This always seems like a huge scam to me. Employee 1 gets 1%? It seems unfair from multiple perspectives.

One is just a straight up naive sense of fairness. If I'm going to be in the trenches with you, I had better be able to see my ownership % in a pie chart with my glasses off. If we're out here both making chairs and when we sell a chair for $100, you get $85 (assuming someone took one of the standard-ish seed rounds that are usually 10-20%?) and I get $1? No thanks.

The other sense is aware that the founder is taking various risks and blah blah blah. Ok whatever. Let's pretend somehow 1% is a fair number and just look at it from a payoff perspective. 1% of stripe? Yeah I'll take that. 1% of the other 1000 startups who had mediocre exits or just muddle along to finally do some kind of tender? I'm barely breaking even. 1% of the other 10000 startups that just folded? At least I can mop the sweat off my brow with the paper I signed.

It seems like the only reasonable way to look at this is you either join a company for a competitive wage and get WLB, or you join a rocket ship in the hopes of becoming genuinely wealthy while pouring your blood, sweat and tears into it. So taking 1% and a shitty salary and having terrible WLB sounds like a huge suckers game.

This isn't a terrible take, but there doesn't seem to be a shortage of people for whom this doesn't feel like a scam.

I'm not particularly fond of the founder hype train, and the typical line is indeed "various risks and blah blah blah" but what's often left out is that employee #1 at a post-funding startup is a pretty different job/profile than co-founder.

Most employee #1's don't have relationships with investors, might not be as employable outside the startup world, and they don't sit on the board, don't have the same formal responsibilities, and rarely are able to raise money to found their own startup -- in fact, this is the often the key reason they're even interested in being employee #1.

It's a market, and as a market I'm not sure it's that skewed.

Want 25%+ of the company? Start it. There's no cabal preventing you from doing that. Have better options than 1% of a likely-dead startup, that pay more and have better WLB? Take them.

After all, few industries give any employees equity. First employee at an ice cream parlor? 0%. First employee of a hedge fund? 0%. First employee of a medical practice? 0%.

Equity grants can be motivating and aligning, and frankly more industries should probably consider them. But not that many people are in a position to found a startup that can raise money (larger equity grants are much more common for pre-external-funding employees) and this differential reflects that.

Btw, "1% of the other 10000 startups that folded" is worth about the same as a founder's 40%: $0. The issue is the middle ground, but there the equity grant is often not worth the paper it's written on: typically the acquirers dictate who gets the money. 1% or 5%, unless the acquirer is trying to retain you, chances are you'll see nothing even if the nominal payout is large.

Anyway, the upshot is what people have been saying for decades: don't do a startup for the money. Do it because you want to be part of that kind of thing, and treat any exit money as a bonus.

Are you talking about 1% and no pay or 1% and a pay?

If I'm getting no pay, I'm definitely a co-founder, but I'm getting a pretty good salary from day 0, I don't think that's too bad.

Say you get offered $200k/y +1%, if things go well, in 4 years you got $800k in cash and your 1%. If things go south, you still got $800k, a cool title, worked on a hopefully interesting product with a nice team. Doesn't sound awful to me. No?

Glad to see someone else say this. I feel like I'm crazy reading these replies about being ripped off. I've been working startups my whole career, earning salaries, working with good people and having fun at times. Sometimes the equity even pays out, but that's not my only financial "egg".

Startup founders often take salaries too

Only after they managed to raise any money, which is not as common as many people assume. And whatever you pay yourself as a founder initially eats into your runway, so that's always a tradeoff.

If you don’t believe a startup can be the next Stripe, then you definitely shouldn’t take 1% and work as one of the first employees.

Also, the risk profile and expectations are vastly different between founders and first employees. E.g. founders are expected to not quit unless the company collapses completely, first employees can quit whenever they wish. Also, if the runway is short, founders work for free and can even go into debt, whereas employees have a stable salary.

Outside US but I never regret getting equity/options and usually it went hand in hand with the higher paying jobs (paltry compared to US standards!) rather than being a salary/equity tradeoff. Atlassian is a great example though I have not worked for them.

I think companies here tend to have less fuck you over terms in employment share schemes but OTOH are less likely to get rich but one company made several employees rich (does 8 figures count?) here.

It's not even remotely fair, but it does follow the golden rule: he who has the gold makes the rules. The founders were the ones who investors were willing to trust their money with. Employee #1 was not.

Unicorn or bust is the name of the game. Once you understand that it’s not so bad.

It’s also possible to level-up pretty well from an acquisition, where maybe the equity was not life changing but you’re now in a bigco at a higher level than you’d otherwise be. The trap there is that many startup folks are not cut out for bigco life.

But yeah if you were dreaming of sailing off into the sunset you need to be a founder (or remarkably lucky). That’s one reason why there’s so many startups.