Ask HN: Becoming employee #1

https://news.ycombinator.com/item?id=3735784

by gawker • 14 years ago

6 6 14 years ago

news.ycombinator.com

For those of you who have experience becoming employee #1, what are the most important things to look out for when deciding to join? I'm particularly worried about delays in compensation and insolvency but are these things I should be worried about?

gyardley2• 14 years ago

I've had experience hiring employee #1 and my wife's had experience being employee #1 at other companies.

At that stage the founders should be comfortable talking about cash on hand and burn rate with you, so while insolvency is a risk, you'll at least see it coming. Confirm that they're open about this before joining. I wouldn't join any startup as employee #1 unless they were totally open with me about cash on hand, burn, and equity.

In my opinion, the biggest risks at a company that small are a) the founders not getting along and you feeling like a kid caught in a messy divorce, b) pivots transforming your job or your product into something you're not interested in, and c) soul-crushing workload transforming you into a burnout case. But those are hard to detect in advance.

The one thing you can detect in advance is whether, administratively, they've got their act together - formal offer letter, assignment of intellectual property paperwork, copy of the options plan, etc. Don't ever enter an employment situation where you're starting now but formalizing the paperwork later, when they can afford to spend money on a proper lawyer. That's amateur hour and you'll get burnt.

gawker2• 14 years ago

Thanks! At this stage of the game, I've heard great things from the founders and they have had a successful exit before. I was planning on meeting up with them anyway even I've decided not to be employee #1 for now. Is it fair to ask about their exit strategy and their plans for growth?

Also, is it fair to make the assumption that employee #1 would be required to put in long hours (soul-crushing or otherwise)?

gyardley2• 14 years ago

It's fair to ask about their exit strategy and plans for growth, to get a sense of how they're thinking about their company. At this stage I wouldn't expect their plans to have much more than a tenuous connection with what will actually happen, of course. You're learning more about them than you are about the future of your company.

It's a really good sign that the founders have successfully done this before, as long as they're continuing to build on and play to their strengths. If the founders' first startup was in a field they knew intimately (accountants building accounting software, say), but now they want to get into something completely unrelated (say, 3D printing), in my opinion that's a bit of warning sign. Previously successful people are susceptible to hubris - 'I did x, so I can do anything!' Often false. Still better than completely inexperienced founders, I think, but by choosing something they know nothing about they're canceling out a lot of their advantage.

Yes, people at startups generally work long hours - that's a fair assumption. But there's a dividing line between long and soul-crushing that varies from person to person.

debacle• 14 years ago

I moved from a start-up in the pre-IPO phase to a start-up in the pre-we-have-checks-with-our-names-on-them phase, and it didn't work out. I took a small pay cut and the increased risk, and a learned a ton on the job, but in the end the mismanagement and inability to accept feedback, I think, led to their demise. At the high point, there were about eight of us working there.

I should have started looking for a way out when the paychecks started coming late and I didn't find out until payday that I wasn't going to be paid. I got laid off three months later. My salary has never recovered.

Would I do it again? Apart from the fact that my wife would probably leave me, for sure. The long hours and tough projects were really challenging, but both in a good and bad way, and I worked with some pretty passionate people there. You just have to make sure that the founders are someone who deserves your absolute faith.

Finally, if you're employee #1, you probably deserve some equity (if you want it - you might not). I don't know what phase this company is at, but it should be anywhere from 5 to 10 percent (closer to 5 than 10). If a company offers you anything more than 10% equity, that's probably a warning sign.

gawker2• 14 years ago

Thanks! I do have a fear that the paychecks might be coming late and I have several dependents as well as student loans to repay which I think would be too risky for me at this stage of my life.

I do appreciate your comments though. How can you tell apart a start-up from the pre-IPO phase to a start-up in the pre-we-have-checks-with-our-names-on-them phase?

Are there any tips on evaluating founders in general? I've only ever worked with established companies and have limited experience in evaluating founders.

brudgers• 14 years ago

The most important thing to look for is your own willingness to be employee #1 and not a founder.

Your role is different, often radically.

Ask HN: Becoming employee #1

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