Ask HN: Equity for first employee unpaid? | Hacker News Reader

Ask HN: Equity for first employee unpaid?

6 pointschany27 comments

Startup consist of 2 founders, they were at this for the last year+ - building a B2B product. 1. industry expert / sales 2. data scientist / cto (part-time)

One of them is my friend.

I joined 3 months ago, helped accelerated the growth - research, sales support, marketing, and products.

However I did not know enough about the industry (which I caught up understanding through reading; [experience needed]) nor I have data science expertise.

Last 3 months, we spoken to clients. Soon to closing early BETA deals. Marketing materials developed. Prior, we did not have any of this.

We still will not see substantial revenue until the next 3 months.

So for 6+ months, with little or no income. I am okay for now since I still live with my family and have savings. However risk is being incurred...

Option A: Look for a product manager role at another startup.

Option B: Stay, if 10%+ equity? No income for 6+ months?

EDIT Option C: Do some freelance gig till then. (Not a big fan of this one.)

FYI, I am a self-taught developer, designer, and sales & marketing. Jack of all trades, master of none (depends on who am I talking to). Just graduated Masters a few years ago, previously worked in financial industry. My aspiration is to be an entrepreneur myself, tried a few things before, hard time finding a team.

So here is the really good news: whatever happens you've learned from direct experience the sort of potentially disastrous naive [in the technical sense] mistakes founders and early hires can make at a time when coming away with nothing will certainly suck if it happens but won't be absolutely devastating. [1]

Now to me, if I were one of the founders, the most critical question on my mind would [hopefully] not be, how much value have I put into the company in the past six months versus how much you have put in. The critical question on my mind [hopefully] would be how much value you bring to the company in the future. Maybe it's 10% - in which case I would consider looking for someone else. What I would want [hopefully] is someone with the potential to exponentially increase the value of the company and therefore who is worth a founder's share. The idea is that a new company is born the day you come onboard.

Yeah it's a little crazy, but a startup is about big risks and big rewards, not little ones. 10% is fine for a lifestyle business with a proven business model and where the founders bring irreplaceable assets [big capital or licensed access to a restricted market]. But lets face it, though most people probably cannot grow and run a company, there are a substantial number who can unless you're Wolfram Research.

Anyway, I don't if that's advice good bad or indifferent, but good luck.

[1] If you walk away with nothing financial from this deal, it's still pretty much identical to the most likely outcome had you been granted equity six months ago. Startups usually fail.

Yea... this is something you should have talked about on day -1. You can really mess up relationships by not getting the expectations out there and then making sure everyone lives up to them.

I would have a conversation with ownership and see if they want to give you any stock. I would couch it by saying. I'm really glad you let me learn from you, but I think its time for me to either get a job or get some visibility to one here.

I won't start making demands... doesn't sound like you set the expectations in the beginning and that's on you. Don't get mad at them for accepting your "help" paid or not. They might value your contribution very differently than you.

Yes. I actually lost my job the same day, I asked if my friend needed any help.

So there was no expectation set on the 1st day. The first and 2nd month or so - was still determining our product-market fit. The 3rd month was more aligning to clients.

However, its clear the value I set for the team behind the 3 month acceleration process. And that now, if they lose my contribution, the whole startup would be set back. (granted thats my perspective)

Not trying to argue with you. I'm only pointing out that if they felt they "needed" you they would have clarified that by now. They may think they are "helping" you out by giving you some real world experience.

My point is you should have a talk with them and find out what's in their head, before you go all "I think I deserve..." There is no better time then now if the project is at a critical junction.

Simply ask what expectations you should have from them employment/equity-wise. How do they see me folding you into the firm. Don't let them put it off and get an answer, within a reasonable time.

Don't make it combative. Find out what they are thinking... digest it... tell them what you are thinking... let them digest... and come to an agreement... or not

10% is good if you are getting salary. If you aren't, you are a founder -- it should be more equitable, but not necessarily equal. If you get salary, perhaps you and next 2-4 employees should be splitting the 10%.

One thing to do is to make a contingent bonus for the pay you aren't getting. Let's say you think 6 months is worth 50k. Then, they sign a contract where they pay you a 50k (or more) bonus if the company (1) makes cumulative revenue of xx million or (2) is acquired (3) raises a round over zz million.

Can you lay out a new case for them? If you've already agreed to Option B, then I would say it's going to be difficult to do anything other than assess which option is more ideal for you personally. Otherwise I would add an addendum to Option B, which is that the company pays you back for all your unpaid time (whatever rate is agreeable) should it become profitable or get funded.

We will have the docs set up in the next 2-3 weeks.

Agreement was we do opposing research and share those readings based on common equity startup practices.

Obviously, its all different case-by-case.

What equity (or extra) compensation should I request for at this point?

A thought keep passing my head is: If I take a job at a mature startup, I be an employee as well. Here, I am also an employee (co-founder level) but no pay. Status is not important at the end, but it just cannot escape my head about it.

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