> I recently told the CEO of a recruiting agency about this compensation model. She told me that if you even mention crypto, more than half your engineering candidates will immediately say “no” to your company.
For good reason. Also, their 'sister article' about the details of the token are a private google doc. Quite promising.
> This is a utility token that will be deployed under the ERC-20 standard, and live on the Ethereum blockchain. It will be set up so that if the product does well, the price of the token goes up, and if the product does badly, the price of the token goes down. You can read more about the details of the token in a sister article. [0]
Funny enough, that "sister article" appears to be a private google docs link... I was curious how this would even work.
Plenty wrong with tokens but I would remember that VC funding also comes with a lot of drawbacks and, in my opinion, is what is holding technical progress back. I am in a startup and VCs are preventing us from focusing on longer term goals like interoperable protocols. The VC game is simple - fund a "disrupting" company aka an extractive monopoly and cash out. In that light, even though we took VC funding some sort of cautious yet fair token raise would have made sense, it'd allow us to work out the product without compromising on longer term goals.
I understand the distrust for blockchain but there is also ideology in blockchain world that has not yet occurred in the greater world, that funding is broken and new alternatives are needed. Has somebody figured a perfect one - no. Is experimentation good? Yes.
Hey guys, CEO of FetchFox here. Happy to answer any questions about the crypto token. I'm also making the draft doc public, please be aware the details are still being worked out, but we will publish the full plans on our site within weeks.
1. What happens if an employee loses access to the wallet their company-ownership-tokens are on? Is it just a matter of re-emitting new tokens and distributing it to them? How are the old tokens handled (e.g. if the wallet is found at a later point in time)?
2. Could you ELI5 how you correlate the company value with token value?
3. Presumably, if everything works out, this allows your team (as well as anyone else) to sell their ownership tokens at any point, but also buy others' tokens that are available on the market as well right? I can see a few issues with this including insider dealing (some people having earlier access to great/awful news before others and making token transactions based on that).
I think it's an interesting idea but I think there are a lot more details that I'd like to see ironed out based on the little that's in the doc (that also has public-write access on it for some reason)
I like this discussion! I'm interested in more equitable and humane company structures and looking for better ways to collaborate. In my day (2014 lol), Founding Engineer was not a common role, it was called "Engineer #1". When we exited, I think I (one of 3 co-founders) netted about 10x my awesome first engineer. He's one of my best friends and the diff seems kind of fair to both of us.
Here's what I did that they didn't:
- worked 24/7 (ok, 12/6) for the first 4 years including 1 where I was paid $0. He was more like 10/5 and came 1 year in. Still an absolute beast but we'd often talk about how I had to work "founders hours" and him employee hours.
- took 1/2 his salary when we hired him after raising our seed
- immediately had to push way out of my comfort zone in terms of responsibilities (investor stuff, copywriting, support, hiring, managing, partnerships, running ads)
At a base level, we're just kind of different people. He had hobbies outside of our company and I was a locked-in computer monk.
The other bit is that he was not like a highly paid Facebook engineer. He had gone back to the midwest after school and we were able to 2x his salary and move him to SF. Founders hiring the first employees need to really scour their network for diamonds that big tech might miss, because it's pretty well accepted that your odds of getting rich are much higher in big tech than startups.
Innovation in compensation is great, but this feels like a "I want to play with crypto" move rather than a mature revision of an inequitable existing model. Options that don't expire are a huge incentive! Offer that. 10% is a huge incentive! Offer that.
If you know you're turning off smart candidates with crypto shenanigans it's a good sign that this is not a mature or pragmatic team.
I have a few pragmatic reasons why I want to use a crypto token, instead of traditional instruments.
The first one is liquidity timing. With a crypto token, you can have 24/7 trading and liquidity from basically day 1. There is no need for second markets with high fees and complicated process. Just a 10 second Uniswap contract.
Second, you don't need to "manage a cap table". The token trades and moves freely on the blockchain, permissionlessly for anyone who wants to use it.
The best example is how money transfers work in the current banking system. A money transfer is the canonical example of why you need transactions in a database: you want to deduct money from person A only of you successfuly transfer money to person B. But guess what: this is never executed as an actual atomic transaction, because A and B are usually at separate banks, in separate DB's.
Compare this to the blockchain: every single transfer is an atomic, universally auditable transaction. If you ignore all the noise and scams in crypto, this just makes 10x more sense to me as an engineer.
FetchFox as a company has two goals:
(1) Make the best possible AI scraper
(2) Prove that crypto tokens are viable and better alternative to traditional company structures
It's lame that so much crypto stuff is caught up in scams that obscure the underlying value.
(1) Make the best possible AI scraper (2) Prove that crypto tokens are viable and better alternative to traditional company structures"
For everyone watching this is the opposite of pragmatism. This is idealism. Your company will succeed or fail based on your ability to execute on your primary mission. Here it should be (1). If you're labouring under a (2) then you have an idealistic company, which is fine, but don't pretend that (1) is your primary mission.
On the other hand, what difference does it make if the greater fool is a dentist’s brokerage account or a dentist’s crypto exchange account? The price of the thing is as imaginary in both scenarios.
Stocks are regulated by legal frameworks in most countries. You can't dilute at will and you can't remove access to stock nor voting rights if they were issued as such.
These crypto tokens aren't even guaranteed to be issued to a wallet you control.
I never understood who takes up these offers. You want me to give up my $220k+ salary plus RSU (let's say worth $60k/yr), to join a startup and take $100k/yr salary.
In effect, I'd be "investing" $180k/yr and putting in crazy hours for a 1% equity that gets diluted to nearly nothing in a few funding rounds. How does that make sense?
