The steps I recommend are:
- Ask questions
- Talk through a brute-force solution
- Talk through an optimized solution
- Write code
After you are asked an interview question, start by clarifying what was asked. This is the time to be pedantic. Clarify every ambiguity you can think of. Ask about edge cases. Bring up specific examples of input, and make sure you are correct about the expected output. Ask questions even if you’re almost sure you know the answers. This is useful because it gives you a chance to come up with edge cases and fully spec the problem (seeing how you handle edge-cases is one of the main things that interviewers look for when evaluating an interview), and also because it gives you a minute to collect your thoughts before you need to start solving the problem.
Next, you should talk through the simplest brute-force solution to the problem that you can think of. You should talk, rather than jump right into coding, because you can move faster when talking, and it’s more engaging for the interviewer. If the interviewer is engaged, they will step in and offer pointers. If you retreat into writing code, however, you'll miss this opportunity.
Candidates often skip the brute-force step, assuming that the brute-force solution to the problem is too obvious, or wrong. This is a mistake. Make sure that you always give a solution to the problem you’ve been asked (even if it takes exponential time, or an NSA super computer). When you’ve described a brute-force solution, ask the interviewer if they would like you to implement it, or come up with more efficient solution. Normally they will tell you to come up with a more efficient solution.The process for the more efficient solution is the same as for the brute force. Again talk, don’t write code, and bounce ideas off of the interviewer. Hopefully, the question will be similar to something you’ve seen, and you’ll know the answer. If that is not the case, it’s useful to think of what problems you’ve seen that are most similar, and bring these up with the interviewer. Most interview questions are slightly-obscured applications of classic CS algorithms. The interviewer will often guide you to this algorithm, but only if you begin the process.
Finally, after both you and your interviewer agree that you have a good solution, you should write your code. Depending on the company, this may be on a computer or a whiteboard. But because you’ve already come up with the solution, this should be fairly straightforward. For extra points, ask your interviewer if they would like you to write tests.
4. Talk about trade-offs
Programming interviews are primarily made up of programming questions, and that is what I have talked about so far. However, you may also encounter system design questions. Companies seem to like these especially for more experienced candidates. In a system design question, the candidate is asked how he or she would design a complex real-world system. Examples include designing Google maps, designing a social network, or designing an API for a bank.The first observation is that answering system design questions requires some specific knowledge. Obviously no one actually expects you to design Google maps (that took a lot of people a long time). But they do expect you to have some insight into aspects of such a design. The good news is that these questions usually focus on web backends, so you can make a lot of progress by reading about this area. An incomplete list of things to understand is:
- HTTP (at the protocol level)
- Databases (indexes, query planning)
- Caching (LRU cache, memcached, redis)
- Load balancers
- Distributed worker systems
Once you’ve done this reading, answering system design questions is a matter of process. Start at the highest level, and move downward. At each level, ask your interviewer for specifications (should you suggest a simple starting point, or talk about what a mature system might look like?) and talk about several options (applying the ideas from your reading). Discussing tradeoffs in your design is key. Your interviewer cares less about whether your design is good in itself, and more about whether you are able to talk about the trade-offs (positives and negatives) of your decisions. Practice this.
5. Highlight results
The third type of question you may encounter is the experience question. This is where the interviewer asks you to talk about a programming project that you completed in the past. The mistake that many engineers make on this question is to talk about a technically interesting side-project. Many programmers choose to talk about implementing a neural network classifier, or writing a Twitter grammar bot. These are bad choices because it’s very hard for the interviewer to judge their scope. Many candidates exaggerate simple side projects (sometimes that never actually worked), and the interviewer has no way to tell if you are doing this.
