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Ask Slashdot: How To Ask For Equity In a Startup?
Uncrase writes "I'm a contract software developer, and have been working for a small startup for over a year now. Not a bad position to be in of course. The company consists of a handful of people, all of which (I believe) are contractors (by their own choice), however we're doing very very well and have a very significant revenue already. Call me greedy, but I've worked hard (as the main IT guy essentially) to get the company to where it is now, and of course get paid contractor rates for this. I would like to get some kind of equity (options) in this. The company is continuing to grow its operations and I am basically indispensible for the continuation of this growth. I'm definitely not planning in any way to force a hand, but I would like to know what could be a good way to approach this. I'd essentially like to ask for a raise — being a contractor — but in the form of equity. Any experience with this? Am I completely off here?"
...and therefore not indispensable ...
Good luck, you are greedy indeed...
If you're charging a rate that you're happy with, then offer to give them a discount for equity. Whatever you do, don't overplay your hand.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Just tell the guy who signs your paycheck that you are interested in getting some stock options since you feel you've put a lot of effort into the company. Tell them the options would secure your long term interest in said company, so it would be in both of your best interests.
Never trust an atom. They make up everything.
say "I wish to (1)trade large amounts of money or (2) decrease my rate of pay in exchange for equity in this company"
If you are just a contractor, you should have negotiated for for a decent rate up front and then offered a lower rate in exchange for equity. If you gave them a lower price because they were small, but didn't ask for equity then, you can either renegotiate or walk away. They might prefer to stick with you instead of finding someone new.
Good luck, though. They might feel that just because they are suddenly making more money, it doesn't mean they owe you a piece and the same fee.
Equity is what you get when a small company can't afford to pay you the full market rate for your skills. You're gambling your current income against a future payout in the event that the company is successful. If they're paying you well and you're happy with that, you're really not in a position to ask for an equity stake. If you believe the company is going to be successful, buy some shares like any other investor would.
"I have the attention span of a strobe lit goldfish, please get to the point quickly!"
You get paid by the hour.
Folks who stand to lose money if the company goes under get equity. Not you.
See my journal for slashdot ID's by year. Mine created in 2005. http://slashdot.org/journal/289875/slashdot-ids-by-year
You were paid (an evidently fair compensation) to do a job. Kudos for doing it well! That said, as a biz owner myself, we take all the risk which includes employment of contractors from day one when the company was deeply in the red and then pray hard that someday we'll transition to black.
Be thankful you have a good job and if they offer it, certainly jump on options...but..again, as the owner of three startups, 2 of which are tech related, we take the risk, not you, ergo we take the reward.
From your perspective, it sucks, I know....I was a contractor for 10 years. From our perspective, it sucks when you ask, because then we have to look at potentially canning you. So, it sucks all around.
dont take anything except for preferred founders stock .. its what I did in similar circumstances...
How much of your money you invested in the company. You see, that's usually what separates the "owners" from the "employees". In the few (these days) cases where an employee becomes a shareholder, it is usually worked out before they are hired. Oh, I forgot, you weren't hired, you're a contractor.
"Eve of Destruction", it's not just for old hippies anymore...
with the money you just got from your raise, you greedy bastard!
And give up the higher contractor wage. That's the deal you make: permanent employee who earns less per hour, but gets a long-term stake in the company, or contractor who makes bigger bucks but nothing in the way of ownership.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
Having more than once been in your boss's role, you mustn't forget the costs involved with doing what you ask. Since (we assume) the company is not yet public, then depending on the current structure, this could involve significant legal fees to set up. In my experience, which is limited, this has ranged from $5,000 to $30,000. Of course, this doesn't apply if the company already has a mechanism to provide equity to its employees.
In addition to the other suggestions, be sensitive to whether or not they can easily make this change.
No. Well...maybe. Actually, yes. It really just depends.
Which will depend on a number of things:
Is your idea of being "owed" equity your idea, or did others approach you and say: "You have contributed work and skill sets that would have been extremely difficult to find for us during the execution of the startup. We would like you to stay in some sort of equity arrangement."
I got approached by two gents after two years and got equity and CIO status because back in 1994, building IP networks was not a widely known skill. Also, putting a internet connection in a company was a significant engineering under taking. Sure they could have found someone else, but not very easily and it would have been a big risk.
If this doesn't apply to you, I would not ask as you will be told no first of all and they will think you are a future risk as you didn't get something you asked for.
-Hack
-
Got Geometrodynamics? Awe, too hard to figure out? Too bad.
If they agree with the idea, expect that they may require you to drop from the current "contractor" rate or some other advantages you currently have or take over some new responsibilities; it would be only fair, since it is you that switched your mind in regards with a previous agreement and choose now to "bet" on the future of the company - so, what are you prepared to "pay" for it?
Note: yes, you "paying" now somehow for the options IS fair - the guys involved in startup took (and continue to take) the risks inherent to a startup until crossing the chasm.
As in any negotiation, the success depends on many factors - I can't say more on this track (other than "stay opened to understand their point of view")... but in any case, the negotiation may succeed (a win-win solution, hopefully) or it may fail. What are you prepared to do if it fails? (hint: twisting their arms is barely an ethical or long-term-prospects choice).
Questions raise, answers kill. Raise questions to stay alive.
But if you are then the company is doing itself a dis service if it is allowing you into a position where you think you are indispensible. Many information hiding IT people do try to do it though - or at least get into their heads that they are.
The people who put forward the ideas and the risk get the equity, you just get your contract rates no matter how the company goes good or bad.
No, don't say "hey, I was just wondering".
"Oh, you were wondering? Well, the answer is no".
You have to go in more assertive than that. Tell them you want it and offer to become an employee.
A contractor with options doesn't make sense IMHO.
If you can read this... 01110101 01110010 00100000 01100001 00100000 01100111 01100101 01100101 01101011
Shares aren't given out for free - even for the founders themselves they almost always have a vesting schedule which means they don't actually own all the shares up-front - they need to vest for e.g. 4 years before they actually own the shares allocated for them. If you're asking for shares from founders at an early stage company, it'll almost always imply they'll need to hire you or the startup's capital structure will feel sketchy to investors.
Also, you need to make sure the founders can be trusted. Whoever with majority control of the company can decide to dilute only "someone else's" shares at the next fund raising.
OK, you're greedy. You're also not irreplaceable.
You've taken none of the risk, and have no reason to ask for any portion of the reward. You've gotten what you contacted for.
You are under no ethical obligation not to ask for what you want. So you should ask. You do need to be careful, as other mentioned, not to overplay your hand. You don't want to sour your relationship, no matter what the answer is. Being in a position of being important to continuing operations is something you should definitely make use of (again, as other said, to the extent that it really is true). It may feel slimy because you generally wouldn't do it to your friends, but this is business. Your friends look out for you in a reciprocal way. In business, the only one looking out for you is you. I behooves you to do a dry run of your request and reasoning with a friend before heading to the "main office". Also, don't assume the answer is no. That will be self-fulfilling and puts you on adversarial terms right away. Assume in your language and tone that you are asking for something that makes sense for both parties.
you made a deal up front to get paid well to do your job, because at the time, you thought the options were not worth much. They paid you accordingly.
Now that you see the company is doing well, you want to get paid and get options too. Pretty raw deal that you present to the company, you basically didn't take any of the risk and want all the reward.
So are you a software developer or the IT guy? You say both. You don't know if people are contractors or not. Do you not talk with your co-workers?
Revenue does not equal "doing well". "Doing well" means making a profit, which means that revenues exceed expenses. It doesn't sound like you have a handle on that.
From what it sounds like, you are likely seen as "the hired help". If you want to get off the "hired help" roll, you should have a talk with the people who have the power to make it happen. They may tell you "no", so be prepared for it. But you'll never succeed if you don't take risks. Be prepared to give a detailed explanation as to why you deserve equity and what you have done to earn it. Also, be prepared to have to show that you are serious.
I have worked for startups and I think directors either give high hourly (and overtime) pay to contractors or employee pay with a stock-option plan issued every year and awarded on a five year term or something like that to keep you employed there long term. In other words, you are either investing a portion of your time and will share in the success or not. Don't be surprised if they only have those two scenarios available. Don't take this the wrong way but it's worth pointing out that nobody is indispensable. Jobs, Gates, Obama, etc, will all be dispensed one way or another and it won't spell the end of their respective organizations.