You can only invest your time and salary cut into a single company, while angel and VC investor can invest their time and money into many companies. They only need 1 of those investments to skyrocket. You need 100% of your investments (size 1) to skyrocket for it to make sense.
Sure, if you hit the jackpot and join Facebook, then you're set for life. But that's an extreme outlier, otherwise I wouldn't be using it as an example.
I think the biggest problem with these offers is that the payoff for the founders vs a "founding engineer" is so wildly out of whack despite minor differences in their work and effort. That is, after a seed round, founders typically (obviously "typically" is doing a lot of work here) retain ~80% of the company, and after a Series A ~20-30%. So, lets say there are 2 founders, and a founding engineer is hired shortly after the seed round. That means at that point each founder will have about 40x the equity of said "founding engineer". Yes, the founders had to come up with the idea and get the initial seed funding, but that process usually takes on the order of 3-6 months. The founding engineer is going to be working just as hard after starting as the founders (oftentimes harder), usually making similar cash compensation, for 40x less equity.
My main point is if you think you might want to be a "founding engineer", just be a founder instead. As a good example, consider Nathan Blecharczyk, one of the 3 cofounders of AirBnB, and was its original CTO and coded its first website. He's now worth about $10 billion and according to Wikipedia is the 203rd richest person on the planet. If he instead took a job as "founding engineer" at AirBnB, and let Brian Chesky and Joe Gebbia instead take on the sole founder titles, he'd be worth orders of magnitude less (granted an order of magnitude less than $10 billion is still hundreds of million, but point being there is no reason he should be compensated less than his other cofounders).
IMO if you're reasonably talented and working harder than the founders as an early employee, it's time to value your options at 0 and look for another job.
Maybe not many people making $220 take these offers?
There has to be a fair number of start ups that really don't "need" a $220k engineer if their business is "uber...but for cleaning your windows".
It would be interesting to see the breakdown of who does take these roles.
Granted "founding engineer" implys a lot so I'm not disagreeing with the premise or article, but sometimes on HN the idea that an engineer costs $200k+ is just assumed where often I think that isn't the case.
Not many people are going to totally ignore their opportunity costs to join as a "founder-ish" engineer at a startup.
I have taken a role like this before, but when I did so, I was making a lateral move from a compensation standpoint. This is without factoring in any expected value of equity (because there was none).
That's a good point. When I joined a startup as the 6th person, I was a college student working part-time freelance gigs and making maybe $30k. The startup was initially a freelance client, they offered to take me on as an employee for $40k part-time / $80k when I could work full time. They gave me some tiny amount of equity, probably less than 1%; it turned out to be worthless. But everything else was a significant improvement: I no longer had to juggle multiple clients and haggle to get paid, I got health insurance, and I had more money in my pocket.
So you want to scale up a new venture with (potentially) risky, low wage talent? That sounds like a bad bargain. I would wage that there's not that many interesting "uber for windows" companies, versus those with at least a modicum of challenging problems. And one of the biggest challenges is managing software complexity at scale, which is almost inevitable in a software startup.
I get that the typical $220k dev probably has a different mindset than the one you'd look to when building a new company. That said, I've focused most of my career on being the 2-5th employee and helping guide startups to viability. I've been able to do that while still pulling in reasonable $$ and hours to make my lifestyle work.
Maybe this alternate model is gone now with the credit crunch, but it does seem like we're missing out on a workable yet oddly unpopular approach here.
I think this is right. There's no way to make it rational for a successful FAANG or FAANG-adjacent engineer to be an early-stage startup employee, but there are other kinds of people who want software engineering jobs. Unfortunately a lot of founders look to their personal networks which only contain people for whom the role doesn't make sense.
By and large, don't do something that you just hate unless that's your only option. But if you can find something you mostly like (and that's a pretty reasonable bar) for pretty good money, that's not a bad target.
I can imagine that hopping between these places might be fun for someone in their early 20s who is unattached and can focus all of their time on the grind. Live cheap, build stuff, have more of an impact than you would at a faang or m7 or whatever we’re calling them now. Maybe you make it big, or maybe you just build a network and get good experience, but not a terrible outcome either way. But yeah, once family and life outside of work need time and comp, no thanks.
From my point of view, I make 400k right now with 7 years of experience at a large tech company. I could reasonably retire in a year or two at my current level of expenses. I could probably make the next level with a fair bit of work in something like 3 to 4 years from now and expect to make somewhere between 500k to 600k, but to me that doesn't seem to seriously change my life trajectory (this is only a bump of 70-140k after tax). Without devoting to something like 10 to 20 more years of working and becoming a director or something similarly soul sucking, I don't see a route where I could reasonably have much more than say 10 million 10 years from now.
So I've thought about saving up enough to comfortably retire, and then going to work in a more risky company for the chance to get a life changing amount of equity (something more than single digit millions). I don't know that I will though, because the odds are seriously bad.
> I don't see a route where I could reasonably have much more than say 10 million 10 years from now.
You have to ask yourself this- how much is enough, and how hard are you willing to work/risk for it? On the low end, how much is the minimum, and what pros would make that acceptable, quality of life, risk, anxiety levels, etc.
Your way forward will be much clearer when you know what your parameters are, even though life may happen between now and the end date of your plans.
Being a founding engineer at what grows into a billion-dollar company basically is $10 million 10 years from now, but against incredibly long odds, whereas staying at bigger companies makes it more likely than not. There's no risk premium.
> You want me to give up my $220k+ salary plus RSU (let's say worth $60k/yr), to join a startup and take $100k/yr salary.
