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6 comments
The verbal promise was to full-fill back pay on this next round, and to cover previous unpaid taxes. I filled for an extension and I did not spend money on an accountant yet.
I don't really know how deep my tax risk is.
I'm not even sure If in the US I am allowed to collect unemployment this time around.
I don't really know how deep my tax risk is.
I'm not even sure If in the US I am allowed to collect unemployment this time around.
Sounds like a weird and bad situation. Here's a question, you are going into debt over this company... is the CEO also doing the same? Is it shared pain? Or... are you the only one who is under pain? Or under-paid?
I've seen startup situations where the CEO earns > $250k but pays everyone else < $100k. And says there isnt enough money. But the truth is the CEO himself is squeezing the company dry and killing it. Are you in that kind of company?
Another thing to consider, are the founders ethical? Are they good people? Have you considered if they are sociopaths? Read: http://en.wikipedia.org/wiki/Dark_triad
The reality for me is that I would never ever ever take a startup job less than break-even cash. That means I am not paying for my day-to-day living out of savings while taking a substandard salary. Because in a properly backed startup, they CAN afford to pay people $120k a year. If you are taking major cash hits, you need to be a founder.
On the founder side, it's a pretty clear cut rule... are you a founder - if the answer isnt "yes" immediately, without a doubt, the answer is in fact NO. First employees arent founders. Employees with stock options (ISO or otherwise) arent founders. "VP of X" or "Director of Y" - not a founder. "But I did the technical due diligence" - not a founder.
Being a founder in major part is also about how the other founders treat you. Are you an equal business partner? Usually if you were hired in substantially after, the answer is NO. They might respect your opinion, but also reserve the right to ignore it. Real founders and partners don't get to ignore the other's opinion without consequences later on. This is true in business and your personal life as well.
In short, if your founders are the Dark Triad type, you may wish to extract yourself. If they are not, you may be able to come clean with them, and come to a negotiated situation. Such as allowing you to find consulting work, or perhaps paying you more, etc.
Good luck!
I've seen startup situations where the CEO earns > $250k but pays everyone else < $100k. And says there isnt enough money. But the truth is the CEO himself is squeezing the company dry and killing it. Are you in that kind of company?
Another thing to consider, are the founders ethical? Are they good people? Have you considered if they are sociopaths? Read: http://en.wikipedia.org/wiki/Dark_triad
The reality for me is that I would never ever ever take a startup job less than break-even cash. That means I am not paying for my day-to-day living out of savings while taking a substandard salary. Because in a properly backed startup, they CAN afford to pay people $120k a year. If you are taking major cash hits, you need to be a founder.
On the founder side, it's a pretty clear cut rule... are you a founder - if the answer isnt "yes" immediately, without a doubt, the answer is in fact NO. First employees arent founders. Employees with stock options (ISO or otherwise) arent founders. "VP of X" or "Director of Y" - not a founder. "But I did the technical due diligence" - not a founder.
Being a founder in major part is also about how the other founders treat you. Are you an equal business partner? Usually if you were hired in substantially after, the answer is NO. They might respect your opinion, but also reserve the right to ignore it. Real founders and partners don't get to ignore the other's opinion without consequences later on. This is true in business and your personal life as well.
In short, if your founders are the Dark Triad type, you may wish to extract yourself. If they are not, you may be able to come clean with them, and come to a negotiated situation. Such as allowing you to find consulting work, or perhaps paying you more, etc.
Good luck!
You are not a founder. The risk is on their shoulders, not yours. If they can't pay then too bad. Tell them to fuck off or pay.
Realize something:
These people, no matter if they are "friends" are going to fuck you if they get a big paycheck. How do I know? They are already fucking you. The role of the founder is to get enough cash flow so that the business is able to function. The role of the employee is to work as long as they are getting paid. You mentioned them having a pattern of late payments. Guess what? Its never going to change. When you pay your employees late, it means that their involvement in the business is temporary. A founder that values an employee will make all he can to pay on time (or at least pay in some kind of structured agreement with you). By you posting publicly means that you are getting the run-around.
