Your first eng hire will shoulder nearly all of the technical burden soon after as the founders transition into more of the non-technical roles (sales, outreach, recruiting, fundraising, business strategy). The amount of blood, sweat, and tears poured in by the first eng hire is somewhat less than a founder, yes, but not the 30-50x typical equity ratio we see today.
I have been on both sides of this, and have thoughts. What do you think is fair for employee #1 making at or near market rate?
To sum it up, I would expect a #1 engineers equity to be at least half of a founders equity AND payed at near-market rate.
Then you have to remember that FAANG companies are large enterprises, by definition, and that comes with a lot of overhead - design by committee, politicking between middle-management fiefdoms, not being a part of the conversation when irrefutable directives are issued by executives four levels above you, varying levels of paperwork and documentation that are necessary in large organizations. That's soul-sucking for a lot of people, and those people will exclude themselves from FAANG-level compensation, and are on the market for (market minus FAANG)-rate compensation.
The real reason why a lot of founders can't hire at market rate compensation is that any early employee, even if you're paying them market rate, needs to buy into your vision just as much as you do. The upside for early employees, even more than potential compensation, is in being a strong influence, including at relatively senior levels, as the company grows. If, as an IC, you find yourself being recruited by somebody who you think is a strong and experienced leader, selling a product that you personally think is important, then you grab the bull by the horns and get on. If somebody who rambles and can't make eye contact asks you to join to build out Uber-for-pidgeons, it doesn't really matter how much compensation is being offered; you're going to walk away.
What happen is that these people will keep trying until they get in. They will focus only in one thing and one thing only: FAANG.
> That's soul-sucking for a lot of people, and those people will exclude themselves from FAANG-level compensation, and are on the market for (market minus FAANG)-rate compensation.
I find things have changed a lot where housing dictates personal career choices lately. It sucks to not be able to buy your own property. I don't care what people strategy is (be it work 4-5 years for FAANG and move midwest or whatnot).
You realize not all job markets have developer jobs paying 400k?
Absolutely. Having said that, I won't join non-SV startups. Why? very simple: the chance of hitting the jackpot is significantly higher in SV.
> You realize not all job markets have developer jobs paying 400k?
For sure, but why would I joined non-SV startups getting paid peanuts while I can join a more established company and get paid double (base, stock, bonus, health benefit).
I felt that First Engineer is a sucker if you don't get compensated well enough (be it way more equity than the typical 0.5-1% or something else).
At the end of the day, I'd choose to maximise my career: be it joining a startup to gain experience knowing the whole stack or joining large enterprise for better career-path and compensation.
I don't join startups to "Change the World" or to "Hit the jackpot with 0.5-1% equity".
Sorry, but no. Jobs are very easy for a good dev. You are taking no zero risk as engineer #1 at a startup if your pay is market rate.
> and a possible kink in your CV (3 years at Microsoft look much better than spending 3 years at an unsuccessful company that eventually shut down).
To who? I would hire the 3 failed startup guy any day over the 14 years at Microsoft guy.
> To sum it up, I would expect a #1 engineers equity to be at least half of a founders equity AND payed at near-market rate.
Haha. I mean I guess it's fair to expect that. Maybe someone would give it to you. To me, it sees like a very inflated value of self worth if you are wanting to take little to no risk but then reap MOST of the benefits of being a founder.
If you need the best, you're going to have to pony up equity since you just can't compete otherwise. The open secret however, is that for most startups, you really don't need the best. You don't need top quality to throw together a web backend and a mobile app and start growing a base; for those companies it makes no sense to dilute the massive payout for the founders by sharing anything with the code monkey actually delivering the app.
Risks can be:
Stress due to working more (wearing more hats, not enough employees)
Not having a stable paycheck because company needs to pay venders otherwise they go bankrupt.
Recession or downturn, loss of job immediately while big company can weather.
Etc...all the things not at a big company.
Loss of medical benefits is just another number to add to thier salary. Statistically, equity especially for an unproven idea is meaningless. It’s likely not to be worth anything.
