4 ms·

so if Karl was so great, and made such huge contributions...why wasn't Karl made a co-founder at the end of his internship? Frankly I think working for a start

by vaksel 17y ago

so if Karl was so great, and made such huge contributions...why wasn't Karl made a co-founder at the end of his internship? Frankly I think working for a startup is stupid unless you get a ton of equity to make the time worthwhile AND know that the company is capable of hitting a big exit. Why? Because you are expected to put in the same time, make the same sacrifices and take the same risk as the founders, but in the event of a cash out you get squat. Everyone always thinks of Google and Apple early employees who cashed out big, but that's selection bias, most startups crash and burn...and those which don't have smaller exits, after the VCs and founders take their cuts, as an employee you'll be lucky to make up the difference in salary you gave up by not going to work for Google or MSFT.

johnrob 17y ago
I couldn't help having the same reaction myself. I hope they offered equity that was more indicative of a pre-funding-no-salary employee, even though he's technically a post-funding-salaried employee.
aberman 17y ago
My co-founder and I had been working almost a full year before we got accepted to YCombinator, and we made some pretty substantial progress building out our back-office financial partnerships and getting savvy in the payment space. Bill had walked away from a very lucrative job in finance, and I left a pretty prestigious scholarship at NYU law. We were far from conception stage when we brought Karl on board. When he agreed to work for us, he knew he was going to learn a lot, get the YC experience, make some good connections, and see what it was like to work for an early-stage startup without having to make a life-changing commitment. If the company went belly-up, he could just go back to school in the fall. In fact, he did go back to school at the end of the summer. If we went belly up, Bill and I would have been shit out of luck. Karl only came back after we raised money and offered him a salary. There is no way we would have hired Karl had we not had the opportunity to work with him over the summer. But he did choose to work with us, and he was rewarded with a position that he would have had no chance of getting otherwise. He still has the option to go back to school, but if he does, he will have a head start on most of his peers. Karl has been an incredible part of our team, and I am thrilled we have him. That being said, we did not need Karl to get where we are, which I think is the one prerequisite for giving anybody founder status (and the commensurate equity). I worked for a startup (poverty level wages) right out of college. It was one of the best experiences I have had, and without it, there is no way I would have started this company. I wasn't doing it in the hopes that one day I would be anointed a founder.
- codexon 17y ago
  Karl only came back after we raised money and offered him a salary. Did you offer him any compensation during that period to stay? I am guessing no. Isn't it unfair to offer him equity only if he works for free without any guarantee of compensation? What if you were stringing him along for free labor? If we went belly up, Bill and I would have been shit out of luck Employee compensation should not be related to how much risk the employers have: it should be related to the market value of the employee. As others have said, Karl also took a risk. If your company went under, all he would have on his resume is an unknown company with less money than if he went for a paid internship at Google etc... If you are paying below market rate for talent, you should compensate through equity.
coffeemug 17y ago
Probably because Karl was willing to do it without a co-founder status. I think the same way you do - that I'd never join a startup unless it were my own. I also used to make the same mistake - I thought that everyone else thinks the same way as me. In practice, the opposite is the case. Most people who want to join startups aren't willing to bear the load of fundraising, staying for months on a brink of death, doing recruiting, or management, or secretarial work, or a million other things a startup founder does. Being an excellent engineer or an excellent manager doesn't automatically make one an excellent founder. Bill and Rich are world class at what they do - founding, growing, and running a company (and everything that it entails). I don't know Karl well, but he is probably world class at what he does - engineering great web applications. If Karl is willing to keep doing engineering for a certain compensation, there is no sensible reason for Bill and Rich to make him a co-founder (and conversely, if Karl doesn't want to deal with all the things founders deal with, there is no sensible reason for him to seek a co-founder status).
- vaksel 17y ago
  basically what I'm saying is that as an employee startups are a bad proposition. You get to work long hours, get paid less money, get less benefits, and unless the company hits a Google size homerun the most you can hope for is recovering the extra income you gave up by not joining Google.
  - coffeemug 17y ago
    Purely from the financial perspective, I completely agree with you. Looking at the statistics, starting a company is a bad enough idea. Joining one is even worse. I once made this argument in front of a start up employee, but he explained that he approaches it from a different perspective. He said he's young, so the extra $30k he'll get at Facebook or at Google doesn't make a substantial difference to him - he still lives comfortably; he enjoys the work that he does and the environment immensely; he's learning a ton of things he wouldn't learn in a bigger company (of course he's not learning some things he would learn in a bigger company, but he already did work at one before). The fact that he might get rich in the unlikely event of a home-run is just frosting on the cake. If you think of it from this perspective, joining a startup as an employee makes sense.
dagobart 17y ago
This is good advice. I should had have it earlier: I always believed that becoming an intern at a startup would be a good idea since (so my opinion) it would give/leave you the freedom to live your creativity at work and influence a little how the startup evolves.