Ask to be moved to a full time employee and tell them you want this because you believe in the company and see it being a huge success. Stroke their ego, but don't lie. They already know what you're worth and there for you're less of a gamble than bringing someone else on and you can still ask for a good market rate. The bonus to this is if you work it right you'll be able to get almost as much as you are now and have taxes taken out and get stock as a sign on bonus. Tell them you're wanting to take a pay cut (because you will have too) in order to get stock as a sign on bonus. It basically costs them nothing and they will save money by paying you a slightly lower hourly rate.
"Ubuntu" -- an African word, meaning "Slackware is too hard for me". - stolen from Dan C alt.os.linux.slackware
You only get what you negotiate, not what you deserve or desire. The best way to negotiate is be willing to walk away.
So, you should find another one or two companies willing to pay you what you want in terms of money and options. Then go to your existing employer and say "With the economy picking back up, I'm looking to find a company that will allow me to grow with them. Do you think AbcCorp could be that company for me?" "yeah, sure, excuse me while I fix my pointy hair, ummhmm..." "I've tried to figure out where that puts me, and found that a comparable position at XyzCorp offers 25 scooby snacks plus the opportunity to drive the mystery machine. Do you think my value to AbcCorp puts me in that range at this company?"
Don't use overly confrontational terminology, like "match their rate", "if I stay", etc. Treat it as a fact-finding mission and at the end of the day, you must be OK leaving if you and your employer don't agree on what the facts are.
Additionally, if you don't find other companies willing to pay more, or if you determine in your heart that you wouldn't really want to move companies, then at the end of this process you will be happier even if you stay. That is just as important to discover.
Then your boss should know that. The thing is in small companies the developers are often directly involved with their bosses but it seems you are not. If you can't trust him enough to simply ask about it then I doubt he trusts you that much.
Also getting equity is usually something that is reserved to people who have a high interest in seeing the company succeed. As a contractor it is sort of assumed you don't. Think about it from your bosses standpoint, he's put in money and taken risks and the profits he's seeing will help him expand and develop his company into what he wants it to be - and if the company fails he looses everything. You just get paid by the hour, if the company fails you find a new job and you don't loose anything, and the vision of how the company will develop is not your own vision. If you are willing to believe in the company vision and stick with it - even if the company were to go into the red and you had to work without pay for a year - then equity could be on the table.
And never think you are vital. You could be the best programmer in the world but if you have a crappy attitude you're out.
If you really are indispensable
No one except the owner is indispensable. It will completely depend on the relationship he has with them. If he's considered a "friend" or "good guy" he might be able to talk his way into something. If he's considered an asset then it's like the copier asking for a raise. A lot of people deride that this is the case or they deride that somebody thinks it's the case but I just think it's human nature and understandable.
Just in my experience and opinion, you would be better off asking that on ycombinator that deals with tech startups and has many from that community, not on slashdot.
,,. is what are you going to get out of this distribution of equity? Will the company benefit greatly in term of profit by doing this? If not, why would they do it? Giving you equity mean taking it away from someone else.
Nothing of what parent said is wrong, per se, but it also does not follow that any of that precludes you from asking. There is no independent answer for "what do you deserve". You only deserve what you can negotiate. Often your negotiations are constrained by what others do (e.g. salaries are constrained by what others are willing to work for), but ultimately you won't get more if you don't ask/negotiate for it.
The time to ask for equity instead of pay was back when there was risk.
As a CEO of a startup (I've done a few, before), I EXPECT contractors to ask to be included in the group of founders. If they're savvy enough, I concur, sometimes converting them to employee status.
1. Start with a question: Ask for a formal review, just like other employees get (usually annually). They'll be surprised, because most people don't WANT a review. But, it helps to know if you're held in low or high regard by the decision-makers. It might not be a formal process in a start-up, but even getting senior folk to commend you for what you've done is a starting point.
2. Later, (so it doesn't seem so obvious) ask to attend the strategic meetings, so you can do a better job (e.g., Strategy/planning sessions, Board meetings).
3. After you've assessed your "cred," and shown you're ready to move beyond simple following of instructions, THEN it's time to ask the critical question: "How could I become a more valuable member of your team?" If they brush you off with a short, "You're doing fine as you are," you've got more work to do. If they offer you the opportunity to "become a more valuable member of your team," the door is now open for negotiation: Ask for fair compensation (salary or fees), and offer to take SOME of it in equity. Now the burden is on THEM to turn you down. But, if you've gotten them to admit you're valuable, and they want you in the inner circle, it's going to be hard for them to reject you.
Advice from an old hand who's both gotten and granted equity in starts-up...
If he quits, can they hire and get up to speed someone else without losing massive revenue in the mean time? Especially considering that he's the main IT guy and therefore is probably the only person who really knows their setup well?
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>> and I am basically indispensable for the continuation of this growth.
That is funny. You must be new to the industry. One of the first things anyone in employee/contractor position learns (should learn) in their first 5 or so years is that EVERYONE is replaceable. Well ok, Steve Jobs turned out to be not so replaceable, but that's Steve Jobs. In all likelihood, you are flattering yourself - you are very much dispensable.
Presently I do a lot of contract work for one customer, and I too would not mind getting a royalty from every unit they ship. And yes, I'm kind of 'indispensable' - several products developed for them, a couple of them are fairly complex. But I know full well that if the push comes to shove they will find a replacement for me. Just the same as they've found me to replace the other guy who was with them for like 10 years before that :)
You should understand that while you think that you're an indispensable part of the equation, odds are pretty heavily stacked against that notion
Give your employer some credit: they took the risk and they deserve to benefit for that (including the ideas behind the company). However, bear in mind that most employers are not opposed to paying someone more, but you will need to justify it. If you want an equity stake, then tell them why it would benefit them to do that for you. Why should they make a partial owner? Break it down into simple math.
Trust me when I say, this is the best way because this is the way I'd want this proposal presented to me (I own a small biz myself)
I'd happily pay you Tuesday for a biopsy today!
First, you are asking the wrong crowd. You'd be better off asking entrepreneurs and start-up dudes.
Second, don't start the conversation by making an offer. That puts you in the worst position because now you are setting the bar, be it too low or (worse) too high, and they have to react to that. You are better off just asking "So, is there a way that I can start earning equity in the company, rather than just straight compensation?" That way they can evaluate the question itself rather than whether or not they want to accept your offer, and in return you will get to evaluate the deal they are prepared to offer (assuming there is one).
If you're as essential as you think, raise your rates -- you're the seller, after all. If they seem ready to consider going with a price hike, offer to take it in the form of equity (because you believe in the company's future and want to be part of it, blablabla. Asking for options in lieu of a rate hike or straight equity would be an easier sell, as it gives them a stronger hold on you and gives you more motivation to work at the top of your game. But the real question is, are you getting paid less than you deserve, and are you willing to demand more. The form of the increase is secondary.
Yes, there are any number of ways to structure a sale so that those in power get a lot and those not in power get little if anything. A sale rarely is so simple as "we'll pay you $X and you have N shares and options outstanding".
Honestly, don't overcomplicate this or it could turn out for the worse. It's a small startup so I assume you know the owners, just sit down with them and ask how you can get onboard with some equity options. Most small startups would have considered equity options in their planning and you should get a simple response either way. I've been on both sides of this situation and in my experience it's always better to be honest, open and direct. Do it now, waiting will just decrease your upside if the company is growing already and there could be external timing constraints which may mean you miss a window of opportunity. Just be prepared that you may not get the response you want, but you should definitely ask the question all the same.
1) Tell them if they don't give you a raise you won't give them the passwords to their servers.
2) Make the news when they bring you up on criminal charges,
3) Write a book about your story.
4) PROFIT!!!
Sometimes the light at the end of the tunnel is the headlight of an oncoming train.
I've been amazed on more than one occasion at how quickly someone who I would have described as indispensable is quickly replaced. There are always issues and will be some lost money... but people step up and surprise you. Having seen this, I'd say very few people are _actually_ indispensable.
I have a feeling this guy thinks he's more important than he actually is. Which is fair.. most people like to think they are the main cog keeping everything running. Rarely the case. If he's not even a full time employee, chances are he could be replaced with little more than a hiccup. Management probably has a transition plan in place.
Unless you are producing novel, patentable ideas you are not indispensable; there is someone out there who can do your job. The "irreplaceable" attitude will bite you in the ass. When I hear someone say they are indispensable the phrase "pompous ass" comes to mind.
If you want a raise, make a case for it based on what you are doing now and how it is different that what you were doing before. If you were being underpaid before you need to make the case as to why you stayed.