Three years as the lead engineer at even a failed startup looks a lot better on your resume than just being a low level drone at Microsoft. You will probably also have your hands in a lot more pots making you even more valuable.
Can get a job. There is no end to the stream of recruiters offering jobs that I am overqualified for and pay well below what I currently make. The companies that can match what I have now (which, to be honest, is still lower than I could get at the Google tier) are few and far between.
Other commenters use different pronouns when describing hypothetical scenarios, and that's great, but it also sometimes triggers flamewars from a different direction.
Best to just avoid playing that game altogether.
About what kind of startup are we talking here?
When we discuss #1 engineer compensation we are most likely talking about a very early stage company that likely lacks a profound company structure and employee benefits program.
So I would assume that #1 engineers will most likely not be greeted with a good health insurance on the employer side.
So that they care about the company on a similar level to the founders, and feel a real sense of ownership, dedication, and responsibility.
I've been in a position several times now where at work I'll have a reputation as a very capable engineer, typically placed on or leading the most critical projects etc. —but, my employers still have no idea what my contribution could have been if I were made to feel like the company was partially my project too, and that there wasn't some massive (though never explicit) social divide between the founders and everyone else, the rest of us being mere tools for the founders' use (only one job I was at really gave that impression—the others were pretty good about creating an environment where everyone felt equal. But from speaking with many other prospects, it appears to be a typical attitude).
There are thresholds in perception of ownership which when crossed give access to new categories of behavior in the perceiver. Think about 1%, 5%, and 10% equity in terms of sharing an object among a corresponding number of people: how much do you feel that thing is yours when sharing it with 100 people? With 20 people? With 10 people?
For me, 10% is about where the line would be where I'd be willing to drop side projects etc. and seriously dedicate myself to the company. (And in my experience, this is not atypical: in the very early stage startup I was in, basically everyone was laying groundwork for their own startups on the side, or at least had other projects they were more interested in—but they'd make sad, fake displays of their dedication to the company to try and cover. At our largest there were still only ~7 people in the company.)
I solved it by becoming a product manager. I miss engineering, but I no longer have that angst on a daily basis. I have found PMming is a job where sense of ownership + willingness to work to further overall success of the given project is heavily rewarded. And the precision of thought that is a pre-requesite for engineering can equally be applied to PMming (though not all PMs have it!).
Because this is how you get good people. If you want to offer them what they could get by working someplace else, they may as well work someplace else (likely without the hours, stress, or potential instability of a startup).
Startups offer a lot of non-financial benefits over working at the big established companies.
1) Looser culture. Less likely to have a dress code or an attendance policy.
2) Less meetings, more coding. For someone that wants to get stuff done, way more to do in a startup.
3) Sense of purpose. A huge part of life satisfaction is doing something that actually matters. WAY easier to do this when you are shipping a product to actual customers vs sitting between 6 layers of management at google writing code to improve ad conversion by 0.1%
My bank doesn't accept "sense of purpose" as payment. My real job is for my mortgage and retirement.
An extra $10k+ per year counts a lot when compounded. $10k a year for 30 years, 7% average long term stock market return gets you $1 million.
That could a better life style, retire many years earlier...all without the risk of a Scrappy startup hoping for a unicorn buyout.
Play with the numbers...but that's what you are giving up because you want to wear a graphic t-shirt to work.
Truly, and it's changed my life for the better.
I'm unclear, however, on the relevance of this statement to the extant startup scene -- ref: the latest YC class, for example.
Neither of those things are much of an indicator of a good #1 engineer hire—yeah you want an above average engineer, but you don't want someone who is dependent on world-class tooling, world-class colleagues, or is so focused on tech that they can't see the forest for the trees of the business landscape they are in.
You need a solid engineer who is a hustler, willing to dive deep into whatever area is necessary, but doesn't fetishize some aspect of technology or become obsessed with implementing something in-house because it's an interesting technical problem. Current hiring practices are largely cargo-culted off of successful tech giants who face very different problems from what the average startup does.