Not really. They don't want you to give up anything or some do and you can just say no. The reality is that people want to find other people who want to work in startups to be their engineers. You really can't get top performance out of a guy who hates doing some work by paying him. You'd much rather get the guy who loves doing some work and pay him enough that he feels appreciated. Mercenary hires are useful in prop trading firms, but anywhere else the mercenary is better contracted than hired.
Besides, startup salaries are not $100k/year and you can get 2% as a founding engineer.
Taking more money to do a job you hate is a recipe for burnout.
I re-read the top-level comment and don’t see where the “hates the work” assumption is coming from. Or is expecting to be compensated fairly for effort a form of hating work?
Your view was completely my view until 7 years at Google.
When I joined, I was shocked how high the turnover was. And not anecdotally! there were stats you could slice and dice every which way, and...it was shocking.
How!? This was paradise.
After clearing enough years, and getting enough advice from people at 50+ who stayed at BigCo, once you got a pile o' money, it looks more like:
$170K/yr + $30K bonus + $100K/yr RSUs at Google - $150K/yr existential dread.
vs. startup:
$150K/yr + $15K bonus + $2.5K/yr (1% chance of $250K/year)
Increasing the money pile becomes not worth it once you've stacked Google RSUs, and the choking existential dread of what goes on inside BigCo is worth the pay difference.
I know that sounds nuts. Hell, when I was doing my big "Where do I go now that I've sold my startup?" interview rounds, I also interviewed for positions with a couple ex-Googlers who told me it'd be awful to join there.
I thought a lot about it and decided they were wrong, they didn't understand how little savings I had.
And they were wrong: it was totally worth building the money pile so I could move on like they did, to more productive areas where there's room to grow.
aside: I'm not sure anyone would get $220K/year base then only get $100K/year base. I usually see roughly the same base, frankly, its usually a bit higher than Google's.
another aside: stereotypes are stereotypes, from what you characterize startups vs. BigCo as, I think you'd be very surprised how many Googlers feel about workload
Speaking as someone that's worked at a startup and also in FAANG, if you're the type that's predisposed to existential dread, the sense of dread in a startup is differently but equally existential when the startup may not be able to cut paychecks or even be around in 30 days, and you have to scramble to find a new job.
At the startup, there's not even the $150k to subtract out.
If all it takes is a 10M valuation, sign me up! I mean, 10M sounds like a lot, but in terms of a remotely successful SaaS company (as opposed to a side project hoping for beer money), it's not that much. That's around 500 people paying $200/month, assuming a 10x multiplier of revenue to valuation. (or 5000 paying $20/month)
The problem is that there's no easy way to cash out with just a valuation and you need the $100k now to pay for whatever, not when the board says there can be a liquidity event (which may never even happen).
Hopefully this doesn’t mark me as a troublemaker among the founders here, but this is a good way to negotiate your salary. As in “I’m valuing your equity at 80% of its 1xPP price at your last round, which makes my total comp 100 + (grant x 0.8 x PP/4) = N. I would accept an offer right away at 1.3N, preferably in cash/equity, but at the current level, I will need some time to evaluate my options to see if this makes sense for me.”
It's even worth than that. The personal utility of money is definitely sublinear. Hence a small chance to make a lot of money is worth considerably less than getting its expected value with certainty.
To follow that line of thinking, it could be way more profitable for you to take your $180/yr "bonus" and put it into angel investments. If you have decent connections and have a good eye - you'll probably have a much higher expected return than your 1% at a startup.
Or just investments in an index fund. I know someone who mad a pretty big pile of money at a company and he told me that he could have done a lot better than angel investing. He still does some--but only companies he particularly believes in.
I would imagine that for some people $100,000 a year is enough? Or there are people who aren't getting $220k+ offers and $100,000 is what they can get?
There's nothing inherently wrong or illogical about making less than the maximum amount of money you can make.
Making career decisions "not about the money" is an incredibly luxury for someone who needs to live or raise a family in the regions where tech startups are a notable factor.
It's to gaslight you into thinking the nineteenth shitty enterprise SaaS for ultra-niche market is going to make you a billionaire. In reality, you're just cheap labor for lining the pockets of the VCs who will sell off their shares to the next sucker at the first chance they get.
fr fr, the only way I will join your startup is if you have a very interesting idea and I will be coming in as a founder with a very different slice of pie than "founding engineer".
Why does no one run a completely employee owned tech company? What is the disincentive for modeling your company as employee-owned and operated? It seems that would be the best path to an efficient company and a focused company that’s not angled to be taken over by outside aggressive for profit interest and dismantling.
I’m guessing that no investor will back a company that they can’t sell for Y times the investment.
EDIT:
Thank you for the thoughtful replies everyone. I totally spaced the idea that I was asking this question on HN, a VC owned forum. I am glad that it was not interpreted as flame war baiting.
> Why does no one run a completely employee owned tech company
I think this might be selection bias or something along those lines. There are probably more companies than you'd expect that are techy bootstrapped companies, but they don't make the news because they don't have the funding round type of announcements. These companies also tend to do something not centered around AI or socials, so again, they fly below radar. I've worked at more than one
How do you take outside investment if all ownership is with the employees?
Even a self funded company has a different problem, the person/people who started it did a lot of the heavy lifting and took on massive risk, they want to be compensated for that risk, and are loath to share it all with others but in some sense, many self funded startups are 100% employee owned… just by a small subset of the employees.
You typically need to pay salaries before you have money coming in the door. Some founders cover this out of personal savings, and some businesses make more than the cost of an employee before they need one, but generally you need outside capital. So you'll need to provide something of commensurate value in exchange for it, which is either debt or equity.
A business with a chance of success in the 90s might be able to get a bank loan. As an early stage tech company, the capital available to you is venture capital.
An early stage tech company can get a loan. The key is not hiring anyone until you can write a business strategy and plan that supports repaying the loan.
