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by ww520
4177 days ago
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Early employees of a startup are in a rotten deal. They took slightly less risk than the founders, similar pay cut, but with order of magnitude less equity, and with more work in designing and building the product, running operation, doing marketing, and selling to customers. When the company goes under, their loss is the same as the founders. When the company does well and scales up, their positions and roles will be diminished substantially, and their equity would be diluted again and again with each round (later grant is often not at the same scale as the initial option grant). Early employees are basically jack-of-all-trade doing essentially the same job as the founders (minus the fund raising) in building up the company but with much less of the upside. If you could, be the founder. Don't be the early employee. |
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As a co-founder, I didn't take a salary until a year into the startup (same with my other two co-founders). Even when we received our accelerator funding, all of it went towards our first hire's (an engineer) salary and operating expenses. At this point, our risk was significantly higher, not slightly. If the company didn't succeed, I can tell you our first hire was next in line for a cushy market job, and he was being actively poached, not us.
After we graduated the accelerator we raised a ~$1M seed round. We hired more two early team members at market salaries. Each of the co-founders were taking $33K salaries. Why? We wanted the budget to hire great people. So no, definitely not a similar pay cut. In fact, it's increasingly hard for early stage startups to hire good talent at less than market rates because there are plenty of amazing startups hiring above market. Our risk at this stage was even higher, because failing would burn most of our bridges with our new investors (maybe a couple wouldn't hold it against us), where as if our engineers went on to start something, no investor would think twice about their history working at a failed VC-funded startup.
We didn't increase our salaries again until we were generating revenue. Even now, three years in, I'm taking $20K less than the starting salary for a junior person in the role I have. While I want to increase that a little more as our revenue grows, I don't think it's fair to take a market salary at our stage.
And I won't even begin to dignify early employees do "more work in designing and building the product, running operation, doing marketing, and selling to customers" with an answer.
I'm not complaining, but to say being an early employee is a rotten deal is unfair. If our startup goes under, I definitely have the more rotten deal. It only looks like I had the better deal if we succeed.
And if you want to start a startup, you should, that's the only way you'll know how truly hard it is.