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What do you recommend an employee do to protect themselves before signing? Are there any special clauses you recommend be on there to maximize profits from an e

by Axsuul 8y ago

What do you recommend an employee do to protect themselves before signing? Are there any special clauses you recommend be on there to maximize profits from an exit or any red flags to look out for? Is it typical to ask for additional options during every fundraising round?

gesman 8y ago
>> Is it typical to ask for additional options during every fundraising round? You may, and they may as well give you some extra paper options to keep you interested. But what's the point? $0+$0 = $0 - in 99.9% of early stage startup cases. Engineering force pretty much has no negotiation power in this. Engineering (surprise!) is a liability, not an asset. Sales is an asset. Anything that generates direct and immediate revenue is an asset. Even if such clause would exist - VC's won't allow it - they won't invest in anything that jeopardize their lion's share of exit. My take: for 99.9% of early stage startups (Non-pre-IPO, not publicly traded) - get as much cash as you can as compensation. Don't get tricked into working for peanuts for the promise of future that has low probability of happening. It just safer bet. Invest the difference into real assets or save it for real estate or so.
- deleted 8y ago
  [deleted]
- burnallofit 8y ago
  This doesn't make sense. "Engineering force pretty much has no negotiation power in this." Of course we do. We don't have to accept an offer unless it meets our terms. "Engineering is a liability. Sales is an asset." This is ridiculous. In an early stage startup, most likely there is no product. Sales has nothing to sell if not for engineering's efforts. "VC's won't allow it." If a startup can't hire, then VCs have exactly nothing. This isn't to say that cash isn't a good thing. I personally agree that options need to be balanced with cash, especially when a startup is well funded, and options are fractions of a penny, but that decision is individual.
  - deanmoriarty 8y ago
    One major problem is also that many times engineers themselves are not concerned at all about compensation. For example, at my current startup I work with a couple 10X engineers (seriously, they are brilliant and able to solve problems in an incredibly elegant way) who are paid 30% less of what I make in cash, and about 25X less equity, despite having joined just a few months after me in a similar role and with more years of experience than me (I know because as part of my due diligence I took a peek at the cap table). The difference is that I negotiated heavily before joining, and every ~12 months I express my discontent to my boss about my current compensation, and he tries to bring it up with new equity grant and/or salary raises and/or performance bonuses. In exchange for that, I try to do my very best on the job. To those people, the pay simply doesn't matter, it’s the specific opportunity given by the startup what they are after (domain/tooling/authorship/etc.). They will never complain about the compensation, or even ask to get more equity, since, as software engineers, the "base" pay allows them to have a reasonable quality of life. If the company sells for $10B and they make $0, they'll be just as happy, they got to work on a for-profit project that became super successful! yay! Empirically, I've seen way more people like them in the software engineering field than in other highly-skilled fields (e.g. law, medicine, accounting), and I'm sure those fields are just as rewarding as software engineering, for the person passionate about those aspects of human knowledge and creativity. I've never raised these observations in a live setting, I am too scared I'd be taken for a cynic who doesn't love his craft and it's only after money, while in reality it couldn't be farther from the truth, I very much enjoy software engineering and spend a considerable portion of my free time reading up and improving my skills. It's just that for me both the compensation and the opportunity need to be good, I won't be happy with just one of the two (so I wouldn't take a very high paying job for a long period of time, if such job would mean stagnating my technical growth as an engineer). Why do you think that is?

by Axsuul 8y ago

gesman 8y ago

>> Is it typical to ask for additional options during every fundraising round? You may, and they may as well give you some extra paper options to keep you interested. But what's the point? $0+$0 = $0 - in 99.9% of early stage startup cases. Engineering force pretty much has no negotiation power in this. Engineering (surprise!) is a liability, not an asset. Sales is an asset. Anything that generates direct and immediate revenue is an asset. Even if such clause would exist - VC's won't allow it - they won't invest in anything that jeopardize their lion's share of exit. My take: for 99.9% of early stage startups (Non-pre-IPO, not publicly traded) - get as much cash as you can as compensation. Don't get tricked into working for peanuts for the promise of future that has low probability of happening. It just safer bet. Invest the difference into real assets or save it for real estate or so.

deleted 8y ago
[deleted]
burnallofit 8y ago
This doesn't make sense. "Engineering force pretty much has no negotiation power in this." Of course we do. We don't have to accept an offer unless it meets our terms. "Engineering is a liability. Sales is an asset." This is ridiculous. In an early stage startup, most likely there is no product. Sales has nothing to sell if not for engineering's efforts. "VC's won't allow it." If a startup can't hire, then VCs have exactly nothing. This isn't to say that cash isn't a good thing. I personally agree that options need to be balanced with cash, especially when a startup is well funded, and options are fractions of a penny, but that decision is individual.
- deanmoriarty 8y ago
  One major problem is also that many times engineers themselves are not concerned at all about compensation. For example, at my current startup I work with a couple 10X engineers (seriously, they are brilliant and able to solve problems in an incredibly elegant way) who are paid 30% less of what I make in cash, and about 25X less equity, despite having joined just a few months after me in a similar role and with more years of experience than me (I know because as part of my due diligence I took a peek at the cap table). The difference is that I negotiated heavily before joining, and every ~12 months I express my discontent to my boss about my current compensation, and he tries to bring it up with new equity grant and/or salary raises and/or performance bonuses. In exchange for that, I try to do my very best on the job. To those people, the pay simply doesn't matter, it’s the specific opportunity given by the startup what they are after (domain/tooling/authorship/etc.). They will never complain about the compensation, or even ask to get more equity, since, as software engineers, the "base" pay allows them to have a reasonable quality of life. If the company sells for $10B and they make $0, they'll be just as happy, they got to work on a for-profit project that became super successful! yay! Empirically, I've seen way more people like them in the software engineering field than in other highly-skilled fields (e.g. law, medicine, accounting), and I'm sure those fields are just as rewarding as software engineering, for the person passionate about those aspects of human knowledge and creativity. I've never raised these observations in a live setting, I am too scared I'd be taken for a cynic who doesn't love his craft and it's only after money, while in reality it couldn't be farther from the truth, I very much enjoy software engineering and spend a considerable portion of my free time reading up and improving my skills. It's just that for me both the compensation and the opportunity need to be good, I won't be happy with just one of the two (so I wouldn't take a very high paying job for a long period of time, if such job would mean stagnating my technical growth as an engineer). Why do you think that is?