Victus Spiritus


Samurai and Ronin, Founders and First Employees

20 Nov 2010

This post is the result of introspection related to a couple of positions I've come across. The most recent is an employee number one position in a YC company lead by two founders called ZeroCater. They're profitable, have big growth plans, and they're running a Python/Django stack but need help scaling up. Thanks to Andrew Badr for taking a few minutes out of his busy schedule to contact me and answer a few questions. David Tisch, the managing director of TechStars New York discussed an attractive HackStars staff position for the coming January-March TechStars NY program. While I'm optimistic about the program, the HackStars position misses out on the valuable social signal of being a carefully selected startup, and is more aligned with an employee number one position. The HackStar role is still a great vector to forging a company and improving tech and business skills.

Getting in on the ground floor of a nascent startup is a role shared by hackers and painters worldwide. A great habit to nurture while building companies is to consistently be aware of adjacent opportunities. The strongest stability in fluctuating markets is a solid skill set and business network. If you're looking for new opportunities, you should pay close attention to the differences between being an early employee, and founding a business of your own.

Let's examine the commonalities first

Both founders and employee number one work closely together to forge a new business and build infrastructure to support a market. Long hours are par for the course, it's not just a job its a lifestyle. That translates into lots of apologies to your spouse/loved ones, missed games for your kids, and a daily physical test of endurance to push forward. The business' health can deteriorate quickly, leading to a manic search for yet another small company role. Startups certainly aren't for everyone.

A few founders have the luxury of financial support from previous endeavors or spouses, but for the most part founders and early employees will both share some form of salary combined with equity in the company. This salary is drawn from revenue or outside investor dollars. In venture funded and many customer driven companies, founders and early employees typically vest over four years to earn their equity.

Samurai or Ronin, who's who

In some revenue driven startups, founders own their shares outright without any vesting schedule. Likely all single owner, revenue driven startups follow this model.

Even in cases where founders receive a salary, there was a time when the company was nothing more than wishful thinking. There was no functional (if less than ideal) revenue model. There was no outside investor interest or capital. There was no interest from prospective employees. There were only a few people that imagined something worth working on, whether or not there was any pay window. For the founders there is every chance that their efforts will have zero payoff, yet they persist.

First employees come into a very different environment. They should expect a competitive salary, healthy equity, and the basis for the company to be well set. But this lower risk profile comes at the cost of autonomy. While there are plenty of opportunities to grow with the startup, the primary authorities are the founders and any investors. Founders are legally responsible for the corporate entity while employees are not. Founders also have final say, any big business deals or decisions require founder approval, not first employee approval.