When you went "into partnership with semi-famous TV talk show host", how much equity did you get?

I got some equity. Some day it might actually be worth something. I was participating in a conversation about how being a founder is better than being an employee, and pointing out that they often end up exactly the same (except for the equity). I edited the post a little, remembering that I do still have friends there.

Isn't equity a big deal? I was employee #2 in a just funded startup. I ended up busting my ass the whole time only to realize that my equity was a fraction of what the founders took in.

IMHO, if you do a startup, do it as a founder, or join after Series B, from a pure risk-rewards perspective.

I didn't mean to inject my bitch-fest into this thread, my point is that the idea that being a founder is going to lead to a job where you have control and independence, can run into a big road block as soon as you take VC money. It's important to get stuff clear with your co-founders before you sign anything.

What you call a "bitch-fest" I call incredibly valuable data rarely seen here. Since most HN readers will never become part of YN, your experience is extremely apropos.

You should seriously consider writing a "Don't Let This Happen to You" piece (a la Philip Greenspun) and posting it here to save others from the same fate. Change the names (including your own) if you like. A post like that could be the single most important thing some hackers ever take away from here.

To paraphrase my lawyer, sometimes companies can be very creative about what the standard "Proprietary Inventions and Information" agreement covers. And any advice I give can basically be summed up as "get your own lawyer early."

No, we totally appreciate your input here, and I think that you'll find that being Digg's first technical guy carries a lot of street cred. Your insight is appreciated. And, even though things may not be looking great for you now, I wouldn't be suprised if you did better for yourself the second time around.

Although on a cautionary note, I'd be careful what I post here, because it does tend to get picked up. Comments I've made got picked up by ValleyWag, and that's almost never a good thing.

Got it. Good luck with your startup. I read Jessica Livingston's 'Founders at work' and the story of many co-founders is very similar to what you said.

"Isn't equity a big deal? I was employee #2 in a just funded startup. I ended up busting my ass the whole time only to realize that my equity was a fraction of what the founders took in."

To be fair if you were an employee, i.e. you got paid well I assume? there was less risk on your part relative to the founders. So your equity should be a fraction of what the founders took in. Why would it be otherwise?

Yes, I was paid very well. I loved the team. And I am now at peace with the equity part as well. They earned every single bit of their equity for the risk they took.

I was responding to ojbyrne's comments that being a founder is not all hunky-dory since (s)he ended up in the same spot. I suggested at least (s)he got better equity being a founder and that is a big deal.

And I still think for a risk/reward outlook, either being a founder or playing it safe until after Series B are the two extremes and are both high in the value / risk ratio.

I'd probably agree with "paid very well", "loved the team", "earned every bit", etc. The problem was that the job went from something I loved (small team, a variety of responsibilities, lots of opportunity) to something I didn't like at all (head-down coding). Which is all I really wanted to point out.

My implication, and I think you got it, was that you should have definitely gotten more than "some equity". I speak from no experience (still a student), but I don't think I'd care who is paraded in front of the media as "the founders" - whatever makes the company more likely to succeed is best. If the other guys are more media-friendly than I am, all the better!

What would really matter for my ego is what piece of the pie I get in the end, although, in your position, it sounds like that's a hard area to negotiate, too, since said "semi-famous person" is adding all the value in the very beginning (before any code is written). This is probably faulty logic to base your equity on, since your piece should be proportional to the value you add at acquisition.

The thing is there's a difference between the equity of management founders, and "non-management founders" which is basically just that the former get a seat at the table at any negotiations, and the latter doesn't. I actually didn't know there were non-management founders till I got to California (you hear occasionally about them - linkedin has one). And the thing I also learned is that liquidity of equity is more important than the percentage.

And I don't think that Kevin added all the value in the beginning. He was significantly less famous at that point, and in fact was about to become unemployed. Many of his coworkers tried to launch sites around the same time, with nearly as much fame, and they all failed.

There was a lot of luck.

Ah, hadn't realized we were talking about digg. Kudos, at least it's something to brag about at parties ;)

I haven't heard about "management" and "non-management" equity, sounds like a cheap way for sleezy MBA types to hoodwink hackers out of money. Could you explain in two sentences how liquidity works? I assumed everyone just cashes in their stock when an acquisition (or IPO) happens.