The solution is to choose a project that produced results, and highlight the results. This often involves picking a less technically interesting project, but it’s worth it. Think (ahead of time) of the programming you’ve done that had the largest real-world impact. If you’ve written a iOS game, and 50k people have downloaded it, the download number makes it a good option. If you’ve written an admin interface during an internship that was deployed to the entire admin staff, the deployment makes it a good thing to talk about. Selecting a practical project will also communicate to the company that you focus on actual work. Programmer too focused on interesting tech is an anti-pattern that companies screen against (these programmers are sometimes not productive).
6. Use a dynamic language, but mention C
No matter what language you use, it’s helpful to mention work in other languages. An anti-pattern that companies screen against is people who only know one language. If you do only know one language, you have to rely on your strength in that language. But if you’ve done work or side-projects in multiple languages, be sure to bring this up when talking to your interviewers. If you have worked in lower-level languages like C, C++, Go, or Rust, talking about this will particularly help.
Java, C# and PHP are a problematic case. As we described in our last blog post, we’ve uncovered bias against these languages in startups. We have data showing that programmers using these languages in the interview pass at a lower rate. This is not fair, but it is the truth. If you have other options, I recommend against using these languages in interviews with startups.
7. Practice, practice, practice
You can get much better at interviewing by practicing answering questions. This is true because interviews are stressful, but stress harms performance. The solution is practice. Interviewing becomes less stressful with exposure. This happens naturally with experience. Even within a single job search, we find that candidates often fail their initial interviews, and then pass more as their confidence builds. If stress is something you struggle with, I recommend that you jumpstart this process by practicing interview stress. Get a list of interview questions (the book Cracking the Coding Interview is one good source) and solve them. Set a 20-minute timer on each question, and race to answer. Practice writing the answers on a whiteboard (not all companies require this, but it’s the worst case, so you should practice it). A pen on paper is a pretty good simulation of a whiteboard. If you have friends who can help you prepare, taking turns interviewing each other is great. Reading a lot of interview questions has the added benefit of providing you ideas to use when in actual interviews. A surprising number of questions are re-used (in full or in part).
Even experienced (and stress-free) candidates will benefit from this. Interviewing is a fundamentally different skill from working as a programmer, and it can atrophy. But experienced programers often (reasonably) feel that they should not have to prepare for interviews. They study less. This is why junior candidates often actually do better on interview questions than experienced candidates. Companies know this, and, paradoxically, some tell us they set lower bars on the programming questions for experienced candidates.
8. Mention credentials
Credentials bias interviewers. Triplebyte candidates who have worked at a top company or studied at a top school go on to pass interviews at a 30% higher rate than programmers who don’t have these credentials (for a given level of performance on our credential-blind screen). I don’t like this. It’s not meritocratic and it sucks, but if you have these credentials, it’s in your interest to make sure that your interviewers know this. You can’t trust that they’ll read your resume.
9. Line up offers
If you’ve ever read fund-raising advice for founders, you’ll know that getting the 1st VC to make an investment offer is the hardest part. Once you have one offer, more come pouring in. The same is true of job offers. If you already have an offer, be sure to mention this in interviews. Mentioning other offers in an interview heavily biases the interviewer in your favor.
This brings up the strategy of making a list of the companies you’re interested in, and setting up interviews in reverse order of interest. Doing well earlier in the process will increase your probability of getting an offer from you number one choice. You should do this.
Passing interviews is a skill. Being a great programmer helps, but it’s only part of the picture. Everyone fails some of their interviews, and preparing properly can help everyone pass more. Enthusiasm is paramount, and research helps with this. As many programmers fail for lacking enthusiasm as fail for technical reasons. Interviewers help candidates during interviews, and if you follow a good process and communicate clearly, they will help you. Practice always helps. Reading lots of interview questions and inuring yourself to interview stress will lead to more offers.This situation is not ideal. Preparing for interviews is work, and forcing programmers to learn skills other than building great software wastes everyone’s time. Companies should improve their interview processes to be less biased by academic CS, memorized facts, and rehearsed interview processes. This is what we’re doing at Triplebyte. We help programmers get jobs without looking at resumes. We let programmers pick one of several areas in which to be evaluated, and we study and improve our process over time. We’d love to help you get a job at a startup, without jumping through these hoops. You can get started here. But the status quo is what it is. Until this changes, programmers should know how to prepare.
