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Comment by stemuk | Hacker News Reader

Even if you pay your #1 employee at market rate he is taking huge risks and should be compensated accordingly. Working at an early stage company often comes with huge job insecurity, loss of medical benefits more mature companies might be able to offer (better insurance etc.) and a possible kink in your CV (3 years at Microsoft look much better than spending 3 years at an unsuccessful company that eventually shut down).

To sum it up, I would expect a #1 engineers equity to be at least half of a founders equity AND payed at near-market rate.

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lol @ startups with no engineers yet paying “market rate”... they will maybe pay market rate within their stage band i.e. compared to other SV seed-stage startups, but this will still be way below the liquid total comp at a post IPO tech company. At this point in the tech cycle the math is so out of whack in favor of big co that I can’t with a straight face recommend to anyone that they join a seed startup as an early employee engineer unless they’re already well off financially (5-7 years ago I felt like I could). There are exceptions, of course.

You realize not all startups are in SV?

You realize not all job markets have developer jobs paying 400k?

> You realize not all startups are in SV?

Absolutely. Having said that, I won't join non-SV startups. Why? very simple: the chance of hitting the jackpot is significantly higher in SV.

> You realize not all job markets have developer jobs paying 400k?

For sure, but why would I joined non-SV startups getting paid peanuts while I can join a more established company and get paid double (base, stock, bonus, health benefit).

I felt that First Engineer is a sucker if you don't get compensated well enough (be it way more equity than the typical 0.5-1% or something else).

At the end of the day, I'd choose to maximise my career: be it joining a startup to gain experience knowing the whole stack or joining large enterprise for better career-path and compensation.

I don't join startups to "Change the World" or to "Hit the jackpot with 0.5-1% equity".

Yeah but those exceptions are pretty big. The hiring pipelines at FAANG are so over-tuned for false negatives that there are plenty of engineers who are good enough to work at a FAANG for FAANG-level compensation yet are not actually getting offers from FAANG companies. They're on the market for (market minus FAANG)-rate compensation.

Then you have to remember that FAANG companies are large enterprises, by definition, and that comes with a lot of overhead - design by committee, politicking between middle-management fiefdoms, not being a part of the conversation when irrefutable directives are issued by executives four levels above you, varying levels of paperwork and documentation that are necessary in large organizations. That's soul-sucking for a lot of people, and those people will exclude themselves from FAANG-level compensation, and are on the market for (market minus FAANG)-rate compensation.

The real reason why a lot of founders can't hire at market rate compensation is that any early employee, even if you're paying them market rate, needs to buy into your vision just as much as you do. The upside for early employees, even more than potential compensation, is in being a strong influence, including at relatively senior levels, as the company grows. If, as an IC, you find yourself being recruited by somebody who you think is a strong and experienced leader, selling a product that you personally think is important, then you grab the bull by the horns and get on. If somebody who rambles and can't make eye contact asks you to join to build out Uber-for-pidgeons, it doesn't really matter how much compensation is being offered; you're going to walk away.

>The hiring pipelines at FAANG are so over-tuned for false negatives that there are plenty of engineers who are good enough to work at a FAANG for FAANG-level compensation yet are not actually getting offers from FAANG companies.

What happen is that these people will keep trying until they get in. They will focus only in one thing and one thing only: FAANG.

> That's soul-sucking for a lot of people, and those people will exclude themselves from FAANG-level compensation, and are on the market for (market minus FAANG)-rate compensation.

I find things have changed a lot where housing dictates personal career choices lately. It sucks to not be able to buy your own property. I don't care what people strategy is (be it work 4-5 years for FAANG and move midwest or whatnot).

There are many companies that offer pretty good pay and great job security outside FAANG. Try Microsoft, Oracle, Siemens, Airbus, SAP or one of the million medium sized companies whose name you've never heard of unless you're in the same line of business.

My experience has been that those companies (except for Microsoft and Oracle) have been well below FANG compensation levels, while being in line (and sometimes lower) than what I can get from later stage startups and not much higher than I have heard from early stage startups. I have only looked for opportunities in NYC and Dallas, though, so that might skew my observations.

> Even if you pay your #1 employee at market rate he is taking huge risks and should be compensated accordingly. Working at an early stage company often comes with huge job insecurity, loss of medical benefits more mature companies might be able to offer (better insurance etc.)

