My experience as the first employee of a Y Combinator startup

http://nathanmarz.com/blog/my-experience-as-the-first-employee-of-a-y-combinator-startu.html

by budu • 16 years ago

192 106 16 years ago

jacquesm3• 16 years ago

If it takes you weeks to recover from a burn-out you haven't burned out - yet.

Burn out is a serious issue and some people never fully recover from it. If you're working hard and you need a break after a few months of hard labour that's normal, but it's not the same as being burned out.

Otherwise a great piece and nice to get some insight in to what goes on behind the scenes of backtype.

Psyonic2• 16 years ago

Can you provide more info on burn-out? What it's like at its worst?

rdl18• 16 years ago

Real burnout is something like losing confidence in your own ability, or the overall system or world. It doesn't go away with time, per se, but requires a real change of your life....like getting a manual labor type job for a few years, going back to school, etc.

jashmenn• 16 years ago

exhibit a:

http://viewsourcecode.org/why/

SMrF2• 16 years ago

Years ago I suffered what I would now call "burn out" although at the time I didn't know what was happening. I found this essay to be an accurate description of my experience, but I think a doctor would be a better source of information on this topic: http://www.stressdoc.com/four_stages_burnbout.htm

At the worst point I was experiencing anxiety, paranoia and depression. My only strategy for coping with stress and difficult situations at the time was to put my head down and work through it. I thought if I was having problems getting the job done, I would just put in more hours. This turned out to be a terrible idea. I worked 80 hour weeks for months at a time in highly stressful situations. Initially this work ethic bought me promotions and raises, but you can't work these kinds of hours under a huge load of stress for years and not suffer consequences. In two years I gained 40 pounds and became a pack a day smoker. When you never put a limit on how much you work you eventually break down.

I nearly ended up quitting and going to seminary. Instead I just got a new job with less hours and responsibility on the other side of the country. After a few years I'm finally getting to the point where I can handle stress like I used to: until now any moderate level of stress has caused me to spiral into anxiety and paranoia again. I was worried I was permanently damaged, but thankfully I'm getting better.

EDIT: I haven't smoked for two years. I've lost over 40 pounds and I'm running my first 5K on Thursday. I got better but I had to drastically change my life.

grinich2• 16 years ago

I've found exercise to be one of the best ways to help prevent burnout. Especially exercises that put one into a meditative state. (Running, rowing, swimming, yoga, etc.)

Good luck on the 5K. :-)

jacquesm3• 16 years ago

That's quite a story. Good to see you come out on the other end in one piece and much good luck on your run.

maeon3• 16 years ago

http://sentientmachine.blogspot.com/2010/07/burnout-how-to-r...

karl11• 16 years ago

Just wanted to comment that this is a great post and I enjoyed reading it.

levesque• 16 years ago

What salary can one expect while working for a YC startup? Is it comparable with the industry's average?

aditya• 16 years ago

http://rethinkdb.com/jobs/ has one data point

When comparing salaries, http://indeed.com/salary has been somewhat useful as well.

dpritchett5• 16 years ago

The general feeling I get from reading HN is that early stage employees take lower salaries in exchange for higher stock options.

As the company matures and expands its perceived risk drops so later hires tend to be more experienced, higher paid, and with less in the way of stock options.

Seeing as BackType has only three people right now I think we can guess it's on the low salary, high stock side of the curve.

abstractbill2• 16 years ago

I took an almost 50% salary cut when I first started working at justin.tv. I don't think you can generally expect the industry average in an early-stage startup. My salary is nearly back up to what it used to be now though.

jacquesm3• 16 years ago

> My salary is nearly back up to what it used to be now though.

How much do you figure is your overall loss because of joining (in $) ? Does your equity make up for that ?

dpritchett5• 16 years ago

Interesting read but the details are a bit scary from my comfy chair here in enterprise software land:

- Six years at Stanford, two CS degrees

- Works up to 90 hours a week from home, has burned out multiple times in only six months with the company

- Founders work even more

- All three appear to be single white 20something males

- Job and tech (Clojure!) sound cool.

Edit: All that said he seems like a nice guy and I hope he gets rich off of Backtype. I love the service. I just can't quite project myself into the profile above.

theoneill4• 16 years ago

Why is it bad that they're white?

dpritchett5• 16 years ago

Obviously it's not bad in and of itself, it's just an additional layer of homogeneity that a prospective teammate will consider before applying.