So, I suggest to talk with these people. Demand your money in a firm manner. Or demand that you be made into a co-founder. Get ready to bail out, because this seems like a sinking ship.
Startups, much less tech ones, rarely ever make it. Move on.
Realize something:
These people, no matter if they are "friends" are going to fuck you if they get a big paycheck. How do I know? They are already fucking you. The role of the founder is to get enough cash flow so that the business is able to function. The role of the employee is to work as long as they are getting paid. You mentioned them having a pattern of late payments. Guess what? Its never going to change. When you pay your employees late, it means that their involvement in the business is temporary. A founder that values an employee will make all he can to pay on time (or at least pay in some kind of structured agreement with you). By you posting publicly means that you are getting the run-around.
So, I suggest to talk with these people. Demand your money in a firm manner. Or demand that you be made into a co-founder. Get ready to bail out, because this seems like a sinking ship.
Startups, much less tech ones, rarely ever make it. Move on.
1. Forget the friendship: Are you an owner of shares or just an employee?
2. If you're an owner you have some responsibility, but if you're an employee then it's really your call. If they're your real friends they'll understand.
3. If you want to compromise take on the some short term freelance work to dig yourself out of a hole. This allows you to dig yourself out of a hole while they try and rescue the company. You may even want to condition returning based upon payment of previous work, even if it's just a payment plan.
2. If you're an owner you have some responsibility, but if you're an employee then it's really your call. If they're your real friends they'll understand.
3. If you want to compromise take on the some short term freelance work to dig yourself out of a hole. This allows you to dig yourself out of a hole while they try and rescue the company. You may even want to condition returning based upon payment of previous work, even if it's just a payment plan.
I negotiated for vesting common stock, rather than options, but it's within range of a large option grant.
I have always been referred to as an employee, not a co-founder, even though I have been advising the CEO for about a year before I was hired. I even introduced the two co-founders.
I am very emotionally invested, and have a large, but not substantial equity position.
Effectively I am 10-15k in debt on this venture and I could double that debt very easily in the next few months depending on how long it takes to find a desirable new role/ contract.
To sum it up, you think they will be understanding.
My biggest fear is that the CEO is way more leveraged than even I. I feel like focusing on other things openly, even open to the team, could mess-up the funding, even if he would really be able to close it.
I have always been referred to as an employee, not a co-founder, even though I have been advising the CEO for about a year before I was hired. I even introduced the two co-founders.
I am very emotionally invested, and have a large, but not substantial equity position.
Effectively I am 10-15k in debt on this venture and I could double that debt very easily in the next few months depending on how long it takes to find a desirable new role/ contract.
To sum it up, you think they will be understanding.
My biggest fear is that the CEO is way more leveraged than even I. I feel like focusing on other things openly, even open to the team, could mess-up the funding, even if he would really be able to close it.
If they're really your friends they'll be understanding — the key word is "if".
1. Are they aware if your personal financial situation? They need to understand if you crash and burn that won't help anybody.
2. What is their situation? Are they in the same boat? If they are there needs to be a bigger conversation. If they aren't they need to be willing to pay you or lend to you or something.
3. Do they have a plan to crash land the plane? When my company imploded in 2002 the best thing i had going for me was a COO who had a crash landing plan: We put a metric on money that needed to come in, set a deadline (so important), and then had a plan to crash.
But it sounds like there is a lack of communication, and sometimes things can actually be worse between friends because they don't want to hurt each others feelings or fear damaging moral.
Side note: The best thing that happened when my company imploded in 2002? I was able to keep the friendship of my co-founder who I knew since high school. And it took me a few years after the failure for me to dig out of that hole.
1. Are they aware if your personal financial situation? They need to understand if you crash and burn that won't help anybody.
2. What is their situation? Are they in the same boat? If they are there needs to be a bigger conversation. If they aren't they need to be willing to pay you or lend to you or something.
3. Do they have a plan to crash land the plane? When my company imploded in 2002 the best thing i had going for me was a COO who had a crash landing plan: We put a metric on money that needed to come in, set a deadline (so important), and then had a plan to crash.
