How much would you pay yourself as employee #1?

zingzong

New member
I got an verbal offer to join a startup that just got accepted into YC. I have worked with the two founders previously and we have a good relationship. They have been interested in hiring me for over 6 months, so presumably they have either had trouble filling the position or they want me specifically because of the trust that exists in our relationship (or both). I would come on to fill a technical position.

I'm thinking of asking to get paid exactly as much as they are paying themselves (let's say $120k), with a lower stock package because I'm not a founder (let's say $80k). All three of us are going to pour the same amount of blood, sweat and tears into this so I think that's fair. What are your thoughts, Reddit? Thanks in advance.
 
@zingzong Founders don't usually get paid much, typically well below market. They typically keep as much money in the company as they can to help it grow, with the idea that their main compensation comes when they exit. You're in a very different position.

Look up market comp for your role and stage. Optionally add on a premium for it being a short stint and if you're not getting healthcare / benefits. Work out an agreement in advance in case they want you to stay full time after. Understand how much risk you want to take in the form of salary vs. equity, and recommend a different weighting if you see fit.
 
@deecruz It depends on who the employee no.1 is?

Normally they pay 3-4% if she/he is a specific person with a great background

Also, there's a red flag, they want her/him for over 6 months? why they should say over 6 months?

Also, if someone wants both equity and salary should accept a salary lower than regular salary
 
@growingbygrace Those are true for an established company. At an early stage startup, the equity is compensation for the risks the individual is taking and the enormous influence they’ll have over the success of the startup.
 
@deecruz I agree, but when it comes to employees not founders, then the equity for employees just is from option pool as 10-15% equity

So in an ideal world, 1st employee will have 3-4% of the whole table, or X% of option pool
 
@deecruz That's wrong

Please let me know that when in an early-stage startup option pool equity is 10%, how many percantage of equity from that 10% goes to employees, from 1st one to X-one?

You know someones role, experience, and contribution, you estimate their potential salary, and know your valuation today and tomorrow, and give the chance to some employees, advisors, and consultants to have equity from your option pool
 
@growingbygrace Nothing this subjective is ever plainly wrong. The absolutism in your comment shows your bias. The first hire is literary the most important hire you’ll ever make. YC itself says 10% of your company should go to your first 10 employees. With that same logic, the plurality of that 10% should go to the first employee, hence the 3-4%. Regarding the argument about role, I’d say regardless of the role, the first hire is essential to the success of the company. That’s literary the definition of why founders should make the first hire.
 
@deecruz Lol, as you mentioned and agree 10% of the company should go to 10 first employees

So, if the first employee is someone really unique you will give 3-4% to her/him, otherwise all 10 employees can have equal share, which means 1%
 
@zingzong Cash -- same as founders.

Stock -- can range from 1% - 33% depends on the person and the company. Ofc, 33% would make you a co-founder and the fact that they got in YC without you drastically de-risked the company for you. I'd say probably closer to 5-15% equity if you are good, 1-5% if your role is a commodity.
 
@cdscp89 Anything above 10% is considered cofounder-level equity by YC. Early hires usually get 0-3%, and above 2% is insanely high.

And like others said, founders usually pay themselves a fraction of market rate. Employees will definitely make more than them.
 
@cdscp89 No one is giving 33% after they already raised. If the founders are technical you also have significantly less leverage. I'd say if you are technical and the first employee, i'd say you'be be lucky to get 2%. Salary is somewhere around market value
 
@addieblessed Yeah I also said 33% is unlikely. But I’ve seen yc companies getting third co-founders post getting in YC. (E.g., when the third member is so strong that the founding team cannot convince them to join pre YC) I think 2% is way too low though unless you want to hire an average engineer. Many people go for the 5-10 rule where the first 5 hires get 10% in total and I typically like a 5%, 2.5%, 1%, 1%, 0.5% distribution.
 
@cdscp89 I could see that. The one thing i would also consider is market conditions. Most of what is being considered "normal" was during ZIRP where extraordinary talent was more scarce. There is a lot more people looking for work now + willing to try their hand at startup life. So the leverage kinda goes to founders at the current time.
 
@cdscp89 Cash should be higher than founders. Most founders at that stage are getting very little in salary, if any. YC is what, like 600k? Having 3 people with 120k salary is closer to 180k in actual cost. That money will be gone within a year. Just not possible for founders to take salary AND hire employees at that stage
 

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