Sorry, but no. Jobs are very easy for a good dev. You are taking no zero risk as engineer #1 at a startup if your pay is market rate.

> and a possible kink in your CV (3 years at Microsoft look much better than spending 3 years at an unsuccessful company that eventually shut down).

To who? I would hire the 3 failed startup guy any day over the 14 years at Microsoft guy.

> To sum it up, I would expect a #1 engineers equity to be at least half of a founders equity AND payed at near-market rate.

Haha. I mean I guess it's fair to expect that. Maybe someone would give it to you. To me, it sees like a very inflated value of self worth if you are wanting to take little to no risk but then reap MOST of the benefits of being a founder.

I mean "market rate" in terms of salary is 30 - 50% pay cut over total comp compared to working at an established company with RSUs and massive EoY bonuses. That coupled with the general resume risk means your first hire is leaving a lot on the table.

If you need the best, you're going to have to pony up equity since you just can't compete otherwise. The open secret however, is that for most startups, you really don't need the best. You don't need top quality to throw together a web backend and a mobile app and start growing a base; for those companies it makes no sense to dilute the massive payout for the founders by sharing anything with the code monkey actually delivering the app.

There is a name for this. It is called a cofounder ( Who is comparatively more junior than the rest of the team ).

A cofounder takes risk, an employee does not. Both are valid, but different, paths.

Employees take risks. The earlier the startup, the bigger the risk. The risk may be different but it's still a risk.

Yep...if I'm going to be offered $x as employee #3 with little to no equity, and the same $x at a stable company...I don't see why I should risk joining when there's little reward.

Risks can be: Stress due to working more (wearing more hats, not enough employees) Not having a stable paycheck because company needs to pay venders otherwise they go bankrupt. Recession or downturn, loss of job immediately while big company can weather.

Etc...all the things not at a big company.

I think the earlier stage you are (seed, angel) then yes, there is definitely risk for a large class of employees. You're taking a risk on the founder's ability to execute, joining a company that is not cash flow positive and tying your mortgage payment/insurance to their ability to raise money in the future... it's derisked in each successive round and startups/founders are not all equal, but I think if we're talking 1rst employee it's fair to say there's some risk.

If your first engineer is any good, “job insecurity” is the last thing he’s worried about. In today’s environment, even a slightly above engineer can get a job within a month.

Loss of medical benefits is just another number to add to thier salary. Statistically, equity especially for an unproven idea is meaningless. It’s likely not to be worth anything.

Three years as the lead engineer at even a failed startup looks a lot better on your resume than just being a low level drone at Microsoft. You will probably also have your hands in a lot more pots making you even more valuable.

> If your first engineer is any good, “job insecurity” is the last thing he’s worried about. In today’s environment, even a slightly above engineer can get a job within a month.

Can get a job. There is no end to the stream of recruiters offering jobs that I am overqualified for and pay well below what I currently make. The companies that can match what I have now (which, to be honest, is still lower than I could get at the Google tier) are few and far between.

Why assume #1 engineer is a he?

Can we just charitably assume that s/he knows that English lacks a gender-neutral second-person pronoun and picked one out of he or she (like those baby books that alternate between gendered pronouns) to finish what s/he said so s/he didn't have to use the thought-interrupting construct "s/he"?

It'd sure be great if people didn't make that assumption, but the HN guidelines ask you to make the strongest-possible interpretations of comments when responding, as doing otherwise leads to unnecessary, off-topic flamewars.

Other commenters use different pronouns when describing hypothetical scenarios, and that's great, but it also sometimes triggers flamewars from a different direction.

Best to just avoid playing that game altogether.

What risk? Market pay, many startups have decent health insurance, and even if it blows up, it actually looks good, not bad on the resume.

> many startups have decent health insurance

About what kind of startup are we talking here? When we discuss #1 engineer compensation we are most likely talking about a very early stage company that likely lacks a profound company structure and employee benefits program. So I would assume that #1 engineers will most likely not be greeted with a good health insurance on the employer side.

I was employee #1 at a startup. Right out of the gate our medical was better than Google’s. Having been exposed to the financial side of things, the cost difference between shitty and decent insurance for employees was inconsequential in the overall cost of doing business.

I was engineering hire #1, and we had no insurance and pay was half market rate, but at least the founders were incompetent and abusive depending on the day.

And therein lies a valuable lesson: don't be employee #1 if you don't know the founders personally, or can otherwise make sure they have a good track record.

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