How to Intern for a Startup

http://blog.wepay.com/2010/03/18/how-to-intern-for-a-startup/

by aberman • 16 years ago

53 41 16 years ago

blog.wepay.com

ig13• 16 years ago

Note unpaid internships are illegal in many countries as they breach employment regulations (i.e. minimum wage, etc.)

cj• 16 years ago

Source: http://www.onedayoneinternship.com/blog/are-unpaid-internshi...

The U.S. Department of Labor’s Wage and Hour Division created a test to determine whether a “trainee” or intern is considered an “employee” based on a 1947 Supreme Court decision that evaluated whether “prospective train yard brakemen were ‘employees’ within the meaning of the Fair Labor Standards Act.” The test requires that all 6 of the following statements are true about the intern’s time with the company.

1. If the training, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in a vocational school;

2. If the training is for the benefit of the trainee;

3. If the trainees do not displace regular employees, but work under close observation;

4. If the employer that provides the training derives no immediate advantage from the activities of the trainees and, on occasion, the employer’s operations are actually impeded;

5. If the trainees are not necessarily entitled to employment at the completion of the training period;

6. If the employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

This is the law. If any one of these six statements is not true about a given internship, then the interns are considered “employees” and are subject to the monetary provisions of the Fair Labor Standards Act. That means that the interns are entitled to minimum wage and overtime compensation.

ig13• 16 years ago

I'm guessing 3 is the tricky one for most startups. The uk has somewhat similar legislation, and it's generally considered that if the intern is doing work which otherwise would have to be done by a full employee then it's displacing a regular employee. Which in practice means you can't give interns "real" work.

edit: tptacek below is right that 4 is probably worse

codexon6• 16 years ago

I think there may be a loophole.

Without naming any names, there was a law based start-up (with lawyers on the board and founders) in the US that wanted me to work for them for free for a while, and then maybe be hired as a salaried employee.

I declined the offer since it seemed like a poor deal and the company was in dire straits, but they told me that they had at least one person work unpaid for several months before being hired.

qeorge• 16 years ago

Short version:

You can't have unpaid interns, unless you're really just doing it for their benefit because you're a nice person. If they generate any value for you, its illegal.

This situation is clearly against the spirit of the law. I am surprised they're being so forthcoming about it. Besides, as Thomas pointed out, can you really not come up with $10/hour to pay your intern?

WillyF• 16 years ago

I wrote the original article, and since then I've done a ton of interviews on the topic with some big name media outlets.

I'm not a lawyer, but I have looked at the topic in depth.

Basically, there are very few cases when unpaid internships are legal. However, there is almost no enforcement of these laws. I haven't heard of anything recent, and I watch the topic pretty closely.

A lot of companies think that requiring students to get "college credit" for their internships provides a loophole to get around the law, but as far as I can tell that's not the case. This is especially interesting, because more and more graduates are taking unpaid internships, which shows that employers are getting even more brazen.

My philosophy is that you shouldn't pay your interns because you have to legally; you should pay them because they're worth it. If you can't find a way to make more off of the intern than the $10/hour that you need to pay him or her, then maybe your business isn't ready for interns.

shrikant• 16 years ago

Was this really unpaid though? Looks like they covered his housing and living expenses - see comment from horse's mouth below.

kschults3• 16 years ago

Thanks for the high praise, Rich.

If anyone's got questions about the experience, I'd be happy to share. Short version: freaking awesome!

deltapoint• 16 years ago

What made you decide to intern at a small startup versus a larger company? How would you describe your experience at wepay?

kschults3• 16 years ago

I never really applied to the larger companies. It seemed like most of the really cool opportunities there were full-time positions only. My friends that had done internships at bigger companies hadn't enjoyed it very much, so I was looking for something small.

When I met Rich and Bill, WePay jumped out at me because it was the most startup-y of all the startups there that day. Every other company had a product and was trying to build it up. WePay was just an idea at the time, and it was obvious that I'd be deeply involved in the building and shaping of the product, rather than adding on to something that already existed.

Asking me to describe the experience is such a broad question that it's hard not to answer in a similarly broad manner. If you've got specific aspects that you're curious about, let me know. As for generally, I absolutely loved it (which is why I'm back here now). I certainly learned way more during three months than I had in two years of school.

alexgartrell• 16 years ago

If you don't mind me asking, what offers did you turn down?

python123• 16 years ago

He didn't actually have any offers. The WePay people just made that up to make it seem like they snatched someone from Google or Facebook for no pay. Pretty pathetic.

zackattack• 16 years ago

Sure, I have two.

