Comment by patio11 | Hacker News Reader

Comment by patio11 | Hacker News Reader

Imagine three twenty-something guys working on a startup that has more lines of code than dollars in the bank. They're working out of an apartment and spend most evenings eating ramen noodles from the same MSG-laden box. They work approximately equal hours (too many). They suffer approximately equal stress (more than they ever expected). They bear approximately equal responsibility for not tanking the company through poor performance. They each accept dramatic pay-cuts relative to easier, better jobs which they could sleepwalk their way into.

Next door, there are another three guys, eating ramen, etc etc.

Now, it seems to me like the three guys behind Door #1 are very similar to the three guys behind Door #2. However, in one case they're all co-founders, and in one case they are two co-founders and a first employee. Those are very, very different statuses for the third guy. The third co-founder gets mentioned in press hits about the company. The third co-founder can call himself a co-founder, a status of value in an industry (and society) which is sometimes obsessed with status. The third co-founder cannot get excised from the cap table without that being mentioned as a subplot in the eventual movie.

The first employee will not usually get mentioned. The first employee gets no social status of particular esteem. The first employee will not have a seat at the table -- literally or figuratively -- when the eventual disposition of the first employee's equity is decided. The first employee's equity stake is approximately 1/6 to 1/40th (or less!) of what the third co-founder's was. Well, theoretically. 0.5% is 1/40th of 20% in engineering math, not in investor math, because investors can change the laws of mathematics retroactively. 0.5% of millions of dollars is sometimes nothing at all. (This is one of the least obvious and most important things I have learned from HN.)

If you're good enough to be a first employee, you're probably epsilon away from being good enough to be a third co-founder. There may be good reasons to prefer being an employee... but think darn hard before you make that decision.

There's a simple solution: employees shouldn't accept a lower-than-market salary. Having been in this situation myself I understand that the psychology of these situations makes it difficult for early employees to maintain an employer-employee distance from the founders, but (in my experience) that spirit of camaraderie ends with the acquisition. The founders will likely be gone within a year, the unique cultural aspects of the company will be subsumed by the acquirer, and early employees will be stuck with nothing in exactly the kind of company they were avoiding when they took a startup job.

Herein lies the problem for early stage companies trying to hire. The people they really need/want are probably capable of starting their own companies.

<epiphany> A small non-technical founding team looking to hire the best technical person they can is effectively looking for a co-founder, not an employee.

So you're right, the coder who would be willing to consider such early involvement in a project is probably fairly entrepreneurial and will lose out if he is taken on as anything other than an equal co-founder. </epiphany>

This has been my feeling previously, but this post and the comments helped make it concrete.

At the same time, unless you're lucky enough to start with the backing of Y-Combinator or somesuch, there can be value to learning about the process while the money involved is someone else's and not your own.

Edit: I realize this is a somewhat heretical idea around here, but the difference in stress when it's your life savings in the mix and your responsibility to make payroll is quite substantial, and being an early employee gives you a window into the process without having to push all your chips to the middle of the table on your first go around.

Not necessarily. At my company, all our early dev hires are awesome people we think will be capable of starting a company one day, but aren't yet. Our goal is to teach them what they need to know so that in a few years they can do that handily.

Some of the things we plan to help them learn: corporate equity, pitching VCs, negotiating investments, dealing with investors, handling PR, user testing, user context research, product management, UI design, A/B testing, running production systems at scale, software processes, and engineering management.

We definitely can't offer them more money than Microsoft or Google can, but we sure can teach them a lot more.

That's... actually a really great pitch. Job as startup school. Nice!

Thanks. I figure it will motivate us to keep the work interesting enough that they won't flee. Which in turn will force us to build a much more robust company. We'll see, though.

What are you doing to ensure that employees receive that broad an experience? In the startups I've worked for, the founders were loathe to involve employees in business development, let alone financing.

Depends on the person and their interests, really. A lot of the day-to-day stuff (product prioritization, feature design, user testing, operations, development process) is easy to get people involved in if they want. We definitely involve everybody with recruiting and hiring, which I think is vital for startups.

Direct involvement in financing is, as you expected, hard. But we try to be very open. Everybody knows the burn rate and the terms we took money under. Everybody regularly gets updated on dealings with our investors. We also have a regular brown bag series. A couple months back, my co-founder did one on venture financing, covering both the basics and our specific fundraising effort. He did another one recently on the competitive landscape. And he's an awfully good presenter; you can see a 5-minute talk he did recently on our approach to testing product ideas:

http://vimeo.com/24749599

Thanks for responding! Sounds like an interesting company. I wish more founders took this attitude.

Kinda boils down to timing of the opportunity and how much risk is on the table before you sign up.

Employees generally come post-funding, get paid, etc. Co-founders work with free with no assurance of EVER getting paid, have to pony up when the company needs cash, etc.

In spirit, though-- I agree. If your risk level is the same as the founders, you should be a founder. If you can't handle or afford the risk but still love the idea of startups, try being an early employee.

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