I'm the technical co-founder of my own startup (http://carmivore.com) and I can't say I agree with this one. See, developers are easy to find (yes, probably not the best ones, but since I'm a developer myself I know a good one when I see their code), and to get an MVP going, you don't really need a highly qualified expert, just someone that can build a relatively simple and stable app (or whatever), hell, even in PHP.
And usually, first employees just don't share the passion for a startup in the same amount founders do, which means there's probably less self-initiative and less contributive to the product itself.
So why should I offer equity to someone who I can easily replace (yes, everyone is replacable, but since it's my company I call the shots :)? At the end of the day, their job will only be transforming my thoughts into code.
EDIT: On the other hand I agree that if I'm not sharing equity, the first employee should get proper salary.
> And usually, first employees just don't share the passion for a startup in the same amount founders do, which means there's probably less self-initiative and less contribution to the product itself.
As someone once put it:
Give me 1%, and you get 1% of me.
Give me 10%, and I will be motivated.
Give me 30%, and I will ask for 20 and work harder than you ever thought it was possible for a human being to work.
PS: "At the end of the day, their job will only be transforming my thoughts into code." is a really really really bad signal to be giving. With that mindset you've probably made it onto the blacklist of most developers. The only ones you'll be able to get are the ones who can't get a job anywhere else.
I'd really work on that attitude if I were you. Friendly advice as a Slovenian to a fellow Slovenian.
I think you got me wrong there, I didn't want to underestimate the value of developers' skills - I merely tried to point out that equity shouldn't be given lightly. What if I had 2 or 3 first employees? Should I give 20 to each one of them?
Since you're a freelancer, you should understand this - if I needed your services, I'd hire you for an agreed amount and I would expect you to deliver what we would agree upon. I trust your expertise, get the product developed and still have all the equity. If I wouldn't be satisfied, I'd find another freelancer, loose some money, and still not loose any equity.
Thanx for the tip though :)
EDIT: Let me try with numbers: I can get an investor to invest, let's say $50k for 10%. Now a first employee demands 20% so the value they bring in must be $100k worth, right? But if I instead hire a freelancer, I pay him $10k or $20k for what the first employee would have done, have the working product, and own 90% of the company instead of 70% and still have some cash from the investment left.
Yes, everyone should value their skills highly, but at the same time realize that everyone is replacable too. Including you and me.
Yes. Now considering you were wise enough to put in a 4 year vesting with a 1 year cliff that means the employee is going to work 4 years to get that $100k. That amounts to just $25k per year.
Congratulations, you just got a very devoted developer for a measly $25k/year bonus that there's an 80% chance you'll never have to pay up.
And if they don't turn out well in that first year, you don't owe them anything.
After the cliff, let's say they get 0.5% per month. The time they leave decides how much you have to buy them out.
Vesting is a wonderful thing ;)
EDIT: You also have to consider this - "If they're that good that they can singlehandedly build your MVP. What are you offering that they would rather take 20% of yours, than 90% of their own?"
How? Vesting doesn't have to be noted in the books immediately, just make a contract which specifies all the details of the vesting without actual transfer of shares, which happens under specific circumstances (e.g. an exit, expiry of the vesting term etc.)
You should probably know that before you start dealing with a prospective employee. If you are hiring quality people then it is definitely worth it. If you don't know for sure then you should not be hiring anyone.
Just wanted to note I get its an analogy. I also remember that being said somewhere too. But funny enough, most won't take 20. They'll do the full 30 or more. LOL
"So why should I offer equity to someone who I can easily replace (yes, everyone is replacable, but since it's my company I call the shots :)? At the end of the day, their job will only be transforming my thoughts into code."
To be fair the author of the post is asking skilled tech folk to avoid this "transform other people's ideas into code" role without either getting significant equity or a market salary.
You are saying that 'converting your thoughts into code" can be done by (relatively) unskilled, (relatively) low caliber, (relatively) easily replaceable devs.
You seem to be agreeing with the author more than disagreeing.
Jacques says (in effect) 'don't be this easily replaceable dev. be a really good dev and be a (co) founder".
"At the end of the day, their job will only be transforming my thoughts into code."
Having joined a startup and worked with an outsourced team of Indian developers I can tell you this is an inefficient way to look at things.
You'll eventually end up paying higher rates for good devs to write good code and waste valuable time and money on those transforming your thoughts into code.
> At the end of the day, their job will only be transforming my thoughts into code.
Technically, part of their job is transforming your thoughts into requirements, presenting options and recommendations about how to resolve problems (or even a different problem to solve), determining what's even possible (and what other possibilities are), and determining what code actually needs to be written.
Someone who is good at those parts is no more easily replaceable than a brilliant business mind with tons of contacts and much more difficult to replace than the vast majority of "ideas and thoughts" that they're working with.
For a high level software developer, "coding" is the least of the responsibilities; it's the easy part.
There are indeed millions of average developers out there, but they aren't going to be capable of taking ideas, independently realizing them, and delivering a superior quality product that will disrupt an industry.
Delivery is at least as important as the ideas if not more so and the person in that role should be well compensated if you do want those skills + that level of commitment.
And usually, first employees just don't share the passion for a startup in the same amount founders do, which means there's probably less self-initiative and less contributive to the product itself.
So why should I offer equity to someone who I can easily replace (yes, everyone is replacable, but since it's my company I call the shots :)? At the end of the day, their job will only be transforming my thoughts into code.
EDIT: On the other hand I agree that if I'm not sharing equity, the first employee should get proper salary.