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I agree this is pretty ridiculous. It does make me wonder though, what is the appropriate way to bring people on when you can’t pay them? I.e. you have no money

I agree this is pretty ridiculous. It does make me wonder though, what is the appropriate way to bring people on when you can’t pay them? I.e. you have no money and are just starting out (1-2ppl), and need someone to help? Do you just make them a co-founder? Or can you structure an employment agreement that grants a substantial percent of equity with a guaranteed salary starting X months after start? I ask because I’m wondering how companies that bootstrap without investment grow headcount. Edit: I guess I should have been less ambiguous, I wasn't really talking about an employee/employer situation, I agree all work should be paid for. Now that I think about it more, I guess the scenario I was describing was 1-2 people working on a project, and then getting someone else in their immediate circle (i.e. friend, connection, etc) involved. I guess this person would then be called a co-founder, since they are assuming similar risk as the 1-2 original people. My question was more, how have others structured equity for those people, (co-founders?) who join significantly after inception?

swsieber 9y ago
Companies that bootstrap without investment wait as long as possible to hire/grow headcount. Yeah, it might take a bit longer to reach higher revenues.
- thomascgalvin 9y ago
  But what about companies that bootstrap without any technical skills, business acumen, marketable ideas, or morals?
  - albertgoeswoof 9y ago
    Oh, they just ask reach out to their "network" for a few hundred thousand
kabouseng 9y ago
"with a guaranteed salary starting X months after start" If you don't have operating capital now, what guarantees can you give that you will have x months later?
- fapjacks 9y ago
  Well, what guarantees that is the "growth hacker" intern they have working on "an interview project" before their phone screening.
- jstarfish 9y ago
  You're missing the point; it's not about whether or not they have the capital-- either way, the employee inevitably gets canned right before that maturity date. That's how "probationary periods" are gamed here in the US.
CiPHPerCoder 9y ago
> what is the appropriate way to bring people on when you can’t pay them? You don't. Pay people for their work, or don't hire them. Anything else is at best ethically gray, but almost always bad.
- tjic 9y ago
  So much this. If you aren't generating profits, and want someone to work for you, either: * borrow the money in your own name * borrow against your house * don't bring them on You're the one creating the risk. You've gotta eat it. Anything else is massively unethical.
- SomeStupidPoint 9y ago
  > 1-2 people If you're less than 3-5 people and have no money, you're looking for a technical co-founder, not an employee. I've done say, 1 day a week of dev on the weekend while having a dayjob to get a project started for a share of equity because I liked the project. (So have others I know.) Just have realistic asks in terms of time/equity trade so people can balance their risk by having other work as well.
jaymzcampbell 9y ago
I think it's irresponsible to hire employees at that stage then. Either they are co-founders and are buying into the struggle equally or they are your friends and they're doing you a favour and can afford it (or can sink the cost for you because of your long-standing relationship already). To ask this of a general person who is looking for a job not a dream would be poor form IMO.
holtalanm 9y ago
I'm going to parrot others and say 'you dont'. You wait until you have the operating income to afford to hire another. Until then, focus on growing your current business.
gadders 9y ago
Apparently they're not just starting out: "This also isn't one of those startups that is trying to find a developer to do what they can not. We have a fully functioning in house dev team and simply want to move faster. As such, you will also be working alongside one of the leading React developers in the world who will assist you every step of the way."
- idop 9y ago
  They probably have nothing. I've never seen a job posting for a junior position saying you will be a key part of the design and implementation of the entire product.
CPLX 9y ago
> I ask because I’m wondering how companies that bootstrap without investment grow headcount. People pay them for their products or services, then they take the money so gained and distribute it to their employees in exchange for their work. My understanding is that this concept has been quite popular historically.
- SmellyGeekBoy 9y ago
  Spot on. I worked for 7 years as a contractor before amassing enough money to be comfortable taking on my first employee. That was just over a year ago and now I have 5 of them - and plenty of cashflow to actually pay them what they're worth. It's almost like people have forgotten how a business works...
  - reitanqild 9y ago
    Hehe, probably you have better understanding of running a business than many business owners. (One pitfall however is that some bootstrapped business owners become unreasonably cheap even when there is reason not to be.)
dragonwriter 9y ago
> what is the appropriate way to bring people on when you can’t pay them? Secure financing by convincing someone with money you have a viable business model, then bring people on since you can pay them.
delphinius81 9y ago
If they aren't being paid at the beginning (equity only), then they are a co-founder of the company. If you want an employee, you find a way to pay them either through personal savings pooled together by the co-founders, or because your product is already producing some revenue that you can use for salary.
otakucode 9y ago
You get investors to give you money so you can pay to hire capable people. Or else you realize that the world doesn't owe you workers to generate profit for you to skim/scalp. If you have 'an idea' the first thing to realize is that ideas are worthless. Utterly and completely worthless. The only thing worth a cent is execution. And execution does not consist of expecting others to execute for you for no compensation. That's begging.
astura 9y ago
This is a real question? You don't hire people if you can't afford to pay them, holy shit. "Hi, you mind cleaning my house? I'm a college student so I can't afford to pay you but I might get a job when I'm out of school, so I'll think about paying you then." What you really are looking for if you are at that "I got an idea but no business plan" stage is investor(s). This could be a bank or one or more people, but these people wouldn't be employees. Realistically though, you won't proceed with your crackpot idea as you realize "starting a business" is not "finding someone to work for you for free", ie, having them take on all the risk just so you can reap the rewards.
- scarface74 9y ago
  He asked if you should make them a cofounder. In the context of software development, what's the difference between sharing the risk with an investor and then using the money to hire an employee and finding someone to work with you for no pay but making them a cofounder? Either way the risk and rewards are shared with someone who can see potential upside and downside. If a trusted friend with a good idea wanted me to "invest" in their software idea, I would be much more willing to invest the time for development than enough money to hire a developer. Especially if I could do that and work.
  - astura 9y ago
    I did not say an "investment" doesn't include an investment in labor, of certainly does. The context was "bootstrap without investment." The answer is, you don't, you either invest yourself (capital or labor) or you look for investors. You don't "make someone a co-founder," that strongly implies that they are a passive actor, you look for someone willing in invest, you look for someone looking to start a company. You don't have "employment agreements," you have "business partnership."
pjc50 9y ago
Answering the edit: you have to value their equity somehow. Two people taking on a third after 6 months would probably not split out 1/3 to the new person, but it should almost certainly be more than 10% and on the same voting terms as all the other equity. Don't forget that this now gives them a say in further dilution when you want to take on a fourth or fifth, or carve out an option pool etc. (I've been the "first non cofounder employee" at a startup, but they paid me properly from day 1 with actual money, as well as options on a normal vesting schedule)
dkersten 9y ago
In some (many?) jurisdictions, it is unlawful to trade while insolvent. If you cannot pay your employees, you are insolvent. If they work for free, for equity, they are not employees (and therefore should be getting a lot more than a percentage or two) and are essentially co-founders.
s73ver_ 9y ago
" what is the appropriate way to bring people on when you can’t pay them? " Go get a business loan. Go get funding. Don't ask others to work to make you rich for free. It's quite disgusting.
vidarh 9y ago
In my eyes, in this situation you are either looking for a co-founder, and give them equity accordingly, or you treat them as an investor who happens to "invest" with work. The former means giving more than you would to an "employee" and giving shares rather than options, and giving them a real say in the business. The latter means going to people like me who earn well enough from consulting etc. that we can afford to spend some of our time on startups without getting paid in cash fully knowing it's a high risk thing, and who will insist on seeing your cap table and investment prospectus so that we can judge the risk, and who will insist on terms that provides additional security. Note that in the latter case my first question would be "why haven't you been able to find an investor yet"? I've talked to people who have had convincing reasons, but I've also talked to people who presented me with investor decks where it took me 5 seconds to see why they'd failed to secure investors. Personally I don't think devs who are inexperienced with startups should consider those kind of arrangements. For me it's kind-of a fun gamble that I take on the side of making more money than most from my paying clients - I expect most of the won't pay, but that's ok.

