How to Intern for a Startup

Bill had walked away from a very lucrative job in finance, and I left a pretty prestigious scholarship at NYU law.

We were far from conception stage when we brought Karl on board. When he agreed to work for us, he knew he was going to learn a lot, get the YC experience, make some good connections, and see what it was like to work for an early-stage startup without having to make a life-changing commitment. If the company went belly-up, he could just go back to school in the fall. In fact, he did go back to school at the end of the summer.

If we went belly up, Bill and I would have been shit out of luck. Karl only came back after we raised money and offered him a salary.

There is no way we would have hired Karl had we not had the opportunity to work with him over the summer. But he did choose to work with us, and he was rewarded with a position that he would have had no chance of getting otherwise. He still has the option to go back to school, but if he does, he will have a head start on most of his peers.

Karl has been an incredible part of our team, and I am thrilled we have him. That being said, we did not need Karl to get where we are, which I think is the one prerequisite for giving anybody founder status (and the commensurate equity).

I worked for a startup (poverty level wages) right out of college. It was one of the best experiences I have had, and without it, there is no way I would have started this company. I wasn't doing it in the hopes that one day I would be anointed a founder.

I think the same way you do - that I'd never join a startup unless it were my own. I also used to make the same mistake - I thought that everyone else thinks the same way as me. In practice, the opposite is the case. Most people who want to join startups aren't willing to bear the load of fundraising, staying for months on a brink of death, doing recruiting, or management, or secretarial work, or a million other things a startup founder does. Being an excellent engineer or an excellent manager doesn't automatically make one an excellent founder.

Bill and Rich are world class at what they do - founding, growing, and running a company (and everything that it entails). I don't know Karl well, but he is probably world class at what he does - engineering great web applications. If Karl is willing to keep doing engineering for a certain compensation, there is no sensible reason for Bill and Rich to make him a co-founder (and conversely, if Karl doesn't want to deal with all the things founders deal with, there is no sensible reason for him to seek a co-founder status).

The U.S. Department of Labor’s Wage and Hour Division created a test to determine whether a “trainee” or intern is considered an “employee” based on a 1947 Supreme Court decision that evaluated whether “prospective train yard brakemen were ‘employees’ within the meaning of the Fair Labor Standards Act.” The test requires that all 6 of the following statements are true about the intern’s time with the company.

1. If the training, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in a vocational school;

2. If the training is for the benefit of the trainee;

3. If the trainees do not displace regular employees, but work under close observation;

4. If the employer that provides the training derives no immediate advantage from the activities of the trainees and, on occasion, the employer’s operations are actually impeded;

5. If the trainees are not necessarily entitled to employment at the completion of the training period;

6. If the employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

This is the law. If any one of these six statements is not true about a given internship, then the interns are considered “employees” and are subject to the monetary provisions of the Fair Labor Standards Act. That means that the interns are entitled to minimum wage and overtime compensation.

1) Did they offer you equity for the initial summer position?

2) What motivated you to go work for them for free?