For small business equity is a very complex issue. It is not like a small private company can just hand you some stock. They may need to make you a partner which is not simple. I you believe you should be a partner then make that case.
Write it down. You look more serious and organized. It allows you to look over your words and polish your presentation. It also allows your boss to re-read it and gain more clarity on your position.
The thing that many people do not understand about business is risk. Yes you contributed to the growth of the company but you did not risk your house, savings and credits rating to get there. What if things went bad? You could walk away but your boss could not. Since you are not the accountant, how do you know they are doing so well? You see the income but you don't see the outlay. There is a lot of overhead that goes into running a business; taxes, accounting, insurance, clerical staff, etc. You bosses may have taken out loans to start the business and they may not be paid off yet.
As someone who is running a startup with a partner, I am trrying to think of a good way for someone to approach me would be. I pay anyone I have doing contractor work very well. In fact, between expenses of the business, hours myself and my partner put in, and startup costs, the contractors make an hourly rate far beyond anything we take out. The majority of the money is re-invested back into the business to make it grow. That and the endless hours working on the business is what will continue to make it grow.
So the question is why would I share the gains? And under what circumstances would I share the gains? I honestly cannot think of any compelling reason that a contractor I pay could come to me and justify any shares of equity. How long was the company in business before you were brought in? How long before the business was actually incorporated was it being worked on before becoming real? And that is where, if someone I pay very very well came to me asking for equity I would probably stop using them. It shows a complete lack of understanding of the amount of time and effort the partners / owners put into the business and in all honesty, I would be insulted.
IF and this is a huge IF, I had a contractor that went so far above and beyond what was expected I would consider it. If that contractor was with me in the beginning and did countless hours of work, not always counting the pennies in the check, then I have something to work with. I know when someone puts in 40 hours of work in a time sheet and did 20 - 25 hours worth of work. I know the opposite as well when someone puts in a timesheet for 40 hours and clearly did 60 hours or more of work. That contractor is bleeding with me and is regarded above others. If you have not put in serious blood, time, and your own skin into the game you have absolutely zero right to ask for any equity. Where I am in my startup, there are only two people who have done the time: myself and my partner. So unless you are putting up money to buy in or working for free, you are on the outside of the circle. I am on a 3 - 5 year outlooks, expecting to break even on the amount of work invested after 7 years of hard work. What that means in that in year 7 or so I expect to finally stop reinvesting all profits back into the business and finally start taking out some for myself and my partner. So yeah, after 7 years I may start driving a really nice car, buy a nice new house, or have a nice retirement fund setup, but trust me I earned every last cent. You got paid for the work you performed.
You are replaceable, no matter what you think. You may be good, even great, but trust me, in my position I would let you go without a thought. Then again like I said I pay very well, so if you are making $50-$75 / hr, ok I may be a bit more lenient. But what I pay my contractors, I pay because they are good and I expect to get things done and I know few can go out and make more. You also are naive. You have no idea what goes in to running a business. I cannot even describe the hours spent doing things like collecting on payments due, finding and maintaining insurance, state / federal filings, evaluating and implementing new systems for the business. Sales and marketing, closing new business, etc. On top of all of that I still do day-to-day programming, just to get more money to reinvest back into the business. You want equity and not want to be laughed at? Offer to come aboard and put in no less than 80 hours a week making less than you did as a contractor. It may be worth the bunch of hours and the couple of thousands of dollars to work it out, figure out workers comp, insurance and other stuff.
LOL, the programming is maybe 30% of the business after it is all said and done. And quite frankly is the easiest by far to deal with. Talk to me when you have the state breathing down your back questioning your business on the use of contractors. Now do it when states are hurting for cash and want everyone on payroll to get their taxes each month or qu
I have a feeling this guy thinks he's more important than he actually is.
Come on, when have you ever heard someone in IT with an inflated notion of their own importance? I mean, that is completely absurd.
Depending on his jurisdiction, he may not be a contractor, but an employee, and both him and his boss are looking at substantial tax penalties and fines.
From your current situation, it sounds like the IRS will want a word with you
And no, having a written contract saying you're an independent contractor means next to nothing when compared to the rest of the evidence.
If they set your hours, your workplace, your work environment, pay you weekly instead of by deliverables, there's no specific "the contract is now complete" condition, and it's a key part of the business (and you have indicated yes several of these), you're an employee, not a contractor.
Let's call it what it is, Anti-Social Media.
I've seen this attitude plenty of times. One job I had, they were using a contract IT guy for both desktop and server support. This guy claimed to be "on call," but if you did have a problem, it would have to wait until he swanned in at 3:30pm to take a look at it, and then not on Mondays (because he wasn't available). When they hired me to be a full-time IT guy, he didn't even seem phased. He seemed to feel he would be spending the next six months "training me" to do stuff he couldn't be bothered to do in the first place. Within about three weeks after I was on the job, the company stopped calling him altogether (and then it was basically just for things like passwords and settings that he hadn't documented anywhere). I felt for the guy -- I guess I basically put him out of some work. But his attitude just made him seem like a prick, and it was costing the company money in lost productivity.
Breakfast served all day!
If he's doing his job and documenting what he's doing, and if he's coding, he's writing passably decent code and documentation, then yes, he is replaceable. This company is in a potential nightmare situation if he isn't documenting everything, not just because he might get fired, but what if he gets hit by a bus?
I'm just putting together a company with a few partners, and part of the incorporation process that our lawyer has told us to do is succession planning; right from the share structure to how to deal with the death, departure or incapacitation of one or more partners. You see, not even the owners should be indispensable in a properly setup company.
The world's burning. Moped Jesus spotted on I50. Details at 11.
No one except the owner is indispensable.
I see your point, and it's pretty much true; however, if the owner is indispensable and gets hit by a bus, there are now employees who are very likely screwed and will be looking for work.
If you're an owner, and you employ people, you have to leave your ego at the door and make sure there is a plan if something should ever happen to you. Owners should not be indispensable, especially at a company with at least a half dozen employees.
Someone flopped a steamer in the gene pool.
No one except the owner is indispensable.
Nah, corporations took care of that concept.
Seven puppies were harmed during the making of this post.
If the owner thinks that the guys who built the systems he depend on everyday are replaceable then he too is replaceable.
Non impediti ratione cogitationus.
Equity in a company should reward those who take a risk (such as putting in some VC or working unpaid hours until the business is mature), not those who get paid by the hour, even if they work hard. Especially as a contractor you are expected to work hard and you (should) get good money for that commitment.
IMO if you think you are a valuable asset then you should request a higher rate - if you are right they will agree, and if you are not right then better find somewhere else to shine.
Also if you have been working there for a while and you bring up the question of options once they start to have good revenues, then it could suggest that you are in mostly for the money.
lucm, indeed.
Not sure where I heard it but it goes something like this..
Place your hand in a bucket and fill it with water.. now remove your hand..that is how much you will be missed.
Given that the missing is inversely proportionate to the size of the bucket..in almost all cases.. you are not missed substantively after a week or two.
Without me, it is just a collection f vans and equipment.
And no, not even a corporation and well written succession plan could change that.
Without me, the licenses are pretty pieces of paper and worth exactly whatever a paper mill will pay for them.
There are still businesses where the owner is indispensable.
With me there the company is a money making machine. Without me, it is just vans, tools and some supplies, worth very little in real terms.
ruin you both and you want to add equity to the mix just to remove any doubt at all that your "contractor" status is pure tax evasion.
That doesn't seem such a wonderful idea.
Instead I would lay out a plan for future value you can add to the company. "Within the next year I can have this project done that'll add $$$ to our revenue".
"I like to lick butts!" by MobileTatsu-NJG (#32700246) (Score:5, Informative)
so you get equity based on the risk you're taking. The fact that you got paid contractor rates until they were successful means THEY took all the risk, not you. This means you're not entitled to significant equity.
It's the opposite - when you work for little pay that would entitle you (at least morally) to a higher equity stake.
If I were one of the owners and you made a play like this I would mentally consider our relationship over, you might as well talk of unionizing. One of my top priorities would be to make sure that you weren't so indispensable as you say you are. My probable delay tactic would be that this needs to be discussed and we'll get back to you.
I have seen variations on this scenario before even among partners where one suddenly says something like, "If it weren't for me we wouldn't have landed that whale. Thus we should go from 50/50 to 40/60. Or my wife has been putting in some time on this and we need to cut her in for 10%." Without exception the relationship went to hell regardless of direction taken. The only time I have ever seen this succeed was when the "partners" had never seen the original incorporation paperwork and didn't realize until the big sale that they only owned a tiny minority while the one who filed the paperwork held the vast majority. Never even made it to court.
