5 ms·

This is why being a super early employee is one of the worst deals in tech: marginally less risk than the founders, long hours, minimal equity, and likely below

by kareemm 12y ago

This is why being a super early employee is one of the worst deals in tech: marginally less risk than the founders, long hours, minimal equity, and likely below-market salary. There are upsides, but outside of a few rare cases, I can't imagine joining a company at this stage.

BallinBige 12y ago
first 5-10% of google and paypal employees MADE BANK
- rhizome 12y ago
  Those in the closest inner circles to get hired when they were coming up. It continues to pay to run in the right circles and know the right people.
- kzhahou 12y ago
  The founders of google landed on approximately $30 BILLION split two ways. There was a lot of talk around IPO that Google was minting a thousand millionaires, but a million is still 1000x smaller than a billion. The lesson we can take from Google (which did make a lot of people a lot of money) is that once the company reaches many many billions in public valuation, then yes, a good number of employees will get rich despite the lopsided equity distribution.
gregcohn 12y ago
It's very easy to justify turning down early-stage jobs with that mentality -- and I've turned down a number that would have made me retirement wealthy based on precisely that logic. But now that I'm a founder I'd take issue with the "marginally less risk" comment. Quitting a six-figure job, forgoing income for a year-plus, taking the risks of never getting liftoff or financing, taking another year or more at way-below-market angel-funded salary... this is not "marginally more risk" than someone who comes in with a salary from day one at a company that is in motion. The early employee has much less opportunity cost (and -- worth noting -- can also pull out much more easily if things seem to be moving sideways). Furthermore the theory of "implied pot odds" applies. You're not just getting the returns on the deal, you're getting all of the career and relationship equity of having been a key player on a huge success. I would argue that early-stage roles, if you can tolerate the opportunity cost over the near term, are one of the better deals going, and likely (though only arguably) better than being an under-ready founder with a high likelihood of failure.
- kzhahou 12y ago
  Yeah, being a founder is higher risk. Correct. At each stage towards success, a company is de-risked. But founders' equity usually totals the equity of all employees combined. Did the founders' risk --and their contributions-- equal the total of everyone else in the company, combined? I'm arguing the numbers in today's equity distributions are wildly out of proportion.
  - angersock 12y ago
    Especially if you take into account saving technical cofounder s from themselves.
  - interesting_att 12y ago
    1) "Did the founders' risk --and their contributions-- equal the total of everyone else in the company, combined?" It depends on how you define the founders' risk as well as their contributions. Both are highly subjective. In Box's case, they could've failed due to an infinite number of potential causes, leaving Levie penniless. We don't consider them because Box is now a huge company. As for a founder's contribution, a prescient business strategy and the ability to handle stress is worth its weight in gold. Who would have thought of starting a cloud storage company in 2005? Who could have raised funds for a tech company in 2005, especially someone as inexperienced as Levie? Additionally, founders have to deal with way more stress than an employee. Founders end up thinking about their startups 24/7, because that is their future. An employee can walk away at any time and just get another job. 2) "I'm arguing the numbers in today's equity distributions are wildly out of proportion." This assumes there is some ideal proportion, one that leads to some optimal social outcome. High equity payouts for founders mean there will be more founders, as average long-term compensation will go up. High equity payouts for first-employees will mean there be more people who want to join semi-stable startups as employees #1 and #2. Which leads to a better social outcome? I don't really know. I would guess we would be better off trying to encourage people to become founders rather than employees. What I do know is that if you don't think equity is good enough for you, you can always try to start a negotiation or start your own company.
- kareemm 12y ago
devinhelton 12y ago
If you can get into YC, or have a sellable product, or an idea you are obsessed with, or can get seed funding, then by all means, found a company. But, from my observation of friends who have gone full-time on a startup project, and who tried to bootstrap it into a company, probably less than 1 out of 10 endeavors even makes it to a stage where it could pay anyone a partial market salary. So by joining a seed funded company that can pay you a bit of a money is already decreasing a lot of risk, the company has already made it through the first great filter. The best positions in startup world are: 1) start a company if you have a good idea that you have a unique ability to execute on 2) join a company at seed stage, if you can get at least half market salary and 2-5% stock, and the founders seem top notch 3) join a company after its B round, when product market fit has been proved, and the company his hitting the mega growth part of its hockey stick
- davidjnelson 12y ago
  3 is sage wisdom. Reminds me of Andy Rachleffs excellent advice. Do you think 3 is worth it if 70 hour weeks are mandatory and the tech chosen is clearly inferior? Hmm...
saryant 12y ago
As someone who just spent two years as employee #1 at a startup before being fired last month, I don't regret it, and while my salary was below market, it wasn't too bad and I had a lot of fun. I went in with no full-time software experience (second job after college, first was a dead end job at one of the big consulting firms) and was able to build a serious set of projects and influence technical decisions that are now paying off—I now have expertise in stacks that people are willing to pay for. I view those two years as building experience and a reputation in the right communities, now I'm cashing in on that. I don't think I could've gained that same level of responsibility anywhere short of founding my own company, which I considered but ultimately never came up with anything worth pursuing. I'm grateful that those founders were willing to take a risk on me, even though it didn't work out.

