Ask HN: Should I sell out the startup that misled me?
Hi guys, I'd appreciate some outside perspective here.
I've been working with a startup for about two months as their CTO. Small team, three/four developers depending how you count. Handshake deal said moderate salary until series A but with equity.
I've been pushing and pushing for a contract stating the terms, but there always seemed to be something else the CEO had to do. However, I met the rest of the team and it all seemed legitimate.
Around the two month mark, I dug my heels in and said contract or I walk. Next day I have a meeting with the CEO and it comes out that there's no salaries being paid, people are working for equity. I explain that this isn't appropriate for my situation, to which the CEO responds with more work for me to do.
Obviously, I should walk away at this point (or ideally weeks before), but there are some twists:
1) The work that I produced for them is still mine, as no copyright transfer has been signed. They'll almost certainly be trying to sell this / bring it to investors.
2) It's not legal to work only for equity in my country, there's a minimum wage, and each employee has to be registered and tax paid on them to the government. I went to apply for unemployment assistance and was told that regardless of whether I was paid, I was considered employed, and thus had no entitlements. Furthermore, as I wasn't registered the company was not meeting its tax obligations in hiring me.
This brings me to the crux of my problem: If I want to claim unemployment benefit while I look for a real job, I must torpedo the old company. This is bad as it not only can hurt my reputation, it will negatively affect the co-workers who have previously worked for low wage and equity.
My feeling is to walk away and cut my losses, but I thought the community may have other suggestions.
Thanks for looking.
101 comments
[ 3.1 ms ] story [ 157 ms ] thread(fix minor phrasing error.)
Even if that were not the case, I say report them. You'll be helping the other people in the company that you like by preventing the CEO from walking over them in the future (if the CEO would do it to another officer of the company, they would certainly do it to the rank and file). It will also set an example to other start-up founders not to screw over people they want to employ.
My guess is that the founder is three steps out of the poor house himself (or herself.)
A few years ago, I worked with a guy for 18 months without pay. I bounced back!
In our case, we didn't try to convince other people to work for us for free.
Now that I think I can read between the lines, give this guy (or gal) about a week to see the error in his ways. Make sure it is on friendly terms. For example, every day, continually engage him (or her) in discussions about the legal issues of employing other people.
If he does not see the error in his ways, torpedo him so that he can't accidentally screw people over like this again.
If he does see the error in his ways, you're going to have to take a personal hit yourself. Disband the company on amicable terms. If it's a good idea, and everybody owns most of the IP, you can get back together in a week or two and find a new leader.
1. Decide you are going to leave, be confident it's the right choice (it is)
2. Protect yourself, by understanding the legal implications with your own research or with a lawyer.
3. As the person in the position of power here (you are) have compassion.
4. Explain that you cannot stay, but you don't want to hurt them unnecessarily.
5.Make a plan for equity compensation, full rights to all of your work (at least for your own and further commercial use), while allowing them to use it under a license that doesn't blow up their lives.
6. Write your letter of recommendation for moving on to the next thing, and have it be clear that you finding job security is a necessary condition for things to proceed.
...Or, blow it all up, while trying to minimize the negative consequences for yourself. Which could be fair enough.
This is not my personal experience.
> As the person in the position of power here (you are) have compassion.
He just got robbed of months of wages. Sure, he has the hand, but he's still undeniably the victim.
I'm all for compassion, and understanding but sometimes things are quite clear cut. I'm not arguing for vendetta, just reparation.
I can't say I agree. There are plenty of instances where your short-term financial situation could be a whole lot less important than your long-term reputation within an industry.
I can only think of one person in the entire world who has damaged their reputation in the programming community enough for me to care.
Most likely, it's a bunch of recent college grads working on someone's pipe dream, but there's no real leadership that would translate to a company.
Regarding the government compliance, I think it's safer to err on the side of the law than on the side of someone who is only promising future rewards, with no commitment on their part.
