
Ask HN: What do you think of this first employee offer? - thrownawaytoday
A UK hardware company is keen to hire employee #1 (software engineer) at ~£1.4k&#x2F;month and 2% (4 year vest, 1 year cliff).<p>The company consists of the founder with hardware experience and a co-founder with marketing experience. It recently finished an accelerator (at $50k for 6%) and has raised ~$150k via crowd funding.<p>The company estimates they&#x27;re worth $3-4m, but haven&#x27;t yet had a formal valuation.<p>It hopes to raise a further ~$500k by the end of the year. If they receive funding, the company promises to raise the salary to ~£44k&#x2F;year.<p>The employee is an intermediate-senior level developer and would be tasked with building a significant part of the product. There currently exists a rough prototype and design docs.<p>How would you rate this offer? Is it fair for the employee?<p>Edit: the position will be remote work (the company does not (yet) have an office).<p>Edit 2: to clarify, I am asking as the potential employee, not the company.
======
TamDenholm
I know its usual for people to take a salary hit when joining a startup but
£16,800 a year is nothing. You're asking for someone to have either a lot of
passion and belief in what you're doing or a lot of naivete. If they have the
passion, belief, experience and willing to take that kind of salary, they'll
most likely be looking for third co-founder, not first employee and thus a
MUCH higher percentage.

Decent developers will get co-founder offers all the time, i'm an at best,
average developer (i have other skills), but i have a good portfolio and
experience, and i get at least 1 company a month asking me to become involved
with their company on an equity basis.

I'd say the company should be looking for their last co-founder, not their
first employee. If its an employee they're looking for, the wage should be in-
line with market wages and the 2% is great, but lets face it, might be worth
nothing.

~~~
danshapiro
This advice (and much of the advice in the thread) pooh-poohs what they've
done and says that you should be a cofounder. I think that the offer does not
fairly reflect your value, but this advice also doesn't fairly reflect what
they've brought to the table.

If the company has created a prototype that's received $150,000 in
crowdfunding support, that's a tremendous accomplishment. The existing
founders have conceived of a product, prototyped it, and validated it in the
most significant way possible - with customers who are willing to not just pay
for it, but pay for it far in advance.

Let me put this in perspective: on Kickstarter, raising $100,000 puts a
company in the top 0.2% of _successful_ campaigns [1]. If you include all
campaigns, they're rarer than 1-in-a-thousand. Due to selection bias, we hear
about these >$100k campaigns preferentially, but the company is breathing
rarified air. That indicates there's real value that's already been created by
the founders.

That said, 2% and a smidge over minimum wage isn't right either. The
compensation hit you're taking is so significant that the equity position
should be larger. I would be looking for something in the 5-10% range. The
question I would ask them is this: the accelerator put in $50k. You're
forgoing much more money than that. The accelerator got 6%. Do they expect you
to provide more or less value over the next four years than the accelerator
did in 3 months?

Also, while verbal promises are legally binding (in the US and I believe in
the UK as well), they're hard to prove. The suggestions to get the "salary
after funding" agreement in writing is a good one.

[1]
[https://www.kickstarter.com/help/stats](https://www.kickstarter.com/help/stats)

------
DanBC
£1,400 per month is £16,800 per year.

16800 / 52 (weeks per year) / 40 (hours per week) is £8.08 per hour.

Current minimum wage is £6.31 per hour. That would be £13,124.80 per year.

I would want:

1) Rock solid in-writing offer of the 44k

2) excellent working conditions

I'd also want to know what happens if they don't get the funding.

EDIT: Remote work: are they paying for the Internet connection? Or electricity
used? Or helping guide you through the tax / insurance complications? (See,
eg,
[http://www.voa.gov.uk/corporate/Publications/workingFromHome...](http://www.voa.gov.uk/corporate/Publications/workingFromHome.html)
)

EDIT2: Not that this means much, but £16,800 is $28520. The figure is probably
gross, before tax and national insurance.

EDIT3: After tax, maybe £14,378.72 per year, £1,198.23 per month, £276.51 per
week. From
[http://www.listentotaxman.com/index.php](http://www.listentotaxman.com/index.php)

~~~
thrownawaytoday
Breaking it down by the numbers was useful. Thanks. This offer is indeed
before tax, etc.

