The delta between first employee and founders is wildly underplayed in this article.
In our case: one founder worked unpaid for almost a year. After incorporating, we both continue to work much longer hours than our first eng hire. In addition, our first hire walked on to a market salary, health insurance, and a company with paying customers and $3m in the bank. ie at least an order of magnitude risk reduction. Both founders continue to take much less salary than the first employee.
If the first employee had left their college, family, or country to join the startup - would they have gotten as much stock as the founder? How much risk must the first employee take on in order to be compensated at the same level?
On the same note - the lack of a paycheck says nothing about the risk of a founder. A founder may very well start with more money, more opportunity, or a bigger safety net than any future employees.
The lack of a paycheck also doesn't tell us anything about how much the founder's skills and creative input contributed to the success of the company VS the first employees.
If they both have been there since the beginning, it is very possible that the company would similarly not exist if the first employees hadn't joined. So "The company couldn't exist without the founder" could also hold true for "The company couldn't exist without the first employees".
I think it's an interesting question - should you be compensated for your contributions to the success of the company or should you be compensated for the risk you took on in working for it.
I feel as though most founders would agree with being compensated for your contributions to success. Though most founders also wouldn't give their first employee's a similar cut of the reward, to themselves.
Yes I think here we have to understand risk as meaning opportunity cost. If employ 1 is getting paid less than he would at google, then the opportunity to earn that money is weighed against the opportunity to own part of this startup.
Exactly. There may be some overgeneralization or maybe exageration sometimes about the first employee doing all the work while the founders get to enjoy the fame and the money.
Let me add my case: 3 founders, I am one of them, we all worked for more than 1 year, not being paid, not taking a single day of vacation, not even weekends, to understand our market, build our product, and launch.
Our first employee came after that, and while we started paying ourselves, on minimum wages, our first employee (developper) was paid slightly above market level and working normal hours.
We have 5 employees today, they all get paid at market level or above, we recently raised funds (at seed level), less than 1M, and we (founders) still work 7/7 most of the time.
I understand how first employees may have the feeling they do not have what they deserve, and in some startups that may be true, but can we say this feeling is _sometimes_ a cognitive bias due to the employee not perceiving the financial risks involved in creating a company, and the amount of work done by founders?
I think that your evaluation of the employee not entirely understanding the toll it has taken on you, is fair. Sympathy and empathy only go so far.
One thing I'd suggest is - In this description, you've emphasized the hours put in.
That's fair. You work hard and feel that this deserves compensation. But - if you were following that logic - your first 2 employees SHOULD combine to have more stock than you. You certainly don't put in more man hours than 2 employees put together.
Nor are you likely paid for the risk you take. You could hire an employee that drops out of college or otherwise risks their future opportunities. They will likely not get as much stock as you.
The thing that you could probably emphasize is how core to the success of your company your contributions are.
It is not a given that your contributions are worth your compensation (compared to the developer).
On a similar vein, one could argue that parents are the people who contributed the most to the success of their children. While you could argue that this is logistically true - in practical, the conception is a very small part of what makes the child successful. What's important is what comes afterwards.
So - It might be true that you work hard. But I'd recommend you fall back on to the value you bring to the table, when justifying your compensation.
From the article: "Many engineers drop out of college or leave comfortable jobs at Google to join startups as early employees dreaming about huge upsides, fame, and romance of working for a startup."
I don't know many folks that drop out of college to work at a startup, that could be a sacrifice. But I do know plenty who dropped out of Big-Tech. If the startup fails, they can almost certainly get their cosy big-tech job back. So all their are giving up is a year or two salary differential for a few years in exchange for a lotto ticket. That isn't much of a sacrifice, it's more of a trade.
In our case: one founder worked unpaid for almost a year. After incorporating, we both continue to work much longer hours than our first eng hire. In addition, our first hire walked on to a market salary, health insurance, and a company with paying customers and $3m in the bank. ie at least an order of magnitude risk reduction. Both founders continue to take much less salary than the first employee.