Memo to CEOs & Founders: Stop Being Such Cheap Bastards

The situations he describes are <i>entirely typical</i>, and he's right to call the founder-takes-all scenario the elephant in the room. Early employees often work incredibly hard and receive a payout that is <i>a thousand times smaller</i> than the founder's. I know because I've been one of those employees.<p>After being on the wrong end of that deal once, I've decided to never make that mistake again. I'd rather work at a larger company (where I enjoy normal hours, lots of benefits, and 3-4x more $$ of stock <i>every year</i> than I got in 4 years from a startup) or be one of the founders actually winning in the startup game. Right now I'm actually doing both. ;-)

This is a big part of the reason I'm doing a startup. I worked for a company pre-IPO (back on the good 'ol days) and saw very little actual cash.<p>I'm paying for the sins of others now: I have heard nothing but snickers or outright laughter when I offer equity.<p>Net-net: single founder, no chance of getting any real talent on board (I'm way past the college buddy thing), all taxes and fees, like incorporation, due up front, my wife is about to divorce me because of the stress.<p>But, I would still rather do the startup than anything else. At least I have a <i>chance</i> to make some big money, whereas that chance is near zero at a job.

Anyone ever read what Calacanis says about his employees? He demands way beyond what even most startups require, yet you can tell in clear text that there's not going to be any payout to his people, I'd love to see his term sheet. Nothing against him, I really enjoy his writing. But working at mahala hmmm n0t.

Far too many employees at early stage startups have completely unreasonable expectations for how much their options are worth. So even though they're getting shafted, there's a sizable chunk of the population willing to work for scraps on someone else's dream.<p>I don't quite understand it, but I'm not exactly worried the startup employee pool will shrink anytime soon. But they won't be getting me and a sizable pool of the top talent.

How does it make sense that the investors get their money back AND get a % of the remaining money equal to their equity?<p>They own half the company, shouldn't they simply get half of the total proceeds of the acquisition?

I think part of the reason founders try to keep as much stock as possible is to retain control for as long as they can through each investment round.<p>If you can demonstrate two cap sheets with the typical scenario and the feel-good scenario and it can be shown that founders loose control at about the same stage, this would probably be more digestable.

i'm waiting to see his cap table. my guys get paid market rate, i'm paying myself less than a teacher; the least i've ever made in the last decade. i also work about 20-30 hours more than my team.

What I will give my employees when I get to that point is this: job stability, a job guarantee of a certain fixed period, and set them up as they leave to start their own business.<p>I learnt that from my parents. If someone is leaving your company to start a business, loan them the money they need to startup.

Is there any evidence of that programmers avoid working at startups?<p>Is there any evidence that disproportionate returns (as opposed to risk avoidance) is the major reason?<p>I'm not saying increased compensation wouldn't increase interest (that applies to any job). But, there is nothing in this article to suggest that startups are hurting to recruit and that this is due to compensation rather than life/work balance and job stability.

"But if you give an extra $10 million to the folks who fought shoulder to shoulder with you, everyone will feel better about what you accomplished together."<p>Sorry, I'm not in this to make everyone 'feel better'. And let's say I was, why would I keep anything for myself? Wouldn't giving 100% away give me maximum feel goodness?

Net message (of this and other posts on the startup experience) seems to be that it can be great to be a founder, but startups suck as employers. If you aren't the company-founding type, you're far better off working for an established company.

If employees don't like what they're being offered, they should vote with their feet.

Or give early employees decent option grants.

I think there are 2 kinds of engineers out there. Those who simply like solving technical problems and innovating to earn a living, and those who themselves are entrepreneurs deep down to some degree.<p>Group 1: The first group is not the target of this discussion, because they're more interested in being employed and having a steady income -- they'll work for you if you have an interesting problem to solve and you pay them market rate for their skills. And companies should value their risk aversion, because it's good to balance insane entrepreneurs with realistic detail-conscious normal people.<p>Group 2: I've been in the second group, and now am in a founder's position bootstrapping a company with my own piggy bank. I have no problem with the way things are. I've worked not only for low pay to do something that was interesting, but also for free to learn the ropes or have a chance at gaining experience at something new. There are very few opportunities to do that in the big corporate world -- especially to have a chance, based much more uniquely on who you are and what you want, to do something very different from your career past or something for which you have little experience. This is especially true if you don't have a stellar academic history, which most of us know means nothing but which the corporate and academic world value so much it prevents group 2 engineers from getting into a lot of doors. And there are other benefits. New ideas come along the way when you're concentrating in the fast-paced smalltech world, along with new friends and knowledge that come in handy regardless if you decide to ever found or be an early executive team member of a company. It's not just about the net monetary gain between today and exit.<p>As an engineer with an entrepreneurial core, I definitely don't despise those who happen to have greater persuasive skills and use those skills to build a productive workforce that's less expensive and adds more value than the next guy. Isn't that one of the reasons they're successful? And isn't it one of the reasons an investor is more likely to give that entrepreneur capital to grow a business? If that guy can convince me to work for his company for less overall monetary gain between now and when I leave his company than if I had gone for some other option (in a wildly imaginative world where engineers have lots of options every time they look for work), then who am I to be upset later over what's in the bank? If he was a better salesman than the next guy (or an i-bank, or Google, or your dad's friend's tire company who needs a web dev), I'm happy to be aboard as the collateral benefits will be great. In addition, if I'm worth something more than the next guy, being a group 2 entrepreneur-engineer, I take it as a test of my own maturity in the entrepreneurial world to bargain for and be able to convince others of what I'm actually worth to them.<p>QUESTION: What about profit sharing instead of equity? I've always wondered if this an option explored by any software startups.

If your goal in a startup is to become rich, become a founder.

This is depressing.