What would you expect in terms of "excellent working conditions"? As this is
remote work, the value of a "startup atmosphere" doesn't exist. IMO, the
problem being solved is more on the coordination, perhaps infrastructure
spectrum, than a specific hard technical problem.

WRT remote work expenses, this hasn't been mentioned, but certainly something
to bring up!

~~~
notahacker
Remote working is a point in the working conditions' favour (not least because
you don't have to live on <£17k gross per annum in London, and might even be
quite comfortably off on that income in other parts of the EU). But other
things to be wary of are tight deadlines that require you to put lots of hours
in, founders thinking you're "on call" to fix technical issues in the middle
of the night, or should be ready to travel at short notice every time they
think a meeting is necessary. That might be tolerable if they were treating
you as a cofounder or paying big bucks, but not with the little you're being
offered. (Indeed the fact they apparently don't consider it necessary to offer
an above-market equity grant to compensate for the below-market salary is not
a point in favour of their expectations from employees being reasonable in
other respects.) On the flip side, if they're quite happy for you to balance
your work for them with side projects, study or generous leisure time it
starts to look a lot more attractive.

Similarly, the hypothetical post-funding £44k offer might end up being
contingent upon being willing to relocate and work from an office, which may
or may not be something you're happy to do.

And above all you should be very interested in solving the particular
infrastructure problem to even consider this, because the alternative of
spending 4-6 months earning £17k in a job paying a market rate and the rest of
the year doing exactly what you want has it's potential upsides too...

------
6d0debc071
So they're paying

1.4 * 12 = £16.8k a year

Minimum wage for the 21+ group at seven hours a week 365 is

6.31 * 7 * 365 = £16,122.05 a year

They're not quite paying the minimum they can legally get away with paying
you, and holidays will further slant that disparity. But it's close, it's
damned close, to the same they'd have to pay a cleaner or a receptionist.

That's not skilled labour rates.

As for the equity... Hah! Equity is what happens when it's easier to get the
money out of an employee's potential wages than it is to convince the
investors to give you the money to hire someone with a decent wage up front.
It's a way of transferring risk onto someone who doesn't have the same
information, experience and risk management means as investors do. As an
employee, you should take the fact that investors won't stump up more money
for your wages as some evidence of how they've assessed the company. I'd
disregard the equity unless you know their industry very well and have some
reason to believe they're a really good bet.

#

I wouldn't take the offer, not unless there are other points that you really
want and can negotiate for. In monetary terms, it's terrible.

~~~
lvturner
Of course, it depends if the 1.4k a month is NET or GROSS pay.

Might sound strange to some - but my salary is currently paid NET (i.e. what
it says on my contract is what I actually get in my bank account), which is
why I bring it up.

(Honestly, it took me a while to figure out a lot of these comments - for a
moment I thought I was horrifically underpaid, or everyone else was overpaid..
until I realised that it was probably a gross salary rather than a net one)

------
valarauca1
As a potential employee (that you're asking as) I'd say you turn and walk (and
not look back).

The total salary your getting is 8.08 per hour. Which is less then a janitor
makes in the city. Even if they throw in 2-4% equity (which as the company is
currently worthless, I.E.: No profit, No product, no anything) is worth little
unless you really believe in the company.

Lastly these two lines are very telling.

>hire employee #1 (software engineer) at ~£1.4k/month

>The employee is an intermediate-senior level developer and would be tasked
with building a significant part of the product. There currently exists a
rough prototype and design docs.

Basically your getting paid a janitors wage to write their entire business
from scratch, this is a horrible idea.

------
mseebach
2% of 4 million is 80k, or 20k/year for the four years of vesting.

You need rock-solid faith that this company will grow quickly to a large
multiple of its current (possibly quite inflated) valuation to even break
even.

I'd take it as a red flag that they're being stingy, those 2% is nothing when
they can't pay a full market salary plus benefits from day one. They're not
going to build a high growth company if they're being penny wise and pound
foolish.