Investors want ownership, so to be completely employee owned means completely employee funded.
So unless you have 5-10 employees willing to work for free until profitability PLUS paying infrastructure costs in the meantime, you are constrained to activities that can be profitable from day one.
This is why you can see employee owned consulting and services companies but not major development projects.
> Why does no one run a completely employee owned tech company. What is the disincentive for modeling your company as employee-owned and operated. It seems that would be the best path to an efficient company and a focused company that’s not angled to be taken over by outside aggressive for profit interest and dismantling.
I worked for a company like that. It was a start-up size company that was in business for 20 years or so. It stayed small and had not external VC breathing on their neck and such.
So it does exist and it has it benefits and downside. For one, just because it's employee owned doesn't mean that the few founding employees won't screw anyone over and it does't mean everyone gets an equal amount of shares. Initial founders may still keep 99% of the shares, and maybe dole out a crumb here, and a bit there.
> Why does no one run a completely employee owned tech company?
I thought about setting up Fetchfox this way, and in some ways we are an employee run company. Everyone including me gets the same crypto token as our stake in the company's success. I get a higher stake as the founder/ceo, but some offers give the employee 0.5 for every 1 of my allocations, which I think is pretty fair.
Long term, it would be nice if I had <50% stake in the project, and it self-managed somehow, similar to crypto projects like Ethereum.
That said, the phrase "employee owned" has some bad connotations. It has an implication that you are not trying very hard to grow, or that you are somehow less committed to company, or that you are some sort of co-op. For these reasons I don't like use that phrase.
I’m not sure avoiding specific phrases because the general populace has stigmas is helpful however. I don’t view employee-owned or coops in those ways at all. For example, your growth rate should be attributed to the quality of the product. The product quality should be attributed to people’s interest in their work. Good compensation/benefits such as ownership should be the incentive of a quality product.
The only reason to sell any of your company is to raise money. If you can raise all the money you need from your employees, then you can be employee-owned.
I think in an employee owned model the CEO is less visible and a different role, that role is then incentivized to actually drive the business instead of creating hype in the market to ensure valuation for investors/stock markets.
The value of an employee owned business is that you can vote the CEO out if they’re not working in the best interests.
I run a bootstrapped cheminformatics company that’s been gaining traction, and I currently own it outright. I’m genuinely interested in a model like you’re describing—something that aligns everyone’s incentives and keeps them at the top of their game, not just waiting to vest or check out once they do.
In my experience, equity alone can become more of a distraction than a motivator. It sometimes encourages people to mark time rather than consistently push the envelope. I’m wondering if a profit-sharing model, possibly combined with some consulting-group best practices, might be more effective at sustaining high performance over the long haul.
If you know of a proven employee-owned approach that doesn’t dilute accountability—and actually ensures teams stay fully engaged—I’d love to explore it. My goal is to bring in the best talent, focus everyone on building the best product, and reward them in a way that keeps us all hungry for continued success.
I don’t have a model specifically but companies like “Bob’s Red Mill” and “King Arthur” are employee owned and rather succesful. Though those are not tech companies I can’t imagine the base model being drastically different when adapted.
Cooperatives are great, but collective governance is a big challenge.
There is also a major issue with realizing equity because employees generally don't buy in or sell out when they leave. This means that equity is essentially locked away from the employees.
The model works well for stable businesses with regular profit that can be split up, and not so well for growth companies. Employee labor investment in capital growth never gets paid out because there is no exit.
Well another reason is that as soon as VC enter the space they provide capital for companies that you could otherwise beat to do really inefficient things like give equipment away for free or "leases" that you can't compete with without taking VC funding. In my experience it's been yet another variation on "worse is better."
You give them shares like every employee has. Employee-owned just means that you need most of the company to agree with it. As long as there is a fair playground where your on boarding investor doesn’t end up eating all the shares then it could work. Ideally your investor would come on as an employee validating their stake instead of an outside pressure.
Probably because most companies aren't able to make profit on the first day, and most employees aren't willing to invest significant capital to get the company to the profitability line?
There are niche examples of 'bootstrapped' companies that are employee/founder owned...
> Why does no one run a completely employee owned tech company. What is the disincentive for modeling your company as employee-owned and operated. It seems that would be the best path to an efficient company and a focused company that’s not angled to be taken over by outside aggressive for profit interest and dismantling.
It is very tough to pull off an employee-owned company over the long term.
1. How do you handle it when someone leaves? How do you handle a new employee when they come in? There are many ways to do it, but I don’t think I’ve seen an implementable way that keeps incentives aligned.
2. What happens when the company is extremely successful? In many examples I have seen, the employee-owners give themselves substantial raises and/or distributions, become way better off than they ever expected, then they aren’t really motivated to do the hard things that make a business work over the long run.
Source: A friend of the family who buys up employee-owned SMBs, gets them back on track, and then sells them.
Note that often times the “employee buyout” is a founder/owner who can’t sell at a price that they like, so they basically sell it to less sophisticated buyers (their employees).
I'm a founder who is pretty sympathetic to the idea of cooperatives.
The simple answer is that I am not savvy enough with financial instruments to be confident that I can structure something that can't be preyed upon if it's successful. I know I care about making sure my employees are well-treated - you shouldn't believe me when I say that, but I believe me, and that means that in terms of my own ethics there's not much reason not to maintain control and depend on my own judgment. If I want to divide 70% of the profits up among my employees, nothing is going to stop me from doing that, so why not keep my options open?
You guessed it. I know some totally employee-owned tech cos, and they can work, but the one thing they can't do is raise money like founder-centric startups.
