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VCs really don't care about "sweat equity" or "discounted salary equity". They believe that if you don't bring actual cash to the table then you aren't risking

VCs really don't care about "sweat equity" or "discounted salary equity". They believe that if you don't bring actual cash to the table then you aren't risking as much as them (even though they are only putting their clients money, not their personal money in most cases). That's one reason I didn't have trouble bailing on a startup I helped start. We took in $1.5mm, did some things poorly (such is life but learned good lessons from them) and even with a path forward we would have still required some more investment (since we weren't profitable). Therefore I knew what the current liquidation preference was, I computed what another round's liquidation preference would add, and it became clear we'd have to sell at $30-50m just for me to start getting money. The likelihood of that happening was small, and the feeling of being un-incentivized from selling at a respectable $20m made me realize the whole game was stupid and rigged. Now I work at a bank making almost 3x of what I made in hard cash (plus better benefits which equals hardware) and that extra money is giving me much better returns in my retirement and stock accounts, and a better quality of life (and less stress).

kevstev 7y ago
I was the third employee at a startup. I was young and stupid and thought "20,000 shares" was a lot. I worked my ass off, it was immensely stressful, but we built and launched a product. I later found out it wasn't much of a stake at all- .1% and that's even before any dilution shenanigans and all that. We took a paycut part of the way through, had our 401k contributions slashed and such. A company in the space (but doing something different) called and made me an offer for twice what I was making. I was the lead developer by that point, had my hands in every significant piece of code, understood how everything fit together and such, and was appalled when I found out that I had such a small piece of the total pie. I demanded more, like 20x more, and they made it sound like I was asking to sleep with their wives. Then they absolutely howled that I was screwing them over by leaving right at launch- they asked me to stay for 3 months, which I said sure- if you match my new salary plus a little more as a retention bonus and to make up for some of the paycut, and again they howled at how could I do this to them... It was a painful lesson, but I learned something very important- Do not work like you are an owner if you are just an employee! I still to this day (this was 10 years ago now) feel very taken advantage of. I was working tons of late nights and weekends, was a super fanboy of the company, at one point I was going to buy us a company logo made out of Legos to hang on our wall, and now I just cringe at the thought. There are so many ways to lose in the startup game, just so many, its really not worth playing anymore IMHO unless you are a founder or very early stage employee with material access to the financials and such.
- alteria 7y ago
  +1 I initially learned this lesson on the other side of, when was part of a startup during college. I was putting in long hours alongside my co-founder, but my staff were doing merely an adequate job. For a while I was confused and unsure why they weren't also pulling long hours, but I eventually learned the lesson. I was working hard to protect my baby, while my staff were just seeking to gain some experience in a cool niche. I would either have to realign incentives for them to also feel compelled to pull long hours, or I'd have to recalibrate my expectations. In retrospect, I'm not sure what took me so long to realize this, but I'm glad it happened relatively early on in my life. The first job I took out of college, I made sure to keep my effort in line with my compensation and investment in the company.
- perl4ever 7y ago
  I was the third "employee" at an internet startup (maybe the fourth, I forget) after the CEO and the lead tech guy, and I got...$5/hr as a 1099 consultant. That's actually more like $8 in today's money. I just looked it up and it was the same year eBay (AuctionWeb) was founded. Coincidentally my boss asked me to (with hindsight) basically create eBay and I didn't have a clue where to start or the necessary hubris. After that, they figured I wasn't useful as a programmer (I was hired to answer the phones).

kevstev 7y ago

I was the third employee at a startup. I was young and stupid and thought "20,000 shares" was a lot. I worked my ass off, it was immensely stressful, but we built and launched a product. I later found out it wasn't much of a stake at all- .1% and that's even before any dilution shenanigans and all that. We took a paycut part of the way through, had our 401k contributions slashed and such. A company in the space (but doing something different) called and made me an offer for twice what I was making. I was the lead developer by that point, had my hands in every significant piece of code, understood how everything fit together and such, and was appalled when I found out that I had such a small piece of the total pie. I demanded more, like 20x more, and they made it sound like I was asking to sleep with their wives. Then they absolutely howled that I was screwing them over by leaving right at launch- they asked me to stay for 3 months, which I said sure- if you match my new salary plus a little more as a retention bonus and to make up for some of the paycut, and again they howled at how could I do this to them... It was a painful lesson, but I learned something very important- Do not work like you are an owner if you are just an employee! I still to this day (this was 10 years ago now) feel very taken advantage of. I was working tons of late nights and weekends, was a super fanboy of the company, at one point I was going to buy us a company logo made out of Legos to hang on our wall, and now I just cringe at the thought. There are so many ways to lose in the startup game, just so many, its really not worth playing anymore IMHO unless you are a founder or very early stage employee with material access to the financials and such.

alteria 7y ago
+1 I initially learned this lesson on the other side of, when was part of a startup during college. I was putting in long hours alongside my co-founder, but my staff were doing merely an adequate job. For a while I was confused and unsure why they weren't also pulling long hours, but I eventually learned the lesson. I was working hard to protect my baby, while my staff were just seeking to gain some experience in a cool niche. I would either have to realign incentives for them to also feel compelled to pull long hours, or I'd have to recalibrate my expectations. In retrospect, I'm not sure what took me so long to realize this, but I'm glad it happened relatively early on in my life. The first job I took out of college, I made sure to keep my effort in line with my compensation and investment in the company.
perl4ever 7y ago
I was the third "employee" at an internet startup (maybe the fourth, I forget) after the CEO and the lead tech guy, and I got...$5/hr as a 1099 consultant. That's actually more like $8 in today's money. I just looked it up and it was the same year eBay (AuctionWeb) was founded. Coincidentally my boss asked me to (with hindsight) basically create eBay and I didn't have a clue where to start or the necessary hubris. After that, they figured I wasn't useful as a programmer (I was hired to answer the phones).