swsieber 9y ago

Companies that bootstrap without investment wait as long as possible to hire/grow headcount. Yeah, it might take a bit longer to reach higher revenues.

thomascgalvin 9y ago
But what about companies that bootstrap without any technical skills, business acumen, marketable ideas, or morals?
- albertgoeswoof 9y ago
  Oh, they just ask reach out to their "network" for a few hundred thousand

kabouseng 9y ago

"with a guaranteed salary starting X months after start" If you don't have operating capital now, what guarantees can you give that you will have x months later?

fapjacks 9y ago
Well, what guarantees that is the "growth hacker" intern they have working on "an interview project" before their phone screening.
jstarfish 9y ago
You're missing the point; it's not about whether or not they have the capital-- either way, the employee inevitably gets canned right before that maturity date. That's how "probationary periods" are gamed here in the US.

CiPHPerCoder 9y ago

> what is the appropriate way to bring people on when you can’t pay them? You don't. Pay people for their work, or don't hire them. Anything else is at best ethically gray, but almost always bad.

tjic 9y ago
So much this. If you aren't generating profits, and want someone to work for you, either: * borrow the money in your own name * borrow against your house * don't bring them on You're the one creating the risk. You've gotta eat it. Anything else is massively unethical.
SomeStupidPoint 9y ago
> 1-2 people If you're less than 3-5 people and have no money, you're looking for a technical co-founder, not an employee. I've done say, 1 day a week of dev on the weekend while having a dayjob to get a project started for a share of equity because I liked the project. (So have others I know.) Just have realistic asks in terms of time/equity trade so people can balance their risk by having other work as well.

jaymzcampbell 9y ago

I think it's irresponsible to hire employees at that stage then. Either they are co-founders and are buying into the struggle equally or they are your friends and they're doing you a favour and can afford it (or can sink the cost for you because of your long-standing relationship already). To ask this of a general person who is looking for a job not a dream would be poor form IMO.

holtalanm 9y ago

I'm going to parrot others and say 'you dont'. You wait until you have the operating income to afford to hire another. Until then, focus on growing your current business.

gadders 9y ago

Apparently they're not just starting out: "This also isn't one of those startups that is trying to find a developer to do what they can not. We have a fully functioning in house dev team and simply want to move faster. As such, you will also be working alongside one of the leading React developers in the world who will assist you every step of the way."

idop 9y ago
They probably have nothing. I've never seen a job posting for a junior position saying you will be a key part of the design and implementation of the entire product.

