I agree that founders take on much more risk and stress than the early employees. I think the source of the discontent that some early employees (like me) express is that the rewards for a founder are worth it, while the rewards for an early employee generally aren't.
I haven't read your post, but I'll guess what it says:
Early employees take a pay-cut, work hard, and get so little equity that even if there's a big (not gargantuan) payout it won't make up for the pay they've lost. The only real advantage is that they are an early employee, and have a reasonable chance of getting promoted in the growing company.
edit: read your post. I was right. It's what basically everyone says about early employees.
I agree with you. For two other categories of employment, the risks, rewards, and promises are clearly laid out.
Founders: take on risk (no salary pre-seed, zero job security) but get a massive payout if it works.
Big-company employees: no risk, high job security, guaranteed payout.
For startup employees, the bargain is murky and implicit. These employees take some risk and stress (not as much as founders, but probably 30-40% as much) in exchange not for a huge payout, but for the promise of a leadership position when the company gets big. That's the (implicit) contract. It's not, "Get $100 million when this thing exits" but "Get a VP-level position, that might help you along to something else, when we hit 500 people".
The implicit nature of that bargain makes it problematic. A founder with 5% in equity is always going to have those shares of stock. (His percentage can be diluted, but he has legal recourse if it's done improperly.) Even if he's fired, he has whatever equity he has vested. The early employee (whose equity amount is small) who worked his ass off to get a leadership position in the company as it grew can be denied that opportunity at any time for any reason.
There isn't an easy solution, because some early employees don't deserve the leadership positions they want, but they usually aren't bad enough to be fired either. My solution would be to give them very small-scale leadership, or even autonomous contributor status (they can work on whatever they want, but can only pull other people to their projects if someone else thinks it's a good idea) as a token of appreciation. Perhaps that's because I think there are few truly incompetent people; some just don;'t grow as fast, for whatever reason.
There's another dynamic that hits this whole thing in the side: as startups grow, they start wanting "The Best" hires, which often means that they have to hire people into positions of some status. But if your older employees feel promised leadership positions, and those opportunities are bargained away to new employees in order to make the best hires, you can end up with a conflict.
Also don't forget employees of small, profitable companies.
I work for a small, profitable company right now. It's great. The pay is good, it's low stress, and I have a lot of control over the direction of the product and the work I do. There's no expectation of crazy hours, and we have time to do things well.
Yeah, I won't make a bazillion dollars, but I've already worked at two startups, and clearly I'm not a bazillionaire.
What's the company? That sounds like a great arrangement.
I find that both startups and big companies usually fail (not maliciously, but just due to failures of introspection) to deliver on their non-monetary promises.
Startups: people associate startups with interesting, creative work reflexively. Not so, or not always. First, 80% of startups aren't doing very interesting things (social semantic coupon aggregators? That's the business plan analogue of OOP's VisitorFactoryObserverFactory pattern!) Even in those other 20%, there's a lot of uninteresting stuff that has to be done in order to meet the rapid client-acquisition or growth targets.
Related to this, every startup has deadlines, and that can be managed so it doesn't become a problem, but too-often startups develop Deadline Culture and accumulate technical debt at a rapid pace. (It doesn't take long.) One of those unpublished startup negativities is how quickly and how often this happens. It's not published because, by the time Deadline Culture is having serious negative impacts (in code quality, organizational structure, morale and blame-shifting when things break) the people being affected have double- and triple-digit employee numbers (i.e. they're nobodies).
With big companies, the promise is that you can have a career within the company that transcends "jobs". That is, if one job doesn't work out, you can move to another one and still have a 12-year career (possibly moving into another role entirely) with the company. In theory.
What happens in practice in BigCos is that manager-as-SPOF is still the law of the land. Large-corporate middle managers often have zero interest in extra-hierarchical collaboration, some actively want to isolate their reports, and are just as liable to take employee's extracurricular interests (or outright desire for transition) personally as startup founders. The problem with the middle managers' emotional outbursts related to people wanting to "leave them" is that they have a lot more power (within their organizations) than "jilted" founders.
What I find darkly ironic is how many rapid-growth startups-- mostly managers, engineers aren't this way-- want to become huge corporations (and naively think they won't lose their character in the process). I find that hypocritical. "We're agile and awesome because we're a small startup. We also want to become bigger than Google." What people can't say (because it's impolite) is that they won't care that the thing became a BigCo because they'll be very rich by then-- or at least, rich enough to easily move on. It's a less brazen variant of "build to flip".