1) Did they offer you equity for the initial summer position?

2) What motivated you to go work for them for free?

kschults3• 16 years ago

1) No, and I would have been incredibly surprised if they had. I had only finished two years of school, and had very little experience when I started. None of us had any idea how it would work out. It would have been foolish to offer equity then.

2) Being in school, the money wasn't a huge issue for me. They took care of my housing and most of my living expenses, so it's not as if I had to support myself on no income.

More importantly, the opportunity was just too good to pass up. It's rare to get the chance to be at a four-person company. I knew that I'd get fantastic experience and learning out of it. After just two years of school, those two were more important than money.

vaksel2• 16 years ago

so if Karl was so great, and made such huge contributions...why wasn't Karl made a co-founder at the end of his internship?

Frankly I think working for a startup is stupid unless you get a ton of equity to make the time worthwhile AND know that the company is capable of hitting a big exit. Why? Because you are expected to put in the same time, make the same sacrifices and take the same risk as the founders, but in the event of a cash out you get squat.

Everyone always thinks of Google and Apple early employees who cashed out big, but that's selection bias, most startups crash and burn...and those which don't have smaller exits, after the VCs and founders take their cuts, as an employee you'll be lucky to make up the difference in salary you gave up by not going to work for Google or MSFT.

johnrob• 16 years ago

I couldn't help having the same reaction myself. I hope they offered equity that was more indicative of a pre-funding-no-salary employee, even though he's technically a post-funding-salaried employee.

aberman• 16 years ago

My co-founder and I had been working almost a full year before we got accepted to YCombinator, and we made some pretty substantial progress building out our back-office financial partnerships and getting savvy in the payment space.

Bill had walked away from a very lucrative job in finance, and I left a pretty prestigious scholarship at NYU law.

We were far from conception stage when we brought Karl on board. When he agreed to work for us, he knew he was going to learn a lot, get the YC experience, make some good connections, and see what it was like to work for an early-stage startup without having to make a life-changing commitment. If the company went belly-up, he could just go back to school in the fall. In fact, he did go back to school at the end of the summer.

If we went belly up, Bill and I would have been shit out of luck. Karl only came back after we raised money and offered him a salary.

There is no way we would have hired Karl had we not had the opportunity to work with him over the summer. But he did choose to work with us, and he was rewarded with a position that he would have had no chance of getting otherwise. He still has the option to go back to school, but if he does, he will have a head start on most of his peers.

Karl has been an incredible part of our team, and I am thrilled we have him. That being said, we did not need Karl to get where we are, which I think is the one prerequisite for giving anybody founder status (and the commensurate equity).

I worked for a startup (poverty level wages) right out of college. It was one of the best experiences I have had, and without it, there is no way I would have started this company. I wasn't doing it in the hopes that one day I would be anointed a founder.

codexon6• 16 years ago

Karl only came back after we raised money and offered him a salary.

Did you offer him any compensation during that period to stay? I am guessing no. Isn't it unfair to offer him equity only if he works for free without any guarantee of compensation? What if you were stringing him along for free labor?

If we went belly up, Bill and I would have been shit out of luck

Employee compensation should not be related to how much risk the employers have: it should be related to the market value of the employee. As others have said, Karl also took a risk. If your company went under, all he would have on his resume is an unknown company with less money than if he went for a paid internship at Google etc...

If you are paying below market rate for talent, you should compensate through equity.

coffeemug4• 16 years ago

Probably because Karl was willing to do it without a co-founder status.

I think the same way you do - that I'd never join a startup unless it were my own. I also used to make the same mistake - I thought that everyone else thinks the same way as me. In practice, the opposite is the case. Most people who want to join startups aren't willing to bear the load of fundraising, staying for months on a brink of death, doing recruiting, or management, or secretarial work, or a million other things a startup founder does. Being an excellent engineer or an excellent manager doesn't automatically make one an excellent founder.