If you really believe in the company, demand co-founder equity, 15-20%. If
they're unwilling to part with that, how much do they really want the company
to succeed, and how crucial is the software software engineer to that success?

~~~
walshemj
For information BT's 5 year share save that matures in a month or so is
returning 80k tax free.

So employee no 1 who by definition is an experienced role your not paying much
more than the minimum wage and in fact the London living wage (ie what
cleaners are supposed to make) is about what your offering.

I would pass on this role.

~~~
walshemj
Out of interest why the down vote on explaining what a stable FSTE 100 company
offers in terms of share options.

~~~
mseebach
First, don't sweat a single downvote. That happens.

Second, while I can't speak for the downvoter (being the parent of your
comment, I couldn't downvote you if I wanted to), your comment is jumbled, has
poor grammar and is frankly borderline incomprehensible. Also, your reference
to the BT share save program like an item of common knowledge is confusing - I
had to Google to find out what it's about.

~~~
walshemj
This is a discussion about a UK based role so I assumed familiarity with how
share options work - just as the others did when mentioning all the various
UK's minimum wages.

If you have poor English comprehension that's not really my problem - this
isn't a flipping university essay its a short and to the point comment in a
discussion forum.

~~~
mseebach
Uhm, you do get that I didn't downvote you, but tried to give an honest
analysis of why someone might have? It's not exactly constructive to get
defensive in response.

And FWIW, you used the word "your" where you seem to have meant "they're" \-
twice. The sentence simply doesn't make sense as it stands, and yes that _is_
your problem, university essay or not. I was able to comprehend it, because I
made an effort to deduce what you meant, thus it was only _borderline_
incomprehensible, but I do also think that we should aspire to a higher level
of discourse.

------
rahimnathwani
I'm assuming that you are a potential candidate for the position. A few
thoughts:

\- Evaluate an opportunity or offer by comparing it to the other opportunities
you have or could generate

\- There is always room for negotiation
([http://www.kalzumeus.com/2012/01/23/salary-
negotiation/](http://www.kalzumeus.com/2012/01/23/salary-negotiation/))

\- If I'm offering to pay you in my company's shares, instead of cash, then
don't take my word for the value of those shares. Do your own valuation, and
factor in any lack of liquidity. If you can't define a minimum value for those
shares, then you can consider them as being worth zero.

\- An oral agreement isn't worth the paper it's written on

\- If you will be co-founder #3, then make sure you know what co-founders #1
and #2 are bringing to the table. Otherwise, why are you giving them 92% of
the company? (100%-6%-2%)

Based on the information you have provided, I can't see a compelling case to
even consider the offer. If you said you were excited about some aspect of the
product, or the people, or something else, then that could go some way toward
mitigating the otherwise poor economics of the deal.

~~~
Kiro
Why are you assuming that? I think it's the company asking.

~~~
rahimnathwani
Because the OP referred to 'the company' in the third person:

"The company estimates they're worth $3-4m"

~~~
Kiro
OP is referring to the employee in third person as well.

------
polemic
No.

Firstly, ignore the 44k. Promises like this are useful for you to get an idea
of abstract expectations of the company, but _its not real money_ :)

Secondly, at this stage you're trading wage for equity, and 2% is essentially
nothing. Let's say there is a 25% chance of the company _existing_ in 4 years
with a valuation of 500k. That's .25 * 0.02 * 500k = £2500 over 4 years.
_sadface_

Don't forget they they're asking _you_ to build it, so you should be looking
at massive equity (>=25%) or a competitive wage... probably even more so since
you can expect a higher than average expectation of your time.

------
brudgers
It does not sound like an offer which will attract an outstanding talent if
that is what is desired and the $3 million dollar estimated valuation is
meaningless. With no product or assets, it would liquidate for less or
nothing.

------
jng
Is ~£1.4k/month before or after taxes? I would say it is very low in either
case, even for the UK (I've heard about a lot stories of poor salaries in the
UK, especially in games).

Plus take into account most startups don't work out in the end, so the 2% is
unlikely to amount to anything.

Good luck anyway.

EDIT: I only saw the 44k thing after posting. That would get to a basic
livable salary, so that's good. As someone else suggests, get it in writing
and also consider requiring it in less than 12 months or so. You may be
looking at 2 yrs work before significant funding can be found (and they're
unlikely to pay 44k salary to you if they only raise 150k in the short term).

