4 ms·

Risks, Rewards, Stress: Early Employees & Founders

44 points by eladgil 15y ago

klochner 15y ago
Little bit of a strawman argument here regarding early employees taking on equivalent risk - I don't know anyone who believes that, other than the situation where early employees are unpaid and the 'product' is just a slide deck. As for how hard people work, I would expect people to work in proportion to their expected payout. Founders have the biggest upside, so naturally they work much harder. An early employee paid with salary and little equity doesn't have the same incentives to be working 20 hours/day.
- michaelochurch 15y ago
  Regarding founders and hard work, it's of a different nature from the typical image of people working hard. It's not like an investment bank where people are fired if they aren't in the office from 8 to midnight. Startupers tend to spend 80 to 100 hours on their startups, but no one is "making" them do it. It's extremely focused engagement. I think it's still counterproductive and unhealthy to work that much (although 60 is sustainable and not unhealthy when you enjoy what you're doing and have a lot of autonomy) but it's not something that happens because startups really require huge amounts of work. They require a lot more commitment and energy than average jobs, but 60 hours is more than enough in most cases (except for people involved in fundraising, which is a hellish and time-consuming slog I wouldn't wish on my worst enemy's tapeworm) to get things done. What causes that insanity in hours is that the extremely high stakes lead to a persistent sense of needing to do more. This causes a lot of people to have serious anxiety, and you know what's a good antidote to anxiety (in moderation)? Work. (Work itself is not very stressful: most people like their work; what they hate is the political and interpersonal stress associated with high-stakes organizational social-climbing.) They subsume themselves in work because it gets them in the zone and happy, whereas when they aren't "working" they are thinking about work stresses and unhappy.
- eladgil 15y ago
  Hmm, I am not sure I agree with the second part of your statement for a few reasons. E.g. 1. Relative utility of the upside. It is not the absolute value of the outcome that matters per person, but rather the relative value. http://en.wikipedia.org/wiki/Utility http://en.wikipedia.org/wiki/Utility 2. Other incentives (fun, interesting work, wanting the "startup experience" etc.). These dont always exist, but often they do and people value them. 3. Passion for making an impact. Some products are really exciting to work on. Not everyone is in it just for the money. I think in general my personal bias would not be to hire people who think purely in economic terms about e.g. their work ethic. Obviously, you want all the people who take the risk to work with you at a startup to do extremely well, but you don't want people whose primary thought is "well, if I make 2X more I will work 2X harder" as there are lots of ups and downs at a startup, and sometimes it is unclear what the outcome will be.
  - sid6376 15y ago
    I am interested in knowing what do you mean when you say you do not agree with the second part of the statement. Do you mean, just because I want some of the things that you listed above, say the startup experience, does that mean I should be working as hard as the founders?
    - eladgil 15y ago
      I mean: When I was working at other people's startups, I never thought "boy, the founders have way more equity then me, I should slack off or not work as hard because of that". I always tried to do my best at whatever job I had, and would want to hire people with the same attitude.
      - klochner 15y ago
        Yes, you want people who are passionate and want to work hard, but there are sacrifices made to work 18 hour days, and people are much more likely to make those sacrifices when their upside is in the millions rather than the thousands. The difference between a 60 hour week and an 80 hour week is pretty significant in terms of personal sacrifice. No one says "I'm going to slack off", it's just that the founders are inherently (financially) more motivated. If the money isn't a motivation, then the founders should have no problem giving out most of their own equity.
autarch 15y ago
I agree that founders take on much more risk and stress than the early employees. I think the source of the discontent that some early employees (like me) express is that the rewards for a founder are worth it, while the rewards for an early employee generally aren't. I wrote about this in more detail in a comment a few months back - http://news.ycombinator.com/item?id=3490364 http://news.ycombinator.com/item?id=3490364 (Some day, I will write a blog post that goes into more detail. Really. I swear. I'm totally on it. Any day now.)
- michaelochurch 15y ago
  I agree with you. For two other categories of employment, the risks, rewards, and promises are clearly laid out. Founders: take on risk (no salary pre-seed, zero job security) but get a massive payout if it works. Big-company employees: no risk, high job security, guaranteed payout. For startup employees, the bargain is murky and implicit. These employees take some risk and stress (not as much as founders, but probably 30-40% as much) in exchange not for a huge payout, but for the promise of a leadership position when the company gets big. That's the (implicit) contract. It's not, "Get $100 million when this thing exits" but "Get a VP-level position, that might help you along to something else, when we hit 500 people". The implicit nature of that bargain makes it problematic. A founder with 5% in equity is always going to have those shares of stock. (His percentage can be diluted, but he has legal recourse if it's done improperly.) Even if he's fired, he has whatever equity he has vested. The early employee (whose equity amount is small) who worked his ass off to get a leadership position in the company as it grew can be denied that opportunity at any time for any reason. There isn't an easy solution, because some early employees don't deserve the leadership positions they want, but they usually aren't bad enough to be fired either. My solution would be to give them very small-scale leadership, or even autonomous contributor status (they can work on whatever they want, but can only pull other people to their projects if someone else thinks it's a good idea) as a token of appreciation. Perhaps that's because I think there are few truly incompetent people; some just don;'t grow as fast, for whatever reason. There's another dynamic that hits this whole thing in the side: as startups grow, they start wanting "The Best" hires, which often means that they have to hire people into positions of some status. But if your older employees feel promised leadership positions, and those opportunities are bargained away to new employees in order to make the best hires, you can end up with a conflict.

