My experience as the first employee of a Y Combinator startup

Post by enjo » Mon, Jul 12, 2010, 10:02 PM UTC

mkramlich wrote: post #82

rdl wrote: post #16

I personally think the first one to five employees in a minimally funded startup with small m&a exit as the likely exit are getting a bad deal, vs. the founders or employees who join after financing. An early employee will get about a percent tops as an individual contributor...maybe up to five percent tops if he is more of a vp engineering. In exchange, a seriously below market salary, equally high if not higher ris…

be a sole founder and get 100% equity. then land some paying customers. keep the 100% equity. add features, polish, maybe hire other folks, maybe give away some equity early to bring on a contributing partner with key skills, etc. then this whole "1% is generous" belief and worrying about dilution caused by outside investment rounds simply goes away. does it always make sense? no. but I think it's ideal.

Post by enjo » Mon, Jul 12, 2010, 10:14 PM UTC

rdl wrote: post #63

pg wrote: post #55

Earlier quoted context omitted.

If by "real" financing you mean a series A round, then you're probably mistaken. People who join a startup with just angel funding might get roughly 4-5x as much stock as they'd get post series A. It's only a worse deal if a series A round makes a company 4-5x less risky. There's a market price for all the different options, from founder to early hire to later hire. It would not make sense for there to be points on t…

I am drawing a distinction between someone likely to only currently be a good individual contributor, and thus who will not have the option of founding his own startup at that point in time, and a well rounded candidate who brings a lot more to the table. One percent is a lot of equity even as employee one if that person is not going to be in a leadership role later. It was what the mint designer and a few other firs…

Post by enjo » Mon, Jul 12, 2010, 10:16 PM UTC

lsc wrote: post #76

rdl wrote: post #72

Earlier quoted context omitted.

The big factor people don't realize is employee number one has worse job security than the founders. If you they have huge equity and no salary, and you draw a salary, guess who goes when the bank account is short? If you all make subsistence only, you are losing due to lack of equity and opportunity cost. And still, if there is only enough for 2 of 3 to subsist, the employee goes. If the company tanks, you all go.

I think people realize this. Nobody who cares about job security works for a startup unless they have no other options. Working for a startup when you want job security would be like getting an art degree if you want money. My experience has been that if you want to hire people for significantly below market rates, you need to accept that you will be getting inexperienced people who probably can't get good stable cor…

Post by usaar333 » Mon, Jul 12, 2010, 11:07 PM UTC

rdl wrote: post #68

usaar333 wrote: post #58

Earlier quoted context omitted.

I'm somewhat sure that would describe National Instruments (IPO'd at a $380M market cap)

Wow. I was secretly trying to get you to find an answer to one of Keith Rabois questions on quora. I forgot he qualified it as post 1999. Can you do that too? National Instruments is an amazing company...I was fortunate to get to use their products on some projects as a teenager.

Post by aberman » Mon, Jul 12, 2010, 11:45 PM UTC

jrockway wrote: post #78

My experience as being employee 8 million at a Large Corporation is nearly identical. I can choose my own tools, work from home when I want to, take breaks, etc. We've already taken care of the cash flow thing, so it ends up being much more relaxing than working for a small company. We aren't going to go out of business if our software isn't released tomorrow, so we have lots of time to write quality solutions. We ca…