I would think as long as the company is happy then investors wouldn’t matter. Then your goal would be for example, to pull in a wealthy person who could invest in the company and work (law? Accounting? Cto?). Then sell their shares when they help it grow in value and would like to exit. That at least would allow investment growth without selling the farm.
But yeah that was a situation of a privately held company opting to make that transition, I'm not sure they had any investors to complicate things. And they're definitely an outlier.
The typical answer is finance. As a socialist myself, I think all finance should be done through loans instead of selling off parts of the company. That way it stays employee owned.
Are you asking why startups need investors? Seriously?
Yeah, if a company is profitable from day one, there is no reason to take investors money. However that happens rarely. And while some people are happy to work without salary in the beginning if they get equity, for others with different risk preferences or life situation it is a big no-go, therefore also different shares of equity and different compensation...
Your insinuation is that a startup that can barely support 1 employee would need 10 employees day 1 instead of growing as it goes. VC money isn’t the only way to expand your business. If you’re not racing to market then there’s really no need to be successful 10+ employee company on day 1.
I agree that early employees need to share in the win. However, this approach has several fundamental problems:
(1) 10 years in, your founding engineers won't have had much more impact than number 4, or 5, or 10. I think you'll have a real problem on your hands when two peers have 100x different equity stake and their tenures are just 1 year apart.
(2) In fact, your founding engineers probably won't be your best or highest impact folks. I much prefer the approach where you give very generous re-ups to your high performers.
(3) Founders and founding engineers are not the same.
(3a) Founding engineers eventually will require market compensation. Founders will not.
(3b) Founding engineers can leave at any time without inflecting the direction of the company. In fact they leave all the time: I've never seen a company where all the founding engs are around 10 years in.
(3c) Founding engineers do not have the investor, customer, and executive relationships that the founders have. An I'm sorry to tell you that those are much more important than engineering prowess.
Equity isn't mainly based on performance. It's based on risk. If I join as the first engineer, before any paying customers, that is in fact worth exponentially more than when there is some revenue, the first cease and desist is conquered, the rest of the core team is put together and working well, etc.
Trusting a potentially insane one-man shop of the founder is way different than trusting a group of 5-10 people who pay rent at the end of the month as proof that the concept might work.
Investors have even less to go on: the founder might be an outright crook and run off to the Bahamas.
(A) I don't know who told you that equity compensation was based on risk, but it's not. A CRO hired at series C will get more equity than any IC level employee hired as employee #1. It's a compensation lever like any other.
(B) I keep hearing people talk about "risk". Is this "risk" in the room with you right now? The reality is that founding engineers at many startups get competitive salary, get to work on incredible problems, and can leave after a few years having vested a bunch of equity and added a solid entry to their resume.
(C) Yes, if you're currently an L6 eng at Google you'd get a pay cut working at a startup. This isn't risk, it's opportunity cost. And guess what: those people very rarely join early stage startups. Those that do negotiate hard and get bigger equity packages. Most early stage startup employees are earlier in their careers / haven't hit the Google jackpot yet.
(I'll set aside the fact that many people leave big tech and join startups for non-financial reasons. Harder to draw generalization about those because the motifivations are so personal, but I know many.)
I've noticed that recruiters recently will use euphemisms for crypto/blockchain/etc. companies in their initial DM and the JD. The only hint might be in the third paragraph, where the word "token" or "chain" is buried in the middle.
> Using a crypto token gives our employees a very important, 10x improvement over traditional stock grants. A crypto token enables continuous, 24/7 liquidity within the first months of the startup's life.
That's not altogether bad (I have always lost with traditional ISOs), but what kinds of coworkers are those kinds of crypto token grants going to attract, and where's the sufficiently long alignment for the coworkers who got skittish early?
> I've noticed that recruiters recently will use euphemisms for crypto/blockchain/etc
I've seen this also, and I think its lame.
This is why at Fetchfox I explicitly use the phrase "crypto token" in the article and in all offers offers to prospective hires. It's a crypto token, so we call it that.
There are a lot of negative associations with the term, but using euphemisms just confuses people and makes it seem like you're afraid or that you're trying to trick them. I say, call a spade a spade, and call Voldemort "Voldemort".
There isn’t a single founding engineer at a publicly traded company that regrets their choice to sacrifice salary at a more stable company for 1% of a startup.
Becoming a founding engineer is a wealth-building, passion-for-your-work risk, not a pure salary optimization decision. HN never seems to understand this. If you’re optimizing for stable salary, go for the FAANG position. You’ll be comfortable, but you’ll most likely never be able to fly private, and you’ll have to be OK existing as a cog in a massive machine. Plenty of people are ok with this. These people should not be founding engineers.
Being a founding engineer is not wealth-building. Only 10% of startups succeed. Of these successes, only a small fraction (likely less than 1%) will be large enough to compensate for missed salary.
I would categorize it more as an extremely high-risk gamble. Actually your odds would be better taking your $3M in FAANG compensation over the same time period and making a 20:1 bet with a 2% chance of winning in Vegas. Probably double your chances of being able to fly private.
Readit News
Found the catch.
For good reason. Also, their 'sister article' about the details of the token are a private google doc. Quite promising.
Funny enough, that "sister article" appears to be a private google docs link... I was curious how this would even work.
At time of this comment, [0] https://docs.google.com/document/u/0/d/1VvxEQBRexuFJT5qCr9MC...
I understand the distrust for blockchain but there is also ideology in blockchain world that has not yet occurred in the greater world, that funding is broken and new alternatives are needed. Has somebody figured a perfect one - no. Is experimentation good? Yes.
This isn’t experimentation, it’s re-running a scam. Experimentation means trying something new.
Good article on some of the less simple incentives of VC: https://pivotal.substack.com/p/making-markets-in-time -- however forewarning that the compelling parts are mixed in with a lot of waffle.