44 points by eladgil 15y ago

Little bit of a strawman argument here regarding early employees taking on equivalent risk - I don't know anyone who believes that, other than the situation where early employees are unpaid and the 'product' is just a slide deck. As for how hard people work, I would expect people to work in proportion to their expected payout. Founders have the biggest upside, so naturally they work much harder. An early employee paid with salary and little equity doesn't have the same incentives to be working 20 hours/day.

michaelochurch 15y ago
Regarding founders and hard work, it's of a different nature from the typical image of people working hard. It's not like an investment bank where people are fired if they aren't in the office from 8 to midnight. Startupers tend to spend 80 to 100 hours on their startups, but no one is "making" them do it. It's extremely focused engagement. I think it's still counterproductive and unhealthy to work that much (although 60 is sustainable and not unhealthy when you enjoy what you're doing and have a lot of autonomy) but it's not something that happens because startups really require huge amounts of work. They require a lot more commitment and energy than average jobs, but 60 hours is more than enough in most cases (except for people involved in fundraising, which is a hellish and time-consuming slog I wouldn't wish on my worst enemy's tapeworm) to get things done. What causes that insanity in hours is that the extremely high stakes lead to a persistent sense of needing to do more. This causes a lot of people to have serious anxiety, and you know what's a good antidote to anxiety (in moderation)? Work. (Work itself is not very stressful: most people like their work; what they hate is the political and interpersonal stress associated with high-stakes organizational social-climbing.) They subsume themselves in work because it gets them in the zone and happy, whereas when they aren't "working" they are thinking about work stresses and unhappy.
eladgil 15y ago
Hmm, I am not sure I agree with the second part of your statement for a few reasons. E.g. 1. Relative utility of the upside. It is not the absolute value of the outcome that matters per person, but rather the relative value. http://en.wikipedia.org/wiki/Utility http://en.wikipedia.org/wiki/Utility 2. Other incentives (fun, interesting work, wanting the "startup experience" etc.). These dont always exist, but often they do and people value them. 3. Passion for making an impact. Some products are really exciting to work on. Not everyone is in it just for the money. I think in general my personal bias would not be to hire people who think purely in economic terms about e.g. their work ethic. Obviously, you want all the people who take the risk to work with you at a startup to do extremely well, but you don't want people whose primary thought is "well, if I make 2X more I will work 2X harder" as there are lots of ups and downs at a startup, and sometimes it is unclear what the outcome will be.
- sid6376 15y ago
  I am interested in knowing what do you mean when you say you do not agree with the second part of the statement. Do you mean, just because I want some of the things that you listed above, say the startup experience, does that mean I should be working as hard as the founders?
  - eladgil 15y ago
    I mean: When I was working at other people's startups, I never thought "boy, the founders have way more equity then me, I should slack off or not work as hard because of that". I always tried to do my best at whatever job I had, and would want to hire people with the same attitude.
    - klochner 15y ago
      Yes, you want people who are passionate and want to work hard, but there are sacrifices made to work 18 hour days, and people are much more likely to make those sacrifices when their upside is in the millions rather than the thousands. The difference between a 60 hour week and an 80 hour week is pretty significant in terms of personal sacrifice. No one says "I'm going to slack off", it's just that the founders are inherently (financially) more motivated. If the money isn't a motivation, then the founders should have no problem giving out most of their own equity.

autarch 15y ago

I agree that founders take on much more risk and stress than the early employees. I think the source of the discontent that some early employees (like me) express is that the rewards for a founder are worth it, while the rewards for an early employee generally aren't. I wrote about this in more detail in a comment a few months back - http://news.ycombinator.com/item?id=3490364 http://news.ycombinator.com/item?id=3490364 (Some day, I will write a blog post that goes into more detail. Really. I swear. I'm totally on it. Any day now.)

michaelochurch 15y ago
I agree with you. For two other categories of employment, the risks, rewards, and promises are clearly laid out. Founders: take on risk (no salary pre-seed, zero job security) but get a massive payout if it works. Big-company employees: no risk, high job security, guaranteed payout. For startup employees, the bargain is murky and implicit. These employees take some risk and stress (not as much as founders, but probably 30-40% as much) in exchange not for a huge payout, but for the promise of a leadership position when the company gets big. That's the (implicit) contract. It's not, "Get $100 million when this thing exits" but "Get a VP-level position, that might help you along to something else, when we hit 500 people". The implicit nature of that bargain makes it problematic. A founder with 5% in equity is always going to have those shares of stock. (His percentage can be diluted, but he has legal recourse if it's done improperly.) Even if he's fired, he has whatever equity he has vested. The early employee (whose equity amount is small) who worked his ass off to get a leadership position in the company as it grew can be denied that opportunity at any time for any reason. There isn't an easy solution, because some early employees don't deserve the leadership positions they want, but they usually aren't bad enough to be fired either. My solution would be to give them very small-scale leadership, or even autonomous contributor status (they can work on whatever they want, but can only pull other people to their projects if someone else thinks it's a good idea) as a token of appreciation. Perhaps that's because I think there are few truly incompetent people; some just don;'t grow as fast, for whatever reason. There's another dynamic that hits this whole thing in the side: as startups grow, they start wanting "The Best" hires, which often means that they have to hire people into positions of some status. But if your older employees feel promised leadership positions, and those opportunities are bargained away to new employees in order to make the best hires, you can end up with a conflict.