[codex]

Hiring #1 is tricky: you need to find someone good, but also naive. In this era of the ray startup, it makes little sense for a great engineer to work for someone else: the first employees work almost as hard as the founders, but receive 1/50 the ownership of the company. In the age of the acqhire founders' risk is very small.

[tptacek]

It depends.

Practically by definition, employee #1 is shouldering less opportunity cost than the founding team. The founding team was able to start a company and raise money sufficient to pay the employee. The employee is accepting full-time employment. Why would they do that unless they didn't believe they could be successful (whatever that might mean) starting something themselves?

I think there's a whole lot of taking-advantage happening in startup hiring, but there's also an industrywide lack of understanding of how risk and basic economics work, too. Equity isn't a merit badge.

[_delirium]

It sounds like there's a bit of a trend towards passing some of that risk on to the employee early-on though, by not really considering the job a real job with a presumption of continuation. The 2nd story here recommends only "trial-hiring" people for 1 or 2 months at a time, and even companies that don't go that extreme have been trending towards quick-to-fire for vague reasons like "poor fit" (more than bigger companies). Of course, you can always be fired in a regular job (in at-will states), but the understanding is that you normally won't be fired one month in, unless either you totally screw up or the company's situation changes significantly. Hence you have a bit less risk because you have normal job + salary, while founders have more risk, but that's not as true if you don't really have normal-job anymore. Of course, if you have a pile of contract work you can transition to at a moment's notice even this arrangement might not be a huge risk, but depends on the person. And in that case you might prefer to just stay a contractor and bill your regular rates, rather than shouldering the opportunity risk of committing to a possibly-evaporating job.

[jt2190]

  > I think there's a whole lot of taking-advantage happening 
  > in startup hiring...

One warning sign of this is when the salary is below market rates. Founding members take low salaries and lots of preferred equity (and lots of risk), while employees take a market salary and a few incentive stock options.

[mchusma]

One quick correction is that founders typically have common stock, not preferred.

[nerfhammer]

They get common stock but without a cliff or vesting period

[tptacek]

No, founders vest. For the love of all that is holy, don't join a founding team with no vesting. Funding or no funding, vesting is non-optional. Get vesting worked out from the jump.

[jenandre]

not true if they are taking on money. any investor will require a vesting period over 4 yr w/ usually a 1 yr cliff (which resets every time you take money)

[webwright]

"...but also naive."

That's silly. You need someone who values the startup experience in some way to balance out the salary hit. That's all. They may love small teams, might be seeking early experience, might want to build cred so they can raise money someday themselves, etc.

"the first employees work almost as hard as the founders, but receive 1/50 the ownership of the company."

The founders take considerably more risk working for free, raising money (time consuming for 99% of startups), and greater opportunity cost... Working 6-9 months or more on an unproven/unfunded startup is WAY RISKIER than joining a funded startup for a slightly reduced salary.

"In the age of the acqhire founders' risk is very small."

This is just plain wrong. What % of failing teams are acqhirable? Stanford grads will have no problems, but many/most teams are too small or too weak from a resume point of view to get a deal done. I've watched very solid teams fail to find a suitor a LOT (including MOST failing YC companies).

[ivankirigin]

But they also get a salary: money the founders raised. That difference is huge.

That said, I completely agree. It takes a great match. Equity percentage can't be the only dimension considered.

Also, if you're struggling with hiring, giving more equity can be a solution. There are plenty of "cofounders" that came on as employees after money was raised but needed a sweeter deal to join.

[jbcurtin2]

Looking for someone who is naive is the problem. I've walked away from countless opportunities because I got the sense that I was being handled.

[Estragon]

What is a ray startup?