How should you entice employees to a startup when you can't pay them?

[layyercake]

Hi everyone, one thing I'm curious about is what are my options to entice new employees to work for a startup (pre-launch) where I have no money to pay them. Is offering equity pretty standard? If so, how much do founders normally distribute in equity early on to get the product off the ground?

 

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[maverick]

Nobody worth their grain will work for free.

 

[Johnny boy]

The market doesn't care if your business model was built to not produce income until year 2.

People want money for their work. Simple.

Change your business model so you are bringing in revenue earlier, maybe get SOME people to agree to a equity payment deal, or get funding from an investor and start pitching.

Sometimes you have to think quick on your feet.

How Airbnb Founders Sold Cereal to Keep Their Dream Alive

A remarkable story on resilience and determination

entrepreneurshandbook.co

If you are so new, you don't have the luxury of having other people doing the work yet. If you need a manufacturer to make your product and you don't have the funds, get a family member to help out, or start saving up cash. Wash cars if you need to. If you need 50k just to get your prototype made, then you're starting off in the wrong place. Go start something else and get your 50k that way, but not before you test the market to see if it will even sell.

 

[Mutant]

I've worked in a few tech start-ups in my time. One got development work done in return for equity. Sometimes this is easier done with a dev company/agency, because the owner will know how much downtime their employees have (not assigned to fee-paying work) and if they're still being paid a salary, they may as well be working on something that gives the owner potential upside.

I've also seen internships used for lower level work. Depends on the rules in your country, you may have to pay some but will be minimal. Can especially look into university students that want, or in some cases need for their course requirements, internships, and there are study/intern abroad programs that are keen to find placements for their charges.

Ultimately though, if you can find people willing to work for equity, they will only do so because they believe that equity will be valuable. Why not find people who believe that equity will be valuable & get them to give you money in exchange for it instead of labor? Then you can use that money to pay for the exact specialised skills you need.

The problem with working for equity - & you may indeed find people willing to - is that people still have bills to pay, & your project will never be the priority when (for example) a paying freelance client comes up. You will get bumped to second place out of need. If you get someone really good to work on your project, they will be in demand & this will happen often.

If you learn to raise money (or even better, make sales!) & can pay people, even if not with exacting regularity, then the pool of people willing to stick around will be higher. As I say, I've been in early stage start-ups (as a bill paying job with a sprinkling of equity) for years. Being paid on pay day is not a given, but - & this is very important - I have always been paid in the end. You can build a good rep making sure that happens. I'd've been long gone if it didn't.

 

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[Kid]

F&F
Angel investor
Equity crowdfunding
TechStars weekend (Techstars Startup Weekend)
or like Johnny said, do some hustle

 

[Ravens_Shadow]

I built my company on giving equity to programmers instead of salaries as I had no money. I sold the vision and they joined me. Needless to say their gamble on my word/abilities paid off.

 

[lomb]

I built my company on giving equity to programmers instead of salaries as I had no money. I sold the vision and they joined me. Needless to say their gamble on my word/abilities paid off.

If you are good enough at selling a vision with a carefully crafted system ie website/ business model of someone being a multimillionaire for a few years of work then they will do it especially if they think what they are doing will work and they have low bills or live at home and are at beginning of careers so have no wife/kids. I don't think any woman would do it it's only a man thing. It can work well in tech where some of the best and skillful workers are actually the youngest ones. Unlike other jobs say a carpenter the best carpenter will be someone with 10 or 20 years of experience. Probably as tech is so fluid and once you get old your mind is set and difficult to grasp new concepts.

 

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[Knugs]

Hi everyone, one thing I'm curious about is what are my options to entice new employees to work for a startup (pre-launch) where I have no money to pay them. Is offering equity pretty standard? If so, how much do founders normally distribute in equity early on to get the product off the ground?

If you need employees in a pre-launch startup then you have the wrong skillset in the founding team. Really the founding team should have all the skillset for your launch. In other words, you need to include employees in the founding teams; therefore you are not looking for new employees but for co-founders.

You need to get equity vesting schemes for everybody. Potentially a delayed salary on profit can be agreed on. So instead of "employing" you can create a freelance contract with a determined "monetary value", which you will either be able to pay later on or which will default on the failing business. A freelancer can invoice your business when he wants to for example; on completion of a project. So legally delayed payment is possible.

How much equity depends on the role and you could create a Virtual share program. In reality somebody will want to be treated as a co-founder and therefore what I found out practically is that its all about being on an eye level and being treated fairly.