This is a common discussion item here at HN. Really it only makes sense to work at a startup in the following scenarios: you are founder, you are new and need experience, you are getting paid very well, or you don't care about money and love the work. Trying to get rich as a non founder is a fools game.
Well, this isn't completely true. Founders are much more likely to make ten or a hundred million than first hires, but first hires are at least as likely to make $500k to $3m as founders, especially in net present value accounting terms, and not even adjusting for risk adjusted returns or opportunity cost differences.
Most startups don't get to first hire. Most startups have founders that don't just make nothing, they lose money. First hires don't lose money.
I'm seeing a lot of these irrelevant moral arguments thrown around. The fact that the founder is taking as much or more risk than you does not mean you should forgo better opportunities to work for him. You should work for him if the combination of salary and equity is competitive, and nowadays it often isn't, even for early hires.
Which makes the argument that being an early hire at a startup doesn't make sense at the current low equity and salary commonly offered.
> first hires are at least as likely to make $500k to $3m as founders
I know too many startups where early hires failed to make anything close to $500k, and in fact didn't cover the difference between their salary and market rate even for a single year.
Exits in which early hires make even just $500k are very rare nowadays.
> First hires don't lose money.
But of course they do! They lose the difference between what they could make elsewhere, and what the startup is paying them.
Non-technical founders have far lower opportunity cost.
Based on your comment elsewhere[0], I seem to be among the crowd you believe is throwing around irrelevant moral arguments when in fact I did not and 3pt14159[1] to whom you’re replying here did not. I was discussing valuation and 3pt14159 probability.
The founder owns a chunk of equity, an asset with some value. Given the ups and downs of reaching a point where people are kvetching about equity allocation — and 3pt14159 reminded us about survivorship bias — the founder may overvalue her stake. If bad news has recently hit, she may undervalue. Regardless, the question is what will persuade the founder to give up a piece of what she owns, and what will she accept in exchange?
Looking backward does not generally make for wise business transactions. The entrepreneur’s role in the market economy is looking ahead to make forecasts and allocate capital accordingly. Comparing past exposure to loss is a pointless exercise. Giving away resources with no hope of repayment or increase is gifting. Spending with the expectation of regaining what was paid plus an additional return is investing. This is still not a moral question but one of philosophy.
Many people miss this when looking at the situation as though it were an undeserved windfall for the founder, a gift from Santa Claus. Assuming the founder is primarily interested in increasing the value of her equity, accepting a smaller percentage of the pie will not achieve this purpose unless the individual slices become more valuable because the grant of equity was an investment, and “Well, I’m going to continue doing the same job I’ve been doing for the compensation I already agreed to” is not a strong business case.
Looking at it from the employee side, of course don’t agree to below-market pay with zero or insufficient equity on the mere hope that big blocks of equity will fall out of the sky later. (This would be an opportunity cost for the employee, but that is still different from out of pocket cash loss to which the founder may have been exposed.) Employees who want more have to either negotiate for it up front or increase their value to the business. On this, I will make a moral argument: yes means yes. Ask for what you want, and agree to what is acceptable. No one is a mind reader.
This is true, but there's opportunity cost as well: those same first hires would be significantly more likely to make that 500k-3mil over a few years at a FAAMG-type company, anyway.
First hires are not at least as likely, they may be rewarded with a portion of the company out of the goodness of someone's heart or they may not be, until you actually have a stake in the company don't mistake your seniority for a share of the profits.
