

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

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.<p>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.<p>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.<p>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.<p>From his perspective, I will just be another employee. From my perspective, it'll essentially be my job to make this thing work.<p>What does HN think? Any input would be appreciated :)
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geebee
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.

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brudgers
_"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.

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codegeek
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 ?

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

~~~
nmcfarl
And without a working prototype? Wow.

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YoAdrian
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.

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epoxyhockey
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.

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roderick3427
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.

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JasonStockman
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?

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

