Ask YC: How can you recruit and reward non-founder programmers at early stages?
I constantly run into situations, where it would be useful to recruit additional non-founder programmers to help out on a project. However, I am not sure what compensation should look like for these non founders. I.e. We have been working on a project part-time for over a year, but could use another rails developer to help out on our front-end work. We'd like to pay with equity, but I am not sure what that normally looks like. Ideas?
11 comments
My own experience of working in a startup (Bubble 1.0) was that (as techies) the web designer and I were completely ignored and counted out of the decision-making processes, even for deeply technical matters. I think this stemmed from the insecurity of the boss, and his second-in-command who was supposed to be "a marketing genius" but somehow never achieved his full potential ;)
Anyway, we were excluded from meetings, and even when we were invited it was only for show and we were told to leave whenever the grown-ups had to make real decisions. The boss started showing people around the office saying "This is our accounts person, Jo. And our support person, David. Oh, and we've got a couple of geeks out the back but I won't bother introducing you to them."
This was an extreme example but it's often similar to that wherever I've worked: techies are viewed with a mixture of suspicion and contempt. If you can get over that and allow all your people to engage in decision-making (not always possible, but desirable, I believe) you will find it easier to retain them, despite lower salaries, etc. You probably know much of this anyway but it's worth keeping it in mind and using it to "sell" the job to potential applicants.
Anyway, we were excluded from meetings, and even when we were invited it was only for show and we were told to leave whenever the grown-ups had to make real decisions. The boss started showing people around the office saying "This is our accounts person, Jo. And our support person, David. Oh, and we've got a couple of geeks out the back but I won't bother introducing you to them."
This was an extreme example but it's often similar to that wherever I've worked: techies are viewed with a mixture of suspicion and contempt. If you can get over that and allow all your people to engage in decision-making (not always possible, but desirable, I believe) you will find it easier to retain them, despite lower salaries, etc. You probably know much of this anyway but it's worth keeping it in mind and using it to "sell" the job to potential applicants.
You're obviously not working at companies dominated by engineering (cough, Justin.tv, cough).
In that specific case, I was. It was very strange... I mean, there were about three or four business plans, each of which centred on the Internet. When I finally left for a contract at double the money, the boss held another secret meeting where he told everyone not to talk to me for the duration of my notice, because I had been "disloyal". One of the office monkeys habitually referred to me as "Spacker" after that. Looking back, I have a headache ;)
In my opinion, if you don't have money to pay them yet, they're a co-founder, even if you've already been working on things for a year. General rules for finding co-founders apply.
And these rules are...?
I'm not sure there's a reasonable compendium, but Paul's written a lot on such in his essays. There's some here:
http://www.paulgraham.com/start.html
For me it's pretty simple, though finding and verifying is the tricky part.
- You have to be able to put up with them. A lot of them. Really a lot of them. It's kind of like getting married there.
- They should be able to do something essential to the company's survival. And they should do that while "getting" what you're doing and thinking it's special.
- You trust their judgement. Enough to bet a few years of your life on it.
"Art of the Start" also has some decent info there.
http://www.paulgraham.com/start.html
For me it's pretty simple, though finding and verifying is the tricky part.
- You have to be able to put up with them. A lot of them. Really a lot of them. It's kind of like getting married there.
- They should be able to do something essential to the company's survival. And they should do that while "getting" what you're doing and thinking it's special.
- You trust their judgement. Enough to bet a few years of your life on it.
"Art of the Start" also has some decent info there.
well right now the ball is in your court. There really aren't that many jobs out there, so you can get a decent programmer who'll take the pay cut just to have a job.
But you do have some other options.
You can give out different titles, lets say someone is just starting out, and you start calling them senior developer on paper, no impact now, but for their next job they'll be able to ask for a lot more money .
The stock options etc have been mentioned, so I won't cover it.
Office space, stay away from the cubicles, and have a relaxed policy.
Workhours, instead of working 9 to 5, offer them to work 10 to 5. + have general flexibility, better to have a good programmer for 4 days, than have someone crappy for 5.
