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Ask YC: Should I work for a startup?

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Re: Ask YC: Should I work for a startup?

#11

Post by dhouston »

johnrob wrote: post #6
cperciva wrote: post #2

I think there are two points you haven't considered. First, for startups which take VC, a "modest exit" can mean that the founders get nothing. The range of outcomes where founders become fabulously wealthy but early employees do not is fairly narrow. Second, most founders start off by not taking a salary. Deciding to be an employee instead of founding your own startup means implicitly deciding to take more salary up…

(this is slightly off topic) I'm not crazy about how equity gets distribution in start-ups. Long story short, founders are compensated for work without salary. The problem is that stock should go to whoever contributes most to the company. Just because the founders work for free, doesn't mean they contribute the most critical work. Here is an extreme example to prove a point: I write a business plan and successfully…

if in that 'extreme example' you're putting the wheels in motion to create that value (i.e. creating a business out of nothing that otherwise wouldn't have existed), you arguably deserve the equity. turns out it's usually not that simple in practice, and most successful founders have to work their asses off and take significant risk.

that said, no one's stopping you from starting something and dishing out equity however you want :)

Re: Ask YC: Should I work for a startup?

#12

Post by anamax »

johnrob wrote: post #6
cperciva wrote: post #2

I think there are two points you haven't considered. First, for startups which take VC, a "modest exit" can mean that the founders get nothing. The range of outcomes where founders become fabulously wealthy but early employees do not is fairly narrow. Second, most founders start off by not taking a salary. Deciding to be an employee instead of founding your own startup means implicitly deciding to take more salary up…

(this is slightly off topic) I'm not crazy about how equity gets distribution in start-ups. Long story short, founders are compensated for work without salary. The problem is that stock should go to whoever contributes most to the company. Just because the founders work for free, doesn't mean they contribute the most critical work. Here is an extreme example to prove a point: I write a business plan and successfully…

> It seems more reasonable to have a system where ownership is determined by contribution... otherwise there will always be the risk of the opposite: contribution being determined by ownership.

Nothing is stopping you from determining ownership any way you want for your biz.

Re: Ask YC: Should I work for a startup?

#13

Post by marketer »

If you're not a co-founder, it's difficult to rich off of stock options in. It happens once in a while (ebay, paypal, etc.), but not very often.

How many employees does it have, and what's a recent valuation? If it has something like more than 10 employees, a valuation in the 10+ millions, and it's in a great market, it could be reasonable.

Another thing to consider is the overall experience. Would you be learning technologies that are unique, and valuable in the future? Who is involved in this startup, and how valuable are the connections you could make? For instance, if the startup makes ROR apps, you could probably spend your time moonlighting and become competent in the technology yourself.

Re: Ask YC: Should I work for a startup?

#14

Post by marketer »

csmajorfive wrote: post #4

Well if you're getting paid a salary, it's not the case that it's riskier for you. You get to enjoy some of the benefits of a startup (culture, equity, etc) without having to go through the period where you're living on credit card debt and ramen.

That's true, but culture, equity, are not tangible. The hours and the effort are very tangible. Startup employees put in a lot of effort, in some cases as much as the founders, depending on the culture. There are few circimstances where you'd want to put in such an effort for a negligible expected reward.

Re: Ask YC: Should I work for a startup?

#16

Post by comatose_kid »

Working at a startup is not more risky for employees than for founders.

Consider that the startup you are applying to already has funding (I'm assuming it does, since it sounds like there is already a team). The founders started with nothing but an idea, probably invested their free time to implement v0 and then sold it well enough to attract funding. They could have failed at any time, and would have had nothing except experience and pissed off investors to show for it, not to mention the loss of any personal investment in the firm.

You on the other hand will draw a salary from day 1, and you already have a better idea of the company's trajectory than the founders did when they conceived of the idea. Even if the company goes under, you will have earned $X in addition to the experience gained.

And you have the luxury of not having to worry about how to get funding, sign deals, etc.

If you don't like the risk/reward, the best way to change the equation is to become a founder, or build/lead something so amazing that your rep alone compels startups to offer you a significant percentage.

