Ask HN: Is this fair compensation for Lead Developer at a start-up? | Hacker News Reader

Ask HN: Is this fair compensation for Lead Developer at a start-up?

12 pointsabrichr10 comments

The company was founded by a friend of mine who is very passionate and driven, and has been working at it for ~5 years. They have approximately twenty employees working on content, all of whom are compensated through shares. They have significant traffic to their website, and are looking to have it redesigned from scratch. So far they don't have any revenue, but have recently secured investment on the condition of a working prototype.

I have an undergraduate degree in software engineering, and am currently working towards my master's. I have 5+ years of experience in building web applications. I will be the first real software engineer that they've had, since they've outsourced all of their development work so far.

My friend, the CEO, has offered me a trial run of three weeks, after which point we'll proceed based on the quality of my work. He said he'll offer around 5%/year, but it could be more or less, depending on the quality.

My question is: is this fair? Seeing as the product is a web application, I know that the actual execution is the key to whether the company fails or succeeds, and I feel like 5%/year isn't really reflective of that. On the other hand, I realize there's a lot more to running a company, such as finding the right people and building a reputation, and he's been at it for years.

From his perspective, I will just be another employee. From my perspective, it'll essentially be my job to make this thing work.

What does HN think? Any input would be appreciated :)

I've been in a similar situation before.

I joined a startup that had limped along for years just as it was launching a new product. I slowly realized that this new product was the company. Everything else was water under the bridge.

However, the company (and certainly its investors) didn't see it that way. They'd invested a lot of time and money. To them, the idea that I would have as much stock as someone who had been there for 7 years seemed unfair.

The company badly needed new funding, and it all fell apart for this very reason. Someone offered to put in a lot of dough. The existing investors and stockholders figured, ok, you're offering about 10% of what we've put into this company, so you get 10%. Okay, 15%.

The investor figured, no, that's all water under the bridge. The money I invest now is almost a brand new investment. I need way more than that. They couldn't reach a deal and the startup folded.

You may be in a similar spot. Your buddy, and all his employees, figure they've been at it for 5 years. But does that 5 years have any meaning, or is it just dead weight?

You did say that they have "significant traffic", so maybe there is a lot of value already there, and you'll be building on top of something already successful. Or maybe there's nothing, and you're essentially starting a new company but with all the baggage of a failed company.

Hard to say, but this is what it all turns on, as far as I can see.

"From his perspective, I will just be another employee."

Let's be optimistic and imagine the company going from $0 to $1,000,000 in revenue this year. Five percent of that is $50,000.

But you don't get paid off of revenue, you get paid off of profit. So you're looking at less than that. Probably much less even without the CEO creatively extracting money as expenses - let's say in the form of a $200,000 CEO bonus and/or leasing servers to the company.

Keep in mind that capital which is raised is not profit. You won't get 5% of it or any portion of it.

The deal smells like bullshit.

5 years with no revenue? Run in the opposite direction.

And without a working prototype? Wow.

Few red flags here as other pointed:

- 5 years without any revenue and 20 employees? enough said.

- 5 years of outsourced work? Doesn't seem like a startup could stretch that far if they had real work/potential.

- "5%/year": 5% of what ? revenue ? equity ?

So he's going to get 3 weeks of your work for free, then based on your work his company ---HIS company--- _might_ get investment money? In return, you get a promise of 5% of NOTHING for the foreseeable future?

No thanks.

This is an absolute waste of time to even consider. First of all, you can't have a website with significant traffic and no revenue unless you explicitly make it that way, like Twitter. However, Twitter had lots of funding which made that possible, and even still, I'm sure they made some money even though they weren't serving up sponsored tweets.

Why don't you tell your friend to put 3 AdSense units on the website and you'll take all of that revenue in exchange for your work + 5% of the option pool that vests in 1 year?

It seems like you have stars in your eyes and are being almost completely taken advantage of. Even the scrappiest of start-ups that are worth your while will pay you a salary + options.

This sounds like your friend the CEO is taking advantage of your friendship. I'm sure he wasn't able to squeeze three weeks of free work out of the guys he outsourced to.

He has content and traffic. Fine. But unless this is a media website or about branding, the actual "secret sauce" will be the functionality (yet to be coded). In that sense, your work will determine 100% the success of the company. As such, 5% doesn't sound fair to me. Also, if after 5 years, he's gotten no revenue, you're number one question as a potential share holder is: Why is this? and How will this change with my involvement?

As Pete Doherty wrote - You know twice as much as nothing at all. It's still nothing at all....

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