Startup, VC, and the Things I Learnt from Open-sourcing A 200+ Hour Client Project

A couple of days ago, a blog post titled "First employee of startup? You are probably getting screwed!" has made to the Hacker News front page and has spawned some great discussion and debate.

Since I had just been screwed recently, I thought it might be a good opportunity for me to share what I’ve learnt.

After my story got picked up by Hacker News and some other sites, I was contacted by my client. It was a very interesting and surreal experience which included keywords such as sue, settle, donation and disappearance. I am however going to spare you the details and instead, going to focus on the things I have learnt.

Be Strong, Be Emotionless

The biggest mistake I made, was being too emotional - not in the sense of being emotionally attached to the project, but in the sense of being emotionally attached to the opportunity.

Despite having detected some negative signs (which I will cover later), I willingly chose to continue on with the project because I wanted it to work out. I wanted to be involved early in a startup, I wanted to create a product that will have large impact, I wanted to have uncertainties and excitement, and I wanted to force myself to be busy.

I was blindsided because of my desires - even though deep in my heart, I already felt the failure approaching.

Be Informed Who You Are Dealing With

My client, who was referred to me by a strong and reputable PHP developer, is well educated, has an MBA, and has worked as a VP of a major US corporation before he decided to start his own startup.

But didn’t that just prove doing background-checking is useless, you might wonder? No. It is still a useful exercise - it proves the fact that, even legit clients can do dodgy things. Therefore you would want to pay more attention to picking up negative signs rather than being impressed by their reputation and/or portfolio.

Be Alert, Pick Up Tells

Just like playing poker, you need to stay alert and try to pick up tells. What are the tells? Well, in my client’s case:

  • He often emphasise the importance of communication, but he communicated poorly via emails.
  • He had unrealistic deadlines.
  • He was overly optimistic about the success of his startup.
  • He tried to lower my compensation expectation by using poor arguments.
  • He would call me up and talk for 20+ minutes when he was fully aware that I was at work (at my day job).
  • He was not being transparent and upfront about the VC side of things.

The list goes on.

No one is perfect, of course. A minor tell or two might just be considered quirks, but half a dozen or more - you run.

Be Informed About Market Rates

Before negotiating my rates, I had done quite a lot of research online - it provided me with context.

As a non-full time, principal developer and designer, my compensation package was approximately:

  • An hourly rate that is equivalent to 50% of my full time salary, or 30% of my contract/freelance rate.
  • 2% of the company, after the seed round.

In return, a 20-40 hours per week sweat investment was expected from me. To me, it was not a bad deal since I don’t rely on the success of the startup in order to feed myself - I still have my day job.

One thing to note, is that the agreed package was actually a result of me being too emotionally invested in the opportunity. The offer from my client was originally:

  • An hourly rate that is equivalent to 90%+ of my full time salary, or 50% of my contract/freelance rate.
  • 1% of the company, after the seed round.

See what I did there? I was emotional enough to trade immediate return for potential future return.

One of the best advices I got from more experienced people in this field is that, always treat equities (or employee options) as a bonus that is likely to never happen.

Be Cautious About the Information Received

Until written on paper and signed, any information you were told should be taken with a grain of salt. Often than not, people would say things to favour and/or support their cases.

The $2mil seed around valuation figure that was told (but was never proved) by my client has indeed influenced my decision of trading my hourly rate for equity.

Be Positive, No Matter What Happens

Positive thinking - one of the most powerful attitudes to ensure your happiness, is the key and morale of the story. You see, even though I went through a lot of stressful days and nights, I still consider the whole experience being positive.

Why? Because I learnt a lot. I learnt many things that I would not have learnt from working at my day job or freelancing. It gives me more confidence for my next startup adventure (whether it’s for someone else, or for myself).

Be Adventurous

Don’t be scared by other people’s experience. Steve Jobs once said something along the line of - they started Apple because they didn’t know any better.

I can comfortably say that, I am very much looking forward to my next adventure! :)

Post Notes

  1. ifredwu posted this