Personally all levels of VC seem like a grift to me.
Draft doc with comments enabled: https://docs.google.com/document/d/1VvxEQBRexuFJT5qCr9MCeZRV...
1. What happens if an employee loses access to the wallet their company-ownership-tokens are on? Is it just a matter of re-emitting new tokens and distributing it to them? How are the old tokens handled (e.g. if the wallet is found at a later point in time)?
2. Could you ELI5 how you correlate the company value with token value?
3. Presumably, if everything works out, this allows your team (as well as anyone else) to sell their ownership tokens at any point, but also buy others' tokens that are available on the market as well right? I can see a few issues with this including insider dealing (some people having earlier access to great/awful news before others and making token transactions based on that).
I think it's an interesting idea but I think there are a lot more details that I'd like to see ironed out based on the little that's in the doc (that also has public-write access on it for some reason)
Here's what I did that they didn't:
- worked 24/7 (ok, 12/6) for the first 4 years including 1 where I was paid $0. He was more like 10/5 and came 1 year in. Still an absolute beast but we'd often talk about how I had to work "founders hours" and him employee hours.
- took 1/2 his salary when we hired him after raising our seed
- immediately had to push way out of my comfort zone in terms of responsibilities (investor stuff, copywriting, support, hiring, managing, partnerships, running ads)
At a base level, we're just kind of different people. He had hobbies outside of our company and I was a locked-in computer monk.
The other bit is that he was not like a highly paid Facebook engineer. He had gone back to the midwest after school and we were able to 2x his salary and move him to SF. Founders hiring the first employees need to really scour their network for diamonds that big tech might miss, because it's pretty well accepted that your odds of getting rich are much higher in big tech than startups.
If you know you're turning off smart candidates with crypto shenanigans it's a good sign that this is not a mature or pragmatic team.
I have a few pragmatic reasons why I want to use a crypto token, instead of traditional instruments.
The first one is liquidity timing. With a crypto token, you can have 24/7 trading and liquidity from basically day 1. There is no need for second markets with high fees and complicated process. Just a 10 second Uniswap contract.
Second, you don't need to "manage a cap table". The token trades and moves freely on the blockchain, permissionlessly for anyone who wants to use it.
I have a long article at https://ortutay.substack.com/p/the-computer-science-case-for... about why I think crypto rails are fundamentally better than the current banking system, from a computer science perspective.
The best example is how money transfers work in the current banking system. A money transfer is the canonical example of why you need transactions in a database: you want to deduct money from person A only of you successfuly transfer money to person B. But guess what: this is never executed as an actual atomic transaction, because A and B are usually at separate banks, in separate DB's.
Compare this to the blockchain: every single transfer is an atomic, universally auditable transaction. If you ignore all the noise and scams in crypto, this just makes 10x more sense to me as an engineer.
FetchFox as a company has two goals:
(1) Make the best possible AI scraper (2) Prove that crypto tokens are viable and better alternative to traditional company structures
It's lame that so much crypto stuff is caught up in scams that obscure the underlying value.
(1) Make the best possible AI scraper (2) Prove that crypto tokens are viable and better alternative to traditional company structures"
For everyone watching this is the opposite of pragmatism. This is idealism. Your company will succeed or fail based on your ability to execute on your primary mission. Here it should be (1). If you're labouring under a (2) then you have an idealistic company, which is fine, but don't pretend that (1) is your primary mission.
These crypto tokens aren't even guaranteed to be issued to a wallet you control.
In effect, I'd be "investing" $180k/yr and putting in crazy hours for a 1% equity that gets diluted to nearly nothing in a few funding rounds. How does that make sense?
You can only invest your time and salary cut into a single company, while angel and VC investor can invest their time and money into many companies. They only need 1 of those investments to skyrocket. You need 100% of your investments (size 1) to skyrocket for it to make sense.
Sure, if you hit the jackpot and join Facebook, then you're set for life. But that's an extreme outlier, otherwise I wouldn't be using it as an example.
My main point is if you think you might want to be a "founding engineer", just be a founder instead. As a good example, consider Nathan Blecharczyk, one of the 3 cofounders of AirBnB, and was its original CTO and coded its first website. He's now worth about $10 billion and according to Wikipedia is the 203rd richest person on the planet. If he instead took a job as "founding engineer" at AirBnB, and let Brian Chesky and Joe Gebbia instead take on the sole founder titles, he'd be worth orders of magnitude less (granted an order of magnitude less than $10 billion is still hundreds of million, but point being there is no reason he should be compensated less than his other cofounders).
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Maybe not many people making $220 take these offers?
There has to be a fair number of start ups that really don't "need" a $220k engineer if their business is "uber...but for cleaning your windows".
It would be interesting to see the breakdown of who does take these roles.
Granted "founding engineer" implys a lot so I'm not disagreeing with the premise or article, but sometimes on HN the idea that an engineer costs $200k+ is just assumed where often I think that isn't the case.
I have taken a role like this before, but when I did so, I was making a lateral move from a compensation standpoint. This is without factoring in any expected value of equity (because there was none).
I get that the typical $220k dev probably has a different mindset than the one you'd look to when building a new company. That said, I've focused most of my career on being the 2-5th employee and helping guide startups to viability. I've been able to do that while still pulling in reasonable $$ and hours to make my lifestyle work.
Maybe this alternate model is gone now with the credit crunch, but it does seem like we're missing out on a workable yet oddly unpopular approach here.
So I've thought about saving up enough to comfortably retire, and then going to work in a more risky company for the chance to get a life changing amount of equity (something more than single digit millions). I don't know that I will though, because the odds are seriously bad.
