Comment by novok | Hacker News Reader

Comment by novok | Hacker News Reader

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That is a big reason why I don't start my own company, because I couldn't really live with doing that.

My current armchair strategies:

* Compete in a way that big tech are not willing to do, which means distributed remote companies. A lot of people don't want to live in $3.5k/month rent SF or other tech centers for various reasons.

* What a lot of startups do, but RDF (reality distortion field) over with 'we only hire the best'. Don't hire the best. Either because they couldn't hack the big tech co interview, have visa issues, are very jr or have personality problems that make them unhirable in big tech cos.

* Go bootstrap, so no VC style business timelines.

* Give offers that basically make them pseudo-founders and match the expected value of bigco with the risk premium of startups. A hard pill to swallow when investors give a lot of money offer similar or smaller dilution terms effectively.

I've never gone out to get investment, so I don't know how much of the above is also blocked by investors in general.

Also crypto style 'startups' (ICO or just a completely new coin) have shown to deliver compared to normal SV startups, but most crypto companies do not deliver actual lasting value and are more pure speculation plays. A big crucial difference is they give crypto coins instead of stock, and those coins are liquid immediately. They are also not restricted to start in the USA.

Founders should be willing to give a lot more equity to the first employees. I don’t get the logic of not doing this. You want your engineers to feel as if they have ownership in the equity that you’re building. It’s such an easy way to keep engineers engaged and productive that it baffles my mind that it’s not done more widely.

I hate working for BigTech. Startups expect too much and compensate very little. The sweet spot for me has been medium sized public companies that offer great compensation but need solid engineering to grow their market share.

It's the math again. Go do a spreadsheet and simulate a company as it grows and you see treating your first 10 employees in line with big tech expected value outcomes is a really, really big hit.

I know this is totally super optimistic, but can we change the perspective from

> is a really, really big hit.

to

> really amazing payoff for the early engineers/employees

My very limited understanding of the growth of the SV tech community is that its a generous cycle of people creating wealth, and then using that wealth to fund the next generation of tech. So it seems completely logical for SV founders to want to do more of this.

Whether it's a big hit or an amazing payoff are actually irrelevant, there is a going rate for engineers who are willing to accept startup risk (in a job market where anyone can get hired right after it fails this is not a lot of risk), and that's the price that will be paid.

When I was young and naive, they paid employees the "risk bonus" in stock shares, not cash. I asked for more cash, and they said, "nobody takes cash, stock shares are the thing". They were the dud thing.

Especially when you consider the diminishing returns on wealth. And presumably you should be able to attract higher quality employees who are more incentivized to work hard. Resulting in faster and more efficient growth. So you may never even take a “hit” to wealth. Unfortunately most founders and VCs have resorted to exploiting the social dynamics of the engineer class instead.

Which will be attrited away over funding rounds

We usually encourage folks to give at least 10% of the equity to the first 10 employees. That's what Stripe did and it worked well.

That number is going up over time, so I can report at least a little bit of improvement, though certainly not fast enough.

Honestly I think 10% should be a floor for this, and considered completely separately from the usual 10%+ option pool (for the ones that come after the first approx 10).

For that matter heading out of a seed round with very roughly 1/3 founders 1/3 employees 1/3 angels/whatever seems pretty sane to me, although a bunch of that first 2/3 should not have vested yet. Your second tranche their would hold a largish option pool for growth, and a bunch of "founding employee" equity. You are all going to get diluted to hell, but however it eventually shakes out I think that collectively those starting key employees should see roughly the same outcome as individually a founder does....

Equity or options? If options, what happens if they leave pre-liquidity? If it's, "they have 90 days to exercise", see this comment on the counterpoint thread: https://news.ycombinator.com/item?id=21868797. To summarize: screw that. If it's actually straight equity you recommend, how do you recommend the dilution work? Is it tied to the founders' own dilution? If not, what incentives do the founders have to not throw their early employees under the bus in future rounds? Even if all of this is done right: 10% seems likely to be too low for the risk.

> Go bootstrap, so no VC style business timelines.

This is easier to do when you have some money on hand. Which is why working at a well-compensated job if you are not from a wealthy background is quite important in your early career. Also its not that bad a strategy. I mean Qualtrics pulled it off quite well.

We'll be taking some of this approach at our new co, bootstrapped, with very generous share grants for the first employees. We're doing partially remote, but I think full remote might make it too hard to get the core team as tight knit as it needs to be. I don't think it's a good substitute for a few people sitting in a room yet, but I could certainly be wrong about that.

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