The 90+ hour workweeks are already a big red flag to anyone with a spouse and/or children. It's hard to get along at work when everyone else is comfortable contributing in ways that you can't match directly. No one wants to be the odd man out in a high pressure work environment.

Edit: Fwiw I am also a white 20something male! I have always worked in relatively diverse environments and I have enjoyed it and would look for the same in my next employer.

m_eiman• 16 years ago

It's not bad that they're white - it's bad if they're three identical clones.

nathanmarz2• 16 years ago

I've had some weeks where I've pulled 90+ hours, but my normal week is more like 70 hours.

jdminhbg• 16 years ago

The sentence about working from 11:00 am until 2:00 am is probably the source of confusion there, if you don't read the part about taking breaks. 11-2 * 6/week = 90.

My work week could be described the same way, but my breaks are for 2 or 3 hours each, and with no commute (which most people don't count in their work week), it's pretty comparable. If you enjoy what you do, those two late hours working uninterrupted are great.

dnaquin2• 16 years ago

this is similarly ridiculously high.

grinich2• 16 years ago

How many hours of that would you say you are in flow? [1]

[1] http://en.wikipedia.org/wiki/Flow_(psychology)

mattrepl2• 16 years ago

Employee compensation from startups depends on many factors including how much they value employees, but it's really important for prospective startup employees to understand that you'll probably work longer hours, have more responsibility, and earn less than if you keep your day job.

Someone with experience in a great "normal" job may be surprised that the compensation, including equity, of a first employee is usually significantly less than what they're already earning. A first employee is taking a risk in opportunity cost by accepting a lower salary, but the risk should have an associated reward, namely equity. However, if a company has to do well just for the employee to break even with the opportunity cost, joining a startup doesn't seem like a sound choice. And not just in terms of money, but also general wealth and quality of life.

Further, the hours conserved by remaining at the day job can be used to build your own product. When the risk-level is acceptable, leave the day job for your own startup where you can maintain control and keep a meaningful equity percentage.

There are benefits to being a startup employee, such as the exposure to growing a company and the opportunity to join a support network and work with good people. Those things have value, but not always enough to offset the opportunity cost of either keeping the day job or founding your own startup.

Personally, I'd still consider joining a startup as an employee if it was a great match.

As a side note, RethinkDB has done a great job with posting a mapping of position/experience to compensation. They set compensation expectations before a prospective employee has even applied.

dpritchett5• 16 years ago

I love the layout on http://www.backtype.com/about

Seeing the two open positions in line with the current team really drives home the point that you'll be taking on key people and not just filling out an org chart.

wfjackson3• 16 years ago

Nice post. I think I would have a hard time pulling the trigger so quickly after meeting someone, but it sounds like serendipity.

rdl18• 16 years ago

I personally think the first one to five employees in a minimally funded startup with small m&a exit as the likely exit are getting a bad deal, vs. the founders or employees who join after financing.

An early employee will get about a percent tops as an individual contributor...maybe up to five percent tops if he is more of a vp engineering. In exchange, a seriously below market salary, equally high if not higher risk of losing one's job vs. founders, and vastly less respect when he later goes to try to do his own startup.

Assuming the same caliber of individual, it makes a lot more sense to either found your own startup, or join after real financing (where you get a market salary, and have a lot less risk, plus a lot of startups with problems have been shaken out.).

Obviously being am early employee at a great startup like google or Facebook makes sense, but for companies more likely going for 10 to 50m base hits, I don't think early employee is a financially rational decision. (note to future people I want to hire: I only do high risk potentially high value exit startups, so your initial equity actually is worth it!)

sofuture3• 16 years ago

That's probably true, but there's a lot more that goes into employment decisions beyond compensation.

As an early startup employee, I'm working for (all things considered) less money than I was when I was working in the defense industry. But I also don't loathe my job or lay awake at night, stressed about the idiocy and bureaucracy that made my days hellish, Kafkaesque, comedic nightmares.

That's worth more a LOT more than ~$10k/year and a guaranteed 'career'.

drewcrawford• 16 years ago

False dilemma: there are plenty of jobs that pay fair market rates that don't involve hellish idiocy and bureaucracy. It's not somehow automatic in companies that are a different age than post-founder pre-funding.