You have to ask yourself this- how much is enough, and how hard are you willing to work/risk for it? On the low end, how much is the minimum, and what pros would make that acceptable, quality of life, risk, anxiety levels, etc.
Your way forward will be much clearer when you know what your parameters are, even though life may happen between now and the end date of your plans.
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Also you are very likely to be laid off or pushed out before you get to the goals you think are so obvious.
Not really. They don't want you to give up anything or some do and you can just say no. The reality is that people want to find other people who want to work in startups to be their engineers. You really can't get top performance out of a guy who hates doing some work by paying him. You'd much rather get the guy who loves doing some work and pay him enough that he feels appreciated. Mercenary hires are useful in prop trading firms, but anywhere else the mercenary is better contracted than hired.
Besides, startup salaries are not $100k/year and you can get 2% as a founding engineer.
Taking more money to do a job you hate is a recipe for burnout.
Back in 2008 when Yahoo was laying off people, joining Facebook was something people did out of desperation.
That was an 85k/year job with an expectation of "all work, no life".
It was not seen as a good option, but most of the time the only place that was hiring during the Great Recession.
A decade later, it was a completely different thing. Yahoo was dead, Google+ (Orkut) had failed & FB had Instagram & Whatsapp.
When I joined, I was shocked how high the turnover was. And not anecdotally! there were stats you could slice and dice every which way, and...it was shocking.
How!? This was paradise.
After clearing enough years, and getting enough advice from people at 50+ who stayed at BigCo, once you got a pile o' money, it looks more like:
$170K/yr + $30K bonus + $100K/yr RSUs at Google - $150K/yr existential dread.
vs. startup:
$150K/yr + $15K bonus + $2.5K/yr (1% chance of $250K/year)
Increasing the money pile becomes not worth it once you've stacked Google RSUs, and the choking existential dread of what goes on inside BigCo is worth the pay difference.
I know that sounds nuts. Hell, when I was doing my big "Where do I go now that I've sold my startup?" interview rounds, I also interviewed for positions with a couple ex-Googlers who told me it'd be awful to join there.
I thought a lot about it and decided they were wrong, they didn't understand how little savings I had.
And they were wrong: it was totally worth building the money pile so I could move on like they did, to more productive areas where there's room to grow.
aside: I'm not sure anyone would get $220K/year base then only get $100K/year base. I usually see roughly the same base, frankly, its usually a bit higher than Google's.
another aside: stereotypes are stereotypes, from what you characterize startups vs. BigCo as, I think you'd be very surprised how many Googlers feel about workload
At the startup, there's not even the $150k to subtract out.
My risk is even higher than yours, coz at 1%, I'll have no say in anything important. And I'm breaking even only once we reach 10M valuation.
The problem is that there's no easy way to cash out with just a valuation and you need the $100k now to pay for whatever, not when the board says there can be a liquidity event (which may never even happen).
I took up an offer to work for 1/10th of my previous salary and half the working hours. Life is not all about money.
basically when I’m on the market at all the smaller companies move faster so I just take them
older mid size companies are the ones that compromise on base salary and take too long
I just don’t and won’t do the studying adequate for FAANG
There's nothing inherently wrong or illogical about making less than the maximum amount of money you can make.
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I’m guessing that no investor will back a company that they can’t sell for Y times the investment.
EDIT:
Thank you for the thoughtful replies everyone. I totally spaced the idea that I was asking this question on HN, a VC owned forum. I am glad that it was not interpreted as flame war baiting.
I think this might be selection bias or something along those lines. There are probably more companies than you'd expect that are techy bootstrapped companies, but they don't make the news because they don't have the funding round type of announcements. These companies also tend to do something not centered around AI or socials, so again, they fly below radar. I've worked at more than one
Even a self funded company has a different problem, the person/people who started it did a lot of the heavy lifting and took on massive risk, they want to be compensated for that risk, and are loath to share it all with others but in some sense, many self funded startups are 100% employee owned… just by a small subset of the employees.
A business with a chance of success in the 90s might be able to get a bank loan. As an early stage tech company, the capital available to you is venture capital.
So unless you have 5-10 employees willing to work for free until profitability PLUS paying infrastructure costs in the meantime, you are constrained to activities that can be profitable from day one.
This is why you can see employee owned consulting and services companies but not major development projects.
I worked for a company like that. It was a start-up size company that was in business for 20 years or so. It stayed small and had not external VC breathing on their neck and such.
So it does exist and it has it benefits and downside. For one, just because it's employee owned doesn't mean that the few founding employees won't screw anyone over and it does't mean everyone gets an equal amount of shares. Initial founders may still keep 99% of the shares, and maybe dole out a crumb here, and a bit there.
I thought about setting up Fetchfox this way, and in some ways we are an employee run company. Everyone including me gets the same crypto token as our stake in the company's success. I get a higher stake as the founder/ceo, but some offers give the employee 0.5 for every 1 of my allocations, which I think is pretty fair.
Long term, it would be nice if I had <50% stake in the project, and it self-managed somehow, similar to crypto projects like Ethereum.
That said, the phrase "employee owned" has some bad connotations. It has an implication that you are not trying very hard to grow, or that you are somehow less committed to company, or that you are some sort of co-op. For these reasons I don't like use that phrase.
I’m not sure avoiding specific phrases because the general populace has stigmas is helpful however. I don’t view employee-owned or coops in those ways at all. For example, your growth rate should be attributed to the quality of the product. The product quality should be attributed to people’s interest in their work. Good compensation/benefits such as ownership should be the incentive of a quality product.
The value of an employee owned business is that you can vote the CEO out if they’re not working in the best interests.
