Ask HN: Good terms for first employee in pre-funding startup?

https://news.ycombinator.com/item?id=2556684

by pepijndevos • 15 years ago

2 5 15 years ago

news.ycombinator.com

I've been asked to work for a startup as their first employee(1 of 2 is a technical founder).

They offered me 1% equity, that will be held in a trust, so I don't actually have any 'power'. As soon as they get funded, I will get a salary in accordance with the general market(they talked $3000 ballpark).

1. Is this a good deal? 2. Are there things I should know or ask?

amoore• 15 years ago

1. No, it's not a good deal. You should get a salary from the first day and a reasonable vesting schedule that results in you actually having equity ownership. And, 1% isn't that great for a first employee, especially if they're deferring your compensation. IF they get funded, bully for them. 2. Yes, there are things you should know or ask. There are simply too many to list here, but for starters: How do they intend to pay you before they have funding or revenue? Are they cash flow positive now?

Whatever they tell you, get it in writing. If it's not written down, then for all intents and purposes it didn't happen.

pepijndevos• 15 years ago

Thanks. Do you happen to know a place that does list all these things?

fdiotalevi• 15 years ago

It depends on many factors (f.i. are the founders successful entrepreneurs? how long have they been working on the company? do they have a working prototype? a product in production? does the company already have customers? revenue? profits?), but in general 1% is not enough for a first employee, especially if you are not getting salary until the company get funding.

I'll shoot for something between 5-10%, but again, it's difficult to say without knowing the details.

Other things to consider

- vesting schedule

- vesting acceleration on single/double trigger

petervandijck2• 15 years ago

It's not a good deal, from the looks of it.

Ask:

- how much equity do they have?

- how much equity is set aside for future employees?

- what happens if they don't get funded within 6 months? Ever?

- why do they not want to give you "power"?

- will they write down the salary and benefits you'll get and the conditions (funding) for that to happen

- what happens if they only raise a small amount of funding?

- will they get salary before you do?

etc.

petervandijck2• 15 years ago

And as an aside: I would never make vague promises that I don't know I can keep to employees. They're asking you to work for free. They should be clear on that, and you should get more equity for that (and with the same rights they have).

Bad deal.

Ask HN: Good terms for first employee in pre-funding startup?

Related Stories