Should first employee at YC funded company work for free?(answers.onstartups.com)
answers.onstartups.com
Should first employee at YC funded company work for free?
http://answers.onstartups.com/q/24947/2692
38 comments
Yes, they should work for free, and YC founders have droit de seigneur, "first dibs"†, on any date/partner/hookup said "employee" brings home.
Guys, it's 2011, not 1511. Feudal system & slavery are over. Sheesh.
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† an earlier edition incorrectly spelled this as "dips", we thank our careful readership for the correction.
Guys, it's 2011, not 1511. Feudal system & slavery are over. Sheesh.
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† an earlier edition incorrectly spelled this as "dips", we thank our careful readership for the correction.
It's "first dibs":
http://en.wikipedia.org/wiki/Dibs
http://en.wikipedia.org/wiki/Dibs
As so often happens on the Internet, there has been a rush to judgment here. I emailed the guy who posted that question, asking him if a YC co had made him an offer of the sort he described, and here's what he said:
"No company has made me an offer along these lines. I was trying to second guess them from a conversation I had. I thought I'd ask that question so I was properly armed should they come back with this kind of offer."
"No company has made me an offer along these lines. I was trying to second guess them from a conversation I had. I thought I'd ask that question so I was properly armed should they come back with this kind of offer."
An employee needs to be compensated for their work. If that's in the form of salary or equity, that's your business. However, you need to be compensated, somehow. Otherwise, it isn't work, it's charity. Non-deductible charity at that.
If someone is asking you to work for nothing (no pay, no benefits, no equity), you need to walk... no run... away from that deal.
This isn't even mentioning the fact that the company would open itself up to IP issues if they weren't compensating you. Let's say you came up with some killer code to do something that the world needs. Who would own the IP? The company that didn't pay you? You're not an employee if you aren't compensated - it isn't work for hire. So, now they have a problem.
If someone is asking you to work for nothing (no pay, no benefits, no equity), you need to walk... no run... away from that deal.
This isn't even mentioning the fact that the company would open itself up to IP issues if they weren't compensating you. Let's say you came up with some killer code to do something that the world needs. Who would own the IP? The company that didn't pay you? You're not an employee if you aren't compensated - it isn't work for hire. So, now they have a problem.
I think you meant "you need to run... no walk... away from that deal." Other than that, all good points.
The answer to all questions related to 'should I work for free,' is 'no.'
The point of work is to get paid, or to at least, get something valuable for the work. An internship might be an example of not getting paid but getting something of value. Barter would be another example...
If you are going to work for free, work for yourself. At least then the finished product is your intellectual property and there is some possibility of you making money off of it directly or indirectly.
The point of work is to get paid, or to at least, get something valuable for the work. An internship might be an example of not getting paid but getting something of value. Barter would be another example...
If you are going to work for free, work for yourself. At least then the finished product is your intellectual property and there is some possibility of you making money off of it directly or indirectly.
No. Just because they got into YC doesn't mean you should work for rent. They haven't made it, they've still got a significant chance of failing, and you working there is going to directly impact whether or not they do make it so you should be rewarded beyond "living expenses".
If they can't appreciate that then bugger them. I can't help but feel there's no way they couldn't appreciate how significant a third set of hands would be and you shouldn't work for them anyway because there is something rotten there.
If they can't appreciate that then bugger them. I can't help but feel there's no way they couldn't appreciate how significant a third set of hands would be and you shouldn't work for them anyway because there is something rotten there.
First answer nails it. If you're taking a risk and taking a hit to your income, you're a cofounder. Congratulations, and enjoy your equity.
If you're not getting a big slug of equity, you're an early employee; enjoy your below-market, but way-above-subsistence, salary.
One would hope that YC companies aren't abusing their brand and cachet in order to underpay employees. It's not necessary; given the capital available to these companies, and the caliber of people willing to work for YC firms, the optimal solution is to raise the funds you need and hire the people you need, not to hire the next tier down at a rock-bottom rate.
If you're not getting a big slug of equity, you're an early employee; enjoy your below-market, but way-above-subsistence, salary.
One would hope that YC companies aren't abusing their brand and cachet in order to underpay employees. It's not necessary; given the capital available to these companies, and the caliber of people willing to work for YC firms, the optimal solution is to raise the funds you need and hire the people you need, not to hire the next tier down at a rock-bottom rate.
And unless your equity starts vesting right away, you should be getting a salary. You don't want to work for 364 days, then get laid off and get absolutely nothing for your efforts.
Not that people would do that, but if you make it possible, it could happen.
Not that people would do that, but if you make it possible, it could happen.