Face the fact - No IT personnel is indispensable.
IT personnel are like disposable diapers.
They are needed - and always will be needed - but when they have done their job, their mission is over, and they are no longer needed.
Muchas Gracias, Señor Edward Snowden !
Ask about buying shares now, before any IPO. That doesn't cost them anything and it shows you have faith in the company (or that you like to gamble). Buy as many shares as you can. Borrow money if you have to.
Ask about buying "directed shares" when the company goes public. These also don't cost the company a thing, but it's a nice way for them to throw you a bone. The downside is that you won't have the shares in hand until the IPO, so you run the risk that they change their mind at the last second. Buying directed shares, and selling them as soon as the lockout period ended, allowed me to put a down payment on my first house. I did have to risk $5k of my own money, though.
Equity comes as a risk/reward position. The other guys who put money in, took the risk, likely went without pay or very minimal pay so that they could do things like say...pay really high contractor rates for their developers.
Had you taken low rates to begin with in order to help out the company's capital position when things were tight starting out, then yes absolutely you should have a solid chunk of equity. You're getting paid well and it sounds like you'll be able to continue being paid well for quite a while now since the company is so stable. Enjoy that. Appreciate that.
Understand that you might be aware of a solid chunk of revenue coming in regularly, but you've got no idea where that money's going. If you've got a steady million a year and 5-6 people on contractor rates it's entirely possible that the business is still just scraping by. There's money going to taxes, office space, savings for future expansion and marketing plans, attorneys, preparation for lawsuits against you, preparation for lawsuits that you have to pursue, patent applications and reapplications, advertising, hopefully more employees so that the company can grow without overloading you...and so on.
It is expensive to run a business and the people that are vested in it stand to lose everything they have if it didn't/doesn't work out in many cases. You got a steady paycheck without having to worry about anything. There is a reason they have equity.
"Don't teach a man to fish, feed yourself. He's a grown man. Fishing's not that hard." - Ron Swanson
The company management seeing a contract coming in with your suggestion should be prepared to be shown the door.
This makes the contractor look like a free-loader: "gimme gimme whats in it for Meeeee?"
Even the owner is dispensable. Few companies are run by their founders. Some crash and burn after the founder leaves, others grow.
...startups are all about getting traction at minimal cost. The time to ask for equity is when the company has no money and want to save it wherever possible. Taking less money back then for some (very) small equity is something all startups would consider. When they're making money, or can see the light, it's all over for you.
In college I was the sole programmer for a website that became relatively successful. The owner was making a living off it. My equity was 0%. What I learned was that equity has nothing to do with who contributes what; it's simply a matter of who owns what. Think about the stock market; if you buy a few shares of McDonald's, you probably have more equity than 95% of the people who work there.
I've worked in project where equity was on the table. Sometimes I took it, sometimes I didn't. The key is it must be win-win. For a company that already has an existing business relationship, for them to win means they get something more than they've got now.
1. You take a pay cut + equity position. Thing is, they're not going to go for paying you the same amount and giving you equity. Where's the value for the company? The privilege of keeping you? As others have pointed out eloquently and not-so-eloquently, there's a good chance you can be replaced. Exception to this is if you get paid the same but somehow increase output (and you can guarantee this, in terms of hours, units of works, etc)
2. Performance-based incentives. This allows you to keep your current pay, but also get something in the future. Of course, this needs to be above and beyond the status quo, it must be measurable, it must affect bottom line, and it must be the result of your efforts. (For example, if company is growing at 10% per month in sales, basing your position on sales increases is a hard sale. Conversions is a better bet in this situation.)
The best thing about a boolean is even if you are wrong, you are only off by a bit.
NO ONE is indispensable. It'll take time to learn and retrain etc... but you would be required to pass the keys (the logins for everything) when you leave.
Nothing of what parent said is wrong, per se, but it also does not follow that any of that precludes you from asking
That depends on how you ask. If you hint that you think you are indispensable (as the question is originally stated), then they should fire you on the spot. Either the employee is sharing a veiled threat or is clearly delusional. And if you walk in with the "I'm well paid, but I'd like more" then you'll likely be denied, as well as have the owner start looking at implementing a backup plan. Asking for a raise when you are an employee is standard. Asking for a raise when you are an expensive contractor demonstrates poor judgment. Asking for a pay cut for options/equity makes sense, if you can approach it right.
But for this guy, if you are a personal contractor (a one man contracting company) and you work for the company in a manner indistinguishable from an employee, then his greatest income would come from working at his contractor rate until the relationship is ended, then sue for benefits. It's illegal to have contractors working as employees (tax implications) and if he were an employee being paid $100 an hour, he'd make 15 to 20% more as an employee at $100 per hour, and the law essentially says he's an employee even if called a contractor. So if he waits until the relationship is severed (as suing your boss generally doesn't work out so well while you still work for them, even if you win - or especially if you win), he'll get a 20% (or so) termination bonus from his boss violating the law. Work for 2 years at $100 an hour, get an $80,000 severance. Not bad for a contractor with no severance in the contract.
That may not be the nicest or most ethical way to handle it, but since this guy already is being paid well and demanding more while asserting that he's "indispensable" we know his judgment is impaired.
Learn to love Alaska
My gods, you people are greedy.
If there's a small startup, and a half dozen people are working there and manage to turn it from a small startup into a successful company, don't you think the employees deserve to share in some of the success as well?
This isn't a case of what they deserve legally. It's more a case of "We built this company. We did it together. Let's all share in the spoils!"
I think it makes sense. There's that famous story of Apple's startup days, when Woz noticed some of the employees who were criticial to the company's success didn't get any stock, and Woz gave them some of his own because he felt they contributed.
If the owners of a six person company become billionaires and the employees only get their piddly (in comparison) salaries, and NOTHING more for what they accomplished, who's being greedy now?
Asking for equity earlier would not have done him any good, because he wouldn't have gotten any then either.
The reason many startups give out equity at the start is because they can't afford to pay the going rate for the talent they need, so the principles are forced to trade a lot of potential payoffs later for cheaper help now.
If this company is hiring contractors, then they have enough money to just pay the going rate for the work they want done. If they've decided they are going to just pay the going rate, having asked for equity at the outset would have just caused them to hire a different contractor.
Fact of the matter is, the guy was offered a compensation package for doing a job. There's no reason to expect any equity when you're getting paid up-front. Equity is compensation for risk. No risk, no equity.
paintball
He's a contractor getting paid contractor rates. If one wants to get paid in equity they need to give up pay in money.
He wasn't risking anything, and wasn't investing either. The employees the toil in sub-standard conditions deserve equity perhaps, but not a contractor getting paid good rates.
Having said that, a renegotiation that involves equity (say x% for the next y hours of work) us fair, but happily taking money until a company is successful, and then asking for a piece is greedy.
Wow, sent an e-mail as suggested when clicking on "use classic" banner, and got a fast response that addressed my msg
Go to the decision maker and say exactly what you said to Slashdot. Say you are willing to take a pay cut to get equity, or make some other offer. You are already getting a fair value for your labor, perhaps. If not, then point that out. If so, then you're going to have to do some give and take. Why is this complicated? LOL
Currently hooked on AMP
If you aren't planning on forcing their hand don't expect anything. It is in their interest to retain your services as cheaply as possible. Why would they give you more money if you are going to work just as hard for less. Jeez!
My first instinct was to reply to that first post up there that basically says: "You're replaceable". Because... you are quite replaceable whether you think so or not.
However, thinking a bit more, the second thing that crossed my mind is simply: it's ok to just ask. This post is along the right track - do some homework and try to figure out what your value is. I'm not sure I necessarily agree with asking for a review unless there's already a formal review process in place. Also, simply being a hard worker and intelligent probably isn't enough. Leadership and ambition are almost harder qualities to find, so stoke those fires well.
----- obSig
but people step up and surprise you. Having seen this, I'd say very few people are _actually_ indispensable.
Cognitive bias. Novice/Intermediate IT admins often think they are experts. IT admins/developers often think a "replacement" would have to do the job exactly the same way they would, and use the exact same techniques. IT people think they have elaborate knowledge of the systems they administer/maintain that noone else does, that's absolutely essential for the system to continue the way they conceived it; which is magically, somehow necessary for the system to continue to meet business requirements.
If the replacement can't figure out the super-secret file path to a shell script or function call they use to do X, the replacement won't be able figure out a way of getting X done. Not the case.