Basically use small stuff like this to make yourself appealing to a certain niche of programmers. So that they'll be much more willing to take a pay cut and work for you.
But you do have some other options.
You can give out different titles, lets say someone is just starting out, and you start calling them senior developer on paper, no impact now, but for their next job they'll be able to ask for a lot more money .
The stock options etc have been mentioned, so I won't cover it.
Office space, stay away from the cubicles, and have a relaxed policy.
Workhours, instead of working 9 to 5, offer them to work 10 to 5. + have general flexibility, better to have a good programmer for 4 days, than have someone crappy for 5.
Basically use small stuff like this to make yourself appealing to a certain niche of programmers. So that they'll be much more willing to take a pay cut and work for you.
"There really aren't that many jobs out there, so you can get a decent programmer who'll take the pay cut just to have a job."
Taking a pay cut is one thing, working for free (just equity) is something else entirely. Not sure if the current situation gives you any kind of an advantage to recruit people for equity only compensation. (If I understand the top post correctly).
Taking a pay cut is one thing, working for free (just equity) is something else entirely. Not sure if the current situation gives you any kind of an advantage to recruit people for equity only compensation. (If I understand the top post correctly).
well I didn't mean equity only, I was more thinking of perks on top of salary to get the candidates. If someone is working for equity only they are a co-founder in my book.
That is a great idea. 4 day workweek is enticing. Perhaps I'll be asking for that next.
Wouldn't you like to have first few programmers to be interested enough to work for 12 hours a day, all days a week than to let him think that getting a low pay means I can do a crappy work for 4 days?
A good programmer will do more work in 4 days, than a crappy one can do in 7. So its a net gain overall.
And the shorter work week will help you attract the higher quality of talent who are willing to take a paycut in order to get more free time.
If someone is good enough, why would he want to work his ass off for 12 hours a day for someone else. That type of workload is co-founder territory.
And the shorter work week will help you attract the higher quality of talent who are willing to take a paycut in order to get more free time.
If someone is good enough, why would he want to work his ass off for 12 hours a day for someone else. That type of workload is co-founder territory.
I think it would be a great incentive to work less hours than 40. I feel I only put out 'great programming' 6 hours a day. The rest of the time is wasted.
Having a great life-work policy as a startup may net more good people than wanting them all to work 80 hours for little pay and the promise of a payout. You will burn them out. That helps no one. Give them time off. Treat them well and they will do good work.
Also by not paying them well they will have to work smaller jobs outside of work. You NEED them to do this for the longevity of your company if you will not pay them. I have heard of companies barring people from working outside of their current job. They'd have to offer me more to have me sign.
Having a great life-work policy as a startup may net more good people than wanting them all to work 80 hours for little pay and the promise of a payout. You will burn them out. That helps no one. Give them time off. Treat them well and they will do good work.
Also by not paying them well they will have to work smaller jobs outside of work. You NEED them to do this for the longevity of your company if you will not pay them. I have heard of companies barring people from working outside of their current job. They'd have to offer me more to have me sign.
> We have been working on a project part-time for over a year, but could use another rails developer to help out on our front-end work.
The fact that you've been working for a year isn't all that relevant. In fact, what you've got now isn't all that relevant. The important thing is what goes into the next step. If all your work is a small part of that, the folks doing the rest get the big piece of the pie.
Think of it from the other side. How much would someone pay you for what you've got now if they have to do the rest?
The fact that you've been working for a year isn't all that relevant. In fact, what you've got now isn't all that relevant. The important thing is what goes into the next step. If all your work is a small part of that, the folks doing the rest get the big piece of the pie.
Think of it from the other side. How much would someone pay you for what you've got now if they have to do the rest?
1) Achieve revenues.
2) Hire freelancers for well-defined specific tasks targeted at increasing revenues, aiming at the low-hanging fruit first.
3) Repeat until you have your own private island.
This works for other skilled workers besides programmers, too. I don't make nearly enough from BCC to hire my writer full time (she has a masters degree and has commitments that make full time impossible at any price) but I get an awful lot of bang out of $100 per month.