In my experience, equity alone can become more of a distraction than a motivator. It sometimes encourages people to mark time rather than consistently push the envelope. I’m wondering if a profit-sharing model, possibly combined with some consulting-group best practices, might be more effective at sustaining high performance over the long haul.
If you know of a proven employee-owned approach that doesn’t dilute accountability—and actually ensures teams stay fully engaged—I’d love to explore it. My goal is to bring in the best talent, focus everyone on building the best product, and reward them in a way that keeps us all hungry for continued success.
Fairly often you see service-focused small companies (i.e. agencies) being run as coops, e.g. my friend's NZ .NET shop http://iontech.nz/
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There is also a major issue with realizing equity because employees generally don't buy in or sell out when they leave. This means that equity is essentially locked away from the employees.
The model works well for stable businesses with regular profit that can be split up, and not so well for growth companies. Employee labor investment in capital growth never gets paid out because there is no exit.
There are niche examples of 'bootstrapped' companies that are employee/founder owned...
It is very tough to pull off an employee-owned company over the long term.
1. How do you handle it when someone leaves? How do you handle a new employee when they come in? There are many ways to do it, but I don’t think I’ve seen an implementable way that keeps incentives aligned.
2. What happens when the company is extremely successful? In many examples I have seen, the employee-owners give themselves substantial raises and/or distributions, become way better off than they ever expected, then they aren’t really motivated to do the hard things that make a business work over the long run.
Source: A friend of the family who buys up employee-owned SMBs, gets them back on track, and then sells them.
Note that often times the “employee buyout” is a founder/owner who can’t sell at a price that they like, so they basically sell it to less sophisticated buyers (their employees).
The simple answer is that I am not savvy enough with financial instruments to be confident that I can structure something that can't be preyed upon if it's successful. I know I care about making sure my employees are well-treated - you shouldn't believe me when I say that, but I believe me, and that means that in terms of my own ethics there's not much reason not to maintain control and depend on my own judgment. If I want to divide 70% of the profits up among my employees, nothing is going to stop me from doing that, so why not keep my options open?
But yeah that was a situation of a privately held company opting to make that transition, I'm not sure they had any investors to complicate things. And they're definitely an outlier.
Yeah, if a company is profitable from day one, there is no reason to take investors money. However that happens rarely. And while some people are happy to work without salary in the beginning if they get equity, for others with different risk preferences or life situation it is a big no-go, therefore also different shares of equity and different compensation...
Your insinuation is that a startup that can barely support 1 employee would need 10 employees day 1 instead of growing as it goes. VC money isn’t the only way to expand your business. If you’re not racing to market then there’s really no need to be successful 10+ employee company on day 1.
(1) 10 years in, your founding engineers won't have had much more impact than number 4, or 5, or 10. I think you'll have a real problem on your hands when two peers have 100x different equity stake and their tenures are just 1 year apart.
(2) In fact, your founding engineers probably won't be your best or highest impact folks. I much prefer the approach where you give very generous re-ups to your high performers.
(3) Founders and founding engineers are not the same.
(3a) Founding engineers eventually will require market compensation. Founders will not.
(3b) Founding engineers can leave at any time without inflecting the direction of the company. In fact they leave all the time: I've never seen a company where all the founding engs are around 10 years in.
(3c) Founding engineers do not have the investor, customer, and executive relationships that the founders have. An I'm sorry to tell you that those are much more important than engineering prowess.
FWIW, I like Sam Altman's recommendation of 10% for the first 10 employees (https://blog.samaltman.com/employee-equity). It's more than most companies do today...
Trusting a potentially insane one-man shop of the founder is way different than trusting a group of 5-10 people who pay rent at the end of the month as proof that the concept might work.
Investors have even less to go on: the founder might be an outright crook and run off to the Bahamas.
(B) I keep hearing people talk about "risk". Is this "risk" in the room with you right now? The reality is that founding engineers at many startups get competitive salary, get to work on incredible problems, and can leave after a few years having vested a bunch of equity and added a solid entry to their resume.
(C) Yes, if you're currently an L6 eng at Google you'd get a pay cut working at a startup. This isn't risk, it's opportunity cost. And guess what: those people very rarely join early stage startups. Those that do negotiate hard and get bigger equity packages. Most early stage startup employees are earlier in their careers / haven't hit the Google jackpot yet.
(I'll set aside the fact that many people leave big tech and join startups for non-financial reasons. Harder to draw generalization about those because the motifivations are so personal, but I know many.)
Yep.
> Using a crypto token gives our employees a very important, 10x improvement over traditional stock grants. A crypto token enables continuous, 24/7 liquidity within the first months of the startup's life.
That's not altogether bad (I have always lost with traditional ISOs), but what kinds of coworkers are those kinds of crypto token grants going to attract, and where's the sufficiently long alignment for the coworkers who got skittish early?
I've seen this also, and I think its lame.
This is why at Fetchfox I explicitly use the phrase "crypto token" in the article and in all offers offers to prospective hires. It's a crypto token, so we call it that.
There are a lot of negative associations with the term, but using euphemisms just confuses people and makes it seem like you're afraid or that you're trying to trick them. I say, call a spade a spade, and call Voldemort "Voldemort".
Becoming a founding engineer is a wealth-building, passion-for-your-work risk, not a pure salary optimization decision. HN never seems to understand this. If you’re optimizing for stable salary, go for the FAANG position. You’ll be comfortable, but you’ll most likely never be able to fly private, and you’ll have to be OK existing as a cog in a massive machine. Plenty of people are ok with this. These people should not be founding engineers.
I would categorize it more as an extremely high-risk gamble. Actually your odds would be better taking your $3M in FAANG compensation over the same time period and making a 20:1 bet with a 2% chance of winning in Vegas. Probably double your chances of being able to fly private.