CPLX 9y ago

> I ask because I’m wondering how companies that bootstrap without investment grow headcount. People pay them for their products or services, then they take the money so gained and distribute it to their employees in exchange for their work. My understanding is that this concept has been quite popular historically.

SmellyGeekBoy 9y ago
Spot on. I worked for 7 years as a contractor before amassing enough money to be comfortable taking on my first employee. That was just over a year ago and now I have 5 of them - and plenty of cashflow to actually pay them what they're worth. It's almost like people have forgotten how a business works...
- reitanqild 9y ago
  Hehe, probably you have better understanding of running a business than many business owners. (One pitfall however is that some bootstrapped business owners become unreasonably cheap even when there is reason not to be.)

dragonwriter 9y ago

> what is the appropriate way to bring people on when you can’t pay them? Secure financing by convincing someone with money you have a viable business model, then bring people on since you can pay them.

delphinius81 9y ago

If they aren't being paid at the beginning (equity only), then they are a co-founder of the company. If you want an employee, you find a way to pay them either through personal savings pooled together by the co-founders, or because your product is already producing some revenue that you can use for salary.

otakucode 9y ago

You get investors to give you money so you can pay to hire capable people. Or else you realize that the world doesn't owe you workers to generate profit for you to skim/scalp. If you have 'an idea' the first thing to realize is that ideas are worthless. Utterly and completely worthless. The only thing worth a cent is execution. And execution does not consist of expecting others to execute for you for no compensation. That's begging.

astura 9y ago

This is a real question? You don't hire people if you can't afford to pay them, holy shit. "Hi, you mind cleaning my house? I'm a college student so I can't afford to pay you but I might get a job when I'm out of school, so I'll think about paying you then." What you really are looking for if you are at that "I got an idea but no business plan" stage is investor(s). This could be a bank or one or more people, but these people wouldn't be employees. Realistically though, you won't proceed with your crackpot idea as you realize "starting a business" is not "finding someone to work for you for free", ie, having them take on all the risk just so you can reap the rewards.

scarface74 9y ago
He asked if you should make them a cofounder. In the context of software development, what's the difference between sharing the risk with an investor and then using the money to hire an employee and finding someone to work with you for no pay but making them a cofounder? Either way the risk and rewards are shared with someone who can see potential upside and downside. If a trusted friend with a good idea wanted me to "invest" in their software idea, I would be much more willing to invest the time for development than enough money to hire a developer. Especially if I could do that and work.
- astura 9y ago
  I did not say an "investment" doesn't include an investment in labor, of certainly does. The context was "bootstrap without investment." The answer is, you don't, you either invest yourself (capital or labor) or you look for investors. You don't "make someone a co-founder," that strongly implies that they are a passive actor, you look for someone willing in invest, you look for someone looking to start a company. You don't have "employment agreements," you have "business partnership."

pjc50 9y ago

Answering the edit: you have to value their equity somehow. Two people taking on a third after 6 months would probably not split out 1/3 to the new person, but it should almost certainly be more than 10% and on the same voting terms as all the other equity. Don't forget that this now gives them a say in further dilution when you want to take on a fourth or fifth, or carve out an option pool etc. (I've been the "first non cofounder employee" at a startup, but they paid me properly from day 1 with actual money, as well as options on a normal vesting schedule)

dkersten 9y ago

In some (many?) jurisdictions, it is unlawful to trade while insolvent. If you cannot pay your employees, you are insolvent. If they work for free, for equity, they are not employees (and therefore should be getting a lot more than a percentage or two) and are essentially co-founders.

s73ver_ 9y ago

" what is the appropriate way to bring people on when you can’t pay them? " Go get a business loan. Go get funding. Don't ask others to work to make you rich for free. It's quite disgusting.

vidarh 9y ago

In my eyes, in this situation you are either looking for a co-founder, and give them equity accordingly, or you treat them as an investor who happens to "invest" with work. The former means giving more than you would to an "employee" and giving shares rather than options, and giving them a real say in the business. The latter means going to people like me who earn well enough from consulting etc. that we can afford to spend some of our time on startups without getting paid in cash fully knowing it's a high risk thing, and who will insist on seeing your cap table and investment prospectus so that we can judge the risk, and who will insist on terms that provides additional security. Note that in the latter case my first question would be "why haven't you been able to find an investor yet"? I've talked to people who have had convincing reasons, but I've also talked to people who presented me with investor decks where it took me 5 seconds to see why they'd failed to secure investors. Personally I don't think devs who are inexperienced with startups should consider those kind of arrangements. For me it's kind-of a fun gamble that I take on the side of making more money than most from my paying clients - I expect most of the won't pay, but that's ok.