Being employee #1 is the worst of both worlds. You get the risk of a startup and you most likely will get very little payout if the startup is successful.
Most of the people I know that were employee #1 got nothing.
Yes, employee #1 is almost always the worst-off person in the company. They get to work like a founder, without the financial benefits. I've been there twice; it isn't a lot of fun.
There's another perspective that is equally true: Employee #1 is getting paid to see how a startup is created, struggles, pivots, pivots again, and eventually turns into a viable business. There is no better way to prepare yourself to be a founder than to be an early employee in a startup.
I definitely understand where you are coming from (and I didn't downvote you), but I have to disagree.
That employee (we'll call her Sarah) isn't being paid to see how a startup is created; she's paying to see how a startup is created.
She's paying heavily. She's losing money in the form of a lower salary compared to equivalent jobs, and she's losing money in the form of losing free-time compared to equivalent jobs.
Sometimes, that payment is very worth it. But it's a payment.
Not to mention that employee #1, if an engineer, is probably chained to the engine block (figuratively), toiling with keeping the machines running. He/she most likely remains in the dark when it comes to the business development and deal making that are all important for succeeding as a startup.
Exactly. This is my biggest problem with the "earning versus learning" philosophy. Both times I was employee #1 the founders had no interest in sharing any aspect of the business side of the company. I was there to build the product; anything else was a distraction.
Employees are less likely to make money from stock options than actors are to make a cut of net profit.
If you don't get the same type of stock as the VCs, and under all the same conditions, it's worth pennies on the dollar at best and likely simply zero.
I know it's probably the furthest thing from your mind right now, but I think it'd be really interesting to hear how this works out, say a year or two from now
My husband was an early employee at a company that was acquired in a mid-nine-figure deal. The founders walked away with at least a hundred million each. Employee #1 got a low seven-figure payout, after about ten years of grueling overtime. Keep in mind this was actually a company that is IMO unusually fair and considerate toward employees.
You really need billions of dollars coming into a company before non-founders have a chance to make fuck-you money.
Not to worry, they've just read the article on why you should not be the first employee in a startup, and more specifically, what terms you should not necessarily agree too.
Being the first employee of a startup can be the best thing since sliced bread. You take little risk (compared to the actual owners), yet the reward is usually way better than employee number 100. Who do you think is more likely to get 1) a bumb in pay and 2) a better position first?
Most startups don't get anywhere near employee #100. If you're in a startup that does, you'll likely be happy to be either #1 or #100.
Being #1 means you work as hard as the owners but for much less -- often you will end up making less than you'd make elsewhere.
Being an early hire seems to be about trading salary & security for experience running a business. Friends who have joined a startup early have said it's the absolute best way to learn what to do -- and many times, what not to do -- when you're starting your own company.
Of course, YMMV. I've heard from plenty of early hires that don't end up near the business side, and don't get much out of it.
The learning is incredible - esp. if you've never been in a startup before and you don't have a business background.
Just go in with your eyes wide open, and don't expect to make any money off the stock options. Figure out what you need to do to get your startup off the ground better. Be flexible in doing whatever necessary as Employee #1.
Had huge learning in 6 years. So although I took a pay cut, and I made 0 on stock - I would recommend it to others.
Most of the people I know that were employee #1 got nothing.