There's nothing about a pre-funded startup that magically banishes the "kafkaesque". Conversely, there's nothing about being well-funded that keeps you from sleeping at night (quite the opposite, actually).

mattrepl2• 16 years ago

Financial compensation is only part of it. Most startups include longer hours and additional responsibilities that limit what else you can do with your life, such as have a relationship, spend time with friends, or work on a side project.

I'd guess you're at an established startup if you're only making ~$10k/year less than your last job in the defense industry. Pre-Series A startups are unlikely to pay even a third of what you'd make in that industry.

johnswamps• 16 years ago

> and vastly less respect when he late goes to try to do his own startup.

Can you elaborate on this?

rdl18• 16 years ago

If you are founding CEO of a startup which fails honorably, or exits, investors and future team members pretty much ascribe all the good accomplishments of the company to you personally, and think you have a good shot at doing it again. A non CEO founder gets a lesser share of the resulting glory, plus way less name recognition.

Only rarely and with big successes will vp eng, product designer, non founding cto, etc get much cred from a startup. If it fails, ceo can usually easily get a job (sometimes as eir or though investor portfolio companies)

pjhyett2• 16 years ago

When did 5% of 50M stop being a lot of money?

edit: I think something far more deceiving is employee #75 receiving 10k shares and the impression they're walking away with gobs of money after a big sale.

dnaquin2• 16 years ago

5% is unrealistic. 1% is.

50 million * .01 * .65 (tax) / 4 years = 81,250

considering opportunity cost and time spent. likely not worth it.

rdl18• 16 years ago

Someone who comes in for five is a potential founder anyway.

At 1 you have another fifty percent dillution from follow on financing, and the odds of any exit at all.

Exmployee 75 is making market, and a 75 man shop will not sell at 50. They are shooting for 500 or more, or failure.

A 5 person startup might sell for 5 to 10 direct, in which case your 1 just bought a nice car, after tax, but not a really nice car, and less than your risk adjusted forgone salary vs. Being a soulless corporate drone in defense, or maybe number 75 at a well funded tech company.

pg2• 16 years ago

If by "real" financing you mean a series A round, then you're probably mistaken. People who join a startup with just angel funding might get roughly 4-5x as much stock as they'd get post series A. It's only a worse deal if a series A round makes a company 4-5x less risky.

There's a market price for all the different options, from founder to early hire to later hire. It would not make sense for there to be points on the continuum that would suddenly be a much worse (or better) deal, and in my experience there aren't.

You're also mistaken in saying that an early hire will get 1 percent tops. This number varies by 30-40x, depending on where the company is and how early the hire is. 1 percent would be typical for a very good hacker fairly soon after a series A. You can get much more pre series A.

vaksel• 16 years ago

"You're also mistaken in saying that an early hire will get 1 percent tops. This number varies by 30-40x, "

so the #1 and #2 employees are going to get 60% equity combined?

Or was that x supposed to be a % sign?

zhyder• 16 years ago

"There's a market price for all the different options"

The market isn't efficient though, because there isn't enough information (tho your comment and the GP are helping increase that). It may very well be that there are worse deals at some points.

rdl18• 16 years ago

I am drawing a distinction between someone likely to only currently be a good individual contributor, and thus who will not have the option of founding his own startup at that point in time, and a well rounded candidate who brings a lot more to the table. One percent is a lot of equity even as employee one if that person is not going to be in a leadership role later. It was what the mint designer and a few other first hire top notch individual contributors at startups I know have received.

I definitely agree you get more equity during bootstrap time vs. in series a funded startups. I just think the combination of survivorship bias and cash comp makes it a better deal to wait.

Actually someone respectable (Suster?) posted a few months back about how there are discontinuities...and that immediately pre series a closing is a much better time to join than immediately post, since the reduction in risk is far smaller than the reduction in equity. I think the opposite is true between employee one and immediately post a.

By real financing I include mega angel seed rounds. For me a 1.5 seed round vs a 3 vc series a is a distinction without a difference.

grammaton• 16 years ago

As employee #2 of a now well-funded startup, I would have to agree with this whole heartedly. I wrote a large part of the company's initial product. I can't say that it's translated into nearly the respect, career advancement, and stock options I was sold on. Remember that a startup is as much about business connections as anything - who do you think the VCs are going to credit with success, the guy like them, or the technical founder(s) they barely understand?

lsc2• 16 years ago

the thing is, the startup job market selects for people who don't place a high value on job security, and who are willing to work (temporarily, at least) for below market rates. If you want something safe and high paying, startups generally don't compete with the big boys.