------
simonbarker87
In the UK I'd be very surprised if they got a valuation of that size, UK
market is very conservative when it comes to valuation - the only way I see
them getting a valuation like that is if investors were taking debt and equity
- in which case the "valuation" is much harder to quantify as they will be
paying with both debt and equity got the investment.

Either way, that's a pretty low starting salary. £44k is good but get it in
writing before you accept the job or I can see that offer evaporating.

~~~
thrownawaytoday
That's an interesting angle I hadn't considered. Thanks.

The company is UK-based, but are focusing on the US-market (I believe). Would
$3-4m sound reasonable for the US market?

~~~
simonbarker87
Hmmmm, only if the investors were US based and potential acquirers were US
based. If investment is from UK investors then they are selling parts of their
company (shares/equity) in the UK - even if the consumer market (ie where they
sell they product) is US based the value of the company is still routed in the
UK market.

One thing I've learnt over the past few years is that valuations between the
US and UK investors seems very different, even in software and so especially
in hardware since the product and companies are not as scalable.

I'd push for co founder status as others are suggesting with 10-15% stake and
16.8k salary rising to 35-40k, OR 26k rising to 44k with 2% stake, can you get
a shorter lock in for the equity? Also, make sure they are aware of the new
pension regulations coming in - many start up founders are trying to ignore
that.

~~~
walshemj
the new pension regs are more about what you can do with your pensions I think
the mandatory employer contributions haven't changed much.

------
chadkruse
In my experience, hardware companies are incredibly hard to pull off, but
they're also incredibly fun. On the software side, the problems that need to
be solved can be wickedly complex, interesting, and far different than
creating another CRUD app. Lots of unsolved problems on the software side of
the hardware/IoT space.

As for the offer, per another post
([https://news.ycombinator.com/item?id=8071330](https://news.ycombinator.com/item?id=8071330))
I always try to decide if it's a co-founder role or a hired-gun role.

>The times I've been in this situation it really came down to figuring out if
I was a true co-founder or just the hired gun. True co-founder roles meant I
was confident in the founder(s) ability to execute, was confident we'd work
well together (takes time), and was stoked about the industry/product/role. We
paid ourselves the same salary, I received founders shares (not options), and
off we went.

>When I didn't have time to properly date first I just assumed I was the hired
gun. In these situations the cash component was high and any equity vesting
immediate.

Their offer suggests you're the hired gun, and at (far) below market.

------
progx
Don't pay to much for significant part of your product and your business.

I think you find the right programmer in Pakistan, they will be really excited
to work for you and make so much money ;-)

Sorry, but for this conditions your really think you find a "good" developer
for mission critical things? (yes they exists, but thats a needle in a
haystack)

------
uniclaude
Be blunt with the company, negotiate something better, or join later, after
the raise, if you really like them.

If they can only pay this price, they should get a junior intern, not an
employee. I don't know which incubator they went through, but no mentor I know
would have told them this is a good offer to give to a developer. 1.4k a month
is what you'd give to your best friend helping you with your startup because
you can't afford more, not your #1 employee.

I can totally imagine how it feels like on the other side, and it's hard, and
they probably do a lot of very nice things, and may be very nice people, but
giving such a low salary is not a good move, and they should know it.

I didn't mention equity so far, because, well, as @MehdiEG said, it's only
icing on the cake, nothing more.

Good luck!

------
MehdiEG
I was on the other side of this equation a couple of years ago - co-founder of
a London-based tech startup that had just finished an accelerator and raised a
£100k round of seed funding (we didn't make it in the end in case you're
wondering). Here are a few tips from what we learned.

1) The valuation is completely and utterly meaningless at this stage of the
company. Unless the company is already generating a profit, it's currently
worth exactly $0. So forget about the valuation when making this decision.

In addition, as you mentioned in your description, this valuation is literally
a completely random number they pulled out of thin air.

Just for your reference, London-based startups that raise a seed round after
having completed an accelerator are typically valued in the region of £1m.
They would have to be quite exceptional to be valued at $3-4m (and maybe they
are - up to you to find out).

2) I'm no expert on what's a reasonably equity share for a first employee. 2%
sounds OK. But in any case, those 2% are worth exactly nothing right now. And
at the stage they're at, their chances of success are close to non-existant
(just like every other startup at this stage). So those 2% will most likely
never be worth anything. Take those 2% as the icing on the cake, not as a main
decision factor.

3) The £1.4k / month salary figure is a bit odd. Salaries in the UK are
usually expressed as a gross annual figure, not as a monthly figure (or at
least that how I've always seen them expressed). So do they mean a salary of
£16.8k gross or £20.3k gross?

In any case, since it's a remote position, you're the only one who knows
whether this is a reasonable offer or not. In the UK, that would be far, far
too low for an intermediate-senior level developer. Even in the parts of the
UK that have the lowest salaries (e.g. Northern Ireland), £17k would be
borderline taking the piss for a graduate-level position, let alone senior.

But then again, only you knows what you could expect to earn where you live.

4) What accelerator did they go through? The purpose of an accelerator is
mainly to "get the badge", i.e. get the credibility associated with the
accelerator and get accepted into the "inner circle" of entrepreneurs and
investors in the region. This is what makes a huge difference to the startup's
ability to raise future funding and get the right introductions.

As a result, the only accelerators that are worth going through and provide
real value are the top-ones, namely: YC, 500 Startups and TechStars. So are
they part of the inner circle or did they just go through a small, fairly
unknown local accelerator?

5) Since they haven't yet raised seed round, they probably don't yet have a
formal board of directors. So failing this, who are their "official" advisors?
Do they have any high-profile, successful entrepreneur helping them out (i.e.
someone who's been there before)? Ask to have a chat with one of them. If
their advisors are really willing to help them and are not just advisors on
paper, they'll be very happy to have a chat with a prospective employee #1. Be
blunt with them - ask them what they think of the company, of the founders and
of their future prospects.

6) Finally, I realise that the above might come across as quite negative but
this isn't my intention. There's plenty of upside with being employee #1 at a
tech startup, even when the salary is questionable.

\- It's common in early stage startups to be very relaxed and flexible when it
comes to working hours, days off, etc. especially given the very low salary
they're offering. Have a honest chat with them about this.

\- If you're genuinely interested in startups, there's not better way to learn
the ropes than to be employee #1 at a tech startups. You'll learn almost as
much as you would being a founder and you'll be paid for it!

\- Although your 2% will probably never be worth anything, there is a good
chance that the company will grow enough to see its team reach a sizeable
size. As employee #1, you'll be first in line to move up the chain of command
and to be given a lot of responsibilities. You'll probably learn more in two
years in a startup than you would have in 10 years at a large corporation.
That certainly won't hurt your CV.

All of the above however is conditional on the founders being completely open
and honest with you and on you having an excellent relationship with them. So
up to you to see whether you and the founders "clicked" and whether they're
going to be open with you or keep you at arm's length.

------
sergiotapia
A quick google shows you'd be making less than legal minimum wage. For skilled
labor. You're not going to be flipping burgers here.

Equity? Hah! During a goldrush sell shovels. Don't go looking for gold
yourself.

