> Then there was the time I wanted to hire my first full time employee. I was apprehensive to do it because I only had enough money to pay him for 2 months, unless I got another client fast.
> “Worry about that in 2 months,” Dad said.
Speaking from the perspective of that employee, fuck you.
OK, for the serious point: you may be not give a shit about risk. Good for you, you crazy risk taker! The world truly needs more people like you.
But for me? I've got a mortgage and a car payment and a wife who is trying to go through graduate school. I need to know that my ass isn't going to come into work on the 61st day and hear you say "Well, looks like we're outta cash -- sorry buddy..."
If, on the other hand, you share that risk with me up front, thanks -- you're a good boss.
I get your point, but if those things are true, then that would not be the proper job for you to take, no matter how risk prone or risk averse the founder is.
Being employee #1 is the worst of both worlds. You get the risk of a startup and you most likely will get very little payout if the startup is successful.
Most of the people I know that were employee #1 got nothing.
Yes, employee #1 is almost always the worst-off person in the company. They get to work like a founder, without the financial benefits. I've been there twice; it isn't a lot of fun.
There's another perspective that is equally true: Employee #1 is getting paid to see how a startup is created, struggles, pivots, pivots again, and eventually turns into a viable business. There is no better way to prepare yourself to be a founder than to be an early employee in a startup.
I definitely understand where you are coming from (and I didn't downvote you), but I have to disagree.
That employee (we'll call her Sarah) isn't being paid to see how a startup is created; she's paying to see how a startup is created.
She's paying heavily. She's losing money in the form of a lower salary compared to equivalent jobs, and she's losing money in the form of losing free-time compared to equivalent jobs.
Sometimes, that payment is very worth it. But it's a payment.
Not to mention that employee #1, if an engineer, is probably chained to the engine block (figuratively), toiling with keeping the machines running. He/she most likely remains in the dark when it comes to the business development and deal making that are all important for succeeding as a startup.
Exactly. This is my biggest problem with the "earning versus learning" philosophy. Both times I was employee #1 the founders had no interest in sharing any aspect of the business side of the company. I was there to build the product; anything else was a distraction.
Employees are less likely to make money from stock options than actors are to make a cut of net profit.
If you don't get the same type of stock as the VCs, and under all the same conditions, it's worth pennies on the dollar at best and likely simply zero.
I know it's probably the furthest thing from your mind right now, but I think it'd be really interesting to hear how this works out, say a year or two from now
My husband was an early employee at a company that was acquired in a mid-nine-figure deal. The founders walked away with at least a hundred million each. Employee #1 got a low seven-figure payout, after about ten years of grueling overtime. Keep in mind this was actually a company that is IMO unusually fair and considerate toward employees.
You really need billions of dollars coming into a company before non-founders have a chance to make fuck-you money.
Not to worry, they've just read the article on why you should not be the first employee in a startup, and more specifically, what terms you should not necessarily agree too.
Being the first employee of a startup can be the best thing since sliced bread. You take little risk (compared to the actual owners), yet the reward is usually way better than employee number 100. Who do you think is more likely to get 1) a bumb in pay and 2) a better position first?
Most startups don't get anywhere near employee #100. If you're in a startup that does, you'll likely be happy to be either #1 or #100.
Being #1 means you work as hard as the owners but for much less -- often you will end up making less than you'd make elsewhere.
Being an early hire seems to be about trading salary & security for experience running a business. Friends who have joined a startup early have said it's the absolute best way to learn what to do -- and many times, what not to do -- when you're starting your own company.
Of course, YMMV. I've heard from plenty of early hires that don't end up near the business side, and don't get much out of it.
The learning is incredible - esp. if you've never been in a startup before and you don't have a business background.
Just go in with your eyes wide open, and don't expect to make any money off the stock options. Figure out what you need to do to get your startup off the ground better. Be flexible in doing whatever necessary as Employee #1.
Had huge learning in 6 years. So although I took a pay cut, and I made 0 on stock - I would recommend it to others.
Being employee #1 is fine, but you should be asking questions like 'how much money do you have?' and 'when will it run out?'
I've been employee #1 and in the position of having to find another gig due to the company running out of money. It sucked, but I was prepared for it since I knew what our runway was and what our situation with funding was.
You should still be honest with employees. They'll prove better in the long run if you are. Not a lot of stories where withholding the truth from your employees ends up being something that a boss feels great about...
