

Should first employee at YC funded company work for free? - zgr
http://answers.onstartups.com/q/24947/2692

======
sunir
It's doubtful this is even legal, which should raise serious red flags. In
many jurisdictions, if you're not (reasonably) compensated, the intellectual
property belongs to you. In California, they have to pay you if you're doing
real work.

[http://www.startupcompanylawyer.com/2010/04/15/can-a-
califor...](http://www.startupcompanylawyer.com/2010/04/15/can-a-california-
company-have-unpaid-interns/)

[http://laborlaw.typepad.com/labor_and_employment_law_/2007/1...](http://laborlaw.typepad.com/labor_and_employment_law_/2007/11/unpaid-
internsh.html)

Moreover, the company is being stingy. Why? They don't want to commit to you
in the long term. Fair enough, but think ahead. What's going to happen after
YC? They will get a company, and you will get nothing. They will either kick
you to the curb or they will offer you peanuts to stay. Will you be happy with
that?

Negotiate wisely so you're getting something for the work you do. If they
don't want to cough up equity, they must pay you. If they can't pay you now,
agree to defer your compensation (essentially an IOU) which you can convert
into equity after a certain date if it isn't paid up. They should pay you a
higher than market rate (double) as well because you are the one taking the
risk here; i.e. that they won't ever be able to pay you.

It sounds like your decision making is distorted by your goal of getting YC
experience. If you want a YC experience, why not just apply yourself? You
don't need YC either. There are hundreds of other startups in the Valley you
can cut your teeth on. You have limited life energy. Why give it away for
nothing?

------
mahmud
Yes, they should work for free, and YC founders have _droit de seigneur_ ,
"first dibs"†, on any date/partner/hookup said "employee" brings home.

Guys, it's 2011, not 1511. Feudal system & slavery are over. Sheesh.

\--

† an earlier edition incorrectly spelled this as "dips", we thank our careful
readership for the correction.

~~~
jrockway
It's "first dibs":

<http://en.wikipedia.org/wiki/Dibs>

~~~
hugh3
I actually like "first dips" in this context. It's a much more vivid mental
image.

------
pg
As so often happens on the Internet, there has been a rush to judgment here. I
emailed the guy who posted that question, asking him if a YC co had made him
an offer of the sort he described, and here's what he said:

"No company has made me an offer along these lines. I was trying to second
guess them from a conversation I had. I thought I'd ask that question so I was
properly armed should they come back with this kind of offer."

------
mbreese
An employee needs to be compensated for their work. If that's in the form of
salary or equity, that's your business. However, you need to be compensated,
somehow. Otherwise, it isn't work, it's charity. Non-deductible charity at
that.

If someone is asking you to work for nothing (no pay, no benefits, no equity),
you need to walk... no run... away from that deal.

This isn't even mentioning the fact that the company would open itself up to
IP issues if they weren't compensating you. Let's say you came up with some
killer code to do something that the world needs. Who would own the IP? The
company that didn't pay you? You're not an employee if you aren't compensated
- it isn't work for hire. So, now they have a problem.

~~~
ww520
I think you meant "you need to run... no walk... away from that deal." Other
than that, all good points.

------
ohyes
The answer to all questions related to 'should I work for free,' is 'no.'

The point of work is to get paid, or to at least, get something valuable for
the work. An internship might be an example of not getting paid but getting
something of value. Barter would be another example...

If you are going to work for free, work for yourself. At least then the
finished product is your intellectual property and there is some possibility
of you making money off of it directly or indirectly.

------
benologist
No. Just because they got into YC doesn't mean you should work for rent. They
haven't made it, they've still got a significant chance of failing, and you
working there is going to directly impact whether or not they _do_ make it so
you should be rewarded beyond "living expenses".

If they can't appreciate that then bugger them. I can't help but feel there's
no way they _couldn't_ appreciate how significant a third set of hands would
be and you shouldn't work for them anyway because there is something rotten
there.

------
byrneseyeview
First answer nails it. If you're taking a risk and taking a hit to your
income, you're a cofounder. Congratulations, and enjoy your equity.

If you're not getting a big slug of equity, you're an early employee; enjoy
your below-market, but way-above-subsistence, salary.

One would hope that YC companies aren't abusing their brand and cachet in
order to underpay employees. It's not necessary; given the capital available
to these companies, and the caliber of people willing to work for YC firms,
the optimal solution is to raise the funds you need and hire the people you
need, _not_ to hire the next tier down at a rock-bottom rate.

------
stretchwithme
And unless your equity starts vesting right away, you should be getting a
salary. You don't want to work for 364 days, then get laid off and get
absolutely nothing for your efforts.

Not that people would do that, but if you make it possible, it could happen.

~~~
grimlck
I would actually go even further, and say that unless your equity is
comparable to that of the founders, you absolutely should not be working for
free.

~~~
pbreit
The founders clearly do not consider this person a founder so I don't think
founder equity is appropriate at all.

~~~
anamax
The founders opinion isn't decisive.

Even if it's legal to make such an offer, no one is obligated to accept it.

------
pg
No, of course not.

------
dotBen
Aside from whether this is ethical or not, its not legal in California. Even
interns have to be paid at least minimum wage.

~~~
japherwocky
In most states, afaik, unpaid interns are not allowed to be working on things
that provide income to the company.