The truly indispensible person falls under a narrow set of possible categories: (1) The owner of the company.
(2) Family members [and sometimes very close friends] over the owner, if they work for the company.
(3) Employees required to retain business essential to the company's survival. For example: an employee that is a family member or close friend of a client of the company, that provides the company with so much business, and the company has so little other business that the company will be bankrupt within 6 months if the client is lost, AND the employee is instrumental in the company retaining that business.
(4) Contracters that the company requires a special service from that cannot ever be possibly obtained from any other source in any other form, for example: due to trade secrets, and that is practically required to keep a client meeting criteria of (3) --- an example of such a contracter would be a monopolist; a local municipal Electric company, a Software company such as Microsoft (if your business is required to support a Windows using client, then Microsoft is an indispensable contracter, and you can't fire them and refuse to keep copies of Windows and support for future Windows OSes).
That's where equity comes in.. up front.
People take some equity in leu of being paid the full going rate, and absorb some risk (but also stand to make serious money if they work hard and the thing takes off). The time to negotiate for equity would have been up front, not after the business is somewhat established and running smoothly.
If the owners of a six person company become billionaires and the employees only get their piddly (in comparison) salaries, and NOTHING more for what they accomplished, who's being greedy now?
Those owners also took all the risk. Again with the trade off. Some startups give out equity as a way of distributing the risk to employees (and the potential reward as well). This employer chose not only to not do this, but not even have him as a full time employee. More importantly this employee chose to work as a contractor at a contract rate (which is probably far from "piddly").
And this is all assuming this guy is really as indispensable as he thinks he is. He could just be a replaceable cog.. most people working on contract are. First step would be to go full time.. next step would be to talk about buying into the company some how.
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If the replacement can't figure out the super-secret file path to a shell script or function call they use to do X, the replacement won't be able figure out a way of getting X done. Not the case.
This has been my exact experience! You assume someone is irreplaceable because only _he_ understands how that system works. So he quits, or gets promoted, or whatever.. someone steps in and figures it out. Before you blink the role is filled. Some things might get pushed back while someone comes up to speed on what said person was doing.. but any manager worth his weight in hammers accounts for this on any lengthy project. The old "lead dev hit by a bus" problem is well known and factored into most project plans.
The time to think about this sort of thing is when the company is/was getting started.
I'm positive that your existing contract explicitly states that you have no rights to the software in question beyond maybe being credited with it, and that you are just a contractor. Going in and asking for a cut of the business now is going to be seen as offensive and almost certainly will erode your current relationship. And it may end you up in court being sued in a worst-case scenario.*
You only recourse is to raise your rates or possibly talk about a full-time position as a in-house developer. Neither will be seen as an offensive move and you may get some perks out of full-time employment that you don't currently get, like health coverage and bonuses and so on (as well as a possible management position later on).
* in the rare case that the software rights are yours and yours alone and the company doesn't have such a clause in the contract (they'd be rank idiots if this happened, so don't count on it), then you can actually hold them by the short and curlies if you want. But you'll get the same pissed-off response by them. In such a case, everyone loses, and the person with the smallest pockets for legal expenses usually comes out the worse for it.
Personally if the company is as close-knit as you make it sound why not just ask for it?
I can't imagine that the stake-holders in the company would be so offended that you asked for stake in the company. Unless you're thinking about storming into the office and demanding it, there is no need to assume there is going to be any hostility until there is some.
If the owners of a six person company become billionaires and the employees only get their piddly (in comparison) salaries, and NOTHING more for what they accomplished, who's being greedy now?
You're suggesting that if you take no risk, make no investment and get contracting rates you should then also be able to reap the rewards of the people who took the risk, provided the investment and paid you those contractor rates. That is absurd! 'Yeah if it succeeds i want some of the profit, but if it fails i don't want any of the debt'
I'm amazed at the number of people who claim the guy is greedy. Whether you are a contractor or a full time employee you can ask for a raise (whether its monetary or in the form of equity) and any time. Feel like they are asking you to do more work? Feel like you are doing more work than others? Then ask. They don't have to give it to you, they may laugh at you. They may also consider it. But you have to also figure out what will you do if they say no? Are you willing to continue to work there? Personally talk to the company, explain why you feel like you deserve a piece of the pie. And if other people feel you are greedy, then fine. They can work for peanuts. Just because you are receiving equity doesn't mean you aren't a contractor.
Just ask. Think it through, determine your goal for each conversation and visualize how a detailed contract would look that gives you equity and with which you're happy. Determine, for your self, what you're willing to bargain and what not. Establish your real position and your position as it perceived by others, maybe by having a few unsuspicious conversations throughout the team, and then move forward. If your position is good, you may even have some leverage. 'I want in. Give me some equity or I'll bail.' can be very convincing if you really are indispensable.
And Captain Obvious say, of course: When it comes to signing, consult a lawyer first.
We suffer more in our imagination than in reality. - Seneca
You're suggesting that if you take no risk, make no investment and get contracting rates you should then also be able to reap the rewards of the people who took the risk, provided the investment and paid you those contractor rates. That is absurd! 'Yeah if it succeeds i want some of the profit, but if it fails i don't want any of the debt'
Working as a contractor, especially for a startup, is always a risk. You could be out of a job at any moment if things don't go well. Seeing as this guy is apparently one of the main people ensuring that things go well, getting a cut of that success doesn't seem like too much to ask. If he is over-inflating his actual importance, then he will probably be unsuccessful in getting that cut. If he isn't, then I think they'd be more than willing to give him a cut in order to retain him. If you don't ask, you can't expect them to just hand it to you, even if they think you probably deserve it.
It's not enough to bash in heads, you've got to bash in minds. - Captain Hammer
Working as a contractor, especially for a startup, is always a risk. You could be out of a job at any moment if things don't go well.
That's no different from being an employee, you wouldn't be much of a contractor if you didn't have a contract.
Seeing as this guy is apparently one of the main people ensuring that things go well, getting a cut of that success doesn't seem like too much to ask.
You can't have it both ways, a cut of the success but no risk of suffering a cut of the failure whilst all the while being paid to do the job you were contracted to do.
If you don't ask, you can't expect them to just hand it to you, even if they think you probably deserve it.
No harm in asking.
If you have a genuine way to IMPROVE their product - which you should have if you've been paying attention and have any experience and initiative, pitch it to them. Don't just casually mention it at the coffee machine, but do a full-out sales pitch, complete with costs, benefits, projections, how it fits in with their plans - the works.
After that, the clincher is to say that you're prepared to work on that new line for FREE, i.e. no more hourly rates. But you'd like a (small: a few percent) stake if the idea works out. That's the key element: that you're prepared to give up your security for the hope of rewards if your ideas work out. After all, that's what the founders did and they'd be crazy to accept anyone new into the fold who wasn't prepared to do the same. However, since they've already taken the lion's share of the risk and done the hard bit, all you have is a "me too" after the fact. So obviously your level of risk is much lower and your future rewards should be too.
politicians are like babies' nappies: they should both be changed regularly and for the same reasons
You guys aren't listening: he's a contractor, but so is EVERYBODY who works there. It's not like he's some guy they brought in to plug in their printers. There's no "management" because the "company" is a handful of contractors, with only a few people (probably the owners) constituting "full time" employees. He likely does constitute a pretty essential part of the crew, since at this stage there isn't a lot of fat for the company to trim
He essentially helped to start this company, and he's worried that he and the rest of the contractors are going to be let go once the high level work gets done so that the owners can let them all go once the remaining labor can be done by peons who require less cash. He should definitely ask them about the possibility of full time employment. I'd say he shouldn't bother continuing there if after what he's done if they really DO just consider him the guy who plugs in printers. Tell your bosses outright that if they aren't willing to give you some stake in the company, you don't see why you should be wasting your time with them. If they're going to act like they don't know you and continue to pay you startup company rates even after serious dough starts rolling in just because the books let them do so, you should find someone who will pay you what you deserve.
I'm so very pleased to see so many before state the painfully obvious. The very notion that anyone other than the proper, majority share holding owner is indispensable, much less a contractor, is naive at best, arrogant at the middle ground, and anathema to productive continuity. While we should all value our positions in whichever line of work we are in, we owe it to ourselves to come as close to objective assessment of the skill sets and their subsequent application toward the overall operation. I hold IT personnel in high regard, but let us all face reality: There are countless others that seek these jobs, many of whom no doubt come without the baggage of misplaced importance or inequitable sense of self-worth. I say this with full recognition that I do not know this person posing the question. That being said, in a place such as Slashdot, I do believe my words fall on many ears that have heard this type of talk stemming from behavior demonstrative of that which fosters ill rapport and declining morale.