2) Hire freelancers for well-defined specific tasks targeted at increasing revenues, aiming at the low-hanging fruit first.
3) Repeat until you have your own private island.
This works for other skilled workers besides programmers, too. I don't make nearly enough from BCC to hire my writer full time (she has a masters degree and has commitments that make full time impossible at any price) but I get an awful lot of bang out of $100 per month.
5-10% depending on the quality of the developer is what I have done in the past and as soon as we start making cash they start getting paid. Also I only do this deal with folks I know well as it is so much more complicated than standard hiring.
You could always pay the person. Is that out of the question. Too often the payoff in the end is not worth it for programmers. They could have just worked a nominal job doing something else and actually make more money.
Unless there is a surefire payoff, get some investor money and pay them what they are worth.
Unless there is a surefire payoff, get some investor money and pay them what they are worth.
So much more complicated is an understatement. Complications with IP, firing and sickness spring to mind.
If you know the person well you still need to be careful with the contract but you should be less likely to fire them and get into an argument about equity.
If you know the person well you still need to be careful with the contract but you should be less likely to fire them and get into an argument about equity.
To think about it, knowing the person well might even be worse if you end up in a sticky situation. Not only have you just lost a friend, but your reputation as well. Moreover, chances are high that he/she will be in the same social circles as you - which ends up getting even more messy
To clarify when I say know well I don't mean friends I mean people who I know have the coding chops to be worth the equity and pitfalls. I'm never had any luck telling how good a coder is without working with them for 3-6 months, after that it is obvious :-)
As a developer, something I worked out with a startup trying to save some cash was that I would work for about half my normal hourly rate up-front.
Then I would take a share in the startup's revenue (not equity - say 20% of gross income) until the other half of my hourly rate was made up for - this could take a year or two years etc, or if the startup is very successful it could only take 3 months; but it is capped to the total 50% of the hourly rate * number of hours worked.
I also would take an extra share of revenue, say for the first year, as a potential bonus for taking on the risk of possibly not earning my full developer rate if the startup fails. This extra could be 5% or 10% of the first year or two years' revenue but is not capped and so if the startup is very successful the developer could do quite well, but the founders have not sacrificed any long-term equity in their business.
I thought that was a nice way to give the developer a share of the business' success without actually giving up equity, and also without asking the developer to take a total risk that they could have wasted their time and never receive anything for it.
Then I would take a share in the startup's revenue (not equity - say 20% of gross income) until the other half of my hourly rate was made up for - this could take a year or two years etc, or if the startup is very successful it could only take 3 months; but it is capped to the total 50% of the hourly rate * number of hours worked.
I also would take an extra share of revenue, say for the first year, as a potential bonus for taking on the risk of possibly not earning my full developer rate if the startup fails. This extra could be 5% or 10% of the first year or two years' revenue but is not capped and so if the startup is very successful the developer could do quite well, but the founders have not sacrificed any long-term equity in their business.
I thought that was a nice way to give the developer a share of the business' success without actually giving up equity, and also without asking the developer to take a total risk that they could have wasted their time and never receive anything for it.
This is creative, but the problem with clever 'backpay' solutions and startups is that often they are starved for cash, so the extra 5% or 10% is valuable money that they could be using to grow the business.
From an owner's perspective, I would never spend future revenue today. What if your not making enough money to pay the bills, yet have to give a percentage of revenue to a developer? They aren't going to stick around if things get tough.
It would be slightly safer to agree to a percentage of profit, but much better to just give a percentage of the company. The same could be said for replacing the lower salary. When you go to work for a startup there is a reason you get paid less: cash in the early stages is extraordinarily precious. This can not be said loud enough. I would not work for a company that didn't understand this.
It's a battle to start a company, and you really need everyone "in the same boat". If it sinks, everyone loses out.
From an owner's perspective, I would never spend future revenue today. What if your not making enough money to pay the bills, yet have to give a percentage of revenue to a developer? They aren't going to stick around if things get tough.