But it sounds like there is a lack of communication, and sometimes things can actually be worse between friends because they don't want to hurt each others feelings or fear damaging moral.
Side note: The best thing that happened when my company imploded in 2002? I was able to keep the friendship of my co-founder who I knew since high school. And it took me a few years after the failure for me to dig out of that hole.
It sounds like you are heavily invested in this company and are taking risks on the same level that a co-founder would. If they can't pay you consistently, you should be getting the equity and title of a co-founder.
what is fair expectation?
Since you are taking close to the same risks as the founders, you should be getting close to what they get.
If I do walk, this is going to embarrassing, as I have been reaching out and trying to warm up friends for a while.
But as you said, if you don't back out you could end up going bankrupt in two months. Don't let a sinking ship drown you.
I have been at a failed startup, ignored the warning signs, and "stuck with it" to the very end, to the very last day when they cut everyone. The smart people saw the signs and had already exited. They all landed softly, and may of them stepped up in their careers. Leaving was the best thing they could have done.
I hope you are formulating options.
I have been at a failed startup, ignored the warning signs, and "stuck with it" to the very end, to the very last day when they cut everyone. The smart people saw the signs and had already exited. They all landed softly, and may of them stepped up in their careers. Leaving was the best thing they could have done.
I hope you are formulating options.
Not being honest is more embarrassing! Embrace failure, and learn...
A friend of mine is trying to help line up consulting work, but I am second guessing myself? Should I just stick with it? Am I just being a nervous nelly?
Or should I layout the blunt truth to them that I am getting way out of my risk tolerance. Even if I don't stick with the company I'd like to keep them as friends.
I've looked up if I can write off on my taxes lost wages, and that seems like a no-go. I have also thought about converting my lost wages to debt within the company as I am honest and pursue full time consulting work vs. maybe 20hours a week or something.
Again, I just don't know the best course of action. I believe in the product and the space, but I am not sure anymore that we are the team that is going to win this ground.
Thoughts?
Or should I layout the blunt truth to them that I am getting way out of my risk tolerance. Even if I don't stick with the company I'd like to keep them as friends.
I've looked up if I can write off on my taxes lost wages, and that seems like a no-go. I have also thought about converting my lost wages to debt within the company as I am honest and pursue full time consulting work vs. maybe 20hours a week or something.
Again, I just don't know the best course of action. I believe in the product and the space, but I am not sure anymore that we are the team that is going to win this ground.
Thoughts?
Have you talked to the founders? State that you are not looking for a full month salary right at the moment but you need the minimum to pay your rent and feed yourself. You need this money like this week and if you don't have the minimum you are being in a very difficult spot. Also, strongly indicate that you do not like debt and are already over leveraged.
There is no shame in doing this. Now, there will be a couple of scenarios that will play out and both will give you a strong indication of where you stand with this startup.
If you are told that there is absolutely no money to give you the minimum (but you know that there is - believe me there always is some money), then they are basically giving you the finger. At this point, I would ask myself, why the fk am I still in the building?
They may also tell you that they can pay part of your salary but you will have to wait another month, 3 weeks etc. Don't fall for this. This is as good as a no.
If they are serious about the startup and its future (and more importantly your role in the startup), the founders can and will dig into their own money to keep things going. If they do this, then you have to decide how long you can keep going with the company with a reduced salary.
Also, another very likely scenario is that they tell you that you know what its very tough and its likely better that you move on to another job. Please, if this is the message, then take it as a gift. They are basically letting you off a sinking ship with mutual consent. If they start to play the guilt trip (ie. we haven't made any salary either, others aren't taking in a salary either, we are all in this together, etc.) then politely say thank you but under your circumstances you can't stay around. It doesn't matter how many friends you have in the startup. It's a business relationship. What's your upside for no salary? Are they substituting that for equity? Likely not, so don't be a sucker.
Anyways, just my thoughts on this. The main thing is that this is not just your problem. It's also the startup's problem. If they care about your contribution then they will help you.