I would actually go even further, and say that unless your equity is comparable to that of the founders, you absolutely should not be working for free.
It all depends on your market value, how much the founders have done so far and how much cash they've invested, your responsibilities. Founders themselves don't necessarily have the same amount of equity.
But, yeah, if you're getting half a percent of the shares and they each have 42%, you better have a decent salary.
But, yeah, if you're getting half a percent of the shares and they each have 42%, you better have a decent salary.
Aside from whether this is ethical or not, its not legal in California. Even interns have to be paid at least minimum wage.
In most states, afaik, unpaid interns are not allowed to be working on things that provide income to the company.
So what if, like almost all startups, no income is being generated?
hrm. That's an interesting stance, and I don't know!
Do you have a reference for that?
Get equity
Get paid
Whether they are in YC or not is irrelevant. YC is a nice to have but not a determinant in your compensation.
1 year cliff
4 years vesting
They also have money in the bank (Thanks to Yuri)
Get paid
Whether they are in YC or not is irrelevant. YC is a nice to have but not a determinant in your compensation.
1 year cliff
4 years vesting
They also have money in the bank (Thanks to Yuri)
Surprised a company getting into YC would try and run with a deal like this. I mean yes you have no money and want to scale up, but you have to at least give someone a significant equity chunk up close to the founders to expect someone to take on the same risk. Otherwise they are just an employee and should get market rate.
I don't think you can even use the word 'employee' if you're not being compensated for your work.
I'm sad that someone presumably talented would even entertain the thought that working for nothing is in any way reasonable.
(i.e, Sad at the reality that skilled people are gullible and undervalue their worth)
I'm sad that someone presumably talented would even entertain the thought that working for nothing is in any way reasonable.
(i.e, Sad at the reality that skilled people are gullible and undervalue their worth)
Absolutely no: no salary makes you a co-founder (who should have a large equity stake). No equity makes you a contractor/consultant (who should receive an above market salary, as they receive no equity or benefits).
The options are (pre-series A): large chunk of equity (1-2%), a below market salary. Post-series A: market salary, good amount of equity. Series-B and above: above market rate (you're longer offering a "life changing" amount of equity, yet you aren't offering the benefits/bonuses/etc.. that larger corporations can), some equity.
If a company is offering something significantly below this (co-founders without equity, salary significant lower than other same-stage companies) they won't be able to hire people who have other options.
This sounds just strange: either the co-founders are very inexperienced, or they're deliberately looking for people who can't get _any other job_ (why else would someone take this?)
The only exception to this is if you really can't get another job, but want one: if you have no professional programming experience, studying CS isn't an option for you, yet you have the confidence that you'll be able to learn and grow in that position until you're able to get a better job. The founders have to also consciously realize that this is what they're offering you (so that they can serve as a reference when you apply to future jobs). Think of it as a (more intense) form of internship.
The options are (pre-series A): large chunk of equity (1-2%), a below market salary. Post-series A: market salary, good amount of equity. Series-B and above: above market rate (you're longer offering a "life changing" amount of equity, yet you aren't offering the benefits/bonuses/etc.. that larger corporations can), some equity.
If a company is offering something significantly below this (co-founders without equity, salary significant lower than other same-stage companies) they won't be able to hire people who have other options.
This sounds just strange: either the co-founders are very inexperienced, or they're deliberately looking for people who can't get _any other job_ (why else would someone take this?)
The only exception to this is if you really can't get another job, but want one: if you have no professional programming experience, studying CS isn't an option for you, yet you have the confidence that you'll be able to learn and grow in that position until you're able to get a better job. The founders have to also consciously realize that this is what they're offering you (so that they can serve as a reference when you apply to future jobs). Think of it as a (more intense) form of internship.
Did this really happen? I would be surprised at the lack of acumen of a YC-approved company. While the experience of YC is priceless, you should of course be getting a salary or equity of a little of each. And unless the sustenance pay is at least minimum wage, it might be illegal in California. If this really happened and there wasn't some mis-undertanding, I would question the credibility of the company.
Founders equity (> 20%) == Same risk as founders, same pay as founders.
Employee[0] equity (<20%) == some salary depending on equity stake.
Whether it's a YC company or not doesn't matter. There are now over 250 YC companies, and 60 in this current batch. They are _all hiring_. You have a choice.
There are over 300 startups funded through Angel List this past year (a number of them YC'ers). They are all looking for engineers as well.
Google is looking for thousands of engineers, Yelp a couple hundred(pre IPO), Zynga a couple hundred (pre IPO), Facebook a bunch (pre -IPO), Twitter a couple hundred (pre-IPO). And, they are all competing for the same talent pool... you.