Re: Ask YC: Should I work for a startup?

#17

Post by webwright »

"working at a startup is riskier for employees than for founders."

That (honestly) is ridiculous. If the founder is taking the standard path, they are going months or years without salaries, oftentimes accumulating debt to do so. When they get a little slice of angel funding, they usually pay themselves pennies so their early hires can get non-insulting salaries.

You seem to assume that a "cash-out" is a foregone conclusion. 99% of startups go belly up. No payout for the founders, "modest" or otherwise.

A fraction of a percent for an engineer is not uncommon. I'd need to know the company size, how far along they are, what sort of salary they are offering, and how senior YOU are to know if it's unreasonable. But for a funded startup offering a non-insulting salary to a relatively junior person, it's common. And (honestly) plenty fair.

What, exactly, are YOU risking as an employee? The 10 minutes it'll take you to go find a new job if the startup flops? Do you know what the founders have on the table? If not, you could probably ask them.

If you want more equity, offer to work for free or ridiculously cheap. Many smart founders will happily trade a little more equity to avoid a monster salary.

Re: Ask YC: Should I work for a startup?

#18

Post by secorp »

Startup pros:

* great people, unique culture

* influence a wide range of issues from tech to office location

* great experience for founding a company later

Note that I didn't include "huge potential financial gain" in that list. A non-founder at a startup really has to value the experience because most likely there won't be a huge financial win. That doesn't mean that you shouldn't try to negotiate a fair compensation package, but really you are using the opportunity to gain skills and experience to use when founding your own company where you will have more ownership and potential financial gain. If you don't believe that the founders take more risk than the employees now, you will once you found your own company :)

If financial gain is your main goal, you may want to take a serious look at getting into the financing side. This will take a different approach, but good analytical skills plus good networking skills are in high demand. Alternatively, you could go down a more corporate path and aim for senior management at a good firm. I'm not necessarily recommending these paths, but it's worth exploring the alternatives so that you can really appreciate the (in my opinion) extraordinary benefits and privileges of working at a startup.

Re: Ask YC: Should I work for a startup?

#19

Post by Spyckie »

For your situation - you are, ultimately, selling yourself not just as an employee but as a package of value contributed to the company. Now, if you are valuable - that means, if you can provide experience, work or code to the company that will drive it forward that not many other people can provide, then yes, you should consider asking for more equity.

Really, its all about selling. You have some goods or services. They want/need it. Is the current deal fair in both parties' eyes? Founders will say all sorts of things like "I bear all the risk", "I've been here since the beginning", and "I've contributed the most work", and many of these things will be true. However, you have cards to play like, "employees need compensation for their efforts", "good hackers are rare" and "I can add value to your company" (we assume you can). There's an argument to be had here about how much employee should get, but really, its all about how you negotiate. You have to show them why you think the deal is unfair to you, and offer up one that you think is more fair to both parties. If you like the deal, just take it. If you don't like the deal enough to take it, offer up your own, and if they reject it, you weren't going to take the original deal anyways.

But I will admit that like everyone else here has said, the negotiation here is skewed heavily towards the founders favor - still try to get what you can.

Re: Ask YC: Should I work for a startup?

#20

Post by bobp »

webwright wrote: post #17

"working at a startup is riskier for employees than for founders." That (honestly) is ridiculous. If the founder is taking the standard path, they are going months or years without salaries, oftentimes accumulating debt to do so. When they get a little slice of angel funding, they usually pay themselves pennies so their early hires can get non-insulting salaries. You seem to assume that a "cash-out" is a foregone con…

I guess it depends on your definition of risk. The definition I was going by is the chance of getting a decent payout after spending 4 years of your life working somewhere. If you work for someone else's startup, especially for a tiny amount of equity, you risk forgoing the opportunity to enjoy the financial benefits of a successful exit after 4 years of hard work.

A founder can also get a job in 10 minutes if the startup flops. The additional sacrifice (not necessarily risk) the founders take is living a few months without salary. This sacrifice obviously merits a higher portion of the equity than an employee -- maybe even much higher -- but as an employee you have to wonder whether the tiny equity you'll get is worth it.

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