
What you need to know before you join a startup - eriktrautman
https://reading.supply/@alexatnear/what-you-need-to-know-before-you-join-a-start-up-MVjDHG
======
jsinai
> Most importantly, you will learn significantly faster than if you worked at
> a large company.

Having worked in two early stage startups and at big tech early in my career,
this depends entirely on your experience level and on the engineering team’s.
At a big tech company you are far more likely to work with highly experienced
engineers and learn from the best then at a startup. That being said, it
depends completely on who they have hired before you or on your own experience
level (especially if you are employee #1). My advice is to meet the
engineering team and make sure that you have a good opportunity to interact
with them during or after the interview process.

~~~
pietrovismara
Having worked in 2 startups, almost all I've learned I did myself.

Finding people more talented/experienced than you is hard in startups, and
there's this really bad tendency to build everything as a prototype, while
very rarely you get to convert something to a stable product.

So while you get to practice on possibly a broad array of topics, you rarely
get to get beyond the beginner level / learn the best practices for it.

In the long run, this can be really disruptive for your career if you don't
take the time to practice on your own.

------
Finbarr
> So if you consider an offer from a seed stage company, and try to estimate
> your upside, divide the shares amount offered to you by at least 1.5 right
> away.

No, multiply by 0 right away.

------
YjSe2GMQ
This comment is probably to be downvoted as off topic, but in case anyone
missed this gem.

Here Comes Another Bubble:
[https://youtu.be/I6IQ_FOCE6I](https://youtu.be/I6IQ_FOCE6I)

------
x0x0
The delta between first employee and founders is wildly underplayed in this
article.

In our case: one founder worked unpaid for almost a year. After incorporating,
we both continue to work much longer hours than our first eng hire. In
addition, our first hire walked on to a market salary, health insurance, and a
company with paying customers and $3m in the bank. ie at least an order of
magnitude risk reduction. Both founders continue to take much less salary than
the first employee.

~~~
invaliduser
Exactly. There may be some overgeneralization or maybe exageration sometimes
about the first employee doing all the work while the founders get to enjoy
the fame and the money.

Let me add my case: 3 founders, I am one of them, we all worked for more than
1 year, not being paid, not taking a single day of vacation, not even
weekends, to understand our market, build our product, and launch. Our first
employee came after that, and while we started paying ourselves, on minimum
wages, our first employee (developper) was paid slightly above market level
and working normal hours. We have 5 employees today, they all get paid at
market level or above, we recently raised funds (at seed level), less than 1M,
and we (founders) still work 7/7 most of the time.

I understand how first employees may have the feeling they do not have what
they deserve, and in some startups that may be true, but can we say this
feeling is _sometimes_ a cognitive bias due to the employee not perceiving the
financial risks involved in creating a company, and the amount of work done by
founders?

~~~
pragmacoders
I think that your evaluation of the employee not entirely understanding the
toll it has taken on you, is fair. Sympathy and empathy only go so far.

One thing I'd suggest is - In this description, you've emphasized the hours
put in.

That's fair. You work hard and feel that this deserves compensation. But - if
you were following that logic - your first 2 employees SHOULD combine to have
more stock than you. You certainly don't put in more man hours than 2
employees put together.

Nor are you likely paid for the risk you take. You could hire an employee that
drops out of college or otherwise risks their future opportunities. They will
likely not get as much stock as you.

The thing that you could probably emphasize is how core to the success of your
company your contributions are.

It is not a given that your contributions are worth your compensation
(compared to the developer).

On a similar vein, one could argue that parents are the people who contributed
the most to the success of their children. While you could argue that this is
logistically true - in practical, the conception is a very small part of what
makes the child successful. What's important is what comes afterwards.

So - It might be true that you work hard. But I'd recommend you fall back on
to the value you bring to the table, when justifying your compensation.

------
blackflame7000
Be very cautious about accepting any position at a startup as the technical
founder but they treat you like employee #1. You will quickly find that you
are (seemingly) doing most of the work but not receiving anywhere near your
fair share. Ideas are easy, building them is hard. Don't be fooled by a higher
salary at the expense of more equity.

~~~
pragmacoders
If you're in this position, also be aware of whether you're being offered
stock options or stock.

