HELP: Join as cofounder or first employee?

[gfenny]

I have the possibility of joining a startup (still working on prototype, no sales or funding yet)

Im being offered to join as first employee, which would mean some equity but probably nothing comparable to the founders.

I feel I can add a lot of value to the startup, but it seems like theyre not open to having another cofounder, as they say that it is their project and have already refused others to join

On one hand, I know I have the skills to be a cofounder and get more equity, and Id feel like im selling myself short if I bring so much value but getting only a fraction of the future returns, also, id feel like im building and working for someone else to profit from, instead of building something that I can also be a real part of

On the other hand, I believe in the project and I dont want to lose out on the opportunity. It could also be a good learning experience for me for the future.

What would you do if you were in my position?

[andrei_says_]

I’d remind myself the following:

- ideas are a multiplier to execution and essentially worth nothing without the execution

- a business-savvy founder who is willing to walk the walk, knock on doors, sell the product, is a multiplier to the viability of the product.

- 9 out of 10 (or so) startups fail. So most likely, this one will fail. How much (calculated in hours * $100/h) am I willing to pay for one lottery ticket? A ticket which will guarantee a maximum of $?

- I need to pay my rent, insurance, food, student debts and save, or I’ll be in trouble soon.

- I have a limited number of heartbeats, a limited amount of cognitive resources per day.

- I am asking a question on a public forum about this situation. This automatically classifies it as a non-“hell yes!” decision.

- I would prefer a different arrangement but the founders are not open to what I really want. How do I feel about a career of compromise?

[gfenny → andrei_says_]

Good points, thanks for your insight

[codegeek]

"still working on prototype, no sales or funding yet"

If you want to join as an employee, then they need to pay you a decent salary. Even if a bit lower than market, you could consider if you really like the idea which could totally fail. But do not join as an employee but no salary (it could even be illegal in the United States but I am not sure which country you are in).

If they cannot afford to pay you a salary right now, then you must be a co-founder because they are still in prototyping stage. You need to get a significant chunk of equity (I would argue it should be closer to equal share).

Remember in either case, this product could go nowhere and you could end up with nothing. But if the risk is worth it to you, then make sure you are protecting yourself properly.

[dabockster]

> first employee

> only equity being offered

> no sales or funding

They want free labor. Don't do it.

[gfenny → dabockster]

We know each other, I trust the vision is long term and theyd compensate me with some equity and a good salary whenever they can afford it

[mindvirus → gfenny]

If you're not getting paid, and you're only getting employee equity, you're getting screwed. They might not be able to afford the salary now, but they can definitely afford the equity - it's just a number on some paper, especially before investors are involved.

Part of the reason that founders get a lot of equity is to offset the cost of not getting paid for the early years of starting the company, and being below market rates afterward. If you're getting paid, then sure, getting less equity makes sense - in two years, if it goes belly up, you have two years of salary, they have nothing.

Whatever you choose, get everything in writing first. Even best friends can become enemies when there's money and verbal agreements involved.

[oldcynic → gfenny]

The internet is littered with founders who fell out at some stage during a startup and/or got shafted from trusting in a verbal agreement. Get it legally binding or run away.

[gaius → gfenny]

We know each other, I trust the vision is long term and theyd compensate me with some equity and a good salary whenever they can afford it

If it’s not on paper, it isn’t worth the paper it’s not written on. If someone is resistant to putting it in writing, they are deliberately attempting to scam you. Are you sure they are really your friends?

[siegel]

Do you actually know how many shares the founders have received? And how does that compare to what you are being offered?

There is no standard definition of "founder" or "co-founder." They could offer you half of what they are getting and refer to you as a "founder." I assume that wouldn't solve your concerns.

I'd put the title aside and think about what you are actually looking for from this experience. It goes without saying that you should be getting a very significant piece of equity if they expect you to work for free. You are taking a huge risk. But I get the impression there is something else about the "founder" designation that is meaningful to you. What is it?

[gus_massa]

Are you "still working on prototype" or they are "still working on prototype"?

Are they paying you now? Are they going to pay you now in hard green cash that you can use in the grocery to buy bananas? (Not IOU, not equity, not an internal ICO, real dollars.)

Also, for YC a founder must have at least a 10% of equity. It's not an official definition, but it is a rule that they use.

[gfenny → gus_massa]

They. Theyve been working on it for a few months and have put some money into it. I know they want me on the team as they believe in me, and theyd be willing to compensate me financially as soon as they can afford to

For reference, how much equity should I ask for in case of being first employee? Note, the idea is that id be in charge of sales, eventually into a COO position

[DoreenMichele → gfenny]

Theyve been working on it for a few months and have put some money into it. I know they want me on the team as they believe in me, and theyd be willing to compensate me financially as soon as they can afford to

I would not take this deal. I would tell them "Either, I am a co-founder, and get risks and rewards like a co-founder, or I am an employee and I get paid like one. You can't have it both ways."

They are working for free because they hope to get rich. They want you to work for free in hopes that, someday, you get a salary and they get rich. I would absolutely not be okay with that.

[cjbprime → gfenny]

Getting founder/investor equity vs employee equity is more important than how much you get. It is common during an exit for employee equity to be literally worthless. It has happened to me.

[justherefortart]

How are you going to join as an employee if they can't even pay you?

You remind me of my friends with little to no actual relevant experience.

I'd get a job that has sales and funding. I've done 8 startups as a point of reference, to varying levels of success/failure.

[notahacker]

Decide whether the hourly rate offered is good enough to make up for not having cofounder level of equity and influence.

If it isn't, work on something else.

[gfenny → notahacker]

Thanks, good point

[taf2]

Already sounds like a bad situation.