If you find someone who gets it and has the skills to back it up then they deserve to be brought in with both a real salary and real equity because at this stage every hire is still life and death for the company. The challenge is whether you can recognize this person.
I'd say the reason you want a strong equity package is a question of alignment and incentive, though. Ideally this person is going to be a VP of Engineering for you someday if you scale up and on top of that needs to have architect + SRE + hacker + sysadmin skills. On top of that, you'll probably want them to make similar sacrifices that you (as the founder) are making to get the business off the ground. It shouldn't be founder equity, and maybe the standard 4 yr + cliff structure isn't right for it, but you probably want this person to have a substantial vested interest in the success of the company.
If you offer tiny or no equity, they have no incentive to align for growth. Also, founders are usually way less useful than the people they hire.
I am assuming that you won't sell goods and services you produce at cost price. If that is case, you'd have worked as an employee of that buyer. Similarly, if I don't get a share of the value I produce, I won't join any startup as a early employee.
Because they’re taking on a gigantic risk too?
In most other major American cities outside of New York/DC area its about $140K. If you compare the cost of living in any of those cities, it starts looking a lot worse for Silicon Valley.
If you go the billable consultant route with the right skill set, you can get up to $200K
Yes this is a realistic range. I’ve been given firm offers to do that type of work (AWS not Google) but the travel requirements would be too disruptive right now.
But the idea that software developers can't do well in other lower cost cities without working for a FANG or even companies that most people have never heard of is another example of the SV/HN bubble.
- You will develop a wide breadth of skills you simply can't develop at FAANG, as you will be involved in product meetings, business strategy conversations, and will regularly eat lunch with the CEO. I imagine the reverse of this is true as well, in that there are skills developed at FAANG that are hard to develop as employee <50.
- You will get to fast-track your career progression, in that you will be in line for promotions much earlier than in large companies, as opportunities emerge.
- Companies (including FAANG) will look for folks with your skillset (my startup experience was a huge plus in my recent job search).
- You will work on hard problems, with passionate people; folks aren't punching the clock here. This is fun.
Also, for folks just thinking about comp, I'd like to gently point out that a 40 hour week on work you feel "meh" about is ~35% of your waking life. That's not to say you can't find exciting work at FAANG (I hope I have), but rather that there is more to a job than comp or career progression, and working with passionate folks on hard problems can be incredibly fulfilling.
Wide breadth of skills? If you’re hired as a code monkey you’re going to monkey code. Nobody ever asked me what I thought about the latest business partnership or synergy strategy. Just code.
Career progression? Another nope. With only a few people in the company, you can’t go up and you can’t build a team under you. Who are you going to manage? There’s nobody under you! My startup coworkers used to jokingly give each other fake “Senior Director” titles which were meaningless of course because there were two managers in the whole company, one was the CEO. Even if you did somehow get a fancy title or a team under you, and got bought by a big company, you’re back to “3rd engineer from the left” in their hierarchy.
Hard problems? I don’t know, not in my experience. Just problems unappealing to the bigger players.
And for all that you risk the company not being able to make payroll or canceling your benefits. Sorry, I can say definitively that working at small companies probably set my career back 10 years.
EDIT: I suppose it’s highly dependent on the company.
I should clarify that a lot of the hard problems at early stage cos are around creating something that is not only new, but is also a viable business, with minimal resources and huge time pressure. Whether the technical side is hard or not is another question entirely.
Anyways, thanks for the comment — in addition to providing a good counterpoint, it’s a good reminder for me that my experience is neither universal nor even necessarily the general case. YMMV.
I remember several exit interviews where I told my managers that one of the reasons I’m leaving was no upward career movement. They looked shocked, like they couldn’t imagine that would be important! Maybe they were legitimately surprised, I dunno. I’ve also had managers say things like: “oh trust me, you don’t want to get promoted or go into management, it’s so much stress!” They will try to gatekeep and you need to push through that.
I'm not disagreeing with your comment, but if the reason you join is to work on hard problems with passionate people then there ought to be a strong reason why it makes sense to be engineer #1 and not yourself a founder.
The difference is so big, that I hope it continues to get repeated, until we start seeing a fairer distribution of equity.
