

A Startup Employee's Checklist for Tough Times - selvan
http://dancallahan.info/journal/startup-employee-sanity-check/

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aaronbrethorst
A startup _employee_ , right? Not a founder?

    
    
        1. How long am I willing to work without pay?
    

zero days.

    
    
        2. How long can I work without pay?
    

doesn't matter. see answer to #1.

    
    
        3. What concessions do I need to make working
        without pay feasible?
    

You shouldn't be making any concessions. Assuming you're merely an employee,
the founder or cofounders should be talking about increasing your stake in the
company by at least an order of magnitude.

    
    
        7. If my employer raises additional
        funding, how and when am I likely to be
        compensated for my working without pay?
    

See answer to 3.

edit: thanks to greenyoda and wtn for shedding some more light on the legal
aspects of this. I hadn't even considered them.

~~~
greenyoda
Also, if you're an employee, the company is probably violating federal and/or
state labor laws by allowing you to work without pay.

~~~
walshemj
And by not paying you they have "frustrated" the contract and have made you
redundant.

------
rdl
All of these are quite reasonable for founders, but not really for employees.

I'd consider more-equity, reduced-pay in a startup which was bridging between
rounds of financing as an employee, but only if I had a large personal buffer
and had high confidence in the value of the company. At that point, you're
essentially an investor. Most people who work for startups, particularly as
non-founders, don't have enough net worth that startup equity should be a
large percentage of their net worth, particularly purchased equity in a single
company who is also their employer and who is having financial difficulties
(which is why they're asking you for concessions...)

Now, something like "we need to raise more money, so we'd like you to work
part-time for the next few months at a reduced wage" is totally reasonable, if
you can swing it -- either do highly paid contracting, or look for a new job,
or take a vacation.

Working 20h/wk for 50% pay seems like something a lot of people would like for
3 months, honestly.

------
callahad
For more context, writing this list was a necessary step in assessing my
situation, accepting reality, and moving on. It wasn't as simple as "no pay,
no work." It should've been, but it's hard when you enjoy the job, love the
team, and desperately _want_ the venture to succeed.

It's harder still when you see potential investors and clients actively
meeting with the founder right up until the end of the runway. It's easy to
delude yourself into thinking that one signature will bring everything back to
normal.

In the end, we all missed two paychecks and, when it was clear that things
weren't coming back soon, everyone dropped down to a 10% retainer (in IOUs)
while simultaneously being encouraged to find freelance or full time work. I
took that opportunity to learn letterpress printmaking and travel a bit while
getting my professional life back in order. Not a bad deal.

But I'll never do that again.

(FWIW, the startup in question did, eventually, repay its debts)

------
zrail
I have experienced a payroll miss (that turned out to be a mustake at the
payroll company). I was not thinking about work that day, I was thinking about
and applying for other jobs. I don't work for free and the minute I stop
getting paid I don't work for you.

------
bifrost
As someone who's started and run a few companies, I am not someone who's going
to ask anyone else to work without getting paid. Paying someone in equity is
legitimate, but it has to be wholly agreed to beforehand. Sure, there may be
exceptions, but I would like to be as proper as possible with everything that
I do.

If you're going to accept an IOU I guess thats something else entirely, but as
most taxpayers in California know, you can't deposit an IOU in the bank.

~~~
flyinRyan
Accepting an IOU as a startup employee is about the dumbest thing anyone could
possibly do. You're effectively placing a bet that you'll simply get
compensation owed on a company who obviously has money problems.

~~~
adventured
Given the extreme failure rate of startups, the same could easily be argued
for going to work for a startup to begin with. Everybody should clearly work
for Microsoft instead.

It's not about the dumbest thing anyone could possibly do. It's a calculated
bet. Every person on earth makes them every single day. Your life choices are
not theirs, so what.

Millions still smoke cigarettes in the US (destroying their lungs), and drink
alcohol (destroying their livers), are you going to lecture them about that
being the dumbest thing they can possibly do, or do you accept that as a life
choice with risks? How about risky sexual behavior? How about driving a car?
Living in Chicago? Eating hamburgers? Drinking soda? It's no different in
principle, they're all calculated risks, and everybody wants different things
for different reasons.

Personally I wouldn't default to assuming someone is doing something dumb.
Seems drastically arrogant to do so without knowing their/the context.

~~~
flyinRyan
> the same could easily be argued for going to work for a startup to begin
> with.

Only if you're working at below market rate for dog shit equity (i.e. stocks
that will be diluted into nothing).

> It's a calculated bet.

In the same way that buying lottery tickets or shoving more coins into a one-
armed bandit is a "calculated bet". The calculation has already been done and
the house always wins.

Again, we're talking about a company that is mismanaged to the point of not
making payroll. _This_ is where you're placing your "calculated bet". And what
happens if you "win"? Oh, you get the money that you had already earned in any
case. This is lose-"break even" scenario. Even novice gamblers should know
better to throw resources after bets like that.

>Millions still smoke cigarettes <snip>

So you make a big long list consisting partially with stupid choices people
make out of peer pressure or down right stupidity, and partially out of things
people do because they get a reward and there is a low risk of downside. How
do you imagine that compares?

Driving a car increases my quality of life in many ways. Even though driving
is one of the more risky things you can do it's still a very small risk that
anything will happen _to me_. And by engaging in this risk I can improve my
standard of living dramatically. Taking a job from people who've _proven_ they
can't make payroll with the hope that _they might pay me what I'm owed_ is not
a similar thing.

>Personally I wouldn't default to assuming someone is doing something dumb.

If someone is doing something dumb (like buying a lottery ticket) then that
person is doing something dumb. It's pretty straightforward. That doesn't mean
_that person_ is dumb, we all do dumb things from time to time. Maybe even on
a regular basis. But we should at least stick to doing dumb things that have a
low risk of a major downside.

------
Murkin
Anyone got even one example of a startup "coming back" from the "I can't pay
my employees" hole ?

