Read this profile alongside our profile on being a tech startup founder.
What is this path?
Rather than found a startup, join one as employee number one to one hundred. Instead of receiving about 20% of the company’s equity, as a founder would, you’ll receive 0.1% – 1% depending on your role and how early you join, and you’ll receive more of your compensation as salary rather than equity. You’ll also have much less say over the direction of the company.
Most commonly, the roles available are either (i) product development (engineers and designers) or (ii) sales and marketing.
What are the key differences compared to founding?
- You have a smaller equity stake, so you have less financial risk, but also lower expected returns. In fact, the financial returns are likely to be similar to working at a large company on average, and only higher than that if you can pick especially successful startups.
- You’re playing a less central role in the company, so you’ll probably also have less impact. However, because founding is more glamorous than being an early employee, some think there’s a shortage of good early employees compared to founders, and many startups find it extremely hard to hire. And this could mean the impact isn’t much less than it first looks.
- If you found, you’re tied to the company for 3-10 years until exit or failure. If you’re an employee, it’s much easier to leave. This again lowers your risk, because you can keep changing company until you find one that takes off, and is good early career if you don’t yet want to lock yourself in.
- The personal costs are much lower. Founding can be all consuming and is usually described as an emotional rollercoaster. Being an early employee involves more autonomy, responsibility and excitement than a job at a larger firm, but with less of the personal downsides of founding.
Who should join a startup rather than found?
- If you can’t come up with a promising idea and co-founder, then it’s better to try to join a startup as an early employee.
- It’s also better to be an early employee if don’t want to make the personal sacrifices needed to found or want lock yourself in for 3-10 years.
- If you get the opportunity to join a startup that’s taking off, you may have greater earnings and impact by joining it than founding your own e.g. the 100th employee of Dropbox still made about $10m, equivalent to a 10% stake in a $100m company. See a more in-depth version of this argument.
How can you find a startup that’s focused on doing good?
If you can find a startup working on an important social problem, that’s an especially good option. As we recommend above in the ‘next steps’ section, finding a job like this will probably involve a lot of networking. We’re not currently aware of any good directories, however, you can find some leads by looking at which startups have been funded by technology investors who care about social impact, such as the OS Fund, Founders Fund, Obvious Ventures, Bethnal Green Ventures, Omidyar, Mustard Seed, DBL, Social+Capital Partnership, and Kholsa Ventures.