5 ms·

If you are a paying your developer a market value salary, you are basically paying to have your idea developed. Unless you were paying the developer very littl

by aonic 18y ago

If you are a paying your developer a market value salary, you are basically paying to have your idea developed. Unless you were paying the developer very little, or nothing, that is when equity should be used as payment 35% is a LOT with $6900/m

tptacek 18y ago
What was the nurse doing? Ideas aren't worth 65% of the company alone. I don't know if it's intentional but it seems like a lot of people here are talking as if there were "rules", like "x% is fair, y% is unreasonable". There are rules of thumb. But compensation is a marketplace. If the founder has no leverage, taking a lower stake in exchange for salary isn't honorable. It's just stupid. Both parties need to feel like they're getting a square deal. If either of them don't, it doesn't work.
- aonic 18y ago
  It doesn't matter what the nurse was doing, the developer was getting paid a good amount of money. If I was hired to do a project, and my payment was inline with my market value, I wouldn't care what my employer is doing as long as I kept getting my money. $6900/m sounds like market value to me. If I was in the nurses position, I would have offered 1% equity on top of $6900/m
  - alex_c 18y ago
    It doesn't matter what the nurse was doing OR how much the developer was getting paid. The developer agreed to the terms upfront (and I'm hoping there was some kind of contract involved). Renegotiating or asking for a raise is one thing, but this sounds a bit too much like blackmail to me. Of course, there are two sides to every story.
    - tptacek 18y ago
      Blackmail?! She didn't take the company hostage. She quit it. You can always quit. I can always fire you. If you make a mistake when you negotiate a position, you are not ethically required to "ride it out" to some foreordained date.
      - aonic 18y ago
        I'm going to link you to your own thread ;) http://news.ycombinator.com/item?id=183584 http://news.ycombinator.com/item?id=183584
      - alex_c 18y ago
        I doubt anyone would consider it blackmail in the legal sense. But I'm putting myself in the owner's place: upfront contract, month 4 of 6, more equity promised upon receiving a deliverable. Losing the developer is a major setback for my startup, and the developer threatens me with creating this setback unless I give a large amount of equity. I would certainly feel that the developer is trying to take advantage of me at that point. Like I said, it's one thing to negotiate better compensation, or to walk away for a better offer, etc. It's another to say "I can screw you over and I will use that to get more from you". And like I also said, there are two sides to every story. This is seen exclusively from the owner's side.
- drinko 18y ago
  I raised the funding, performed the market research, liased with many different health organisations, classifed the information in the database, wrote all the copy for the app, and created the interface mockups working with a designer.
  - tptacek 18y ago
    Four possibilities spring to mind: * Maybe you really did do a majority stake's worth of work, and she was just inexperienced. * Maybe you didn't really do a majority stake's worth of work, and she felt like she had gotten shafted. You did start her at 6%. * Maybe she was just a bad employee and a crap dev and wanted the paycheck. You weren't experienced enough to notice and fire her. * Maybe through no fault of her own the project became untenable (for instance, maybe the spec changed a bunch of times, or you couldn't hammer out a reasonable set of features to launch on --- this has happened to us lots). You ran out of money, and she couldn't stay, good faith or not. What are you going to do different next time?
nostrademons 18y ago
You're much better off paying that 35% equity along with a full salary than giving her 6% (or worse, 1%). Think about it this way: she is building your product. She can either put in high effort or low effort. If you give her 35%, there's a good chance she'll put in high effort, you'll both succeed, and your 65% is actually worth something. If you give her 6%, there's a good chance she'll put in low effort, you'll fail, and she'll soak you for your $6900/m sunk cost. If you give her 1%, it's almost certain she'll blow you off and you get the privilege of paying her $6900/month for nothing. As happened here, apparently. There's a whole chapter on this problem in most introductory game theory textbooks. The basic problem is that you cannot directly control how hard someone works, you can only give them incentives to work hard and then measure the output. Much as you'd like to say "She's a professional, you're paying her, she ought to do a good job," the real world doesn't work that way. She'll do a good job if it's worth her while to do a good job. The economy is not fair. You can try to pretend it is and watch all your ventures get driven into the ground, or assume that you're going to get a raw deal sometimes and only take those raw deals when it leads to a sweeter deal later on.
- drinko 18y ago
  nostrademons I paid the 35% equity 8 months ago, only to have her quit when the going got tough.
  - nostrademons 18y ago
    I think that the project was doomed with this particular developer from the start, because it sounds like she doesn't really know how to program. 12 months for a Django website with nothing to show for it is insane. My comments are mostly intended for bystander-readers who're thinking of doing the same thing - paying a technical developer a full salary + 1-5% equity to develop a product from scratch. There're a lot of people that still suggest that, and it really doesn't work, as you've found out the hard way. I dunno what advice I'd give to you personally - it's a hard situation, as many others have pointed out. Probably cut your losses, chalk it up to an expensive learning experience, and move on, then try again some other time. As I mentioned in another comment, I think it's fairly unlikely that this developer left you usable code that someone else could pick up, so it'd be difficult to get a contract developer to push it to finish line. You could learn to hack yourself - Python and Django are not difficult - but it'd set you back at least a couple months, and then you'd still have to implement everything. [Edit: last paragraph was on the assumption that her work was not even demoable, but rereading your post, it sounds like you've gotten to alpha but just need to incorporate the feedback in. If that's the case, a contractor might work, but be aware that it's harder to read code than to write code, and if the code quality is bad enough any contractor would just have to throw everything out and start from scratch.] If you can find a technical cofounder, someone that you trust that you know is a good developer, I'd do that (and give the decent equity from the start!), and then they can probably write the whole site from scratch in a couple months. But it has to be someone you know well, someone whose skills you're sure about, because otherwise you run the same risk with them.

