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Comment by ojbyrne | Hacker News Reader

I got some equity. Some day it might actually be worth something. I was participating in a conversation about how being a founder is better than being an employee, and pointing out that they often end up exactly the same (except for the equity). I edited the post a little, remembering that I do still have friends there.

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Isn't equity a big deal? I was employee #2 in a just funded startup. I ended up busting my ass the whole time only to realize that my equity was a fraction of what the founders took in.

IMHO, if you do a startup, do it as a founder, or join after Series B, from a pure risk-rewards perspective.

I didn't mean to inject my bitch-fest into this thread, my point is that the idea that being a founder is going to lead to a job where you have control and independence, can run into a big road block as soon as you take VC money. It's important to get stuff clear with your co-founders before you sign anything.

What you call a "bitch-fest" I call incredibly valuable data rarely seen here. Since most HN readers will never become part of YN, your experience is extremely apropos.

You should seriously consider writing a "Don't Let This Happen to You" piece (a la Philip Greenspun) and posting it here to save others from the same fate. Change the names (including your own) if you like. A post like that could be the single most important thing some hackers ever take away from here.

To paraphrase my lawyer, sometimes companies can be very creative about what the standard "Proprietary Inventions and Information" agreement covers. And any advice I give can basically be summed up as "get your own lawyer early."

No, we totally appreciate your input here, and I think that you'll find that being Digg's first technical guy carries a lot of street cred. Your insight is appreciated. And, even though things may not be looking great for you now, I wouldn't be suprised if you did better for yourself the second time around.

Although on a cautionary note, I'd be careful what I post here, because it does tend to get picked up. Comments I've made got picked up by ValleyWag, and that's almost never a good thing.

Got it. Good luck with your startup. I read Jessica Livingston's 'Founders at work' and the story of many co-founders is very similar to what you said.

"Isn't equity a big deal? I was employee #2 in a just funded startup. I ended up busting my ass the whole time only to realize that my equity was a fraction of what the founders took in."

To be fair if you were an employee, i.e. you got paid well I assume? there was less risk on your part relative to the founders. So your equity should be a fraction of what the founders took in. Why would it be otherwise?

Yes, I was paid very well. I loved the team. And I am now at peace with the equity part as well. They earned every single bit of their equity for the risk they took.

I was responding to ojbyrne's comments that being a founder is not all hunky-dory since (s)he ended up in the same spot. I suggested at least (s)he got better equity being a founder and that is a big deal.

And I still think for a risk/reward outlook, either being a founder or playing it safe until after Series B are the two extremes and are both high in the value / risk ratio.

I'd probably agree with "paid very well", "loved the team", "earned every bit", etc. The problem was that the job went from something I loved (small team, a variety of responsibilities, lots of opportunity) to something I didn't like at all (head-down coding). Which is all I really wanted to point out.

My implication, and I think you got it, was that you should have definitely gotten more than "some equity". I speak from no experience (still a student), but I don't think I'd care who is paraded in front of the media as "the founders" - whatever makes the company more likely to succeed is best. If the other guys are more media-friendly than I am, all the better!

What would really matter for my ego is what piece of the pie I get in the end, although, in your position, it sounds like that's a hard area to negotiate, too, since said "semi-famous person" is adding all the value in the very beginning (before any code is written). This is probably faulty logic to base your equity on, since your piece should be proportional to the value you add at acquisition.

The thing is there's a difference between the equity of management founders, and "non-management founders" which is basically just that the former get a seat at the table at any negotiations, and the latter doesn't. I actually didn't know there were non-management founders till I got to California (you hear occasionally about them - linkedin has one). And the thing I also learned is that liquidity of equity is more important than the percentage.

And I don't think that Kevin added all the value in the beginning. He was significantly less famous at that point, and in fact was about to become unemployed. Many of his coworkers tried to launch sites around the same time, with nearly as much fame, and they all failed.

There was a lot of luck.

Was there any sort of written contract in the beginning? Kevin first announced Digg on The Screensavers in a way like he had nothing to do with it. If there was nothing in writing between the two of you at the time Kevin announced it, wouldn't that mean Kevin split equal ownership with you?

Ah, hadn't realized we were talking about digg. Kudos, at least it's something to brag about at parties ;)

I haven't heard about "management" and "non-management" equity, sounds like a cheap way for sleezy MBA types to hoodwink hackers out of money. Could you explain in two sentences how liquidity works? I assumed everyone just cashes in their stock when an acquisition (or IPO) happens.

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