There is no shame in doing this. Now, there will be a couple of scenarios that will play out and both will give you a strong indication of where you stand with this startup.
If you are told that there is absolutely no money to give you the minimum (but you know that there is - believe me there always is some money), then they are basically giving you the finger. At this point, I would ask myself, why the fk am I still in the building?
They may also tell you that they can pay part of your salary but you will have to wait another month, 3 weeks etc. Don't fall for this. This is as good as a no.
If they are serious about the startup and its future (and more importantly your role in the startup), the founders can and will dig into their own money to keep things going. If they do this, then you have to decide how long you can keep going with the company with a reduced salary.
Also, another very likely scenario is that they tell you that you know what its very tough and its likely better that you move on to another job. Please, if this is the message, then take it as a gift. They are basically letting you off a sinking ship with mutual consent. If they start to play the guilt trip (ie. we haven't made any salary either, others aren't taking in a salary either, we are all in this together, etc.) then politely say thank you but under your circumstances you can't stay around. It doesn't matter how many friends you have in the startup. It's a business relationship. What's your upside for no salary? Are they substituting that for equity? Likely not, so don't be a sucker.
Anyways, just my thoughts on this. The main thing is that this is not just your problem. It's also the startup's problem. If they care about your contribution then they will help you.
the company is on vapors, and we can not afford salaries right now.
i think i am the least leveraged person, but that's because i planned for some extent for this, and didn't spend any money in the last 6 months. i didn't even visit family for christmas.
it's hard when you know someone with a family might loose their house if you quit, and that spooks the VCs.
i think i am the least leveraged person, but that's because i planned for some extent for this, and didn't spend any money in the last 6 months. i didn't even visit family for christmas.
it's hard when you know someone with a family might loose their house if you quit, and that spooks the VCs.
I think you are answering your own question.
What's the likely hood of getting the upside on this? Let's say the funding does come through? Is that going to solve the problem? You can only answer this. Based on what you are saying, it's clear to me that you have a strong sense that this company may not survive.
You need to ask yourself why you are still with the startup because based on what you are saying, there is a very high risk that the startup will shut-down in the next weeks, months.
Based on all the information you have given, it looks like you are on a sinking ship. The problem is that you cannot afford to be on this ship. If you had the resources to stick around then it could be different. Being able to take on more debt does not mean you can do this. Don't set yourself back 3-4 years because you feel you owe the startup anything. At this point, they are not keeping up their end of the deal. If this was your startup and you were the founder, its a different dynamic. Why are you taking the same risk as the founders when your upside is so much less?
What's the likely hood of getting the upside on this? Let's say the funding does come through? Is that going to solve the problem? You can only answer this. Based on what you are saying, it's clear to me that you have a strong sense that this company may not survive.
You need to ask yourself why you are still with the startup because based on what you are saying, there is a very high risk that the startup will shut-down in the next weeks, months.
Based on all the information you have given, it looks like you are on a sinking ship. The problem is that you cannot afford to be on this ship. If you had the resources to stick around then it could be different. Being able to take on more debt does not mean you can do this. Don't set yourself back 3-4 years because you feel you owe the startup anything. At this point, they are not keeping up their end of the deal. If this was your startup and you were the founder, its a different dynamic. Why are you taking the same risk as the founders when your upside is so much less?
I have been in position of having to wait to get paid (in fact a volunteered to let those with mortgages and kids to support to get paid first)
My suggestions are
1 Make sure you have an up to date CV
2 Start looking for a new job NOW (just in case)
3 Make sure that your boss knows that he owes you one.
4 Use up any leave you have owning (again just in case)
5 Find out if the company owes money to social security
6 Check your pension contributions are as they should be I worked for one company and they had not been paying both their contributions and mine!
Given you seem to be cash short you may have to be brutal and look after number one as a priority. I could afford to forgo a month or so as I have savings and I know that the Government (I am in the UK) will cover the statutory redundancy if the company goes bad.
BTW from a legal perspective not getting paid can be deemed to have "frustrated the contract" so you need to check with a lawyer if any NDA etc are still valid.