It would be slightly safer to agree to a percentage of profit, but much better to just give a percentage of the company. The same could be said for replacing the lower salary. When you go to work for a startup there is a reason you get paid less: cash in the early stages is extraordinarily precious. This can not be said loud enough. I would not work for a company that didn't understand this.
It's a battle to start a company, and you really need everyone "in the same boat". If it sinks, everyone loses out.
> From an owner's perspective, I would never spend future revenue today. What if your not making enough money to pay the bills, yet have to give a percentage of revenue to a developer? They aren't going to stick around if things get tough.
If they developed the product that's producing said revenue, why does it matter whether they're still around?
Suppose that your product required an expensive piece of equipment and you didn't have enough cash to pay for it. (Or, you didn't want to pay cash.) Would you object to paying over time? Does the answer depend on whether the payments go to the manufacturer or a third-party?
Yes, you might well prefer terms with a fixed cost but there's a considerable risk that they'll get nothing and it's unlikely that they can reuse the code elsewhere. (Besides, you probably insisted on an exclusive license.)
If they developed the product that's producing said revenue, why does it matter whether they're still around?
Suppose that your product required an expensive piece of equipment and you didn't have enough cash to pay for it. (Or, you didn't want to pay cash.) Would you object to paying over time? Does the answer depend on whether the payments go to the manufacturer or a third-party?
Yes, you might well prefer terms with a fixed cost but there's a considerable risk that they'll get nothing and it's unlikely that they can reuse the code elsewhere. (Besides, you probably insisted on an exclusive license.)
We're in the same boat here and found equity share plus an adequate (although not exactly "market level") honorary a good balance.
It lowers the barrier of entry for the would-be partner because he'll at least get something out of it immediately which is still better than working on promises alone. It's also attractive for us because we obviously don't want to give away too much of our equity early on. Remember: equity can only be given out once, cash will hopefully be a regenerative resource.
Btw we're looking for flash devs, drop me a line if interested.
It lowers the barrier of entry for the would-be partner because he'll at least get something out of it immediately which is still better than working on promises alone. It's also attractive for us because we obviously don't want to give away too much of our equity early on. Remember: equity can only be given out once, cash will hopefully be a regenerative resource.
Btw we're looking for flash devs, drop me a line if interested.
The equity slice in compensation depends on the salary and the stage of the company.
When the company is just a drawing on a scrap of napkin and no way to pay salary, it may require as much as 10-30% of the company to convince someone to come code for you. Based on this equity slice, the person would be essentially a founder.
When your company is a small prototype and can only pay enough salary to cover food, rent, etc, then you're probably looking at 2-8% of the company based on experience.
When the company is a couple thousand man-hours of code and you can pay a basic intro-level salary, then you're probably looking at 0.5-2% of the company, depending on experience.
When the company is just a drawing on a scrap of napkin and no way to pay salary, it may require as much as 10-30% of the company to convince someone to come code for you. Based on this equity slice, the person would be essentially a founder.
When your company is a small prototype and can only pay enough salary to cover food, rent, etc, then you're probably looking at 2-8% of the company based on experience.
When the company is a couple thousand man-hours of code and you can pay a basic intro-level salary, then you're probably looking at 0.5-2% of the company, depending on experience.
Not to sound simplistic, but I think most any coder would work for a modest salary if the work were meaningful or exciting to him/her. My first job (coding) was for a company that made special software for financing insurance premiums. No offense to anyone in that field, but to me, it wasn't a terribly interesting subject matter.
On the other hand, I regularly see offers of people willing to volunteer on iPhone game projects just so they can learn the ropes -- it's just that interesting to them.
So, perhaps you should only offer the equity/money/bennies after you've found someone who's passionate.
On the other hand, I regularly see offers of people willing to volunteer on iPhone game projects just so they can learn the ropes -- it's just that interesting to them.
So, perhaps you should only offer the equity/money/bennies after you've found someone who's passionate.
How much equity have you set aside for non-founders in total?
Are you intending on hiring other developers? Is the developer you're hiring permanent?
Are you intending on hiring other developers? Is the developer you're hiring permanent?