Y Combinator Startup Podcast - How To NOT Get Screwed As A Software Engineer | Dalton & Michael Podcast

Episode Date: December 21, 2023

The stories are true: technical founders (and early technical employees!) often end up with the short end of the stick when starting a company. In this episode of Dalton & Michael, we’ll discuss the questions and best practices that an aspiring technical founder should think about — whom to start a company with, and how to think about things like equity split and division of responsibilities. Know what you are worth and act accordingly! Apply to Y Combinator: https://yc.link/DandM-apply Work at a Startup: https://yc.link/DandM-jobs

Funniest thing is this one of the technical person who does all the work is the one actually reading the analytics. And like, hey, like, this, our launch bombed. What's the plan in the business? Don't worry about it. This is like, you need to be quiet. This is my department. You know, stop asking questions. All right. This is Dalton Plus Michael. And today we're going to talk about how to not get screwed as a software engineer. Interesting. Yeah, we're going to get some tips. You know, we've, we've noticed. that a lot of the, of technical folks sometimes get exploited, they kind of get ripped off by other folks. Evil business people. Yeah, it's kind of a bad pattern. And so we're going to talk about it. So who is this aimed at, Michael? Who is this video for? The folks we're talking to,

so we're talking to maybe you're a technical co-founder at a startup right now. Maybe you are a great engineer at a scaling up company, the guy that everyone comes to, the person who always gets fixed, the woman who's always up late getting those text messages and having to... Yeah. Or you're at a really early stage startup. Yes. But you're not a founder, a co-founder.

You're like a lead engineer or head of engineering or there's some title. Yes. And the whole company is like three people, but you're not a founder. You're not a founder. Okay. There is the college student who all the MBAs go to to build their... prototype. And then there's the Googler, right? How did you describe it? It's the person that does the work that other people take credit for to get promoted. Promoted. Promoted in bonuses. It's the person

that does that, you know, actually producing the products that a lot of people stick their career on. Yes. Yes, yes, yes, yes. So that's who we're talking. Yeah. So I think the thing that we're trying to really help you with is to. Yeah, we feel bad for you. So this comes up a lot for us at YC where we read a lot of applications and we interview a lot of companies and we see folks where it's pretty clear what's going on. We can see it a mile away in the application that someone is getting exploited or ripped off and it's usually the technical person. Yes. And it feels bad to see just all of these applications come in. Yes. And it's crystal clear what's going on. Yes. And so this is for you. Yes. We would like to give you some questions to ask

yourself to figure out whether you're being treated well or not. And I think that to be clear, we don't want to presuppose, right? There are a lot of people who are in great situations. We just want to give you some tools. So let's talk about equity. What are the questions people should ask themselves about whether they have enough equity, equity at all? This comes up a lot.

I know you are a big proponent of this, Michael. But in general, something like equal equity is pretty common for startups that apply to YC and is something we recommend. And sort of the anti-pattern we might see is say there's two founders and the non-technical business founder has 90 percent and the technical person has 10 percent or less. And the explanation is basically just that the business founder had sharper elbows and was a better negotiator. Like there's actually no justification for this.

It was my idea. Yeah. Yeah. Right? And so there's really no good reason. It's just that the business guy gets more for. whatever case. And usually in those situations, you wanted up with something much closer to even. Again, you give this advice. How do you explain this when this happens? I always just think that,

like, the vast majority of the journey is ahead of you, not behind you. And you want your co-founders to feel like owners and partners. And I always think about, you know, in the other days of our company, on Sunday night, when the website went down, I couldn't fix it. And so we're going to live in one of two worlds, the world where I get text and I have to, like, cajole people to fix it, or the world where everyone feels like an owner, and they get text, and they wake up and they fix it, right? And I think a lot of people just don't understand that if you can make people inherently motivate it, they'll do far better work than if you fucking yell at them. So that's the, that's the founder. Do you have close to equal equity?

Yeah. What does your equity look like? And does it make sense? Is the justification for whatever your equity is, does it make sense to you based on what you bring to the table and based on your actual responsibilities? Now, what about the early employee? Well, the early employee notoriously kind of gets hosed on this stuff, especially if they're providing the work of an equal technical co-founder, yet they get one percent or less of the company. Again, this is very common where you'll have two business founders, three business founders, you know, and then they'll have someone that's, you know, lead engineer that is effectively technical co-founder. And they at like 1% not great.

Yes. Not great. That's not a good pattern. I would say if you're in the scale up and you are the essential engineer, the test I would kind of ask myself is if this thing works, are you going to make a life-changing amount of money? And, you know, I would argue that like, you know, that doesn't mean you necessarily should have as much equity as the founders or you're going to have as much equity as someone who came

in early. But it does mean that like if this thing actually IPOs or gets bought and you get like a pat on the back and like, you know, a nice Christmas bonus, probably you're not in the right situation. Yeah. All right. That next group, the Googler. I think this one's actually much more interesting because I would argue that if you're the Googler, you're getting a bad deal if you're doing like a hundred hour week. weeks and grinding. Yep.