by kareemm 12y ago

BallinBige 12y ago

first 5-10% of google and paypal employees MADE BANK

rhizome 12y ago
Those in the closest inner circles to get hired when they were coming up. It continues to pay to run in the right circles and know the right people.
kzhahou 12y ago
The founders of google landed on approximately $30 BILLION split two ways. There was a lot of talk around IPO that Google was minting a thousand millionaires, but a million is still 1000x smaller than a billion. The lesson we can take from Google (which did make a lot of people a lot of money) is that once the company reaches many many billions in public valuation, then yes, a good number of employees will get rich despite the lopsided equity distribution.

gregcohn 12y ago

It's very easy to justify turning down early-stage jobs with that mentality -- and I've turned down a number that would have made me retirement wealthy based on precisely that logic. But now that I'm a founder I'd take issue with the "marginally less risk" comment. Quitting a six-figure job, forgoing income for a year-plus, taking the risks of never getting liftoff or financing, taking another year or more at way-below-market angel-funded salary... this is not "marginally more risk" than someone who comes in with a salary from day one at a company that is in motion. The early employee has much less opportunity cost (and -- worth noting -- can also pull out much more easily if things seem to be moving sideways). Furthermore the theory of "implied pot odds" applies. You're not just getting the returns on the deal, you're getting all of the career and relationship equity of having been a key player on a huge success. I would argue that early-stage roles, if you can tolerate the opportunity cost over the near term, are one of the better deals going, and likely (though only arguably) better than being an under-ready founder with a high likelihood of failure.

kzhahou 12y ago
Yeah, being a founder is higher risk. Correct. At each stage towards success, a company is de-risked. But founders' equity usually totals the equity of all employees combined. Did the founders' risk --and their contributions-- equal the total of everyone else in the company, combined? I'm arguing the numbers in today's equity distributions are wildly out of proportion.
- angersock 12y ago
  Especially if you take into account saving technical cofounder s from themselves.
- interesting_att 12y ago
  1) "Did the founders' risk --and their contributions-- equal the total of everyone else in the company, combined?" It depends on how you define the founders' risk as well as their contributions. Both are highly subjective. In Box's case, they could've failed due to an infinite number of potential causes, leaving Levie penniless. We don't consider them because Box is now a huge company. As for a founder's contribution, a prescient business strategy and the ability to handle stress is worth its weight in gold. Who would have thought of starting a cloud storage company in 2005? Who could have raised funds for a tech company in 2005, especially someone as inexperienced as Levie? Additionally, founders have to deal with way more stress than an employee. Founders end up thinking about their startups 24/7, because that is their future. An employee can walk away at any time and just get another job. 2) "I'm arguing the numbers in today's equity distributions are wildly out of proportion." This assumes there is some ideal proportion, one that leads to some optimal social outcome. High equity payouts for founders mean there will be more founders, as average long-term compensation will go up. High equity payouts for first-employees will mean there be more people who want to join semi-stable startups as employees #1 and #2. Which leads to a better social outcome? I don't really know. I would guess we would be better off trying to encourage people to become founders rather than employees. What I do know is that if you don't think equity is good enough for you, you can always try to start a negotiation or start your own company.
kareemm 12y ago

devinhelton 12y ago

If you can get into YC, or have a sellable product, or an idea you are obsessed with, or can get seed funding, then by all means, found a company. But, from my observation of friends who have gone full-time on a startup project, and who tried to bootstrap it into a company, probably less than 1 out of 10 endeavors even makes it to a stage where it could pay anyone a partial market salary. So by joining a seed funded company that can pay you a bit of a money is already decreasing a lot of risk, the company has already made it through the first great filter. The best positions in startup world are: 1) start a company if you have a good idea that you have a unique ability to execute on 2) join a company at seed stage, if you can get at least half market salary and 2-5% stock, and the founders seem top notch 3) join a company after its B round, when product market fit has been proved, and the company his hitting the mega growth part of its hockey stick

davidjnelson 12y ago
3 is sage wisdom. Reminds me of Andy Rachleffs excellent advice. Do you think 3 is worth it if 70 hour weeks are mandatory and the tech chosen is clearly inferior? Hmm...

saryant 12y ago

As someone who just spent two years as employee #1 at a startup before being fired last month, I don't regret it, and while my salary was below market, it wasn't too bad and I had a lot of fun. I went in with no full-time software experience (second job after college, first was a dead end job at one of the big consulting firms) and was able to build a serious set of projects and influence technical decisions that are now paying off—I now have expertise in stacks that people are willing to pay for. I view those two years as building experience and a reputation in the right communities, now I'm cashing in on that. I don't think I could've gained that same level of responsibility anywhere short of founding my own company, which I considered but ultimately never came up with anything worth pursuing. I'm grateful that those founders were willing to take a risk on me, even though it didn't work out.