~~~
DanBC
UK rates for National Minimum Wage: [https://www.gov.uk/national-minimum-wage-
rates](https://www.gov.uk/national-minimum-wage-rates)

    
    
        Year 2013 (current rate
    
        21 and over £6.31
    	
        18 to 20    £5.03	
    
        Under 18    £3.72	
    
        Apprentice* £2.68
    

£6.31 * 40 (hours per week) = £252.40

£252.40 * 52 (weeks per year) = £13124.80

So OP would be making a little bit over minimum wage rates.

~~~
myhf
If he only works 40 hours per week.

~~~
chippy
and not considering holidays

~~~
DanBC
Working more than 40 hours a week means he earns less money. The max is 48
hours (with limited exceptions) so £6.31 * 48 is £302.88 per week, or £15,749
per year. Thus, still less than OP is earning.

But then the UK has 5.6 weeks of holiday for most workers. Since 28 days of
paid holiday applies to OP and to people on minimum wage it cancels out.

------
ownagefool
The offer is terrible. Wouldn't take it unless you're a kid with no prior
experience looking to break into the industry.

------
thenduks
Is the salary enough to live comfortably on in the area whee the employee
lives? Do the co-founders seem like they'd be good people to work with? Does
the product/work sound appealing to work on for 2+ years? Is there an
opportunity to learn a lot?

I think these are the things that will matter day to day more than any
'fairness'.

------
pmorici
What would your salary be if you just got a normal software engineering job
with an established company?