Not only that, but if it's a current YC company, you know they just got around $180k in money right off the bat, so they have a bit of something in the bank to pay you.
Employee[0] equity (<20%) == some salary depending on equity stake.
Whether it's a YC company or not doesn't matter. There are now over 250 YC companies, and 60 in this current batch. They are _all hiring_. You have a choice.
There are over 300 startups funded through Angel List this past year (a number of them YC'ers). They are all looking for engineers as well.
Google is looking for thousands of engineers, Yelp a couple hundred(pre IPO), Zynga a couple hundred (pre IPO), Facebook a bunch (pre -IPO), Twitter a couple hundred (pre-IPO). And, they are all competing for the same talent pool... you.
Not only that, but if it's a current YC company, you know they just got around $180k in money right off the bat, so they have a bit of something in the bank to pay you.
I disagree with a lot of the naysayers here.
Assuming this arrangement is legal (which others have pointed out might not be correct), I'm not sure this is such a bad deal.
Assuming you have access to all the YC dinners, the talks with pg et. all, etc., this is close to a once-in-a-lifetime opportunity to get an up-close look at one of the greatest institutions for startups around. That's worth a lot in itself.
I'm specifically talking about a case where the deal is only for the 3 months of YC. If someone came up to me with a deal to live in SF for 3 months and go through all of YC and learn from the experience, at the cost of only 3 months for myself, I'm not sure that I wouldn't be extremely tempted.
Assuming this arrangement is legal (which others have pointed out might not be correct), I'm not sure this is such a bad deal.
Assuming you have access to all the YC dinners, the talks with pg et. all, etc., this is close to a once-in-a-lifetime opportunity to get an up-close look at one of the greatest institutions for startups around. That's worth a lot in itself.
I'm specifically talking about a case where the deal is only for the 3 months of YC. If someone came up to me with a deal to live in SF for 3 months and go through all of YC and learn from the experience, at the cost of only 3 months for myself, I'm not sure that I wouldn't be extremely tempted.
Will you be able to take public credit for your contribution, and will it be big enough to impress people? What I'm thinking here is that if they become very successful and well known, and you can point to them and say "I'm the guy who built their infrastructure" or something like that, that might get you a really good high paying job somewhere else or get a good consulting career launched.
But generally, unless you have some specific plan like that in mind, I think the vast majority here are right and it is a bad idea.
But generally, unless you have some specific plan like that in mind, I think the vast majority here are right and it is a bad idea.
Anybody working for free should get exactly the same equity as the founders. Or more than that if the founders are getting salary/benefits.
the arrogance of a company to even propose such a relationship with an employee blows me away
Only if you believe in the people (and to a lesser degree the project) then I'd say it'd be good to consider it. Or if you're independently wealthy enough and value the y-comb experience that much.
Only if you believe in the people
If they do not cough up equity or salary then they don't believe in you. Which should be a red flag, you are letting the fact that they got into YC blind you to the fact that it is a bad deal all the way around. It is the only reason I could fathom that someone would even be entertaining such a deal.
If they do not cough up equity or salary then they don't believe in you. Which should be a red flag, you are letting the fact that they got into YC blind you to the fact that it is a bad deal all the way around. It is the only reason I could fathom that someone would even be entertaining such a deal.
probably not. If you have enough funding to give the employee a salary, you might as well. I think it would turn off a lot of talent if they weren't getting any salary whatsoever.
see http://shouldiworkforfree.com/
The only problem with Jessica's chart is she didn't make the NO in red font and twice as big.
The only problem with Jessica's chart is she didn't make the NO in red font and twice as big.
http://www.startupcompanylawyer.com/2010/04/15/can-a-califor...
http://laborlaw.typepad.com/labor_and_employment_law_/2007/1...
Moreover, the company is being stingy. Why? They don't want to commit to you in the long term. Fair enough, but think ahead. What's going to happen after YC? They will get a company, and you will get nothing. They will either kick you to the curb or they will offer you peanuts to stay. Will you be happy with that?
Negotiate wisely so you're getting something for the work you do. If they don't want to cough up equity, they must pay you. If they can't pay you now, agree to defer your compensation (essentially an IOU) which you can convert into equity after a certain date if it isn't paid up. They should pay you a higher than market rate (double) as well because you are the one taking the risk here; i.e. that they won't ever be able to pay you.
It sounds like your decision making is distorted by your goal of getting YC experience. If you want a YC experience, why not just apply yourself? You don't need YC either. There are hundreds of other startups in the Valley you can cut your teeth on. You have limited life energy. Why give it away for nothing?