It's a very fine line. I'm not disagreeing with you entirely, but every startup I have been at, bar one, has run out of money. Sometimes multiple times. You get bridge loans, venture debt, whatever. I also find that even most seasoned startup employees don't really understand the finer points of finances in a venture backed company and how quickly goings can turn.
It would generally be advisable to tell someone coming in "We have 2 months of finances, but expect (or need) to close this large deal to get some sustainability." But at what point do you not need to have that conversation? With 6 months of money? 12? 24?
Yeah, I see no problem if you tell the employee, "I can pay you for two months." At least he knows what he's getting into. Besides, even a "safe" job can abruptly end, often with much less than two months' notice.
>> Then there was the time I wanted to hire my first full time employee. I was apprehensive to do it because I only had enough money to pay him for 2 months, unless I got another client fast.
>> “Worry about that in 2 months,” Dad said.
> Speaking from the perspective of that employee, fuck you.
Yep I agree that does sound a bit irresponsible, though realistically I doubt most employers have more than a few months salaries stashed away in their bank accounts to pay employees.
Better advice from his father would have been to wait till he at least got another client first, then he could justify getting another hire - if just to work on the new client project.
Pretty much all employment is risky. It doesn't matter that you have a car payment and a wife going thru graduate school. Those are financial risks you took.
Your employment could end at any time. The company could be seized by the government as part of some investigation and shut down, the CEO could be hit by a bus, you could screw up in a big way and get fired. You could be hit by a brain aneurism and simply not be there to provide for your car payment and your wife's schooling.
Every employee is taking risk that their employment might end for any number of reasons.
This is one of the reasons that, when something like that happened to me, I said "That's it, my livelihood will never be in someone else's hands again" ... and have been self employed / doing my own startups since.
Just because these things can theoretically happen at any company doesn't make them equally likely. Startups are far more likely to go bust or lay off people with little warning.
The difference is that most of those things are risks you can't reasonably plan for. If you know that the start-up you're working for has x months of runway, then you can plan for looking for a new gig, ensure you have savings to carry you over, or decide to work elsewhere.
But you can't plan for it if the company's owner hides it from you. If you think you need to lie to your staff about the company's finances, then you're an untrustworthy prick.
And if you get lucky, no one will ever know. And if you don't get lucky, everyone will know that you can't be trusted, and that could affect your ability to get contracts and employees at your next venture.
I agree with you, but I'd like to point out that the article was expressing apprehension at hiring the guy (e.g.: he was concerned as to whether he'd be able to keep him employed for more than 2 months)... there's no indication that the financial state of the company was hidden from the employee.
At least in my experience, while I haven't known the exact financial state of startups I've worked for, I've generally known the level of risk I was signing up for.
If you're completely up-front about the financials then there's no reason to be apprehensive, surely? After all, the employee is deciding their own level of risk then.
There's no way never to have your livelihood in someone's else's hands ever again; the world's too small. Probably the closest thing is growing your own food in a remote area based only on supplies you produce, but that leaves you exposed to acts of aggression aimed at control or destruction of the land.
Your livelihood depends on so many people when you're doing a tech startup (your clients, the organizations running the internet, the government, the army, your neighbours) it's not even funny.
I absolutely agree. There are zero guarantees in life.
I left a reasonably stable small company to take a risk as employee #2. But where my experience may have diverged from what OP describes was in the hiring process. My new employer was very up front with the fact that, hey, it's a startup, and it might not take off. We discussed some alternative options & put some timelines in place to help reduce the risks I'd face.
Might everything fall apart tomorrow? Sure. But my company was 100% up front with me regarding my risks -- at least if we fail, we fail together.
I've had friends who have joined companies as the #1 where the owner completely misrepresented the situation of the company throughout the whole process, were burned, and are now working stable jobs that they hate. That's the biggest shame of all.
> “Worry about that in 2 months,” Dad said.
Speaking from the perspective of that employee, fuck you.
OK, for the serious point: you may be not give a shit about risk. Good for you, you crazy risk taker! The world truly needs more people like you.
But for me? I've got a mortgage and a car payment and a wife who is trying to go through graduate school. I need to know that my ass isn't going to come into work on the 61st day and hear you say "Well, looks like we're outta cash -- sorry buddy..."
If, on the other hand, you share that risk with me up front, thanks -- you're a good boss.