You've clearly never set up a company. It's been a good couple of hundred years since people setting up a company have had to take on the risk of debt. What do you think that limited in limited company is, except to give a special dispensation to business owners?
Setting up business is not a risk/reward thing, it's a have money/reward thing.
Horseshit. People often take on loads of personal debt - included secured debt, like mortgages - to fund startups.
"It is our blasphemy which has made us great, and will sustain us, and which the gods secretly admire in us." - Zelazny
Setting up business is not a risk/reward thing, it's a have money/reward thing.
Bullshit. I did some work for a startup a few years back, which was paid entirely in shares (I needed the experience a lot more than the money - it was during my PhD, so I had my stipend to live on). Eventually the startup went bust. Limited liability meant that I was not liable for any of its debts, so I lost nothing. The people who set up the company, however, were. The bank refused to lend them any money unless they accepted personally liability for the debt (not uncommon - otherwise everyone would set up companies, borrow money, pay themselves a salary to do nothing, and then fold the company). They were left with a large bank loan to pay off.
It's different if you have a lot of venture capitalist funding, but then the reward is less too, because they end up owning a large stake in your company.
I am TheRaven on Soylent News
If the replacement can't figure out the super-secret file path to a shell script or function call they use to do X, the replacement won't be able figure out a way of getting X done. Not the case.
In most cases, yes. In some situations, the setup may be so completely batshit insane that there's no way anyone else could unravel it. Of course, in that case the original employee isn't indispensable, he's a liability.
I am TheRaven on Soylent News
You've clearly never set up a company. It's been a good couple of hundred years since people setting up a company have had to take on the risk of debt. What do you think that limited in limited company is, except to give a special dispensation to business owners?
Setting up business is not a risk/reward thing, it's a have money/reward thing.
You're obviously just spouting shit you know nothing about. You think LLCs magically fund themselves? It's the people who fund them that take on all the risk and many of the people who fund them are the business owners that take on considerable debt funding those businesses.
You didn't sign up for the risk. As a contractor, you specifically skipped the risk. I can see no reason for you to "reap the rewards".
The time to do it was before ether started to grow - when their future was more uncertain. Now, they are beginning to have a good story to tell - so it's harder to convince them to give up some of what they risked earlier. That said, I'd go with a "I think you are going to be very successful and would like to trade some of my current compensation for a stake in the future." Then work out a pay reduction in exchange for equity. Also, get a good lawyer that understands startups so whatever deal you cut, if any, is fair to both sides. They could give you equity with the right to buy it back a a low price, if for example, the company is sold. Or fire you before it vests.
I'm a consultant - I convert gibberish into cash-flow.
Is to simply approach your boss (or the owners) and express an interest in investing in the enterprise. This works for both you and the owners as it registers your interest and belief in the endeavour and allows the owners the widest possible options in response.
If you are truly part of the companies DNA you will be recognised as such and can expect something reasonable; ELSE your offer is politely declined and you carry on working knowing exactly where you stand and, as you are fairly compensated anyway, no worse off than before.
Quidquid latine dictum sit, altum sonatur.
Honestly you can ask to go permanent and that is probably it. Be grateful you appear to have a solid client that won't let you go.
From their point of view, they had the idea, the money, and the forward planning to know they needed an IT solution and put the right budget in place. If they did not have the budget, they would have offered equity at the time of your employment. You, at that time, would have said no.
Having been in a similar position, I turned it down. That venture failed eventually.
As somebody who has worked as a contractor developing software for startups for the better part of a decade, I'm here to tell you that you get what you negotiate. Renegotiating the contract you are working in the light of success is very bad form. Live and learn.
Working as a contractor, especially for a startup, is always a risk. You could be out of a job at any moment if things don't go well.
But as you're paid considerably more than an employee, if you have any sense you keep most of that extra as a buffer of cash to tide you over any periods when you don't have work.
Being out of work isn't a risk of being a contractor. It's part of the job. It shouldn't be the shock that it is for an employee.
You've clearly never set up a company.
On the contrary, it's clear you haven't. You need money to start up a business. And you're either going to be supplying it out of your own pocket, or it's going to be a secured loan. Very often people have their houses backing their loans. If their business fails, they lose their house.
Wow, one of three nearly identical strawman. Let's see what I said:
It's been a good couple of hundred years since people setting up a company have had to take on the risk of debt.
See that? Everyone can take on personal debt to set up a business, but it's optional: if you have sufficient experience to have built up savings or a sufficiently good plan to persuade outside investors, i.e. if you're the typical likely-to-succeed business, then you are safe afterwards.
A typical successful business is of the "have money/reward" variety, not the "throws all his money into some cunning idea which works out" ("risk/reward") variety.
Then he is doing his job wrong, and should be fired in order not to prolong the problem.
I have made my living coming in after someone "indispensable" leaves a company. What happens for the first couple weeks there is a high stress and the "new guy" is putting out fires as they often don't have enough information to keep things running 100%, so they fix it when it goes down, then during the next 3 months a process is taken place where the old way is documented and evaluated, making sure the new Admin isn't stuck in the job and the next transition will be much smoother. Then keeping those documents alive (keeping them up to date) the process is slowly standardized, as it is mostly the case the "Indispensable" person has a lot of hacks to keep things going. And either there is now standardized technology that can do the job, or that hack is fully analysed and documented so we can keep it as a special watch. Then you work on cross training others so they understand the documentation and are able to perform most of the humdrum maintenance. As you go onto your next project.
When I am the guy who makes the infrastructure that is vital to the company, I actually work quite hard to make sure I don't own it, and that the company I work for owns it. Because if/when I choose to leave I don't want the company to first think I am leaving them out to fend for themselves, and after I am gone I don't my legacy to be one of employees cursing every thing with my name on it, because they don't know why it is there or my mindset for doing such thing. By leaving on a high note when I look for a job after that I have good references to add to my list, and as you go up the corporate ladder your resume is less important then your references.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
By the time is become obvious that you're trending upward, it may be too late to trade a portion of you fees for any significant stake. On the other hand, you may want to consider buying in. If money is tight at the company, and they could use an extra $100-200k, you might have a shot.
Is it just my observation, or are there way too many stupid people in the world?
There is a difference between Valuable and Indispensable. If an employee was truly indispensable the company will be bending over backwards to make sure they stay. Normally they are Valuable where they are paid better then the other people in the job, trying to make sure that they just don't walk out the door, but if they do it isn't the end of the world and no one should really threat.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
Anyone who told me they were "indispensable" ended up getting fired. Either you are not really indispensable or the company will fire you anyway because they are not too bright. The company will tell you that you are special, but only at your going away party.
Sorry, but gray text on gray background is making my eyes bleed.
Stop being a pussy and just say it. People who don't ask, don't get.
Say: "I believe I have been important to this company and will continue to do so. I would like some stock options."
The worse that can happen is that they can say no.
Lame. You've spouted crap and been called. Now you rely on two bolded words to try to show you really know what you were talking about when it's obvious you don't as your last sentence here shows once again.
I recommend reading the book "Getting to Yes". It's a fluffy business book, but by far the most useful such book that I've ever read. It presents a very nice way of understanding and approaching the process of negotiation. Basically it comes down to 1) identifying your personal interests and the mutual interests that you share with the negotiating party and 2) identifying your "Best Alternative to Fairly Negotiated Agreement (BAFNA), i.e. what your fallback plan is if the negotiation falls through. The negotiation process starts with a discussion of the various interests and possible arrangements that can satisfy the interests, while avoiding positional bargaining (I want this much. You can have this much. No, I want at least this much...) The strength of your negotiating position depends on the attractiveness of your BAFNA, (and the strength of the other party depends on their BAFNA). This may all sound like plain old common sense, but I find that this framework helps structure my thoughts and approach to negotiating, leading to more success and less pain...
I wouldn't presume to judge my own value to the company, but I might invite the business owners to do so. "I know I'm just a contractor and am easily replaced, but I enjoy the work I do here, and I support the company's mission. If a suitable position ever became available, I hope you'd be willing to consider me, because I'd certainly be interested." Then end the conversation promptly so they don't feel any subtle pressure to comment on your value.
I've noticed that the people who bring the most value to an organization tend to presume the least about themselves.
