My experience as the first employee of a Y Combinator startup • Hacker News Board

Re: My experience as the first employee of a Y Combinator startup

#61

Post by grammaton » Mon, Jul 12, 2010, 7:48 PM UTC

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…

As employee #2 of a now well-funded startup, I would have to agree with this whole heartedly. I wrote a large part of the company's initial product. I can't say that it's translated into nearly the respect, career advancement, and stock options I was sold on. Remember that a startup is as much about business connections as anything - who do you think the VCs are going to credit with success, the guy like them, or the technical founder(s) they barely understand?

Re: My experience as the first employee of a Y Combinator startup

#62

Post by zhyder » Mon, Jul 12, 2010, 8:01 PM UTC

pg wrote: post #55

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…

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…

"There's a market price for all the different options"

The market isn't efficient though, because there isn't enough information (tho your comment and the GP are helping increase that). It may very well be that there are worse deals at some points.

Re: My experience as the first employee of a Y Combinator startup

#63

Post by rdl » Mon, Jul 12, 2010, 8:02 PM UTC

pg wrote: post #55

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…

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 first hire top notch individual contributors at startups I know have received.

I definitely agree you get more equity during bootstrap time vs. in series a funded startups. I just think the combination of survivorship bias and cash comp makes it a better deal to wait.

Actually someone respectable (Suster?) posted a few months back about how there are discontinuities...and that immediately pre series a closing is a much better time to join than immediately post, since the reduction in risk is far smaller than the reduction in equity. I think the opposite is true between employee one and immediately post a.

By real financing I include mega angel seed rounds. For me a 1.5 seed round vs a 3 vc series a is a distinction without a difference.

Re: My experience as the first employee of a Y Combinator startup

#64

Post by thaumaturgy » Mon, Jul 12, 2010, 8:05 PM UTC

rdl wrote: post #41

thaumaturgy wrote: post #20

Earlier quoted context omitted.

Absolutely. I burned out at a tech job in 2000, and spent several subsequent years working as a climbing instructor, outdoor gear retail clerk, cable technician, etc. ... anything that didn't require the use of a computer. There's a difference between simply needing a vacation, and being completely and absolutely disgusted with your field and everyone in it.

What got you back into tech? I think that i am fortunate in that I direct all my wrath and loathing outward.

As totally cheezy as it sounds, I "gradually woke up one morning" and realized what it was that I wanted to accomplish with my life. My newfound goal was going to require more resources than I could ever accumulate by selling backpacking gear, so at that moment I decided it was time to get back into the tech industry. (I still have fond memories of my time away from it though.)

I haven't felt anything close to the same burnout since. Although I'm often stressed out over one thing or another, for the most part I'm pretty happy with the way everything is now.

Re: My experience as the first employee of a Y Combinator startup

#65

Post by rdl » Mon, Jul 12, 2010, 8:09 PM UTC

grinich wrote: post #54

SMrF wrote: post #26

Earlier quoted context omitted.

Years ago I suffered what I would now call "burn out" although at the time I didn't know what was happening. I found this essay to be an accurate description of my experience, but I think a doctor would be a better source of information on this topic: http://www.stressdoc.com/four_stages_burnbout.htm At the worst point I was experiencing anxiety, paranoia and depression. My only strategy for coping with stress and di…

I've found exercise to be one of the best ways to help prevent burnout. Especially exercises that put one into a meditative state. (Running, rowing, swimming, yoga, etc.) Good luck on the 5K. :-)

I definitely agree re exercise.

A good relationship, kids, and general family life also seems to help people survive high stress, but high stress often leads to a bad home life which can make it worse yet.

Re: My experience as the first employee of a Y Combinator startup

#66

Post by patio11 » Mon, Jul 12, 2010, 8:09 PM UTC

_delirium wrote: post #43

dnaquin wrote: post #40

Earlier quoted context omitted.

5% is unrealistic. 1% is. 50 million * .01 * .65 (tax) / 4 years = 81,250 considering opportunity cost and time spent. likely not worth it.

It's also often not even 1% of 50m, but 1% of (50m minus liquidation preferences).

Liquidation preferences are wacky -- I would have never understood them without several patient explanations on HN. I'm curious: is modeling their effects just common Valley knowledge that you'd do effortlessly during a job interview, or would most candidates be as unknowingly ignorant of their effects as I was a year ago?

Re: My experience as the first employee of a Y Combinator startup

#67

Post by jacquesm » Mon, Jul 12, 2010, 8:12 PM UTC

abstractbill wrote: post #25

levesque wrote: post #5

What salary can one expect while working for a YC startup? Is it comparable with the industry's average?

I took an almost 50% salary cut when I first started working at justin.tv. I don't think you can generally expect the industry average in an early-stage startup. My salary is nearly back up to what it used to be now though.

> My salary is nearly back up to what it used to be now though.

How much do you figure is your overall loss because of joining (in $) ? Does your equity make up for that ?

Re: My experience as the first employee of a Y Combinator startup

#68

Post by rdl » Mon, Jul 12, 2010, 8:12 PM UTC

usaar333 wrote: post #58

rdl wrote: post #51

Earlier quoted context omitted.

Name one company in the USA which didn't take outside funding and exited for more than 30mm usd?

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.

Re: My experience as the first employee of a Y Combinator startup

#69

Post by lsc » Mon, Jul 12, 2010, 8:15 PM UTC

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…

the thing is, the startup job market selects for people who don't place a high value on job security, and who are willing to work (temporarily, at least) for below market rates. If you want something safe and high paying, startups generally don't compete with the big boys.

Now, obviously, the first hire gets a worse deal than a founder wrt compensation... but I think everyone is aware of that going in to the deal, and that this is part of why it's so hard to hire experienced people for those (non-founder, early employee) roles.

Re: My experience as the first employee of a Y Combinator startup

#70

Post by rdl » Mon, Jul 12, 2010, 8:18 PM UTC

vaksel wrote: post #60

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…

"You're also mistaken in saying that an early hire will get 1 percent tops. This number varies by 30-40x, " so the #1 and #2 employees are going to get 60% equity combined? Or was that x supposed to be a % sign?

Also none of my argument applies to a startup with one or more non technical non domain expert founders hiring a tech guy as employee number one. In that case he is a founder without the title and might get a founder level share. However I think those companies are generally born wearing the stink of death and nor worth consideration.