Comments on: Financial crisis, startup opportunity. NYC developers, join a startup!

By: casewi

casewi — Wed, 03 Jun 2009 14:53:57 +0000

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By: Barrett Sheridan

Barrett Sheridan — Mon, 06 Oct 2008 14:45:02 +0000

@Rod — another possibility for innovative compensation: pre-IPO opportunities to exercise options. starting nov. 1, facebook is doing just that (wsj article is at http://tiny.cc/zLagm, although hidden behind a firewall, unfortunately — damn you, murdoch). with the dearth of IPO activity in the last couple years, seems like there’s a strong need for an alternative exit, esp. if you’re using equity stakes to attract top developer talent.

By: Roderick Salguero

Roderick Salguero — Fri, 03 Oct 2008 16:19:17 +0000

Good thoughts, Dave. A couple of points though on switching from banks to startups…

1.) Banks offer a transparent career path with great salary and potentially lucrative bonus. To make serious dough at a bank, you don’t have to be #1, you just have to keep your head down, do your job, and hope the bank makes a good profit.

2.) Start-ups don’t offer the same kind of high salaries that banks do, and could potentially fail at any moment (though these days, banks aren’t very reassuring either).

3.) Therefore, the risk/reward curve to motivate someone to work at a start-up needs to be steeper. In other words, the management at start-up needs to aggressively court tech talent with creative upside packages.

One example of such a package could be an “adjusting” equity stake depending on the sale price or ascertained value of the company. So instead of just getting a static equity stake, you start out with a large chunk that is worth at least something, if not much. As the company increases in value, your equity stake gets smaller and smaller, thus leaving you with a stake that is more in-line with your position, but still worth more that what you started with.

Another possibility is a guaranteed bonus based on company performance that is 50% to 150% of the salary of the employee.

Basically, entrepreneurs that want to secure the best talent need to be willing to give employees the most value at the early stages of a company and only take their reward once the company has become established and successful. This not only removes risk from the employees perspective, but also assures them that the entrepreneur will always act in the best interests of the company.

By: Mayo

Mayo — Fri, 03 Oct 2008 02:04:49 +0000

@Lauren

Shamwow? No mayo way.

By: Ryan Graves

Ryan Graves — Thu, 02 Oct 2008 17:58:52 +0000

So- Is this going to make it ridiculously tough for those who want to get into a startup job but aren’t coming from the NYC finance world? Do we think that the startup positions will be flooded with financial crisis “left-overs”?

Time will tell. Kopelman’s site is awesome by the way. I love well timed/positions sites like that.

Great post!

By: Lauren Gilchrist

Lauren Gilchrist — Thu, 02 Oct 2008 14:21:13 +0000

Great post Dave! I think there’s a section of employees that you missed: analysts. Of the 150,000+ positions that will be cut as a result of the crisis, I’d estimate that 20,000 of them are analysts and associates. Most people in those positions fit the profile of young entrepreneur: young, hungry, driven, analytical, and able to think outside the box. I wouldn’t be surprised if, as a group, they’re feeling burned by the financial sector that promised them the moon 2 years ago, but ultimately left them with nothing. What better remedies for Wall Street burnout are there than the creativity and collaboration that characterize the NYC start-up community? Hope to see some of you Dealbreaker types on this side of the market — minus the Ferragamo loafers, of course.