Thanks to Jared Friedman, Emmett Shear, Garry Tan, Alexis Ohanian and Daniel Gackle for reading drafts of this.
Footnote : This is not to say that interview performance does not correlate with programing skill. It does. But the correlation is far weaker than most companies assume, and factors other than programing skill explain a large part of interview variance. ↩
tl;dr Short stock option exercise windows suck. They force startup employees to make hard decisions, and often rob them of fairly earned compensation. We’ve created docs that companies can use to give their employees 10 years to exercise their options. YC will recommend all their startups use these documents going forward. We’re advising Triplebyte candidates to favor companies making this change, and we’ve already convinced 12 companies to pledge to do this.
Stock options are valuable compensation for startup employees. The high potential upside of these options motivates employees to turn down larger salaries at bigger companies and work at startups. It seems obvious, then, to expect that employees should own their vested options outright, even if they leave the company. Stock options are compensation for work that’s already been done. Returning them to the company when you leave would be inequitable.
Unfortunately, this is exactly what often happens. The industry standard stock option agreement gives employees 90 days after leaving a company to exercise their vested options, or they are returned to the company. Many employees don’t have the money to exercise their options within such a short window and lose them. To fix this we’re announcing three things:
- We’ve worked with the team at Ironclad (YC S15) and Nancy Chen at Orrick to create the Triplebyte extended window stock option plan. This is standardized paperwork any company can use to give their employees 10 years from grant date to exercise their options. You can download these directly here or use Ironclad to set up and manage them here.
- We’ve been encouraging startups to make this change and are publishing a list of YC companies who offer an extended exercise window here. Currently 14 have already implemented an extended window option plan, and 9 have pledged to do so using our plan. More companies are in the process of deciding and we’ll be updating the list as they do. We’ll be encouraging Triplebyte candidates to weigh this heavily when choosing companies.
- Y Combinator has agreed to recommend that its companies use the Triplebyte extended window option plan documents when they form an option plan, beginning with the current Winter 2016 batch.
If you’ve been an employee at a startup, you’ll know this issue is important and causes stress in two ways.
(1) To exercise the options, you need enough money to cover both the exercise price and the taxes you now owe. In the case where the company has performed well and the valuation has increased (i.e. when people care most about their options), this will be more money than you can afford, unless you’re already wealthy.
(2) How do you know if now is the right time to exercise the options? The company may still be years away from a liquidity event, with some uncertainty remaining over its future outcome. Investors in the company are diversified and can absorb this uncertainty. You can only work for one company at a time, with all your eggs likely in this one basket. The stock is also likely illiquid right now so you can’t sell some to recoup your cost of exercising.
So now you’re left with three choices. Give up your options, stay at the company longer or scramble to find a financial solution quickly so you can afford to exercise the options. As Sam Altman wrote, this is an unfair situation and needs to be fixed.
At Triplebyte, we spend a lot of time talking to engineers who are thinking through startup job offers. They’re becoming increasingly savvy about how stock options work, and ask thoughtful questions about the mechanics of options. We also see an outsider’s perspective on this, as we talk to many engineers from non-traditional backgrounds who are based outside of the Valley. Invariably when we get into discussing the details of options, they are surprised by how quickly they’d be forced to exercise their options if they left a company. We agree with them. It’s not a fair situation to put someone in. People should stay at a company because they want to, not because they feel locked in by fear of loss.
There is a growing trend to fix this inequity by increasing the post-termination option exercise window for employees. This “option extension” gives you more time to exercise your options, which increases the likelihood there will be a liquidity event to help you pay the exercise price and the tax triggered upon exercise. Quora, Palantir, Pinterest, Asana and Coinbase have all increased the post-termination option exercise window for their employees. This is the future and we’re going to accelerate this trend to make it the industry standard to give employees 10 years from getting their options, to decide whether to exercise.