People tend to fetishize 200%/year growth curves and billion-dollar exits, while ignoring the fact that anything growing that fast is going to get destroyed in the process. Fuck 200%. If my income grows at a "piddling" 10%/year for the next 40, that will give me more money than I could ever need at any stage of life (and more than I could ever deserve toward the end). So I'd rather focus on building real skills and learning how to actually reliably deliver value to the world than chasing some huge acquisition.
Out of curiosity, what technologies do you use at your company? I've become a major fan of Scala of late, but I'm also impressed by Clojure and Ocaml.
Little bit of a strawman argument here regarding early employees taking on equivalent risk - I don't know anyone who believes that, other than the situation where early employees are unpaid and the 'product' is just a slide deck.
As for how hard people work, I would expect people to work in proportion to their expected payout. Founders have the biggest upside, so naturally they work much harder. An early employee paid with salary and little equity doesn't have the same incentives to be working 20 hours/day.
Hmm, I am not sure I agree with the second part of your statement for a few reasons. E.g.
1. Relative utility of the upside. It is not the absolute value of the outcome that matters per person, but rather the relative value. http://en.wikipedia.org/wiki/Utility
2. Other incentives (fun, interesting work, wanting the "startup experience" etc.). These dont always exist, but often they do and people value them.
3. Passion for making an impact. Some products are really exciting to work on. Not everyone is in it just for the money.
I think in general my personal bias would not be to hire people who think purely in economic terms about e.g. their work ethic. Obviously, you want all the people who take the risk to work with you at a startup to do extremely well, but you don't want people whose primary thought is "well, if I make 2X more I will work 2X harder" as there are lots of ups and downs at a startup, and sometimes it is unclear what the outcome will be.
I am interested in knowing what do you mean when you say you do not agree with the second part of the statement.
Do you mean, just because I want some of the things that you listed above, say the startup experience, does that mean I should be working as hard as the founders?
I mean:
When I was working at other people's startups, I never thought "boy, the founders have way more equity then me, I should slack off or not work as hard because of that".
I always tried to do my best at whatever job I had, and would want to hire people with the same attitude.
Yes, you want people who are passionate and want to work hard, but there are sacrifices made to work 18 hour days, and people are much more likely to make those sacrifices when their upside is in the millions rather than the thousands.
The difference between a 60 hour week and an 80 hour week is pretty significant in terms of personal sacrifice.
No one says "I'm going to slack off", it's just that the founders are inherently (financially) more motivated.
If the money isn't a motivation, then the founders should have no problem giving out most of their own equity.
klochner made my point more eloquently than I could. I am the first employee of an early stage start-up and I think I have put in the hard work. However, because I work at a startup, does not mean that I put on other things at hold, more importantly, my development as an engineer.
I had a holiday today and I spent the entire day working on SICP. There was a part of me which kept saying I should also probably do some work. So, maybe, I am just trying to justify today to myself.
Regarding founders and hard work, it's of a different nature from the typical image of people working hard. It's not like an investment bank where people are fired if they aren't in the office from 8 to midnight. Startupers tend to spend 80 to 100 hours on their startups, but no one is "making" them do it. It's extremely focused engagement.
I think it's still counterproductive and unhealthy to work that much (although 60 is sustainable and not unhealthy when you enjoy what you're doing and have a lot of autonomy) but it's not something that happens because startups really require huge amounts of work. They require a lot more commitment and energy than average jobs, but 60 hours is more than enough in most cases (except for people involved in fundraising, which is a hellish and time-consuming slog I wouldn't wish on my worst enemy's tapeworm) to get things done.
What causes that insanity in hours is that the extremely high stakes lead to a persistent sense of needing to do more. This causes a lot of people to have serious anxiety, and you know what's a good antidote to anxiety (in moderation)? Work. (Work itself is not very stressful: most people like their work; what they hate is the political and interpersonal stress associated with high-stakes organizational social-climbing.) They subsume themselves in work because it gets them in the zone and happy, whereas when they aren't "working" they are thinking about work stresses and unhappy.
I wrote about this in more detail in a comment a few months back - http://news.ycombinator.com/item?id=3490364
(Some day, I will write a blog post that goes into more detail. Really. I swear. I'm totally on it. Any day now.)