~~~
lonnyk
Blogger. IIRC from Founders at Work[1] book the company was on its last legs
and everyone, even a co-founder, left. The only person left was Ev Williams
and eventually figured out how to grow and make some rev. and ultimately sell
to Google.

[1]
[http://www.amazon.com/gp/product/B001C30BH6/ref=oh_d__o04_de...](http://www.amazon.com/gp/product/B001C30BH6/ref=oh_d__o04_details_o04__i00?ie=UTF8&psc=1)

~~~
lonnyk
Wikipedia[1] says I remembered correctly.

[1] <https://en.wikipedia.org/wiki/Pyra_Labs>

------
benjamincburns
While I agree that this is a very individual choice (at least one other has
referred to it as a calculated bet), it's a bit appalling to generalize this
and codify it into a checklist. The situations where you should go down this
line of reasoning are very, very rare. This is _not_ general purpose advice.

General purpose advice: Learn to recognize a [sunk cost][1].

If you decide to be an early employee of a startup ( _especially_ one which is
not yet profitable) build the expectation that there will be an uncertain
future. Tell yourself that you're going to work fiercely hard, and be fiercely
loyal as long as your employer can support you. Tell yourself that the
experience gained will be worth the long hours and uncertain future. But
please, _please_ , don't tell yourself "I'll probably have to work without
pay." Don't tell yourself in advance that you'll ride it out for the equity,
or because it's just so interesting, or because these founders are
geniuses/nice/cool/whatever. If they can't pay you, it's not time double down
on what you're paying them; it's time to move on.

[1]: <http://en.wikipedia.org/wiki/Sunk_costs>

------
michaelochurch
_QUIT_. I am going to join the chorus of people telling you as much. Get the
fuck out now. Get. The. Fuck. Out. Staying on board after a payroll miss as an
_employee_ is a terrible fucking idea. If you stick with the effort after a
pay miss or even a cut, you are an _equal_ with the founders and you are
invited to _all_ the investor meetings (whether you want to go is up to you).
No fucking exceptions ever. People will take advantage of you, not respect you
for being "a nice guy", if you work for them on bad terms.

I made this fucker of a mistake. It was 2008, after the economy imploded.
Unrelatedly, I have PTSD which had started throwing panic attacks at me and,
for a period of about 3 months, I was unemployable (or thought I was) until I
figured out how to manage the attacks. (Now they are no big deal. Very fucking
annoying, but I know what they are and can resolve them in 5-20 minutes at
worst.) So I was damaged, but I have this extreme work ethic which leads to a
false sense of desperation that impels me sometimes to take horrible jobs just
to "be employed", and this was one case of that. I had savings, but I needed
to feel like I was doing something. So I joined a startup on "deferred cash"
which is essentially a zero-interest loan to your employer. Don't ever fucking
do that. Oh, and my salary (what I would have been paid once we got funding,
which by the way never fucking happened) was still a 40% drop from what I had
earned at the hedge-fund job before that. Talk about a loser fucking move. If
you undersell yourself (false desperation) people will pick you the fuck off.

Then I went to Google. I had burned lots of savings and, after egregious drama
and a huge financial loss, I was a fucking headcase and I made the mistake of
disclosing my problem and I had a sadistic pigfucker of a boss who gaslighted
me to see what would happen, and ultimately had a two-day-long hypergraphic
episode on a 10k mailing list. I found out later that he had a history of
using false performance problems to get people to disclose medical problems
and then fucking with people who were sick because he enjoyed watching them
break down. I found at least three cases, some paid substantial severances. HR
knew about the problem but did nothing because the manager had a reputation
for "delivering". If I hadn't been coming off a horrible startup, I wouldn't
have been nearly as vulnerable and he wouldn't have been able to break me (I'm
a normal person with an abnormal past, and 95+ percent of the time I can keep
it in the fucking past) and that pigfucker bully would have attacked someone
else.

Bad startups will ruin your fucking life. No exaggeration. I have a pre-
existing aggravator but normal people melt down just as hard. In fact, I think
it's worse for them because they're not used to insanity and don't recognize
it as such when it hits them, so they actually buy into the insane thoughts
they start having when the world goes to hell on them (I don't; I'm a veteran
of that shit). You will lose lots of money and credibility. Your career will
end up in the toilet. Sometimes people will maliciously damage your reputation
and you'll seriously consider hiring a hit man, but you can't because you have
no fucking money.

Payroll miss == Get the fuck out. Now. No exceptions. Do NOT fuck up your life
for these people. They aren't worth it.

~~~
modoc
Obviously there are other scenarios. I worked at a company in 1998 who missed
payroll for 2 (I think) periods in a row. They then pulled out of it, had a
strong IPO, endured the crash, and then got bought for a billion dollars a
decade later. Those who stuck it out through the dry period, who believed in
the company and it's potential, were rewarded in many ways.

------
gordaco
I just won't work for free. That's also why I shun overtime.

------
rschmitty
How would you handle "reduced pay" for founders with different % ownership
during a dry spell?