As a company, if you haven’t already implemented a stock option plan, adopting the increased exercise window is simple. You can just use our documents.
If you have an existing option plan in place, amending it requires thought and analysis of the tradeoffs. We’ve created a summary of the gory details on both the business and legal aspects here. Our goal is for founders to use this to have an informed discussion with their counsel and make a decision. What we want to make clear is that it is possible to do this for your existing employees by amending their outstanding options and adding a longer exercise window to them.
Much has been written about this issue in the past but not enough has changed. Most companies continue issuing options with a 90 day window. Employees are often either not sophisticated enough to ask about this issue, or are reluctant to ask a company to incur the expense of paying lawyers to draft new and complicated paperwork.
We’re applying the three forces we believe will make a real change (1) standardized paperwork accessible to all, (2) public recognition for companies who have made the change, (3) educating employees about the issue. We expect increasing the exercise window to become a necessary condition for startups who want to hire the best people, which is ultimately what their success depends on.
Thanks to Sam Altman, Carolynn Levy, Jonathan Levy, Jason Boehming and Nancy Chen for reading drafts of this post.
We wrote here why we believe giving employees 10 years (i.e. the full term of their options) to exercise their stock options is the future of startup employee compensation.
If you have an existing option plan in place, amending it requires thought and analysis of the tradeoffs. We encourage every company to think about this deeply and make an informed decision. What we want to make clear is that it is possible to amend outstanding options held by existing employees and add a longer post-termination exercise window to them.
There has been a lot of discussion on this topic, with arguments made both for and against implementing the extension. When talking with founders who agreed with making the change in principle, but were deterred by speaking with lawyers, we found there to be a lot of misinformation about the key issues in circulation.
Here is a summary of the issues, both business and legal, we most commonly hear brought up by founders thinking through this. Our goal here is to provide the information needed to raise this topic for internal discussion with your team and make a decision.
1) This matters only to the “wrong” kind of employee
Issue: The exercise window matters most to the mercenaries who want to move onto the hot new company each year. The company will lose an important retention mechanism that comes with options.
Thoughts: Having people stay at your company because they feel locked in isn’t good for employee morale. Companies want motivated people working for them, and should find positive ways to incentivize employees to remain in employment. Companies can also implement the option extension in a way to encourage retention by requiring employees remain in employment for e.g. 2 years to be eligible for the option extension. This is how Coinbase and Pinterest implemented it.
2) This is worse for employees from a tax perspective
Issue: There are two types of stock options, incentive stock options (ISOs) and nonstatutory stock options (NSOs). Only NSOs can have this extended exercise window but they also have less favorable tax treatment than ISOs.
Thoughts: It’s true that ISOs have better tax treatment than NSOs but the difference is not as great as commonly thought because of AMT (Alternative Minimum Tax). To understand this, let’s compare how the tax treatments differ at the two most important events, exercising your options and selling your stock.
1. Employee exercises stock option
ISO: Employee now owes AMT (Alternative Minimum Tax) on the difference between the amount they paid to exercise their options (the exercise price) and the fair market value of that stock today. Calculating exactly AMT can be tricky, most likely you’ll pay 28% on the difference.
NSO: Employee owes Ordinary Income Tax (38%) on the difference between the exercise price and fair market value of the stock.
2. Employee sells stock
ISO: Employees owes capital gains tax on difference between the sale price and fair market value of the stock at exercise. If this sale happens within a year, you’ll owe short term capital gains (38%). If it’s been over a year and two years since the options were granted, you’ll owe long term capital gains (20%).
NSO: The capital gains treatment is the same as above.
