This is a sentiment that I see frequently on HN, and I'm not exactly sure why. I was a "questionably" contracted employee for awhile, and I never once felt exploited by the company, and I'm confident that they never felt that they were exploiting me.

Sure, being contractors might not be ideal for them at the moment, but they are the first 8 employees at the company. There are additional benefits to being in that situation.

In addition, we have no idea how much they do or do not understand their employment status. It is convenient for us to jump to the conclusion that the employees are ignorant about tax law, but that very well may not be the case. Just like in any other service industry, there are plenty of educated and informed workers in the mix, especially when you start looking at those that tend to excel in that particular field (he did say he now only hires top notch folk, after all).

I guess what I'm saying is, the discussion about W2 vs 1099 in this case is both valid and valuable, but let's not jump to any conclusions about who is exploiting whom.