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I got hired as an early employee (employee #4) and considered as key engineer of the company. As compensation, I got some stock option grant (1%), and well below market salary (about 30% of what I can get from my last employer). Now, I have been working for few months, still haven't got my salary yet. The CEO said that it'll be delayed a bit as the funding (already sign'd with an investor) hasn't received yet.

What should I do with this situation?

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5 Answers

up vote 8 down vote

The blunt advice: Find a new job.

If somebody doesn't pay me, when I've a contract that says they should be paying me, I stop working and find somebody who will.

You don't need to be rude with the founder - but just explain politely that you have commitments that need to be maintained and you need a salary to do that.

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up vote 7 down vote

There are three types of people who work at a company:

  1. Partners - those take a big personal risk (often by not taking a salary or by taking a low salary) in exchange for a big reward if the company is successful.

  2. Employees - those do not take big personal risks and do take a fair salary, sometimes they get a small cut if the company is wildly successful.

  3. People who are takes advantage of - Those are people who take partner sized risks for employee size rewards.

I'm very sorry to say you are in the 3rd group - and you should get out of this group immediately.

A 1% option grant in a very early stage startup, and one that can't even afford to pay salaries, is worth absolutely nothing (believe me, I once had lots and lots of options in a startup that everyone believed is going to be hugely successful - those options were worth a lot of money "on paper" at the time - but since the company went out of business before the IPO those option were never actually worth money).

If you really believe in the future success of the company and you are willing to take the financial risk you should get partner level reward - that is, actual stocks (not options, real stocks and the ownership they imply) and the same order of magnitude of stocks the founder gets - along with real control over the direction of the company.

If you don't feel like working years for little or no money in the hope the company sometimes makes it big then you should stop working there immediately and find a job that actually pays money.

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up vote 3 down vote

It sounds like essentially you're giving the company a loan/seed investment, and that should be factored into your compensation.

And that includes an appropriate adjustment to compensate you for risk, which might be low or high, depending on the company's situation.

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Well said. Receiving only 1% stock options for this is too little in my view. Work hard, but ask for more if you don't get paid. You ultimately work for your employer's financial benefit. – Hendrik Sep 19 '12 at 9:42
up vote 2 down vote

If you are in US, find another job and then file a complaint with your local Department of Labor for non-payment of wages. You are entitled to tripple of unpaid wages and legal fees. Wages are due when earned, not when investor money comes in. And since you have pitiful 1%, you are definitely not co-founder level and not paying you is illegal as hell.

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It's almost certain that actually following through on this will break the company. And since they don't have any money, not get the OP anything. Not that I don't agree in principle... – DJClayworth Sep 19 '12 at 10:24
1  
With all due respect, we are talking about business and not charity. If you can't pay, then give people proper equity and at least pay minimum wage to keep it all legal. If one is too stingy with equity AND is not paying wages on time, their business deserves to be disseminated. Many of us dipped into our credit cards etc. to meet the payroll. No excuses! – Apollo Sinkevicius Sep 19 '12 at 21:13
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I agree with you. I just wanted to make sure the consequences were understood. – DJClayworth Sep 20 '12 at 8:30
up vote 1 down vote

You seem to have left out one key piece of information: Do you believe in the product and the management team? It is not at all uncommon for founders (and early key players) to have salary delayed during initial funding.

Start-ups carry MUCH greater risk, and often greater rewards. These potential rewards include access to discussions that if held in a big company you might not be senior enough to participate in. Another potential reward is getting to do a far broader range of tasks so you expand your horizons and your experience.

If you went to a start-up for stability, then you made the wrong choice. If you can not have a candid discussion with the CEO, you may want to leave.

If the dollar amount has become too much to risk on a verbal promise, it is not unreasonable for you to request that the company issue you a promissory note for your earned salary (not future salary), and they should be willing to make a "personal guarantee" - so they are on the hook as individuals. IF there were assets in the company (doubtful as you describe things) you could have a note for your accrued salary be secured with something called a "UCC-1" - ask your legal counsel if you think there are assets in the company that can be used for collateral (security).

Being part of a start-up means you are willing to do the unconventional to solve problems which might otherwise be solved by throwing money at the issue. Find a solution or decide that start-up life is not your cup of tea. For most it is not, but for many there is nothing better in the world. Know yourself, then make the best decision for you.

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