Startup founders have this habit of approaching techies to ask for their help in building their startups. And because the startup has no funding yet, the only other option for paying their team is often through vesting shares.
Don't get me wrong. I understand why this approach is used because one, I have founded a startup myself and I know how hard it can be to afford good engineers; and two, I have founded a startup!
One of the biggest struggles we had (and maybe still have) is funding, which is the center of all operations. Having zero funding means we cannot find good employees who will help us raise our revenues and get more funding. And trust me, you need a good team to get money as a startup: but you also need money to get a good team! It's a paradox!
To escape this paradoxical situation, most startups look for a good team and pay them in vested shares or pledges. 'When we get funding, you will get x amount, and when we go public, sell or exit the company, you get y percent."
I do think this would be a good approach if there are clear timelines and structure of the work that will be needed from the techie. If the techie fully understands that it could be 1 - 4 years before the company gets any funding (if ever), and they may have to work over 40 hours a week (without any pay, remember) and get calls in the middle of the night to fix errors: then I am all for it!
My only problem with this approach is: startup founders tend to be delusional and very optimistic, which is good for business but not so good when they start making promises.
Every founder tends to believe they are the unicorn: and they will get funding within 6 months, then make millions in a year. They rub this off on their team with the promises of pledges and shares without peeking at the pessimistic side of things.
When the techie joins the team, they think they will only work for one year freely then the money starts pouring in! 10 months in, the techies realize they are doing too much work without seeing any financial results. They also 'wake up' and realize that the founder is a bit delusional (And maybe a little crazy). They realize they are trusting a madman (or woman) to lead them through an unknown territory. And the doubts start! Then the mistrust! And eventually, they drop off the company!
Because this team is ideally the foundation, the startup starts crumbling; the founder still holds hope and tries looking for a replacement for their team, but it's too late.
My 2 cents on this: paying in shares is a bit manipulative when the full vision and workload of the team are not fully understood.
I would take a different approach as a startup founder. I think of it as a 'bilateral startup growth' or 'nipe nikupe'. This is where both parties, the founder and the techie, stand to gain by having one another as part of the startup.
There is no financial gain involved in this approach, but other types of growth-oriented development. Such could include mentorship, skill acquisition, and portfolio diversification; among others.
In this case, the founder only hires the techie who sees something to gain other than shares or finances from the company. The two need to agree on working together without any finances or shares on the table; because they see a mutual benefit in each other.
This is the approach I have been implementing in my startup. I will leave the story of how I undertake this for another day. And maybe someday, I will dig deeper into the 'bilateral startup growth' approach.
|My 2 shillings, because due to inflation, my 2 cents are no longer worth much|