What you need to know before you join a startup

In really big tech this can be mitigated sometimes because projects may be split out of the company at large, and these little moonshot projects might function as a startup within the larger ecosystem.

Finding people more talented/experienced than you is hard in startups, and there's this really bad tendency to build everything as a prototype, while very rarely you get to convert something to a stable product.

So while you get to practice on possibly a broad array of topics, you rarely get to get beyond the beginner level / learn the best practices for it.

In the long run, this can be really disruptive for your career if you don't take the time to practice on your own.

A good startup with strong engineering team and fast shipping cycle will provide with way more learning opportunities than FAANG.

Personally, I think for a fresh grad going to an early stage startup or to FAANG is a close call in terms of value. 1.5-2 years at FAANG gives a good boost to the resume to pursue better opportunities later, while 1.5-2 years at a startup can provide more learning and potentially some upside already. At that stage there's time to take chances either way. A close-to-IPO company is also a viable option.

My goal in the article was not to say startups are bad (or good), but rather to provide insights so that people can make more informed decisions.

Let me add my case: 3 founders, I am one of them, we all worked for more than 1 year, not being paid, not taking a single day of vacation, not even weekends, to understand our market, build our product, and launch. Our first employee came after that, and while we started paying ourselves, on minimum wages, our first employee (developper) was paid slightly above market level and working normal hours. We have 5 employees today, they all get paid at market level or above, we recently raised funds (at seed level), less than 1M, and we (founders) still work 7/7 most of the time.

I understand how first employees may have the feeling they do not have what they deserve, and in some startups that may be true, but can we say this feeling is _sometimes_ a cognitive bias due to the employee not perceiving the financial risks involved in creating a company, and the amount of work done by founders?

On the same note - the lack of a paycheck says nothing about the risk of a founder. A founder may very well start with more money, more opportunity, or a bigger safety net than any future employees.

The lack of a paycheck also doesn't tell us anything about how much the founder's skills and creative input contributed to the success of the company VS the first employees.

If they both have been there since the beginning, it is very possible that the company would similarly not exist if the first employees hadn't joined. So "The company couldn't exist without the founder" could also hold true for "The company couldn't exist without the first employees".

I think it's an interesting question - should you be compensated for your contributions to the success of the company or should you be compensated for the risk you took on in working for it.

I feel as though most founders would agree with being compensated for your contributions to success. Though most founders also wouldn't give their first employee's a similar cut of the reward, to themselves.

It's a little heartbreaking to watch years of equity disappear, in the company you built, because you don't have a year's paycheck worth of savings lying around to buy your options before they expire.

To be fair - investors are also not fans of that. Potential investors will look at how shares and stock options are distributed and determine if it will allow them the flexibility they need in future fundraising/buyout efforts.

To go against this (investor interest and personal flexibility) founders would both have to have strong conviction and KNOW they won't need to rely on pleasing VCs in the future, for the company to survive.

This goes against how startups are currently built.

I'm not immediately sure why a fixed amount of shares, whose value simply increases over time, is not the status quo. The only trouble I can see with this is that shares are non-divisible, so you have to give out at least 1 share, even if it is priced at $10,000.

Also, if you sell your own shares the money goes to you, not the company. I guess you could then loan the money to the company, but you'd still be liable for tax.

Going from owning 1% of a 1M company to owning 0.5% of a 2M company isn't unfair. The extra value comes directly from the new shareholders investing their money.

Employees believing their ownership percentage will not change is a problem though, and founders should not suggest that to be the case.

It's because the dilution mechanism is the easiest way to sell partial ownership without tax penalties and it also a minimizes the # of transactions among previous owners.

Reducing everybody's ownership by a percentage amount ("dilution") is way more straightforward than having all owners coordinate to sell a fraction of their shares to an investor.

>, I think it would be much more fair to sell my own shares to investors, instead of diluting all of my early employees. [...] , then just give them 0.3% and promise that there will be no dilution.

Let's say an investor wants to invest $1 million. If you sell your shares, it will be a taxable event. You'll pay ~$350k in taxes to the government and keep $650k. On the other hand, if you dilute everybody, that $350k can be used by the company to pay salaries for 2 more programmers for another year.

To simplify all this, what you, as a founder, really want to achieve when looking out for the welfare of employees is to increase their total wealth. Dilution isn't the real issue; instead, it's ultimately increasing their total wealth by making the company more valuable.

(If you want to somewhat approximate the idea that "0.3% that never dilutes", the company could issue extra refresh grants to that employee. But mathematically, that still requires diluting somebody else because all owners still have to add up to 100%.)

>EDIT: I just got to the end of the article: "Finally, we structured our company in such a way that our tokens never dilute." That sounds like a great idea to me.

It's only a great idea of future investors buy into it. If Near's previous tokens "never dilute", then the author doesn't make it clear what the future investors are buying. The investors can't be buying equity since they just said existing tokens don't dilute. So are new investors providing a loan? Or buying bonds? Or buying warrants? Or if they're buying "utility tokens" instead of "ownership tokens", how do their investors make a multiple of their investment back?

A bit like the one company I interviewed at that had some odd stuff on their site about your reading level.

It never came up in interview but I would have loved to have said of course I new all those words drum roll at age ten doesn't every one :-)

Even outside of SF there are a whole gulf of positions out there that fall somewhere between a dev shop / "back office of SomeBigCo" and starts ups. Plus sometimes "back offices" can be pretty rewarding too if the person in charge of that office has fostered the right kind of work environment.