>- You will develop a wide breadth of skills you simply can't develop at FAANG, as you will be involved in product meetings, business strategy conversations, and will regularly eat lunch with the CEO. I imagine the reverse of this is true as well, in that there are skills developed at FAANG that are hard to develop as employee <50.
Yes, this is true. Note, however, that this exposure isn't necessarily that transferable, unless you plan to become a founder yourself (which isn't a bad idea).
>- You will get to fast-track your career progression, in that you will be in line for promotions much earlier than in large companies, as opportunities emerge.
Only internally. It won't transfer to long term career progression unless your startup happens to be widely successful.
>- Companies (including FAANG) will look for folks with your skillset (my startup experience was a huge plus in my recent job search).
Nah. Experience in general is a huge plus in today's job market - but non-founder startup experience is no better than any other experience, unless your startup happens to be widely successful.
>- You will work on hard problems, with passionate people; folks aren't punching the clock here. This is fun.
People are passionate and not punching the clock in most places. You certainly do get to work on hard problems at small startups much more though.
>Also, for folks just thinking about comp, I'd like to gently point out that a 40 hour week on work you feel "meh" about is ~35% of your waking life. That's not to say you can't find exciting work at FAANG (I hope I have), but rather that there is more to a job than comp or career progression, and working with passionate folks on hard problems can be incredibly fulfilling.
And your comp today directly determines how much of your waking life down the road you will need to spend on work. Higher comp today means financial independence tomorrow (allowing you to work on whatever the heck you like).
Note: I'm a happy early engineer at a startup that offers competetive comp (based on my personal evaluation - and I'm normally a skeptical person - the expected value of my compensation is clearly higher than what I would get at FAANG), so I'm not agains startups; it's just highly unfortunate that most startup founders are incredibly stingy with equity.
I feel being first engineer at a startup gave me the skills to found my own company and make a living on my own terms, which is ultimately what I want from life. Being super rich isn't too important to me as long as I feel I have broken out of the mold and am on a path to greater personal and creative freedom. I honestly wanted to kill myself after a few years at a well-liked, growing 1000 person company. It was too confining and I was too distant from the real world. I can't imagine ever being happy at a FAANG Corp, even if the work is initially interesting. The weight of layers of managers above always becomes unbearably heavy for me, especially since I naturally struggle against authority.
On the hiring side, I also incorporated some hard lessons learned about growing our Eng team from 2 to 14 here:
That's a big NO-NO for me. 30 days is way too small for any company to make a decision on a hire. It just means your process for hiring is not good. We must start with firing people who were responsible for the that bad hire first.
We're lucky enough to live in a time where our skills are in great demand and compensation can be matched without blinking an eye - my advice to business minds hiring their first engineers is to get to know them, build trust and find the ones who are committed to building cool shit with you for the long haul. Don't just make it about comp and perks.
> As I said at the start, hiring your first engineer is incredibly hard unless you’re lucky enough to have a friend you can convince to join
If your critical employees joined the company for romantic and/or emotional reasons, it can be very difficult to retain them should they somehow become disillusioned.
You can far more easily acquire funding to increase compensation than you can make someone change their mind about how they feel about something the leadership has done or the direction the company is heading.
< Don't just make it about comp and perks.
I can't comment which skill is more valuable. They are somewhat orthogonal to each other right ? The better you get at software engineering the more process oriented you become. Hopefully an early startup gives you that kind of progression, but very unlikely, since the progression is directly correlated to the startup's scale and success.
If someone desires to put good software engineering into practice from day 1, then engineer #1 at an early stage startup is not the right choice.
This is all based on anecdotal experiences so am happy to stand corrected.
In order for the engineer's median compensation to match the median compensation he would make working at FANG, how much stock would you have to give them making reasonable assumption about valuations (ie, assume your start up will have a trajectory in the top 30% percentile, but not in the top 0.1%).