Bill and Rich are world class at what they do - founding, growing, and running a company (and everything that it entails). I don't know Karl well, but he is probably world class at what he does - engineering great web applications. If Karl is willing to keep doing engineering for a certain compensation, there is no sensible reason for Bill and Rich to make him a co-founder (and conversely, if Karl doesn't want to deal with all the things founders deal with, there is no sensible reason for him to seek a co-founder status).

vaksel2• 16 years ago

basically what I'm saying is that as an employee startups are a bad proposition. You get to work long hours, get paid less money, get less benefits, and unless the company hits a Google size homerun the most you can hope for is recovering the extra income you gave up by not joining Google.

dagobart• 16 years ago

This is good advice. I should had have it earlier: I always believed that becoming an intern at a startup would be a good idea since (so my opinion) it would give/leave you the freedom to live your creativity at work and influence a little how the startup evolves.

krschultz2• 16 years ago

Way to go Karl.

I have a similar story from the other side. About 3 years ago I was a sophomore in college looking for an internship. I knew I wanted to get into a startup but didn't know how to get in touch with one.

I asked HN if anyone knew startups in the NYC area, a few people responded. I emailed a few, I received a few responses. Most of them were unpaid, which I MIGHT have been able to do but I do need money to support myself so it would have been a few days at that internship and a few working a paying job. I felt like a lot of the offers were just a dude in some apartment in brooklyn hacking on a project that was calling himself a startup (again, ok, I'd do that) but the ideas were not that good. I won't list them here, but suffice to say it was weak.

Eventually I got in touch with Bug Labs, and over the course of a few weeks hounded the crap out of them until finally they relented and agreed to an interview. They were not looking for interns - I think there were about 8 people at the time and they had 1 round under their belt but that was it, and working out of the old del.icio.us office which was quite cramped at that point. I distinctly remember being asked "So what can you do for us" because they really didn't think an intern could be of help. I think they pictured me making coffee.

Anyway I convinced them somehow to start me a few hours and a few dollars, and go from there. It became clear that I could contribute pretty quickly and I went to full time and they paid me more what interns were getting paid elsewhere, and the whole thing worked out really well. I came back the next summer and there were 2 other interns. I came back last summer and there were enough interns to have an area in the new office called "intern city", which had 5 or 6 guys of various levels of commitment/pay/hours.

It was a great experience for me, vastly more responsibility than I would have gotten at a "big" company like the article mentions, and I think I helped Bug Labs a bit too. Not to mention the guys I was working with were some of the smartest people I've ever met, and I got to be in NYC every day. I would say it was one of the best decisions of my career to "Ask HN" that day.

Oh and now that I and the other interns have convinced them its worth having interns around (and you're in the NYC area) apply for one!: http://www.buglabs.net/jobs

(edit: weird coincidence with the kschultz/kschults thing to these stories)

yotery2• 16 years ago

That's pretty cool. Thanks for sharing. Do you have any suggestions for a someone looking for an internship in the middle of no where?

krschultz2• 16 years ago

Its still about networking. In my case it was HN -> intermediate group of people -> contact at Bug Labs -> interview. After working at Bug Labs for a while my girlfriend was looking for a job and I introduced her to someone I met at work who knew someone whose wife needed an intern. Neither were advertised jobs. So my suggestion is find the tech crowd and see if they can help you. Right now I'm looking for a job in a completely different part of the country so I'm facing a similar struggle, you really should search for companies that match what you are looking for, don't necessarily search for people advertising internships. Once you find those companies figure out how to talk to SOMEONE and work from there. Linkedin might be helpful.

jackowayed6• 16 years ago

Allow them to work remotely. Lots of companies are highly productive working remotely.

Data point: I've still never actually met either of my bosses from last summer. None the less, I got a whole lot done and made good money.

yotery2• 16 years ago

Gah, I meant internship, sorry about that.

wooster• 16 years ago

Unpaid software internships are for suckers.

* If an intern is providing value for the company, they should be paid.

* The barrier to someone providing value as a programmer is extremely low. A bright, hard-working sophomore CS major should be getting paid as an intern.

* Students are often at an information disadvantage, in that they are not aware of how valuable they are.

* The idea that internships at Microsoft, Apple, Facebook, Google, etc don't offer the ability to write production code is ignorant of these programs.

* Companies which are willing to take advantage of an information disparity to underpay interns are also likely to underpay their other full time employees.

How to Intern for a Startup

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