Ask HN: Are Startups Exploiting Freelancers?

I'm a little curious about how the bill got to $100k. Were the payments going unmade for months while you continued to do work for them?

I usually asked for biweekly direct deposits when I was contracting with startups, and I made sure to add that to my contract as a clause. If the money stopped, so did the work. But I never had anyone pay very late, and if they did it was quickly remedied with a phone call.

Now, as the cofounder of a startup (http://uphex.com) who uses freelancers regularly, I make sure that my freelancer collaborators know I'm serious about paying on time. I carefully lay out how and when we pay invoices, and usually pay far in advance of when we need to, in order to build up trust. To date, it's worked very well.

Bill weekly, offer a 10% discount for 100% pre-payment or you take at least 50% of the initial engagement up front. That cuts out clients for whom you've either a) not demonstrated enough value to or b) weren't going to pay you anyway.

Once is chance, twice is coincidence, third time is enemy action ^H^H^H an opportunity to improve your business practices.

1) You appear to have been working for startups with no money. There is a word for devs who work for startups with no money. It is "technical cofounder." If a startup does not have sufficient money in the bank to pay you, tell them you're happy to continue the conversation after they have raised money.

2) Startups with money in the bank are frequently amenable to e.g. 25% deposits for first-time clients. You can even offer them a trade: 25% deposit means they get scheduling predictability, otherwise the engagement happens subject to your availability, and -- since we're all businessmen here -- we're all clear that in case of conflicting desires about scheduling the client willing to pay a deposit wins.

3) Your computer just developed a really strange bug where elaborate excuses in emails regarding payment cause it to shut down and not be able to boot until your bank says the check cleared.

Answer: Adverse selection.

If you charge 2x your normal rate for some class of clients (e.g. startups) with no other changes in how you source or engage with clients, then you may end up with only those startup clients who were not going to pay you anyway. The guys who would have paid you will baulk at the 2x fee. Those who accept don't care that the fee is 2x, as they weren't going to pay anyway.

There's no substitute to doing due diligence and limiting the risk (e.g. through contracts and short payment cycles, as others have said).

1000x this; this is what I think about every time I see one of those HN front-page posts where a designer has replaced someone's website with a complaint about non-payment.†

Anyone on HN who hasn't consulted/freelanced for a year probably does not understand that 6-9 month payment delays aren't even unusual.

This is, by the way, all the more reason not to count on returns from consulting sold to startups with less than a year's runway in the bank.

† We occasionally buy design services. We pay _promptly_ (professional services courtesy). But I would never work with someone who had outed a customer for non-payment that way.