Depending on what you’re making you also might be doing yourself a disservice by only wanting to hire from “the best” - if you’re making a simple website or CRUD app as part of a larger business strategy such as online ordering, you don’t need to hire an expert in big data
Age is probably somewhat of a factor here since people who went into software before it was so highly paid likely didn’t have money as a huge motivator, compared to people who went into software more recently
Having said that, software engineering as a profession is shitty in some respects. I don't think I would do it if it paid as little as the humanities. I'd continue doing it on my own time, but the drudgery of dealing with other people's bad code, corporate practices, clueless bosses, clients who undervalue and lowball you, etc. wouldn't be worth dealing with.
It's not so much that I wouldn't be able to make a living, because I think I'd be content living on relatively little(as I am currently experiencing), but life is just too short to deal with professional software engineering when I'd get so little out of it.
Alternatively, I'd just go into woodworking. Income becomes relative to the quality of work produced (I've never worked anywhere that actually cared about or rewarded quality code) and I could say or do whatever I want without someone else reaping most of the benefits and judging my actions by outdated 1950s office standards.
Where everyone loved something about technology programming/hardware/etc and continued day or night.
In many ways things would be better. This represents a time before everyone liked computers and most feared them. Salaries were not as high as today. The work was harder but more meaningful.
We can't go back. The future looks more like turning programmers into interchangable pieces that can be commodized. Defining all work into smaller pieces.
I think many of us would trade big salaries for jobs at places like bell labs.
I loved art and drawing too. But I wisely chose not to master in art when going to college.
Also, rent in some cities might not be as much if fewer people went into tech ;-)
I go to work every day just for the money. I keep on top of tech trends for optionality.
I'm good at my job and I enjoy it for the most part, but I'm only doing it because I get paid well.
I would probably have continued programming in the evenings, but doing history as the day job. Today I program in the day, and often read history in the evenings.
Ultimately, I like paying rent/mortgage, soo.... yeah.
I ended up in computer engineering because it came natural (and now, software engineering as that's where the jobs are). If humanities salary was swapped I'd be a history major while tinkering on the side :)
Managing great employees can be challenging; managing someone you don't know is great can be 10 times more difficult.
2. Present your idea the best you can.
3. Only hire if he/she is interested in your idea.
4. Offer stake in your business so it is also his/her business.
Have you ever noticed, you can move mountains if you are genuinely interested in something? That it is difficult to focus and too easy to procrastinate if you don't want to do something or find something boring?
Corporations are good at solving large problems because they can throw funds and money at the problems. They can absorb the damage caused by people who are barely productive.
When you are startup you can't do that. But the advantage you have is that you are looking for one person at this point in time and you can be picky and wait until you find the one. Bad hire at this point in time can frequently spell disaster for your budding enterprise.
I don't want to say that it is totally impossible to find somebody who might not be interested about your idea but will still do good job. But it is unlikely and then remember, you are not only looking for your first engineer but also your first manager, possibly CTO, etc.
Look at stories of successful startups -- in most cases first hires seem to have been critical and mostly seem to be passionate people who then established themselves close to the top of new organization.
This is probably part of why it's hard to find a good first engineering hire -- for better or worse, most engineers aren't a good fit for that stage of a company's growth.
Maybe that's not widely agreed, though. I saw an ad on the "Who's Hiring?" post this month looking for a first engineer with a broad and deep skill set and big responsibilities offering 0.2% equity... Essentially no motivation to move heaven and earth to make the company succeed. Shrugs.
Yes because they have a hope for a larger reward later.....
The same goes, to a lesser extent, for early employees.
Them not so much.
For instance Marco Arment was the first engineer at Tumblr. The exit was for $1 billion. He is rumored to have received less than $6 million.
* Take over everything technical I was good at and hired for.
* Take over policy and progress on everything I was good at.
* Be on call 24/7.
* Do whatever the CEO/CIO didn't want to do.
Think this is pretty standard from my reading of other startups. The one lesson I should have learned and didn't
is that as first engineer you should get 10% or more equity if you stay > 5 years.
If you can’t do that then all the time you spend taking them out to dinner is wasted.
On TripleByte - they should make it clearer that the platform is only for the Bay Area and Software Engineering.