It's a little heartbreaking to watch years of equity disappear, in the company
you built, because you don't have a year's paycheck worth of savings lying
around to buy your options before they expire.

~~~
taude
People should be more aware of this, especially if you go to work for a couple
years at a high-value Unicorn company where your strike price might be
something crazy like $25. If you don't ride it through to exit, you may very
well either be trapped, or gamble that they will have an exit in the future.
You may easily be spending $60K or 150K to exercise your options and have no
market to liquidity them.

Naturally, this is counter-balanced by you not giving up on your base
compensation when you go to work at such a company and you mentally treat the
stock perk as an incentive to get you through the rough work patches.

I'd be really curious about people's experience who worked at some of the more
famous unicorns and left already. Maybe at a company like Uber or AirBnb?

Edit: I don't know if Uber issues RSUs or anything. I'm only basing on my
knowledge that I know there's Unicorn valued companies out there with late
stage round raises that offer options at what seems like grossly high prices.

------
nathan_f77
I don't really understand why dilution is such a common thing. Why not just
issue a fixed number of shares at the beginning and plan for future funding
rounds? If I was a founder of a VC-backed startup, I think it would be much
more fair to sell my own shares to investors, instead of diluting all of my
early employees.

If you offer your first employee 1% of the company, but everyone knows that
they're going to end up with ~0.3% after all the dilution, then just give them
0.3% and promise that there will be no dilution.

EDIT: I just got to the end of the article: "Finally, we structured our
company in such a way that our tokens never dilute." That sounds like a great
idea to me.

~~~
mostlystatic
You don't know what future funding rounds there'll be. Maybe you raise a seed
investment and then decide to sell the company two years later. Maybe you'll
raise 5 more rounds and IPO.

Also, if you sell your own shares the money goes to you, not the company. I
guess you could then loan the money to the company, but you'd still be liable
for tax.

Going from owning 1% of a 1M company to owning 0.5% of a 2M company isn't
unfair. The extra value comes directly from the new shareholders investing
their money.

Employees believing their ownership percentage will not change is a problem
though, and founders should not suggest that to be the case.

~~~
pragmacoders
> Going from owning 1% of a 1M company to owning 0.5% of a 2M company isn't
> unfair. The extra value comes directly from the new shareholders investing
> their money.

If this we're true, investors wouldn't be adding things like dilution
protection to their contracts and special stocks that have further liquidation
protections (and potentially voting rights) wouldn't be the norm for non-
employees.

Investments are not one-to-one exchanges and employees take up most of the
personal risk in the exchange due to lack of any protections as well as lack
of a (personal financial) safety net if things go wrong.

Though I agree with you in that whether this is fair or not has nothing to do
with what modern companies will do.

The reason that employees do not get these protections and rights is because
they lack the leverage to demand them from the people who make those decisions
within the company.

------
Animats
If you're good enough to get into Google/Facebook/etc, you should demand more
money to work at a startup. The risk is higher.

~~~
im11af
Sure, the risk is higher. But so is the potential reward. And that shouldn't
go unnoticed.

~~~
Animats
As the original poster points out, if you're not in the first few employees,
the potential reward is smaller than what you'd make at a big company.

------
miesman
Ask for and actually read the company stock agreement line by line before
agreeing to join. The article does not mention clawback which is another thing
to look for:

[https://en.wikipedia.org/wiki/Clawback](https://en.wikipedia.org/wiki/Clawback)

~~~
moxthrowingaway
yeah, but even without a clawback, couldn't the company just ask for the
shares back or threaten to fire the person? that's what Zynga did.

------
ligotti
This is simply a detailed argument to consider opportunity costs. One
concerning thing, to me, is that it mostly centers around money. There are so
many "pivots" and re-orgs to become the next 10x grower that kills morale. If
it's VC-backed I would stay far, far away.

Anyways here are my takeaways.

Pros: Had a bit more freedom to push my solutions and learn quickly. For
example, at one point when we needed scaling I was able to be a decision maker
on which technology to use (landed on Spark). Faster-pace, and there is a
sense of ownership of the product.

Cons: The product itself can change if an investor freaks out. Founders often
feel entitled to your time and effort in a very unhealthy way. Possible long
hours and high stress.

The author has a great point about expectation value. What is the probability
of punching that lottery ticket times an employee's payoff? This should be the
calculation. If it is higher than your sweet job at Google, go for it, if
that's what matters to you.