Was there any sort of written contract in the beginning? Kevin first announced Digg on The Screensavers in a way like he had nothing to do with it. If there was nothing in writing between the two of you at the time Kevin announced it, wouldn't that mean Kevin split equal ownership with you?

of course i know what site you're talking about, since you've been around here for awhile, and so have i.

another thing pg says about startups is that they're very risky. while you might not be getting the respect you deserve in your first startup, perhaps you'll do better in your second, or third.

That is the hope. I pretty well knew what was going to happen the day I met our new CEO. I was not prepared for the extent of the bullshit.

I think your example shows the importance of learning how shrewd businesspeople think.

<< example #1 >>

My first business mentor was literally a con artist. I was starting my first business and he, ostensibly a retired lawyer, took me under his wing... while we worked together he helped me a lot, but one day he skipped town and left me (and a few other people) screwed.

It was some of the best money I ever spent on education -- it's not every day you get exposed to deception at that level of sophistication.

Since then I've interacted with some very ethical businesspeople who understand things in a remarkably similar way to that con artist -- they are acutely aware of the mechanics of perception manipulation, which can be applied to good or bad ends in almost any conceivable field of endeavor.

<< example #2 >>

One big reason I burnt out last year is because I didn't pay attention to what I'd learned in example #1 because I started a company with ethical people I knew extremely well (read: even if you're with great people, you still need to know exactly what you're committing to).

I had equity, but I was the youngest & least-experienced founder, and left behind the other founder & founder-investor in N. America to go and manage everything myself on the other side of the world, in China.

A few things that contributed to a living hell:

* I had zero salary (ALL my money came from expense claims) so I couldn't buy as much as a chocolate bar without running a stressful "is-this-worth-the-cost-to-investors" calculation in my head -- I couldn't internalize even a single dollar of "cost" to my own personal budget, and I let this stress me out because my co-founders were people I cared about. I felt like a child who had to ask his parents before buying anything.

* I lived in my office. And let me say that living alone out of an office in a foreign country with a nearly impenetrable culture and language is not the same as sharing an apartment in a hip city with your co-founder/friends.

* Decision-making was terribly slow -- it would take days to go back and forth b/w China and N. America on even the simplest issues. We totally underestimated the cost of this.

* My vesting period was undefined, and we had no official corporate paperwork, despite already having spent $100k+ on startup costs. I didn't realize this was a problem until I burnt out, and found that a simple conversation over dinner was all it took for me to be entirely out of the picture equity-wise.

* My other founder insisted on being the sole interface to the founder-investor. Which meant that information flow, despite being an extremely small startup, was already horribly distorted. There was already a chain of communication this long: Staff (6 people) > Project Manager > Me > Founder #2 > Founder-Investor. And the Founder-Investor was the only person who had any real experience in manufacturing, which was what we got ourselves into.

By the end, I had not even a hint of feeling like a responsible, independent person, let alone leader of a company. Every single aspect of my existence was, technically even if not practically, under the control of "the company" -- the food I ate, the office I lived in, the staff I hired... and I'd agreed to it all, in a trusting sort of way, because I didn't see that "good people" still require "good structure" in order to function properly. It was the least entrepreneurial position I've ever felt myself to be in, despite being the most entrepreneurial from a cursory glance.

Things would've been a lot smoother if I'd let my "shrewd businessperson" self take over initial discussions instead of my more natural "trusting friend" self, which left all the details to some nonexistent universal positive force of social goodness.

I just did some quick research into this and all I have to say is WTF?? Why'd they do you like that? Please tell me you've got enough equity to put you in the briar patch if and when the company exits.

Here's one clue. I was 44 when we started. I think that explains some of what happened and also why I put up with for as long as I did (as someone said above, letting the media-attractive people parade before the cameras was good for the company). And yes, I'm waiting (sometime impatiently) for the exit, and if I get what I'm supposed to get, I'll be back here apologizing for every bitchy comment.

This sounds terrible. 1) why couldn't you advance? 2) wasn't the company being deprived of your talents since you were only doing a cubicle job? 3) what would you have preferred to be doing?

quit?

Is that a question or advice? Either way I did quit.

congrats!

I am just in a mode right now where I see victimhood for what it is. Glad you're not letting yourself be a victim.