--Working as a contractor, especially for a startup, is always a risk Um...balderdash. Working for a contractor is NOT a risk. I've worked as an employee and contractor and as a contractor, I know I'm always the first to go. I also know I get paid contractors rates. There is a premium paid for no having to pay for education, medical, insurance, overtime, etc. If you want a piece of success...be willing to take on some of the risks. Waiting UNTIL the revenue stream comes in....not exactly fair.
I concur. The folks getting paid contractor rates have far less "skin in the game" than the folks who may not have had a consistent paycheck. When I founded a company, there were many times that myself and the other founder didn't take a paycheck so that we could afford to pay everyone else, plus their healthcare, etc. In our case, we did give some equity to key employees, but it was a fraction of ours; and it was in exchange for pay that was slightly lower than what they could have gotten elsewhere - certainly not "contractor rates". If you are a contractor you have nothing on the line.
I'm guessing you never started a company either. Maybe you got hired by a startup - but that's not the same thing. Mine started out as two guys with an idea. We quit our jobs and had to survive with no income until we got some angel funding about 6 months later. We used that money to hire more developers, but only paid ourselves enough to cover mortgages and food. When we needed to fly we used airline miles saved up from our previous jobs. We paid for tools using credit cards. I had about 20K on mine before we got some VC money. After that, we finally got health insurance and a decent paycheck.
This is a job for the Geek Squad. Or any of the thousands of IT companies out there. Dude, no one in any IT support job is even close to indispensable or irreplaceable. You could get hit by the proverbial bus and never step foot in that place and the company will be just fine. Any decent IT/Network Admin type could get in there and figure out your setup. If not, then you have deviated wildly from normal practices and even then they could still do it. It just might take reloading some servers and or plugging into the back of some routers but it could be done. External hacking is hard but when you have keys to the place and can pretty much touch the hardware, come on.
If you are a truly a trusted asset talk to them about becoming a permanent player. Make sure you stress your commitment to the place and let them know you want the company to succeed at all costs. They like it when you tell them they are #1 in your life. To quote the pyromaniac from The Stand, "My life for you" . Let's say something like this, Hey boss man (or woman) I been here awhile now and really like the place. I have built us a nice little infrastructure that I think you'll agree works pretty well. If possible, I would like to be come a permanent part of the scenery and maybe even move into a management position or at least be involved in decision making. I think you know me by now and I think you'll agree that I am a level headed intelligent individual. Some one you would like to have on your team. I been thinking a lot lately about the future. I really want to settle down into a long term job and really make a difference somewhere. I think this is the place for me to do just that. This whole contracting thing is fine but I am tired of it. what do you say, can you make room for me?
Anyway, good luck. :)
This aint Daytona and you aint Dale Earnhardt. So stop trying to draft on Interstate 40.
...so here's one from a guy who owns a startup and will shortly be offering equity to one or two senior-level people I'm going to need next year!
You aren't a greedy bastard for being interested in equity. If you're a normal person, you have a decent but incomplete idea about how startups...well, start, and who gets equity and why. And why shouldn't you? I wouldn't know half of this stuff if I didn't run a startup. You see the place doing really well and you want a piece of the action because you've been a significant part of that. This is a normal human impulse.
But several other posters are correct when they say that the time to ask for this stuff was up front. Companies (like mine) offer equity because they can't afford salaries and benefits early on and are promising you a piece of the pie if and when the company takes off. We use contractors as well, but they're remote and for specific projects -- if you show up to an office every day and don't have specific projects, then yeah, your company might get in trouble with the IRS, as others have suggested. But that's not going to help you (rather, your boss may need to convert all of you to employees ASAP, which may cost him a bundle depending on what state you're in).
There aren't many rules for small companies about how much equity you can get and when. If you really are indispensable, then your bargaining position is this: you can come to another company (like mine) and get hired on account of your experience being a startup ninja IT guy, quite possibly with equity. The likelihood of this happening is probably the only thing that might cause your boss to give you equity in your current job, because you are essentially asking for the reward even though you didn't risk as much as an equity partner did. Here I disagree with those posters who say 'your job was at risk just like theirs,' and yes, that's true, but that's not the point -- an equity partner is risking more than just losing their job; they either started the business or accepted below-market compensation to work there, meaning they gambled lost income from a 'real' job in exchange for equity. You, on the other hand, were paid at market or above market (contractor) rates, so while you don't have employee benefits and probably didn't make more than you otherwise might have made at a salaried job, you didn't make less.
You might try to split the difference and ask for a very small amount of equity. Just explain to your boss that you really like your job, you're committed to the company, and you feel that you've earned a little stock. If you really are as vital as you say, then they'll at least entertain the idea -- I would -- but that's your gamble.
I rely on the fact that I mean what I actually say whereas almost every reply is angrily beating down a straw man. Often posting on /. is like criticising Israel: instead of a post defending Israel, you get a hundred people saying, "You hate Jews!"
Face it: most successful businesses rely on having more than enough money to start up combined with the protection of never losing more than you put in. Even then, an LLC/Ltd. company allows you reward nowhere near in proportion to your risk.
Or investor. But anyway:
1. Save up and gain experience in your field, so you are actually qualified to start up a business;
2. Invest some of your money in starting up a business;
3. All further company debts are not your own;
4. Profit!
Your risk is minor: you invest some amount of your savings. The rest of the risk is taken up by your creditors, i.e. the businesses around you who provide services to your business and who will take the hit if you use your company's limited liability protection to jump ship rather than pay back what you owe. Yet, oddly enough, these same businesses don't enjoy a special reward protected in law when you are successful.
Capitalise profit; socialise losses. It doesn't just hit the proles.
He is not an employee. He is a contractor. There is a big difference. If the submitter were an employee, you might have a point, but he is a contractor. He is employed by an outside agency, which could be himself if he is self-employed, to provide work contracted by the small company. The small company does not have to provide anything other than pay for service to the outside agency which could be per hour or by the piece.
His requesting an equity stake in the small company would be like a contracting company employee saying to Verizon "Hey, I do a lot of important work for this company so I think I should get Verizon stock options".
There is no "-1 offended" or "-1 you don't agree with me" mod options for a reason.
You post was blatantly misleading. Yes they don't "have to" but they also don't "have to" live in a house or "have to" have shoes.
In reality almost all small startups : ie ones not started by someone with daddies money behind them involve the owners taking on large amounts of personal debt and a large portion of those companies end up folding.
If you want a chunk of the rewards then take some of the risk and throw your own money into the pot at the start.
since LLC's are apparently such an insanely easy and risk free way to make money you do have all your personal savings invested in small startups due to the oh so low risk and huge rewards right?
Right?
Hm. In a past life I worked for a year in an office, saved up about $8k and used that toward starting up (rest from partner). In the scheme of things, it was one of the least risky things I have ever done. Work wasn't dangerous, and the worst that would have happened is that I ended up losing my investment and having to go back to being employed. The greatest impact was the stress of working two jobs during the initial months, i.e. part time work at the old place for $ topup, but honestly, it's not exactly the most challenging thing in the world for a healthy young man to sit in front of a computer for 12-14 hours a day for a few months.
*Risks* in work mean dedicating years to something, or doing things which are dangerous (to your health, to your freedom, whatever). My partner's father took a risk getting well paid for some fairly dangerous factory labour many years ago and now he's bedbound and wasting away. An old school-colleague took a risk when he decided to teach in Palestine; a friend of a friend took a risk when he worked at an animal testing lab so he could report on poor procedure (read "unnecessary cruelty"). A few thousand dollars over a few months... really, capitalists have it easy.
Since it's such a trivial and easy hack I assume you've taken this approach and founded your own business by now to take advantage of this?
right?
I mean if you knew of a really easy way to make lots of money with no risk surely you'd be a fool not to use it.
I guess it's been a couple hundred years since people buying houses had to take a mortgage too? Mortgages are optional: if you have sufficient experience to have built up savings, i.e. if you're the typical likely-to-pay-your-bills person, then you are safe afterwards.
See that? Almost everything is optional. Of course, 99.99% of the people could never afford a house that way, nor could 99.99% of start ups.
You would be wrong.
I'm an employee at a small company much like yours (I am not a contractor, though -- I took a lower salary than I wanted with the understanding that I'd benefit if the venture was successful). Here's my advice, based on replacing "I am basically indispensable for the continuation of this growth" with "my employers recognize that I am very valuable to the continuation of this growth".
1. Don't attempt to negotiate based on your past value. You agreed to be paid for what you did, you did what you agreed to, and you were paid. Everyone is even -- you are not owed anything for the past. Focus your negotiations on how you'd like things to be in the future.