Being able to "only" work 40 hours a week and make 350k sounds like the
lottery ticket to me. I hate to be so preachy about it but working 7 days a
week, 60+ hours a week, giving up family, friends, social life and hobbies,
for years on end, to be millionaire instead of a super comfortable hundred-
thousandaire sounds a bit over-the-top.

------
ryanobjc
Generally true, but the upside of a bigcorp is higher than indicated, which
significantly dilutes the financial upside of startupland.

The quote: "after accounting for dilution you will get around $600K, which is
more than what Google would have paid you on top of the base salary"

Here the answer is.. maybe. Senior Software Engineers @ Google earn $350k or
so, so over 5 years thats about $170k/year RSUs, or $850k over 5 years.

------
hcnews
A disproportionate amount of this company's employees are ICPC
winners/finalists. I am getting Imposter Syndrome just by looking at that
page. oof.

~~~
baoha
Russia and China have a huge tradition in preparing and participating in those
competitions, while in US, I found it's more like of a hobby, so I'm not
surprised given both founders are Russians.

~~~
SkidanovAlex
While P(Russian|ICPC Winner) is high, P(ICPC Winner|Russian) is still pretty
low :) Also, Illia is Ukrainian, not Russian, but it's nitpicking.

ICPC is a great way to start your career if you were unfortunate enough to get
born in a noname city somewhere in ex-Soviet Union, thus people are pretty
motivated to do well. In US by the time you graduate you already have few
internships in your resume, and are pretty figured career wise, so naturally
the benefits of ICPC are less attractive.

~~~
baoha
Don't get me wrong, I have great respect for people with high prizes in ICPC,
which is way more difficult than IOI in high school. I was just stating the
fact.

------
alexpetralia
I think it's worth keeping in mind that most people don't live in SF and most
people wouldn't get a job at FAANG. People work at startups often because
their reasonable alternative is working at a dev shop or the back office of
SomeBigCo. Startups offer more energy, learning, and often even pay (thanks to
investor capital) than these alternatives. Yes, the amount of equity offered
may not be justified from an ethical point of view, but it does seem to be a
market-clearing rate.

~~~
laumars
> _I think it 's worth keeping in mind that most people don't live in SF and
> most people wouldn't get a job at FAANG. People work at startups often
> because their reasonable alternative is working at a dev shop or the back
> office of SomeBigCo._

Even outside of SF there are a whole gulf of positions out there that fall
somewhere between a dev shop / "back office of SomeBigCo" and starts ups. Plus
sometimes "back offices" can be pretty rewarding too if the person in charge
of that office has fostered the right kind of work environment.

~~~
winningcontinue
Very good counter point. I worked at a back office for a large transportation
company, and the work was much more rewarding than anything I've experienced
at a startup.

------
fatnoah
The article doesn't seem to mention the concept of a liquidation preference.
Your 1% could be worth $0, even in a $50M exit.

------
techslave
> And (again, just a personal advice) you should only accept an offer if you
> plan to immediately forward exercise all the offered options

horrible advice

~~~
optimusclimb
Additionally, the vast majority of startups I've worked for, and am aware of,
will not file the paperwork to let you 83b. AND, if you bring it up, they will
probably tell you politely they're not going to bring up your request to the
board and go through all that hassle just to hire you.

~~~
nathan_f77
That doesn't sound right. I thought an 83b election is always strongly
encouraged, because the tax consequences are horrendous if you forget to file
it. And I don't think the startup has to do anything? You just fill out the
form and send it to the IRS.

------
jondubois
>> A $10M acquihire brings $3M to the founders, so they are likely to accept
the offer, leaving them significantly richer, and you with $100K that are
unlikely to cover what you would have made if you joined Google instead.

This doesn't sound like a very bad scenario at all. 100K is a lot of money.
Also, back then there was a risk that maybe Google would not have grown as
much as it did.

>> But if you join as employee #10, and are offered 0.1% of shares, the story
is completely different. If the company exits for $100M, you only get $60K,
which is a completely meaningless number if you invested few years of your
life into the company.

That's almost one year of an average person's salary in the US. It could pay
for someone one year to work on their own project.

~~~
SkidanovAlex
"unlikely to cover what you would have made if you joined Google instead."
refers to what you would have made if you joined Google few years ago, not at
its early days

~~~
jondubois
Google stock price almost doubled in the last 3 years. That's a lot for a
company that size.

