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Everyone's risk tolerance is different. Sometimes, you need to get paid. This will get you in the door at an already funded startup where you'll get a salary an

by zaius 16y ago

Everyone's risk tolerance is different. Sometimes, you need to get paid. This will get you in the door at an already funded startup where you'll get a salary and still have the potential payoff of a big exit.

johnswamps 16y ago
It's also probably good practice for founding a startup. You get to learn about the issues that come up in running a startup without having to make all the big decisions yourself. Think of it as similar to auditing a college course.
rmorrison 16y ago
This will get you in the door at an already funded startup where you'll get a salary and still have the potential payoff of a big exit. Simply out of curiosity, what range equity stake would a programmer get? More specifically, if there is a $10mm exit, what would a programmer stand to make? How about $100mm? I know it varies by company, vesting, additional funding rounds, and a bajillion other factors. I'm just curious as to rough order of magnitude. While I think it's a great idea to work for a startup because they're exciting environments which offer a lot of learning experiences that big companies do not, "big exits" for non-founding programmers are exceptionally rare and are too easily oversold.
- 1053r 16y ago
  Based upon some completely unscientific asking around, it seems like a person who has an employee number under 10 is likely to make 1/50th to 1/400th of the total exit after taxes. So $100mm for the company = $500K plus or minus. Not total crap, but also probably not worth it based upon the money alone. The reason to work for a startup as an early employee is the fun (if you like working 12-14 hour days on cool stuff) and the experience. I'm guessing having a successful startup under your belt makes it a LOT easier to get your own company funded down the line. Also, people can end up much higher in a large organization earlier than they could have without some serious corporate climbing.
  - doki_pen 16y ago
    Is the 12-14 hour thing necessarily true? I know some people at startups and they don't work that much. It seems that a lot of startups say they value life/work separation. There has also been research to suggest that working that much is anti-productive. Of course, I understand crunch time, but as a rule 12-14 hours a day!? That seems a little outrageous.
    - roel_v 16y ago
      > It seems that a lot of startups say they value life/work separation. Of course they say so. Deloitte says so too, and Wachtell, and Cravath, and every other high pressure professional outfit. Doesn't make it true. > There has also been research to suggest that working that much is anti-productive. Yeah but most of those are in different circumstances. It all depends on where the motivation comes from. If you take a wage slave and whip him into working 80 hours, while paying for 40, and not dangling any form of carrot in front of him/her (making partner), of course productivity will go down. If you've got a product you believe in, a vision to make it come true, an innate drive to succeed no matter what, and no personal life, you can work 80 or 100 hours a week for months on end and get the work of 5 or 10 people done in that time.
- pg 16y ago
  This is the kind of thing I'm going to talk about at the event. But here are some rough calculations. If you were the first person hired by a YC startup you'd probably get between 3% and 30% of the company. I know that's a wide range, but that's the range I've seen. Suppose to make the math easy you got 10%. Suppose you get diluted 20% by funding rounds before a $10m exit. That yields $800k. In a $100m exit you'd probably have been diluted more, because the company would probably have taken VC funding to get that much. So suppose your 10% was diluted by 2/3. Then you'd get $3.3 million. This is assuming you're the first person hired by the startup, of course. The amount of equity you get decreases by time to a power. Someone who joins the company after 6 months would get way less than half as much as someone who joins after 3 months. It's rare for a series A funded startup to give more than 1% to a programmer.
  - nl 16y ago
    What's a typical salary for the same person? (Obviously this affects the risk/reward trade-off)
    - pg 16y ago
      Someone that early would probably get the same deal as the founders, which would vary depending on how much funding the company had. If the company only had a small amount of angel funding, they'd be paying themselves no more than living expenses. If they had more substantial funding they might get 50-70% of market rate.
- starkfist 16y ago
  Programmers < 10 typically get between .25 and 1.5%, pre series A. It's best to look at this as a theoretical upper bound, not a likely outcome. Usually the investors, founders and board members fuck around with the corporate structure, option splits and preferred vs. Common stock so that the employee options are worthless, anyway.
  - pg 16y ago
    Usually the investors, founders and board members fuck around with the corporate structure, option splits and preferred vs. Common stock so that the employee options are worthless, anyway. That's not common in successful startups. No successful startup would want to alienate their employees this way. It wouldn't be worth it, just to recapture a few percent of stock. Common stock only gets massively diluted when a company is in trouble. And usually startups in trouble end up dying, or getting bought in a fire sale, so in those cases the equity isn't worth much anyway.
    - starkfist 16y ago
      Most startups are not successful. This way the executives the VCs installed when the company started to fail can walk away with something when they fold the company into another company in their portfolio and disguise it as an acquisition. Edit: I think you edited your post as I made mine and made my point for me.
    - nivi 16y ago
      Work at a Startup is a brilliant move and I'm looking forward to learning from it. I don't agree that "usually startups in trouble end up dying, or getting bought in a fire sale." I don't know if anyone has a big enough data set to give us the "correct" answer. But if you talk to thoughtful, experienced VCs and entrepreneurs who have seen many companies through their whole lifecycle (birth to IPO and beyond), I think they'll tell you that a lot of the successful startups get in significant trouble along the way. And if that trouble coincides with the need to raise a round, common stockholders get diluted. Preferred stockholders have anti-dilution, pro rata rights, protective provisions, and cash reserves to protect them.