by aonic 18y ago

tptacek 18y ago

What was the nurse doing? Ideas aren't worth 65% of the company alone. I don't know if it's intentional but it seems like a lot of people here are talking as if there were "rules", like "x% is fair, y% is unreasonable". There are rules of thumb. But compensation is a marketplace. If the founder has no leverage, taking a lower stake in exchange for salary isn't honorable. It's just stupid. Both parties need to feel like they're getting a square deal. If either of them don't, it doesn't work.

aonic 18y ago
It doesn't matter what the nurse was doing, the developer was getting paid a good amount of money. If I was hired to do a project, and my payment was inline with my market value, I wouldn't care what my employer is doing as long as I kept getting my money. $6900/m sounds like market value to me. If I was in the nurses position, I would have offered 1% equity on top of $6900/m
- alex_c 18y ago
  It doesn't matter what the nurse was doing OR how much the developer was getting paid. The developer agreed to the terms upfront (and I'm hoping there was some kind of contract involved). Renegotiating or asking for a raise is one thing, but this sounds a bit too much like blackmail to me. Of course, there are two sides to every story.
  - tptacek 18y ago
    Blackmail?! She didn't take the company hostage. She quit it. You can always quit. I can always fire you. If you make a mistake when you negotiate a position, you are not ethically required to "ride it out" to some foreordained date.
    - aonic 18y ago
      I'm going to link you to your own thread ;) http://news.ycombinator.com/item?id=183584 http://news.ycombinator.com/item?id=183584
    - alex_c 18y ago
      I doubt anyone would consider it blackmail in the legal sense. But I'm putting myself in the owner's place: upfront contract, month 4 of 6, more equity promised upon receiving a deliverable. Losing the developer is a major setback for my startup, and the developer threatens me with creating this setback unless I give a large amount of equity. I would certainly feel that the developer is trying to take advantage of me at that point. Like I said, it's one thing to negotiate better compensation, or to walk away for a better offer, etc. It's another to say "I can screw you over and I will use that to get more from you". And like I also said, there are two sides to every story. This is seen exclusively from the owner's side.
drinko 18y ago
I raised the funding, performed the market research, liased with many different health organisations, classifed the information in the database, wrote all the copy for the app, and created the interface mockups working with a designer.
- tptacek 18y ago
  Four possibilities spring to mind: * Maybe you really did do a majority stake's worth of work, and she was just inexperienced. * Maybe you didn't really do a majority stake's worth of work, and she felt like she had gotten shafted. You did start her at 6%. * Maybe she was just a bad employee and a crap dev and wanted the paycheck. You weren't experienced enough to notice and fire her. * Maybe through no fault of her own the project became untenable (for instance, maybe the spec changed a bunch of times, or you couldn't hammer out a reasonable set of features to launch on --- this has happened to us lots). You ran out of money, and she couldn't stay, good faith or not. What are you going to do different next time?

nostrademons 18y ago

You're much better off paying that 35% equity along with a full salary than giving her 6% (or worse, 1%). Think about it this way: she is building your product. She can either put in high effort or low effort. If you give her 35%, there's a good chance she'll put in high effort, you'll both succeed, and your 65% is actually worth something. If you give her 6%, there's a good chance she'll put in low effort, you'll fail, and she'll soak you for your $6900/m sunk cost. If you give her 1%, it's almost certain she'll blow you off and you get the privilege of paying her $6900/month for nothing. As happened here, apparently. There's a whole chapter on this problem in most introductory game theory textbooks. The basic problem is that you cannot directly control how hard someone works, you can only give them incentives to work hard and then measure the output. Much as you'd like to say "She's a professional, you're paying her, she ought to do a good job," the real world doesn't work that way. She'll do a good job if it's worth her while to do a good job. The economy is not fair. You can try to pretend it is and watch all your ventures get driven into the ground, or assume that you're going to get a raw deal sometimes and only take those raw deals when it leads to a sweeter deal later on.

drinko 18y ago
nostrademons I paid the 35% equity 8 months ago, only to have her quit when the going got tough.
- nostrademons 18y ago
  I think that the project was doomed with this particular developer from the start, because it sounds like she doesn't really know how to program. 12 months for a Django website with nothing to show for it is insane. My comments are mostly intended for bystander-readers who're thinking of doing the same thing - paying a technical developer a full salary + 1-5% equity to develop a product from scratch. There're a lot of people that still suggest that, and it really doesn't work, as you've found out the hard way. I dunno what advice I'd give to you personally - it's a hard situation, as many others have pointed out. Probably cut your losses, chalk it up to an expensive learning experience, and move on, then try again some other time. As I mentioned in another comment, I think it's fairly unlikely that this developer left you usable code that someone else could pick up, so it'd be difficult to get a contract developer to push it to finish line. You could learn to hack yourself - Python and Django are not difficult - but it'd set you back at least a couple months, and then you'd still have to implement everything. [Edit: last paragraph was on the assumption that her work was not even demoable, but rereading your post, it sounds like you've gotten to alpha but just need to incorporate the feedback in. If that's the case, a contractor might work, but be aware that it's harder to read code than to write code, and if the code quality is bad enough any contractor would just have to throw everything out and start from scratch.] If you can find a technical cofounder, someone that you trust that you know is a good developer, I'd do that (and give the decent equity from the start!), and then they can probably write the whole site from scratch in a couple months. But it has to be someone you know well, someone whose skills you're sure about, because otherwise you run the same risk with them.