And like your boss or your boss's boss is getting like mega vacations and $10 million a year packages and like promotions and da-da-da-da. I would say on the flip site though, like if you've got good work-life balance. Yeah, I think it's risk or word. This is a subtle point that Michael's making. I think it's for the opportunity cost that you're taking to not do something else. Yes. Are you getting a square deal versus if, again, if you're working really, really, really hard,

perhaps another thing would be better. Yes. But if you're very happy with the trade you're making on work-life balance and compensation, hey, man, maybe. Does that be good? Yeah, it could be great for you. Yeah, you know. And then I guess, you know, last but not least is the college student who, like, in most

cases isn't even offered equity. Like, that's like, you know, they're just the typer. You're the intern. Yeah. You're our technical intern. Just do all of the work. Just do the thing. We're just the idea guys.

Yes. So equity is one set of topics you can ask yourself in these roles. Another one and one that you brought up was kind of decision-making process. Like, okay, we've established that you are doing a lot of the work. Yeah, it's basically, do you have a seat at the table? And so, again, if you're trying to self-diagnose, am I being exploited as an engineer, as a technical person, is the whole point that the business people have a lot of meetings that you're not invited to in all decisions about everything are made,

by the business people, and you are basically used as a robot to write code. Yes. Probably not a great sign. Probably a sign that you might be being exploited, right? You're being used as like a machine to write code and not a person with a brain. I think the next thing you should be thinking about is kind of effort level. You know, are you working these crazy hours, but everyone's on vacation in Aruba half the time, right? Are your counterparts who are doing fundraising and sales and HR and all the other tasks from the company, are they grinding or are they not?

Yep. Like this is a self-diagnosis thing, but it's really sad when you see someone in the role of technical co-founder and they really have to work their butt off. And they're really showing up every day. And the idea guy or the salesperson or the business expert, the fundraising expert actually isn't doing much. Sometimes they're part-time. Sometimes they're part-time. Yeah, yeah. And man, that is such a vector for being exploited.

And so you should really feel, from a self-diagnosis perspective, that, yeah, your counterparts are just as into it and there's just as much heart that they're bringing to the table as you are. And if so, again, maybe it's a great deal for you. Yeah. I think that the last two are kind of connected, this kind of like, is it working slash opportunity costs, right? Like, one would argue that, like, you, because you're doing all this work, have an amazing

ability to judge whether the company is working. Yep. And you should maybe trust your instincts there. And, you know, is it working, right? Like, you might be exploited if you're being asked to do all this stuff. And, like, the evidence is painfully obvious. It's not working. Well, and you're the technical person.

So you notice the first. The funniest thing is just one of the technical person who does all the work is, is the one actually reading the analytics. They're like, hey, like, this, our launch bombed. What's the plan in the business? Don't worry about it. This is like, you need to be quiet. This is my department.

You know, stop asking questions. And so if it just seems like you're bringing your A-game effort and doing all of the work and it's definitely not working, probably might be a sign you're being exploited. Well, and this is even more of the case that the opportunity costs might not be, worth it. Or you might be not leaving because you're afraid, but you know intellectually this thing isn't working. Yep. All right. So and like don't let them finesse you. Again, this is the the same person that convinced you that you getting, you know, one-tenth of their equity is a

great deal for you is the ones like, hey, I know it looks like we're not growing and we have no revenue and we're about to run out of money. But I got this. It's fine. Like don't let that same suave person keep doing the same move on you over and over again. Yeah. It's weird because I never use the term gaslighting, but it is, it's actually gaslighting. It's actually that. Okay, so I don't want to paint too bad of a picture because on the flip side, we see situations that are great. Yeah, more often than not, you know, the folks we find.

YZ, yeah, the folks we fund, it's mostly like a really awesome trade. So let's talk about situations where, like, things are going well, right? Like, you, signs that this is great. I think one sign is from an opportunity cost perspective, you realize that you're at the best possible place in the world for the risk-reward ratio. And whether, however you're being comped, you're like, wow, I'm getting a smoking deal. And I know there's no better deal I can be doing. And I'm proud.

