First of all, there is a new term in town “a founding engineer”. I believe it was coined in the last several years to make it sound cooler. Howeve

Does it make sense to be an early employee?

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2021-08-17 01:00:06

First of all, there is a new term in town “a founding engineer”. I believe it was coined in the last several years to make it sound cooler. However, the idea is the same. You join early, get a cut in compensation, get some equity (in order of magnitude of 1%) and you work your a$$ off the same way as founders.

There is one HUGE caveat. Most likely from a financial perspective, you will get less than by joining a mid-size or large software company.

A quite common founder's pitch is: “You will get 1% of equity. In the best-case scenario when we get to a $3B IPO, you will get dozens of millions and in the worst scenario, we will have a small exit of $100M and you will get $1M.”

It makes (especially for people who weren’t involved in startups) imagine multi-million dollar outcomes. And this image is fueled quite well with a constant drumbeat of IPO’s and big exits.

Unfortunately, this pitch is way beyond positive spin. This is a classical survivor bias fallacy. We see big IPO’s and exits on a monthly basis, but we don’t see hundreds of companies that run out of business.