2. Don't use (or even hint at) ultimatums unless you are 100% willing to follow through. Don't focus your negotiations on the idea of "fairness". Sell the idea that the future situation you want is better for everyone.
3. Don't attempt to negotiate at all unless you are willing to take risks and make significant sacrifices for future benefit. Your employers are doing both of these things, and that's why they stand to benefit most from success. It's almost certain that you need to be willing to be a salaried employee at a lower-than-desired rate, and that you need to be willing to work more hours, have higher availability, and take on more responsibility.
4. Your approach can't be about "cashing in" or "getting a piece". Evaluate whether the venture is something you want to be a bigger part of. Your employers probably view the business as their "baby". You have to be able to see it that way too.
Good luck!
(1) Starting a business is generally nowhere near as urgent nor as expensive as having a roof over your head;
(2) And it would generally be a lot better to wait until you have experience (and savings).
While you're here, think what the housing market would be like if everyone waited a bit.
Everyone thinks they're indispensable, until the first time they get fired/replaced and realise they never were.
There's nothing magic about being a software developer instead of a mechanical engineer, sales director or airline pilot, you're just doing a job. It's the people who come up with new ideas who are truly irreplaceable, not people who are good at what they do.
To have a right to do a thing is not at all the same as to be right in doing it
Pretty simple: just ask. Not arrogantly, don't bring in side issues, don't say 'I am indispensible'. Just ask: Can I have equity? The worst they can do is say no. Be prepared for them to say no. Wait awhile and ask again. Ask three times. Try not to get angry if they say no and don't hold a grudge. They have their reasons. As a business owner I am astonished at what people won't do. You will never get the girl if you don't ask her out. -- IV
http://www.LinuxMedNews.com Revolutionizing Medical Education and Practice.
“The cemeteries of the world are full of indispensable men.”
- Charles de Gaulle.
But as you're paid considerably more than an employee, if you have any sense you keep most of that extra as a buffer of cash to tide you over any periods when you don't have work.
You're paid more because they don't have to provide you with any benefits like health care and such. They do this because you ultimately cost them less than an actual employee would, because those benefits are expensive. So you really aren't getting any extra cash. You're getting less extra cash than it would cost for those benefits that you now have to get for yourself. So you end up with the same risk of losing your job if the start-up folds, and you get less money/benefits than an actual employee would. What am I missing here?
It's not enough to bash in heads, you've got to bash in minds. - Captain Hammer
a bit in recent years.
But, originally at least, contractors made a significant amount more than employees....yes, benefits weren't paid and that accounted for it, but the theory was that contractors were specialists brought in and expected to be let go. Ideally, employees would keep through thick and thin.
This has been lost recently, mostly with companies treating employees like...well, anyway. But the practice still continues. As a contractor, if you want to pay me $$$ for getting signatures on a sheet of paper (believe it or not, I have actually done that...spent 8 hours talking to people trying to explain why a change was okay to go to production) - and I had no problems with that.
Make me an employee though and that's the first thing to change. Then I'm supposed to have a tie into whether or not the company does well (and makes it's next quarter or not).
(Also...contractors...at least myself...expect to change jobs at the drop of a hat. I don't expect that as much if I'm an employee)
Thanks everyone for their replies, it's very good to see various opinions - from both sides of the equation!
If you're not willing to give part of your salary back if the startup fails, how is it okay to assume you'll get more when they're successful?
https://twitter.com/#!/paulg/status/51528478083923968
Uh, any small company without a solid credit history and references to prove it is almost guaranteed these days to be required to sign agreements with their suppliers/creditors which make the directors personally liable for payment for services rendered.
For a site about things like basic rights, Slashdot users sure do like to censor "dissent".
That's either very recent or not universal. But it certainly illustrates why an LLC is a daft idea: it's just a way for the owner(s) by default to fuck over his creditors.
Your risk is minor: you invest some amount of your savings.
You're risk is only going to be minor if the company you are setting up is minor. Your dream of a serious start-up with the potential for serious returns, on trivial capital, is just that, a dream. You've never done it.
The rest of the risk is taken up by your creditors
No one is going to extend a start-up much credit. You want stock for example, they're going to want a cleared check before they ship. Employees, you're going to get a month out of. But then you're going to have to pay them.
And investors want more than an idea. Investors will help you expand once you've got a proven business. But other than family, they're not going to invest in the beginning of your start-up.
What am I missing here?
When I went contractor in the UK, my income doubled. And healthcare is free for everyone, so it's not that. For sure, vacations and pension accounts for part of it, but not doubling. The reason employers pay more is because the flexibility of immediate start and termination of people who already have required skills is worth lot.
UK situation seems to be significantly different than the US situation then. I don't know anyone that makes that much more as a contractor, and the articles I've read in business mags and sites all claim that businesses can save money by employing contractors wherever possible.
It's not enough to bash in heads, you've got to bash in minds. - Captain Hammer
Instead of asking for stock options, tell your management you'd like to invest money in the company.
Slashdot = Sarcasm
Your dream of a serious start-up with the potential for serious returns, on trivial capital, is just that, a dream. You've never done it.
Well, well, someone's projecting, aren't they? :-)
What, to you, is "trivial capital"? Is it like the $18k that Y Combinator initially invests on average? That may be a significant amount to someone in his late teens, but if you wait a decade until you have gained experience and knowledge then you should certainly have the money management skills to have a lot more than that in savings (if you're cut out to be a businessman). For those who really have too much testosterone to wait and save, they'll be reassured to learn that bootstrapping money from friends/family averaged around $20-25k (before the implosion), "and further, 58% of the fastest-growing companies in the U.S. started with $20,000 or less.”
When, in a former capitalist life many years ago, I started up a business, the initial amount my partner and I put in from savings was comparable.
Have a nice day.
Like others here have implied..consider yourself lucky to be able to BUY equity at this point..if the company's doing that well it's a golden opportunity .. it's way too late to get paid in equity.. as others have pointed out.. shared risk = shared equity ..contracting = NO risk ..
Agreeing with a number of postings: Start by offering your positive assessment of the company, your enthusiasm for the company's future and your feeling that your work has contributed to the current good status. (Of course, touting one's own contribution needs delicacy, but no, it's not wrong to cite it.) Note that you are feeling a responsibility to continue to help the company to succeed. State that you would like to share some of the risk and benefit of the company's good future by participating in the equity plan. As others have noted, this can -- and usually does -- involve a tradeoff with other compensation. Higher pay means less stock. Also as already noted, the company's having matured already means that it is likely the stock price and the amount available to folk such as you won't be as wonderful as founder's shares. You probably do not know any details of the company's stock plan, so you should state openness about what the package of stock should be. But this is a negotiation and you want to cast it positively and flexibly. Before pursuing this, you need to consider what your reaction will be to being turned down. Will it sour your relationship to the company? Good luck. d/
Dave Crocker bbiw.net
Come on people. Really?? This guy doesn't deserve to be beaten into the ground for asking this. It's a good question. I've been in this situation more than once. If the project has much further to go, and your direct effort has a large effect on the outcome of the project, you may be in a position to ask for equity or options. Don't expect a huge percentage. Think 10%. Maybe lower depending on the financials and length you expect to be involved. I've seen vesting for certain amounts of time, or tied to revenue. Which brings us to the really hard part. How do you get money out of it? If you own options, you don't really own anything, until they are exercised. You are not entitled to anything, no profit sharing, no payouts, nothing until the company sells, the company or another share holder wants to buy the options, or you invest money in the company to exercise the shares yourself. (Options are just an option to buy, not free money. Even if the options were free to you.) In some cases you are even restricted to selling the options to pre-approved people. Private companies have a lot of control over who owns their shares, they are in fact restricted to NOT selling shares to the general public.
You may want to ask for an appraisal of your work before you make the above proposal. If the appraisel is positive, then you have a value call. If you are indispensable, then the thing to do is invite the principal(s) to lunch (one at a time), and state your case. You are the Architect, and the Project manager, and the team leader. Your contribution has resulted in revenue increases from zzzz to AAAA, in the months you took over. You believe it is reasonable to receive equity so that you will be encouraged to excel. Be prepared for a stall, or a Let me check with my partners reply. If that is stated, then say, great, let me know by next week. Good luck
Leslie Satenstein Montreal Quebec Canada
In India it is called "forward caste"
http://en.wikipedia.org/wiki/Forward_caste
Slashdot = Sarcasm