I feel privileged to be working on this team I am because they care just as much. Like if everyone feels like they're getting a great deal, that's a sign of a good culture. Yeah. I also think if you feel like you're giving a given a lot of responsibility, you have a lot of opportunity to learn. I think most people don't realize that you can learn at a startup pace or you can learn at a Google pace and like a startup is an amazing opportunity to learn. So if you're getting better, faster than your peers who are in big tech, you might be getting

a really good deal. Especially we see this a lot with people who learn a ton and then they go start their own company. And it's like, well, that startup was incredible for you. Yeah, even if it didn't work, you didn't get rich from it. That was like the best educational. you could have ever gotten. And we see this also with immigration.

Like sometimes that startup or that company is getting you to the country you want to be in or getting you the visa. That's great deal. That might be getting you a great deal. So that's like a really, really big thing. I also think there's this element of like, you're not exploited if you're part of the problem.

Yes. Again, this is a subtle point. Let's see if we can explain it. It's basically if it's not working and you have a seat at the table, it's on you, man. Yes. You can't just blame, hey, business guy, you're not pulling your weight because no one wants our thing.

But if you have a seat at the table, you're equally culpable. If you have equal equity with someone and you have a seat at the table in decision making, just because it's not working doesn't mean you get the right to blame other people. No, that's not cool. You know, and I think the last one that I would say is like, and this is a slightly dangerous one, but like when people are honest with you and it turns out to be that way, when people are like, this is going to be the hardest job you've ever done, and then it turns out that you're working like crazy. Like when the team you're coming into is extremely upfront with you about how it's

going to be, and it turns out the way and it's not good, it's not necessarily being exploited. Like you made that choice. Yeah. You chose that. That's a really great point, man. Like, think about expectation setting when you take any job. Yes. Or when you go to school, the people, the great professors or teachers or bosses, it's not that they tell you what's going to be easy. It's that they tell you what's going to happen. Yes. And they're right.

They're honest. And you're like, wow, I really respect that you set my expectations well and I knew what I was walking into. And so again, if someone did an A plus job of expectation setting, you can't really hold, you can't argue that they're exploiting you or that this is like not what you signed up for. No, right. All right.

So I suspect I'm in a bad situation. What do I do to fix it? If you think you might be in a bad situation, I would look at what are the other opportunities that you're taking an opportunity cost from doing? So for instance, if you're at the big tech company and other people are getting tons of promotions because of your work, you probably are pretty well undervalued and you can be learning more. And so I would explore starting your own company or going to working somewhere else. If you really want that seat at the table, my guess is you could find a job where you have way more a seat of the

the table when you're doing decision-making? Well, I'll say a step you could do even before that. You can ask for a seat at the table. That's true. I remember there was this great employee at Justin TV, this guy named Tim, and he was disgruntled because the company wasn't doing well. And as disgruntled as he was, he actually would do the work to come up with ideas and to point out things that were wrong.

to create fixes. And like, he took ownership. And what was interesting is that as he took ownership, he was given ownership. So it wasn't this weird, it wasn't like, oh, like you're not at the table. It's like, come up with a smart ideas. Maybe you do have a, maybe you are at the table

and you're just not fucking participating. Or taking responsibility. That's a great point. And we see this with equity splits, because often sometimes it'll just be, hey, have you all thought about maybe, or how did you come up with the equity splits? Like, well, it's, you know,

90-10. Well, why? Well, it's my idea. Well, you know, most of the work is ahead of you, not behind you. What if you went like equal? People are like, okay. Yeah, fine. It's actually not that hard to fix this stuff sometimes, shockingly. No. It's just they've never had the conversation. Exactly. They almost expected the business person to do right by them or like gave up their like agency at all. And it's like, no, you have agency. And then I'll say, you know, another thing is location. Like sometimes you're in a place where your work isn't valued. and there are other places where your work will be valued more, whether that's geographic location company.

That's a great point. And I think the last one that I observe a lot is that sometimes you have to take a step backwards to take two steps forward. So maybe you're stuck in a bad job and like you have a lot of responsibility but you're not being given good compensation. You might have to go switch jobs into a place where you have less opportunity, less responsibility, but better compensation, you can develop a better network. Maybe you have to move.

Maybe you have to take risks. Yeah. Like maybe you have to do something that doesn't feel like you have the perfect next thing on your resume because it sets you up two moves down the line. Right. I think sometimes people are like look at their careers very linearly instead of saying like it's the end that matter, right? It's like, can I retire, raise my kids?

And like maybe the path to get there isn't just this linear step by step. So anyways, what would be your last parting piece of advice for someone I suspect there in this world? Look, technical people know your worth. And if you're a really nice person, those are the people that tend to get ripped off the most. Follow our handy checklist and find a place where you're appreciated and valued the way you should be. Because you have this amazing rare skill. And for those business people listening to this, don't exploit folks.

be honest be upfront right like make decisions that they're gonna that your people you work with are gonna be excited about today but also tomorrow because like if that amazing tech person leaves your company you're fucked all right Dalton great chat thanks