It seems that "Engineer", in the context of hiring, for anything YC-sponsored, means programmer. Even "Work at a Startup" was (and likely still is), exclusively for software engineers.
This is despite the fact that YC actually accepts/funds companies that aren't pure software plays.
The problem is that the main piece of advice is correct but unuseful. Indeed, you should look at people you've worked with. In some sense they've all interviewed with you already, so you know what it's like to work with them, you know how good they are at communicating, and you know their limitations.
Unfortunately, most people haven't worked with enough people to have more than one or two likely candidates for whatever they're thinking of doing. Your homies are either not right for the role, unwilling to move from a position of comfort, or not willing to put your friendship on the line.
The same is also the reason why your company cannot grow via connections of employees past some point, the r < 1 on that series and it will converge on some low number.
Where my problem is a bit different to the article is that before you have any devs, you have a really big problem identifying good devs. Heck even hiring for devs outside your specialty is hard. If you can't do X, how are you going to find a good X? You will end up falling back on recommendations and reputation, and you'll pay up for a branded individual if one is around. Not in itself terrible, but every penny counts early in a startup.
I was talking to a shop who were after their first programmer a few months back, and they did the sensible sounding thing of bringing in a trusted friend from a FAANG to interview people. Main issue with that is that person is thinking about how a megacorp hires people. Mainly avoid guys who can't reverse a linked list, and stick the new guys into a process that already exists. But it's not quite the same things you care about as a day 1 startup.
Day 1 guys need energy. Sad to say it, but this probably tilts against people who have kids. In my first day 1 jobs, I didn't have kids, I could wake up at 6 and code to 11 at night. Or you do like my current firm, where I was also day 1, but let people work from home. Then you suddenly have a very big carrot for experienced hires. The guys in the previous paragraph did the same.
Day 1 guys also need a high degree of autonomy. When you've got nothing, as in not even a chat about what stack you're using, day 1 guy needs to put down those foundations. This is a lot harder than you think. Not only do you need to consider budget, you need to think about what a small team can do, you need to think about what imaginary future employees will want to work with, and you need a way to get from little team to big team where your hands aren't tied by your day 1 decisions. And you gotta balance current technical debt against future payments on that account.
You also need to be broadly read. You can be highly specialized, but you need to have some idea of what's going on in the software world in general. Chances are you will end up picking the most standard choice of everything that isn't your specialty, like Django for a web framework or SciKit for a bit of ML. But you need to have an idea about a huge variety of things to know what the landscape roughly looks like.
So how do you find a person like that? Well actually none of the methods other than "network" will actually check for these qualities. Most people are specialists with a label that enables them to move to other jobs with similar titles (Low Latency c++ dev), and recruiters are on the lookout for the label. Inbound and Outreach are also not going to tell you how broad someone is, because everyone writes stuff on their CV to look specialised, with a bit of breadth to catch a few interviews. Meetups, maybe, depends on how good you are at directing the conversation. A skill in itself.
One super power startups have is being frugal with money, why would you want to throw it away?
I don't see how engineer #1 or engineer #100 changes that.
When I onboard a senior engineer, they get a problem on day 1.
Could you share a bit more about why, in your experience, this is something to prioritize with your first engineer?
Unless the startup founders themselves are technically up to the bar required, I would think this is going to require huge motivation to make folks like that join. That can be either in the way of convincing them with your software potential enough for them to make the switch OR a ton of money/equity (And not FANG level money, even better). I would go with the latter in 90+% of cases, probably both.
IOW - I don't think we have a proper market place today that serves these high tier developers who will single handedly make or break it for you. I don't think the normal recruiting methods apply to excellent established candidates. You might luck into one, but it is going to be real hard unless you draw from known sources.
FWIW, I am very curious if there is one such premium marketplace as well. (Sorry if this sounds gentrifying, but there are a bunch of engineers I know whose gross comp is close to 1MM/yr or more and I don't think you are going to find them prowling LinkedIn or responding to regular methods anytime soon. Anecdotally I do believe many of them have the capacity to do magic technically though).