~~~
thrownawaytoday
I'd imagine somewhere in the region of ~£40k. A quick browse through
[http://www.glassdoor.com](http://www.glassdoor.com) supports this figure.

~~~
rahimnathwani
In that case, the deal makes no sense. Just do the math:

Market salary (40k) less salary offered (16.8k) = 23.2k per year

Stock vesting in year 1: 0.5%

For the stock to make up for the salary discount, the company has to be worth
at least 23.2k/0.5% = 4.64 million

If _you_ value the company at more than that, and are happy with the level of
risk, then you might consider it.

Do the math. Think about your alternatives. Get everything in writing. Make
sure you understand the contract and the tax implications before signing.

------
Jake232
Where is the job located, wages in London are a lot higher than other parts of
the country for example.

~~~
thrownawaytoday
It'll be remote work (at least to begin with).

~~~
purringmeow
Then maybe look for someone in Central or Eastern Europe? This salary would be
decent there.

------
new299
No, this is not a fair offer. You should get more equity (founder level,
25%?), or the post should be part time (1 day a week).

------
__xtrimsky
When I was a junior I would have refused this offer, I don't know how you want
to hire an intermediate-senior with that.

------
michaelochurch
As written, do _NOT_ take this offer.

At such a low salary, you're a _founder_ , not an employee, and deserve to be
treated like one.

When you take a deal like this (low salary, low equity, because the founders
have a track record of raising money) you are paying for connections. How
connected are they? So far, they've only done something you could do (join an
accelerator, and crowd-fund). I don't think you should sell your labor at a
discount for their "connections".

(I'm going to convert these numbers into dollars, just because it's easier to
use one currency.) You're making $2,375 per month, or $28,500 per year. That
won't even cover rent in a major city.

Let's do the math. I'm going to compute a fair equity slice for you. An
intermediate-to-senior level developer (7 years experience) is worth _at
least_ $100,000 per year. (Bay Area: $150k, New York, Seattle: $135k, Austin:
$125k, Midwest: $110k.) That's about £58,000. Now, I get that startups often
pay less, but you need to know what you're worth in order to figure out how
much equity you should get.

If you're worth $100k (and you're worth at least that, if you're intermediate-
to-senior level) and making $28.5k, you're putting $71.5k per year into the
business. Let me add a few things to consider. First, you're not getting the
typical big-company benefits (in the US: 401k matching, conference attendance,
health insurance) which are probably worth $15k a year in addition. Second,
raises are rare in startups. When things are going well, the equity
appreciation _is_ the raise (even if that enrichment is illiquid) and when
things are going badly, it's not a time to ask for things. So, if you stay for
4 years, you're forgoing four years of raises. That's another $60k or so ($10k
in year 2, $20k in year 3, $30k in year 4). Third, there's more risk in a
startup. People are fired more quickly, and while traditional corporations
tend to call it a layoff and pay severance unless you do something illegal,
startups fire people without severance all the time. I'd price that risk at
$10k per year.

All-in, the total opportunity cost is $446,000 over four years. That is, in
effect, what you'd be paying (one could argue for _lending_ , but at zero
interest) to work there.

Now, what is the business worth? It might be worth $4 million to VCs, who get
some measure of control of the company. Unlike you, VCs are nearly impossible
to fire. They also have a lot of capital to invest; their job is to do exactly
that. The company is worth less to you. Also, all you have to justify the $4
million claim (which is where the company will be valued _if it is funded_ )
is the founders' statement. I'm going to put the startup's value (including
the work you'll put into it) at $2.5 million. That's generous. If the founders
aren't connected, it's less than that.

With those numbers, you're putting $446k into a startup around $2.5 million,
and argue for _17.8_ percent. Even that, I think, is low.

------
sauronlord
This sounds terrible. 2/10

However, since you have such low self confidence ( because you're posting this
here and wasting your time with a BS offer) you should probably take it.

This offer doesn't even pass the giggle test. What the heck is wrong with the
economy and labour market there that would have you consider something like
this?

Move to Canada already

