Ask HN: First startup. What do I ask so I don't get screwed?

[throwaway21618]

I'm about to join my first startup in SF as the 9th employee at a company that has sucessfully closed a small Series A round ~2M. CEO has a track record of exiting companies ... 5 so far anywhere from 10M-50M.

They have not made their offer yet, but what kinds of things should I be looking out for in the hiring terms? What kind of questions should I as them about options, stock, etc?

I hear so many horror stories about companies screwing early employees I was hoping you could give me an idea of things to look out for.

[pardner]

As an "old guy" founder with multiple exits, may I suggest you consider reframing the question in your own mind, perhaps to something like "If I join an 8-person startup, what are the daily qualities I need to exhibit to become indispensible to the team, and maximize the chances of not only riding this pony across the finish line but becoming well-positioned to leverage that success into even bigger and better things going forward?"

A couple of quick observations:

1) It seems unlikely that the CEO you decribe (5 decent exits, and another $2M series A) got that far by screwing people by any objective measure.

2) I've never met a rockstar who (as far as I know) worried a lot about getting screwed... they knew they could walk into a better gig any day if they weren't getting a fair shake.

3) They probably won't have too much wiggle room on their first offer, anyway. Sounds like they have enough experience to know what it takes to attract and retain a good team. So if you feel you can do "a lot" better elsewhere (or where you are) then that would be the right choice for you.

4) It's worth considering that it's one possible stepping stone on your path. When I joined Xilinx very early, I was pretty darned sure I was worth a lot more than the stock I got. That said, it was an awesome education on thriving in a frenetic startup environment with exquisitely talented peers, and fwiw that seemingly-meager stock offering bankrolled my next deal, which bankrolled the next one, etc.

[notbitter]

Totally disagree on #2. Walking into a better gig is easy, but it means you lose years of investment in the previous company (due to dilution, preferences, loss of retention bonus on acquisition, etc). Many of us on the engineering side consider that "getting screwed" even if folks on the executive side think of it as business as usual.

To the OP, I would suggest that the only sure-fire way to avoid getting screwed is to remain indispensable all the way through to a liquidity event. Even then, employee #9 may not see much from their equity.

[accomplice]

Here some advice from Ryan Freitas

http://secondverse.tumblr.com/post/5840343627/so-you-want-to...

Here a couple of red flags to look out for. They are looking to be a billion dollar company. This is another way of saying that they have giant egos and unrealistic exit plans. Find the people that know the topography of the exit landscape and how they fit into it.

Business Development personel without a product: For most startups, its just too early to have a BizDev person around, unless partnerships are critical to the success of product

The CEO can't code

They have 1 Jr level designer to feed 6 engineers

Everyone uses Windows, including dev-ops. (run away)

[devs1010]

I agree with the "CEO can't code" part, I've worked for two very small companies (one startup, the other basically a startup but was a few years old) and both had worthless CEO's who hardly understood anything about technology which made things rather unsavory at points. In small companies the CEO is very involved in things and they can really muck things up if they don't know anything about software development.

And, of course, the windows point, if a developer uses windows I immediately take off credibility points.

[brudgers]

The 9th employee of a company sold @ $50 million is very unlikely to cash out with fuck you money, regardless of anyone else's level of integrity - it would probably take close to a double digit undiluted stake to put you there...at least.

In other words, the biggest way to avoid feeling screwed is to have realistic expectations and to place a realistic value on any stock options. Remember that the bigger the target number for exiting is, the more likely that all the options and stocks will be worth exactly zero.

Good luck.

[descentintomael]

I'm on my first start up right now so I don't have a whole lot of advice, but all I can say is personalities count. In a small environment like that you need to make sure that you can get along well with everyone there. Get to know the team a little bit and try to spot any red flags. If the team includes a few friends or relatives of the founders, that could be a red flag for nepotism over execution.