If you're in a different country than the company, it may be hard (and costly) to assert your rights, so keep that in mind: it's a liability for you to do too much for free. You're basicaly extending them a line of credit hoping to be paid back but with a non-certain process to recover your investment if they don't stay true to their word.
Leave immediately, take your IP, and don't even consider doing anything else until things are in writing and the backpay, etc are resolved.
I would go a step further and get the hell away from these guys. If they've scammed you, they've likely scammed others and/or will scam people again. This could be you again, customers, or your investors. You do NOT want to be part of a team that scams their investors.
Walk.
The rest of this thread is basically noise.
(Also, don't ever start work without a contract dammit. That's the first sign to walk away.)
What is it about software developers that makes them think there's even a question about this?
Also anything art related: rich family fine arts graduates that work for peanuts in semi-public institutions to "make a name".
They could be considering you as a contractor. Research the difference between contractor and employee. Depends on your working relationship with them.
EDIT: You can only be a contractor if they are actually paying you. If you are getting no money, not sure what that means.
Breach of contract?
You can be a contractor if they've agreed to a legally-valid contract (which requires some kind of obligation of consideration, whether payment in money or something else), but they could fail to perform that obligation and you could still be a contractor (just as you could still be an employee if the company failed to pay wages), they'd just be in breach of their duty under the contract (whether its an employment contract or otherwise.)
When I was involved in the startup scene in Silicon Valley, there were a lot of clowns who didn't understand what it means to run a company. They were charismatic; but at the end of the day, they didn't understand that they have to pay their employees in exchange for their labor. Often, these clowns assumed that things would work out in the end, and that hard work will always reward itself. They wanted everyone to make a sacrifice for their own dreams.
My opinion: I would have walked away at the two month mark. At day one, I would need to know that everyone under me is working for equity; because that changes the work dynamic significantly. The demands made on someone working for money are different than someone working for equity.
Furthermore, a tech startup is a for-profit venture, so you always need to do what's in your best interest, and your subordinates best interest. Ideally, you can torpedo the clowns enough so they can't pull this kind of stunt again; but it's also import to look out for the people working under you.
No good can come from allowing criminals to go about their crimes without justice.
Perhaps you should name this company here, since this has made the front page of HN.
I kept asking for the reimbursement and back-pay promised earlier, some months later they just refused, and I was not paid. I was offered stock options (not even stock/equity) instead of money. That's when my team and I saw the crap going down and started preparing for the worst.
You need to have all your communication about this problem documented, including if possible the responses from the CEO and others.
You may need to consult an employment advisor or lawyer for advice, if your department of labour can't provide this to you. You need to be crystal clear about your situation and repercussions if you choose to torpedo this company.
If things are really as bad as you say they are, you don't need to be too worried about your reputation - I have been through this situation and it is not hard to manage. As for co-workers, I sympathise with their plight, but you need decide for yourself how much you value your career (or don't) by not taking action now. Also, your co-workers ought to be smart enough to see what's happening.
In my situation, I went and spoke to a government officer in our department of labour. She told me that I needed to engage a lawyer in my situation. Legal fees would have been greater than the money I was owed. In the end, I filed a police report for the record, with complete documentation on everything that happened and details of the compensation owed to me.
I lost a few thousand dollars, chalked it up to experience and moved on. The company's office in my country had to close, their hardware and other equipment was seized for non-payment of rent, and they wasted many times the money they could have just paid me to build a great product. As for the product, their launch was delayed 20-24 months but I believe they did get something out.
What's even more pitiful is that they had a few million in funds, were already cash-flow positive on a previous product, and could easily afford to pay what's due.
Bottom line - if the company is run by a money-grubbing skinflint with a tendency to shaft his employees, you have every right to do what's good for you.
Keep everything professional, and unemotional. Document facts.
Whether or not a new job is hard to come by, you are in a toxic situation, and if you are anything like me, your physical and mental health is already being affected.
Even if there is an offer of compromise by the CEO, I would be very suspicious given his past history.
If you don't report them more people will be victimized by their antics. So you have a moral duty to stop that from happening.