by vaksel 17y ago

johnrob 17y ago

I couldn't help having the same reaction myself. I hope they offered equity that was more indicative of a pre-funding-no-salary employee, even though he's technically a post-funding-salaried employee.

aberman 17y ago

My co-founder and I had been working almost a full year before we got accepted to YCombinator, and we made some pretty substantial progress building out our back-office financial partnerships and getting savvy in the payment space. Bill had walked away from a very lucrative job in finance, and I left a pretty prestigious scholarship at NYU law. We were far from conception stage when we brought Karl on board. When he agreed to work for us, he knew he was going to learn a lot, get the YC experience, make some good connections, and see what it was like to work for an early-stage startup without having to make a life-changing commitment. If the company went belly-up, he could just go back to school in the fall. In fact, he did go back to school at the end of the summer. If we went belly up, Bill and I would have been shit out of luck. Karl only came back after we raised money and offered him a salary. There is no way we would have hired Karl had we not had the opportunity to work with him over the summer. But he did choose to work with us, and he was rewarded with a position that he would have had no chance of getting otherwise. He still has the option to go back to school, but if he does, he will have a head start on most of his peers. Karl has been an incredible part of our team, and I am thrilled we have him. That being said, we did not need Karl to get where we are, which I think is the one prerequisite for giving anybody founder status (and the commensurate equity). I worked for a startup (poverty level wages) right out of college. It was one of the best experiences I have had, and without it, there is no way I would have started this company. I wasn't doing it in the hopes that one day I would be anointed a founder.

codexon 17y ago
Karl only came back after we raised money and offered him a salary. Did you offer him any compensation during that period to stay? I am guessing no. Isn't it unfair to offer him equity only if he works for free without any guarantee of compensation? What if you were stringing him along for free labor? If we went belly up, Bill and I would have been shit out of luck Employee compensation should not be related to how much risk the employers have: it should be related to the market value of the employee. As others have said, Karl also took a risk. If your company went under, all he would have on his resume is an unknown company with less money than if he went for a paid internship at Google etc... If you are paying below market rate for talent, you should compensate through equity.

coffeemug 17y ago

Probably because Karl was willing to do it without a co-founder status. I think the same way you do - that I'd never join a startup unless it were my own. I also used to make the same mistake - I thought that everyone else thinks the same way as me. In practice, the opposite is the case. Most people who want to join startups aren't willing to bear the load of fundraising, staying for months on a brink of death, doing recruiting, or management, or secretarial work, or a million other things a startup founder does. Being an excellent engineer or an excellent manager doesn't automatically make one an excellent founder. Bill and Rich are world class at what they do - founding, growing, and running a company (and everything that it entails). I don't know Karl well, but he is probably world class at what he does - engineering great web applications. If Karl is willing to keep doing engineering for a certain compensation, there is no sensible reason for Bill and Rich to make him a co-founder (and conversely, if Karl doesn't want to deal with all the things founders deal with, there is no sensible reason for him to seek a co-founder status).

vaksel 17y ago
basically what I'm saying is that as an employee startups are a bad proposition. You get to work long hours, get paid less money, get less benefits, and unless the company hits a Google size homerun the most you can hope for is recovering the extra income you gave up by not joining Google.
- coffeemug 17y ago
  Purely from the financial perspective, I completely agree with you. Looking at the statistics, starting a company is a bad enough idea. Joining one is even worse. I once made this argument in front of a start up employee, but he explained that he approaches it from a different perspective. He said he's young, so the extra $30k he'll get at Facebook or at Google doesn't make a substantial difference to him - he still lives comfortably; he enjoys the work that he does and the environment immensely; he's learning a ton of things he wouldn't learn in a bigger company (of course he's not learning some things he would learn in a bigger company, but he already did work at one before). The fact that he might get rich in the unlikely event of a home-run is just frosting on the cake. If you think of it from this perspective, joining a startup as an employee makes sense.

dagobart 17y ago

This is good advice. I should had have it earlier: I always believed that becoming an intern at a startup would be a good idea since (so my opinion) it would give/leave you the freedom to live your creativity at work and influence a little how the startup evolves.