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Comment by rdlecler1 | Hacker News Reader

As for more equity: founders have a qualitatively different risk profile than employees. I've been running my startup for over two years, and I am the lowest paid person on our team. I have to defer having a family and can't enjoy the things that my employees enjoy. I also can't ask my employees to work harder than me, which means I have to work harder than everyone else. A couple of times I had to cover payroll with my credit card and would have been bankrupt if we didn't pull through. If things get tough an employee can jump ship at anytime, while I will be going down with the ship. And at the end, if I'm lucky I end up with 5-15% of the company. I'm not complaining, this is what I signed up for, but employees can be very well compensated in today's market prior to equity upside.

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Allow me to disagree slightly with this, in the cast of early (number less than, say, 10) employees. My (hard-earned) experience here is as the first engineering hire, functioning as engineering lead.

We have the same (maybe even worse!) risk profile: we are being paid below market rates (because small startup), we probably don't have healthcare or benefits (because small startup), we have the majority of the burden in terms of actual leadership (because we probably have been hired with the explicit intent of having us grow the team, tech, or sales). We don't get the glory or good press that the founders do (because we're just employees, lol). We don't get the same access or transparency to the business decisions (because we're not founders).

If the business folds for the founders, they shut it down, walk away, and maybe have to file some bankruptcy. In exchange, they get to join The Magical Founders Club, wherein they can parlay their experience into speaking engagements, recruiting for new gigs, senior-level business and tech positions (regardless of skill), and funding from investors.

When the startup folds for early employees (or exits in such a way only the founders are taken care of), the result is whatever personal harm comes of stress and health issues (if not taken care of b/c of bad benefits), the net loss of however much time spent working at below market prices, potentially no portfolio work (because a lot of companies are shitty about NDAs and proprietary software), and so on.

For third or forth wave employees, sure, it's just another round of job hunting. For the first folks who actually had to build the business, well, it can really suck.

EDIT:

A minor elaboration...Micheal O'Church in an essay made an interesting claim that the founders and employees are no longer considered in the same class, compared with the 90s.

My observation has been that founders will merrily maintain three orders of magnitude of equity while doing very little more than their first few hires. In fact, they may be doing less work, because they are inexperienced and spend time doing the wrong things because they don't know any better and are senior enough they feel they can ignore advice.

If you are the eng or sales lead at a startup, you can blog and tweet and sprinkle the magic founder dust on yourself. There is no Office of Dust Control .

Nope. But the level of interest you'll draw is substantially lower. You can also declare yourself a celebrity of some other kind -- there is no Office of Celebrity Control. But similarly, it doesn't work as well.

Couldn't agree more. It's the same for business / marketing / sales folks too.

This incentivizes people to be founders, because first employees get a terrible deal (comparatively).

It's odd that we reward people that "simply started the company" to such a great extent. Especially since "starting a company" is not the difficult part.

If by market rate, you mean $250k per year at Google, then yes, most startups will pay below market rate, but it's a competitive market for talent and it's very hard for startups to attract good talent. You need a generous compensation package and a compelling mission.

Everyone on my team makes 2x - 3x what I make, and I'm three years into my startup. I wouldn't expect a non-founder to assume that same burden. Moreover, if we fail I'll have no savings, I'll likely have gone bankrupt trying to save the company, and that Magical Founders Club you speak of really only exists for founders who built a successful company and had an exit for their investors.

You also mentioned stress and health issues. I'm not sure why founders would be immune to that. They should have it far far worse. Heavy is the head that wears the crown.

You'd be amazed at the number of companies in the Midwest that balk at paying devs above 65K, even for senior level work.

As for your company--if you fail and it wipes out your savings, that was your choice as a founder. There is no golden rule saying you need spend anything more than what is necessary to file bankruptcy. There's a reason it's called a limited-liability corporation.

And yes, being a founder isn't easy (did that, flamed out, f--- would not recommend on amazon), but at the same time the sort of stress is quite different than the ongoing exploitation and powerlessness that you can find as an early employee faced with misbehaving founders. At least as a founder you have some degree of control.

Great writeup - I recently had the opportunity to join a startup as an early employee and ended up turning it down (by way of asking for "too much equity"). Every time I read comments like this, it only reinforces my decision.

I don't mean to sound disparaging, but I assumed that the modern funding landscape would have changed all that - with the right level of investment one should not have those horrors. Additionally what market signals does "barely covers payroll" say to prospective employees?

There are (say) two Startup profiles - grow steady and go for the moon. I would assume Inwoukd not go for the moon unless outside investors had covered my ass. Otherwise all this bad things would be a huge risk for me.

I am not a risk taker it is obvious, but if you have the right idea, a good team, then all that is needed is time ? Is this not actually true?

Initial VC and follow-ons, statistically, are not as easy as headlines make it seem.

Likewise, for "organic", key is to remember that growth is crucial to a startup ("grow or die") vs. small business, and at early stages, the step function around big salaries sucks.

Ex 1: SaaS where growth seems on nice trajectory so you hire up on sales (~3mo warmup to effectiveness), yet maybe Google switches algorithms and your marketing funnel dies.

Ex 2: Enterprise where you hire up for a big customer who then flakes out.

You could choose not to grow, but that's arguably riskier.

I'm not saying it is easier, just that if capital wants to invest it needs to do so at a price the founders will accept - and it seems there is far more capital than founders (with good ideas / teams). Which means the price goes up.

As someone with arguably both, and the same with my peers, not really. Difference between easier and easy.

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