You can see the tax difference between ISOs and NSOs is most important at the time of exercise. What’s important is companies don’t have to decide whether employees get the flexibility of an NSO or the preferential tax treatment of an ISO. Employees can make this decision themselves. If an employee exercises their options, post leaving the company, within 90 days they’ll still get the ISO tax treatment. Otherwise they’ll get NSO tax treatment. They can decide whether to tradeoff better tax treatment against the flexibility of having more time to decide if they’d like to exercise.
3) Cap table management
Issue: Increasing the post-termination exercise window means having shareholders who haven’t been actively involved with the company for years. This equity could have been “re-invested” to incentivize new or current employees. This also makes cap table management difficult, putting a burden on the company to keep updated contact information for them all.
Thoughts: Stock options are a reward for work that has already been done. Once vested, employees deserve to own their options outright and have the opportunity to exercise the rest of their vested options. The additional administrative overhead is small in comparison to protecting this right.
4) Dual class of employees
Issue: Extending the exercise window is not possible for existing employees and will only be applicable to new hires. This creates two classes of employees, penalizing the loyal long-time employees whose options did not originally have the option extension.
Thoughts: This is simply not true. It is possible to amend outstanding options held by existing employees to add an option extension. This amendment may convert an incentive stock option (ISO) into a nonstatutory stock option (NSO), and the company may have to comply with the tender offer rules to offer employees this option extension. However, this is completely feasible, and many companies have complied with the tender offer rules to implement this.
5) Better handled on a case by case basis
Issue: This issue is better handled on a case by case basis with each individual employee. Companies should have a personal conversation and find the best solution for each person, rather than offering this to everyone by default.
Thoughts: Option extensions require board and optionee consent. Handling option extensions on a case by case basis is administratively burdensome, because the company has to remember to seek board approval of an option extension each time someone leaves. In addition, a case by case analysis may make the company vulnerable to a claim of discrimination if employees and their options are not treated in the same manner. Finally, if there are multiple case by case option extensions, there comes a point when the tender offer rules will get triggered anyway, because of the number of option extensions that have been offered. This isn’t something a company wants sprung upon them without time to prepare for it.
Legal and Accounting Issues
1) Tender Offer
Giving current employees the decision whether to keep their ISOs without the option extension or have NSOs with the extension is an investment decision, which may require the company to engage in a tender offer when offering the option extension. This tender offer process is relatively easy to implement, but the company has to give its employees at least 20 business days to think it over and decide.
2) Accounting Charge
An option extension will likely result in a higher accounting charge with respect to the options, although many companies have not found this additional charge to be material. The company needs to check with its outside auditors on the accounting implications of an option extension, which will vary depending on the number of options affected by the option extension and the length of the option extension.
With an option extension, a company can anticipate that most options will be NSOs when exercised. If NSOs are exercised when there is a gain on the exercise date, the company will incur an additional tax cost, because the company has to pay the employer portion of the employment tax on such gain. At the same time, the company gets a deduction equal to the gain recognized on the exercise of an NSO, so the company has to balance the cost of the employment tax against the benefit of a tax deduction. There is no comparable tax cost with the exercise of an ISO.
If the company is acquired, occasionally, a buyer may require that the company track down all former employee optionees to obtain their consent to the option treatment, as a closing condition. However, the form of the Triplebyte stock plan is drafted to give maximum flexibility in the treatment of options in an acquisition, so optionee consent to the option treatment shouldn’t be required in most acquisitions.
Due to the option extension, there may be more options outstanding at an IPO, which may result in a larger overhang (i.e. larger number of outstanding equity). However, it’s possible that the company will have a similar overhang without the option extension, if most optionees exercise options and become shareholders.
If you have any questions about these, please get in touch. More companies are starting to follow the trend set by Pinterest, Quora, Coinbase, Amplitude and others and we’d like to see this become the standard.
A collection of thoughts discussing this issue we’d recommend reading:
Thanks to Nancy Chen at Orrick for providing the legal details in this post.