The reason I'm asking is because the comp listed in that thread is "in the $160-180K range and equity around 1.5-2.0%". I'm assuming that actual founders (not "founding engineers") will have equity stakes that are an order of magnitude more at that point in the company (though perhaps much lower cash salaries? not sure).
Now, of course, actual founders at this point have already done a ton more work and had more initial risk - they came up with the idea, did the work to get into YC, etc. But, going forward, the founding engineer is probably going to be working just as hard as the founders, and has just as much risk as the whole thing going belly up.
So, I don't mean this to come across as overly negative, but being a "founding engineer" seems like a pretty bad deal. If the company hits, you are going to have put in nearly as much work as the founders, but will be probably making ~10x less in equity. If the company fails, you're out of a job but are otherwise in a similar boat as the founders. I guess my overall point is, if you're considering being a "founding engineer", why not just become a founder? Case in point, Nathan Blecharczyk, who was CTO and basically original engineer for AirBnB, was an actual cofounder and is now worth multi billions of dollars. If he were a "founding engineer", he would probably put in nearly as much work, for 10x or more less payoff.
Would be interested in folks with more experience who could actually comment on the economics and thoughts on the risk/reward of this. Perhaps I'm just reacting to the phrase "founding engineer", because it seems like it's trying to conflate the role of founder with much less of the benefit.
Benefits:
- Learn on the job
- Learn to start companies/test ideas
Drawbacks:
- Company pivots or moves locations? Can lose all equity if < year 1 even if you stayed up late often building first MVP
- All of your points
The payoff could be the startup, but more likely it's the experience and skills for down the line. Are you inexperienced? Then it's a great option if you want to start a startup in the future.
For me I ended up getting a full time, much much better job by essentially going through the agile sprint wringer at multiple startups. It would be a much harder sell now to me, not that I'm not open to it, I just have more of a radar for better startups now.
Caveat if you don't have the skills required to start the company, then there's no opportunity cost and the opportunity cost exists somewhere else if you have other skills. I did notice how several founders were very good at fundraising, instead of writing code -- and it was equally important.
The criterion for getting early funding from places like Ycombinator has changed substantially. The thinking used to be to find great teams including tech ability, invest in them very early, and let them pivot around until they find product-market fit.
In the last few years, the model has shifted substantially. Now, it seems that incubators and early money investors expect you to already have a decent business idea, have it in some sort of production or beta cycle, and show actual revenue for a year or more before they're interested in risking their money.
In practice, this skews the whole process in favor of people with a business and product focus. Frequently, I'm seeing MVPs that are built offshore by inexpensive teams, or even some of the no code solutions. Early funding is basically raid your saving account, and hit up your friends and family (or, be a repeat founder with a big win on your bio). , If the mvp shows some traction, there suddenly needs to be some serious technical leadership, which is not the skill set of the founders. The founding engineer concept is an attempt to square this circle by giving enough equity to a talented tech lead to convince investors that you have the technical chops to chart a course over a few years and execute without a major catastrophe.
As to the surprisingly low comp, here's the truth: Startup has become a glamour profession, equivalent to fashion or entertainment. You can pay poorly because there's a long line of people with the talent and ambition to try it out. The status boost you get by saying you're working at a Silicon Valley startup with white shoe VC investors is very valuable in some circles.
If you want to make money, and you can cut it, do Faang. If you have a relatively low aversion to risk, and ambition to do big things and be important someday, take the plunge with startup, but don't fool yourself for a minute that it's a sure thing, no matter how smart you are.
How do you decide how to balance that? YC/Silicon Valley has settled chiefly on near-market (~80%, it seems) rate salary and a much more significant stake (0.5-1.5%-ish, I guess) than later employees.
The other factors that play into it, in my mind, are:
* interested, but not ready to be a founder; by whatever definition they want to use
* less "feeling" of risk as a 1st employee vs. actual risk (this one CAN'T be discounted. emotions are not rational)
* wanting to have a much larger area of responsibility than they could at other companies
* firmly believing in the company/founders/mission for whatever reason
Those seem to be the things that come up in every discussion I remember. Let me know if I missed anything obvious.
It simply means early employee and carries no other significance. It generally implies some technical seniority but I've seen this given to lower level or lower experienced folks as well. It's interesting that internally, if ranks (levels) are shared, that when the company reaches a hundred or hundreds of employees, the early engineers will be readily identifiable and perhaps command a certain respect or deference.
I find it to be a form of title inflation, used to attract early employees.
You are correct, that founders will have an order of magnitude more equity. But also, note that non-denominated plain ole "engineers" will have an order of magnitude less equity than founding engineers. Surely you must agree that they also carry nearly the same risk. As an employee earning startup market rate ($160-$180k) your risk is on par with those who come on at A or B rounds, so yes this is a sweet deal IMO, title inflation aside.
In a very real way, your risk is actually much less than later employees, even series A. By that time, the equity is much more expensive to exercise. At "founding engineer" time, it's cheap enough that you don't even have to think about it. Just early exercise it.
I think it's important to understand that a "founding engineer" is someone who has been with a company since its inception—someone who has been instrumental in building and developing the product/service/company from the ground up. That doesn't mean they can't also be a co-founder, but I'd say that's not necessarily true. Founding engineers are usually the people who don't put their equity and their money is not at risk during the early stages that decide the fate of the company. But when they do own the risk, they are taken as founding member.
It sounds like you're wondering whether or not the term "founding engineer" is trying to conflate the role of founder with much less of the benefit. Yes, there are definitely benefits to being a founder—and things that come along with being one—but I don't think those benefits apply to all founders. It really depends on what kind of business you're building and how much risk you're willing to take on as an entrepreneur.
If you are not at the choosing the stack. If they insist on testing your technical abilities these raise red flags. Who is choosing the stack.. who is testing your technical abilities? The real founding engineer..
Founding engineer = first engineer but it’s not clear yet what the long term role should be (eg CTO vs VP Eng). Sometimes it means the person is very junior and it’s a wait and see type of situation. Sometimes it means it’s not clear to the involved sheet things will head in terms of your work.
At least that’s how I’ve been using them. If you joined my startup as a first engineer, then you can pick your title, but I would nudge you in the direction that makes sense. It often comes down to many CTO folks being architects and not active code writers. In an early startup that’s not always ideal of course, why it’s often better to start with a founding engineer title.
If you think you’re heading in the direction of being the future CTO, I think you should angle for 5%. My guess is they’re not seeing you as that (eg if you’re very junior), but your equity is def very strong for a non-CTO role IMHO.
P.S.: the company valuation and your market comp determine your %. For example, if your market value is considered $200k and the company can afford to pay only a $100k salary then you’d get $100k worth of equity.
How should founders hire early engineers who feel invested in the company?
- offer more equity
- offer more salary
- offer the same position but with no “founding” title. (Would your rather work the same position with no “founding” title? Different title? “Foundational engineer”?)
- get more co-founder engineers with 10%+ equity
You still share the high risk of failure, but the actual cost of failure is much lower.