by zaius 16y ago

johnswamps 16y ago

It's also probably good practice for founding a startup. You get to learn about the issues that come up in running a startup without having to make all the big decisions yourself. Think of it as similar to auditing a college course.

rmorrison 16y ago

This will get you in the door at an already funded startup where you'll get a salary and still have the potential payoff of a big exit. Simply out of curiosity, what range equity stake would a programmer get? More specifically, if there is a $10mm exit, what would a programmer stand to make? How about $100mm? I know it varies by company, vesting, additional funding rounds, and a bajillion other factors. I'm just curious as to rough order of magnitude. While I think it's a great idea to work for a startup because they're exciting environments which offer a lot of learning experiences that big companies do not, "big exits" for non-founding programmers are exceptionally rare and are too easily oversold.

1053r 16y ago
Based upon some completely unscientific asking around, it seems like a person who has an employee number under 10 is likely to make 1/50th to 1/400th of the total exit after taxes. So $100mm for the company = $500K plus or minus. Not total crap, but also probably not worth it based upon the money alone. The reason to work for a startup as an early employee is the fun (if you like working 12-14 hour days on cool stuff) and the experience. I'm guessing having a successful startup under your belt makes it a LOT easier to get your own company funded down the line. Also, people can end up much higher in a large organization earlier than they could have without some serious corporate climbing.
- doki_pen 16y ago
  Is the 12-14 hour thing necessarily true? I know some people at startups and they don't work that much. It seems that a lot of startups say they value life/work separation. There has also been research to suggest that working that much is anti-productive. Of course, I understand crunch time, but as a rule 12-14 hours a day!? That seems a little outrageous.
  - roel_v 16y ago
    > It seems that a lot of startups say they value life/work separation. Of course they say so. Deloitte says so too, and Wachtell, and Cravath, and every other high pressure professional outfit. Doesn't make it true. > There has also been research to suggest that working that much is anti-productive. Yeah but most of those are in different circumstances. It all depends on where the motivation comes from. If you take a wage slave and whip him into working 80 hours, while paying for 40, and not dangling any form of carrot in front of him/her (making partner), of course productivity will go down. If you've got a product you believe in, a vision to make it come true, an innate drive to succeed no matter what, and no personal life, you can work 80 or 100 hours a week for months on end and get the work of 5 or 10 people done in that time.
pg 16y ago
This is the kind of thing I'm going to talk about at the event. But here are some rough calculations. If you were the first person hired by a YC startup you'd probably get between 3% and 30% of the company. I know that's a wide range, but that's the range I've seen. Suppose to make the math easy you got 10%. Suppose you get diluted 20% by funding rounds before a $10m exit. That yields $800k. In a $100m exit you'd probably have been diluted more, because the company would probably have taken VC funding to get that much. So suppose your 10% was diluted by 2/3. Then you'd get $3.3 million. This is assuming you're the first person hired by the startup, of course. The amount of equity you get decreases by time to a power. Someone who joins the company after 6 months would get way less than half as much as someone who joins after 3 months. It's rare for a series A funded startup to give more than 1% to a programmer.
- nl 16y ago
  What's a typical salary for the same person? (Obviously this affects the risk/reward trade-off)
  - pg 16y ago
    Someone that early would probably get the same deal as the founders, which would vary depending on how much funding the company had. If the company only had a small amount of angel funding, they'd be paying themselves no more than living expenses. If they had more substantial funding they might get 50-70% of market rate.
starkfist 16y ago
Programmers < 10 typically get between .25 and 1.5%, pre series A. It's best to look at this as a theoretical upper bound, not a likely outcome. Usually the investors, founders and board members fuck around with the corporate structure, option splits and preferred vs. Common stock so that the employee options are worthless, anyway.
- pg 16y ago
  Usually the investors, founders and board members fuck around with the corporate structure, option splits and preferred vs. Common stock so that the employee options are worthless, anyway. That's not common in successful startups. No successful startup would want to alienate their employees this way. It wouldn't be worth it, just to recapture a few percent of stock. Common stock only gets massively diluted when a company is in trouble. And usually startups in trouble end up dying, or getting bought in a fire sale, so in those cases the equity isn't worth much anyway.
  - starkfist 16y ago
    Most startups are not successful. This way the executives the VCs installed when the company started to fail can walk away with something when they fold the company into another company in their portfolio and disguise it as an acquisition. Edit: I think you edited your post as I made mine and made my point for me.
  - nivi 16y ago
    Work at a Startup is a brilliant move and I'm looking forward to learning from it. I don't agree that "usually startups in trouble end up dying, or getting bought in a fire sale." I don't know if anyone has a big enough data set to give us the "correct" answer. But if you talk to thoughtful, experienced VCs and entrepreneurs who have seen many companies through their whole lifecycle (birth to IPO and beyond), I think they'll tell you that a lot of the successful startups get in significant trouble along the way. And if that trouble coincides with the need to raise a round, common stockholders get diluted. Preferred stockholders have anti-dilution, pro rata rights, protective provisions, and cash reserves to protect them.