~~~
pbreit
So what if, like almost all startups, no income is being generated?

~~~
japherwocky
hrm. That's an interesting stance, and I don't know!

------
andreshb
Get equity

Get paid

Whether they are in YC or not is irrelevant. YC is a nice to have but not a
determinant in your compensation.

1 year cliff

4 years vesting

They also have money in the bank (Thanks to Yuri)

------
robryan
Surprised a company getting into YC would try and run with a deal like this. I
mean yes you have no money and want to scale up, but you have to at least give
someone a significant equity chunk up close to the founders to expect someone
to take on the same risk. Otherwise they are just an employee and should get
market rate.

------
statictype
I don't think you can even use the word 'employee' if you're not being
compensated for your work.

I'm sad that someone presumably talented would even entertain the thought that
working for nothing is in any way reasonable.

(i.e, Sad at the reality that skilled people are gullible and undervalue their
worth)

------
strlen
Absolutely no: no salary makes you a co-founder (who should have a large
equity stake). No equity makes you a contractor/consultant (who should receive
an above market salary, as they receive no equity or benefits).

The options are (pre-series A): large chunk of equity (1-2%), a below market
salary. Post-series A: market salary, good amount of equity. Series-B and
above: above market rate (you're longer offering a "life changing" amount of
equity, yet you aren't offering the benefits/bonuses/etc.. that larger
corporations can), some equity.

If a company is offering something significantly below this (co-founders
without equity, salary significant lower than other same-stage companies) they
won't be able to hire people who have other options.

This sounds just strange: either the co-founders are very inexperienced, or
they're deliberately looking for people who can't get _any other job_ (why
else would someone take this?)

The only exception to this is if you really can't get another job, but want
one: if you have no professional programming experience, studying CS isn't an
option for you, yet you have the confidence that you'll be able to learn and
grow in that position until you're able to get a better job. The founders have
to also consciously realize that this is what they're offering you (so that
they can serve as a reference when you apply to future jobs). Think of it as a
(more intense) form of internship.

------
pbreit
Did this really happen? I would be surprised at the lack of acumen of a YC-
approved company. While the experience of YC is priceless, you should of
course be getting a salary or equity of a little of each. And unless the
sustenance pay is at least minimum wage, it might be illegal in California. If
this really happened and there wasn't some mis-undertanding, I would question
the credibility of the company.

------
iamelgringo
Founders equity (> 20%) == Same risk as founders, same pay as founders.

Employee[0] equity (<20%) == some salary depending on equity stake.

Whether it's a YC company or not doesn't matter. There are now over 250 YC
companies, and 60 in this current batch. They are _all hiring_. You have a
choice.

There are over 300 startups funded through Angel List this past year (a number
of them YC'ers). They are all looking for engineers as well.

Google is looking for thousands of engineers, Yelp a couple hundred(pre IPO),
Zynga a couple hundred (pre IPO), Facebook a bunch (pre -IPO), Twitter a
couple hundred (pre-IPO). And, they are all competing for the same talent
pool... you.

Not only that, but if it's a current YC company, you know they just got around
$180k in money right off the bat, so they have a bit of something in the bank
to pay you.

------
edanm
I disagree with a lot of the naysayers here.

Assuming this arrangement is legal (which others have pointed out might not be
correct), I'm not sure this is such a bad deal.

Assuming you have access to all the YC dinners, the talks with pg et. all,
etc., this is close to a once-in-a-lifetime opportunity to get an up-close
look at one of the greatest institutions for startups around. That's worth a
lot in itself.

I'm specifically talking about a case where the deal is _only for the 3 months
of YC_. If someone came up to me with a deal to live in SF for 3 months and go
through all of YC and learn from the experience, at the cost of _only_ 3
months for myself, I'm not sure that I wouldn't be extremely tempted.

------
tzs
Will you be able to take public credit for your contribution, and will it be
big enough to impress people? What I'm thinking here is that if they become
very successful and well known, and you can point to them and say "I'm the guy
who built their infrastructure" or something like that, that might get you a
really good high paying job somewhere else or get a good consulting career
launched.

But generally, unless you have some specific plan like that in mind, I think
the vast majority here are right and it is a bad idea.

------
Stormbringer
Anybody working for free should get exactly the same equity as the founders.
Or more than that if the founders are getting salary/benefits.

------
phonehome
the arrogance of a company to even propose such a relationship with an
employee blows me away

------
VaedaStrike
Only if you believe in the people (and to a lesser degree the project) then
I'd say it'd be good to consider it. Or if you're independently wealthy enough
and value the y-comb experience that much.

~~~
kls
_Only if you believe in the people_

If they do not cough up equity or salary then they don't believe in you. Which
should be a red flag, you are letting the fact that they got into YC blind you
to the fact that it is a bad deal all the way around. It is the only reason I
could fathom that someone would even be entertaining such a deal.

------
sbochins
probably not. If you have enough funding to give the employee a salary, you
might as well. I think it would turn off a lot of talent if they weren't
getting any salary whatsoever.

------
earl
see <http://shouldiworkforfree.com/>

The only problem with Jessica's chart is she didn't make the NO in red font
and twice as big.