Now, obviously, the first hire gets a worse deal than a founder wrt compensation... but I think everyone is aware of that going in to the deal, and that this is part of why it's so hard to hire experienced people for those (non-founder, early employee) roles.

rdl18• 16 years ago

The big factor people don't realize is employee number one has worse job security than the founders. If you they have huge equity and no salary, and you draw a salary, guess who goes when the bank account is short? If you all make subsistence only, you are losing due to lack of equity and opportunity cost. And still, if there is only enough for 2 of 3 to subsist, the employee goes. If the company tanks, you all go.

mkramlich• 16 years ago

be a sole founder and get 100% equity. then land some paying customers. keep the 100% equity. add features, polish, maybe hire other folks, maybe give away some equity early to bring on a contributing partner with key skills, etc. then this whole "1% is generous" belief and worrying about dilution caused by outside investment rounds simply goes away. does it always make sense? no. but I think it's ideal.

enjo3• 16 years ago

Of course it's "ideal", but in almost every case capitalization gives you a huge advantage and greatly increases your odds of success. You can only iterate and perform customer development as long as there is money to fund that. The less money you have, the greater your chance of failure (but the greater the reward at the end as well).

jrockway4• 16 years ago

My experience as being employee 8 million at a Large Corporation is nearly identical. I can choose my own tools, work from home when I want to, take breaks, etc.

We've already taken care of the cash flow thing, so it ends up being much more relaxing than working for a small company. We aren't going to go out of business if our software isn't released tomorrow, so we have lots of time to write quality solutions. We can build stuff that's really nice to work on, instead of stuff that will give us one more checkbox in a TechCrunch comparison article.

(I worked at a small company for a long time. It was less flexible, and every year, we "don't have enough money" for a raise. Eventually it was very stressful, my input didn't matter at all, and I got paid nothing. All for what most people consider "the ideal job". "Going corporate" was the best thing I ever did!)

umjames• 16 years ago

I assume you don't want to tell us which Large Corporation you work for, but I think your experience is not the typical BigCo employee experience.

StavrosK• 16 years ago

It's better if you actually own the small company, though...

dschobel• 16 years ago

Maybe for having an impact, but for stress? I doubt it.

jrockway4• 16 years ago

So that I can spend 99% of my time doing something I'm bad at, and 1% of my time doing something I'm good at? No thanks.

As an employee, I spend at least 80% of my time doing my best work -- no billing, no taxes, no finding new clients. I wake up, do some programming, chat with coworkers, eat lunch, do some more programming, then go home. And oh yeah, I get paid even if the company has a slow month or year.

Don't get me wrong; in many ways, I would love to have my own company. But I am pretty sure I will make more money, be less stressed, and have more free time not doing that.

(Anyone want to pay me to implement whatever random useless ideas interest me? Exactly.)

mrduncan• 16 years ago

It was less flexible, and every year, we "don't have enough money" for a raise. Eventually it was very stressful, my input didn't matter at all, and I got paid nothing.

As always, it depends on the company you're working for (it sounds like you're working for a great one!). I'm sure there are plenty of people who could claim the exact same thing while working for a big corp.

aberman• 16 years ago

What do your stock options look like?

If BigCo doubles revenue this year (probably impossible if it really is a big company) how will it affect your life?

If BigCo gets acquired next year will you be popping champaign or worried about your job?

jrockway4• 16 years ago

No stock options, they just give us cash instead. Bonuses end up being a pretty good percentage of the base salary.

roel_v2• 16 years ago

I'm interested in hearing about experiences on people who are not founders and made money in an IPO/buyout. How much can that realistically be? You're diluted down to 0. something percent by the time the exit happens. Compared to the opportunity cost of just getting paid each month for several years, do employees in a startup come out ahead, financially?

_b8r0• 16 years ago

Wow, having read that I'm genuinely horrified. You work 6 days a week. Why? You're an employee. Seriously even if you weren't theres more important things in life. I can understand where you're coming from but believe me, it's not that the founders are abusing you, it's that you're abusing yourself.

Seriously, go out, enjoy yourself. Live.

My experience as the first employee of a Y Combinator startup

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