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I've been bumping around the startup world for a while, and most startups I've seen seem to have (amongst other things) two things in common:

  1. A lack of money
  2. An inability to, reliably, hire good quality developers

This means that, for startups, the ideal hire is someone who is free - where they can wait until they've both raised money and found out that the hire is worth his price tag.

When (if ever) is this a win win situation? For you, as a programmer or software developer, when would this make sense?

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closed as off topic by ratchet freak, Yusubov, Walter, gnat, HLGEM Oct 10 '12 at 17:11

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5  
Charity. Family held hostage. Enjoy living off the land. –  psr Oct 9 '12 at 23:24
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If a company can't convince people with money that it's a good enough idea that they should invest in it, either their management is incompetent or it's probably not a very good idea. Either way, you probably don't want to be donating time. –  David Schwartz Oct 10 '12 at 0:07
    
Money is a universal tool to adjust an employee's will to match that of the company. The more an employee "gets" the company's vision, the less dollars they will need, because they enjoy the effort. The more you have to adapt then to fit your mold, the more you have to pay them. However, you will almost never find an employee willing to work "for free," because your company is very rarely in the job of feeding their family, so their goals will always be different than your goals. –  Cort Ammon Feb 27 at 3:53

9 Answers 9

When (if ever) is this a win win situation?

About the only time when it would make sense is when all of the following is true:

  • You are a co-owner with a double-digit percentage stake in the equity of the company
  • You have other means to sustain yourself and your family for at least a couple of years
  • You love the idea behind the start-up, and you see a clear path to its profitability

In all other cases, reading a good book is a better way to spend your time.

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6  
+1 for importance of being co-owner. –  Yusubov Oct 10 '12 at 0:09
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+1 for profitability. Sure you might love working somewhere, but eventually it has to sustain itself or else you're just ripping yourself off. –  joshin4colours Oct 10 '12 at 1:15
    
If you're a co-owner they're (you're) almost certainly paying you, unless it's a garage-band style operation with zero income –  Ben Brocka Oct 10 '12 at 19:13
    
@BenBrocka Not necessarily: I worked for two start-ups where at least one co-owner did not draw any salary. One of these start-ups grew into a pretty large operation, with hundreds of programmers, and a large sales organization. –  dasblinkenlight Oct 10 '12 at 19:19

Working for free is OK if the purpose is for charity.

If the purpose to is to make someone else wealthy then it's never OK.

If you are being paid with ownership of the company, then I don't consider that working for free. Despite the high chance you won't make any money.

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"When (if ever) is this a win win situation?"

Never. Never, ever, ever, ever, ever.

Your time and skills are worth cold, hard cash. Odds are, you and your coworkers will spend way too many hours writing a bunch of crap code "just to get it out the door".

Once it's out the door, the company is in make it or break it mode.

Once its in that mode, it'll most likely break.

If it breaks, you're SOL for payment.

If it makes, you could still be SOL for payment.

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By this logic no one would ever start a business. –  Kirk Broadhurst Oct 9 '12 at 23:51
    
@KirkBroadhurst: But it would stop a lot of foolish start-ups that could never succeed anyway. This is a good rule of thumb but like all rules there are exceptions (but generally never). –  Loki Astari Oct 10 '12 at 20:00

The only reason to do that is if you are one of the founders (or are getting as much out of the deal as a founder).

You are taking the same risk you need to be in a position to get compensated appropriately for that risk high risk high reward.

Your ability to live off oatmeal may affect your ability to do this effectively though :-)

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Yes, I would do that if

  • I could live by other means.
  • Would give me some experience that I could cash it out later (internship mode).
  • Could not find any other employment.
  • most important: Got equity.

If you cannot be paid, or compensated, then the startup founders should give you equity. Also in order for this to be meaningful (because first employees can make or break a company), you have to be fully aligned with their vision and strategy.

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Never work for free.

As previously mentioned, make sure you get equity - real equity, not options.

My conditions for working for equity only:

  • I can support my lifestyle without cash from this job
  • Will I be learning anything that will be useful to me later in my career (not just technical skills, but soft skills too)?
  • Do I believe in the founders? Make sure you fully check-out their backgrounds. Meet them at least three times before committing. I've met plenty of these dreamers who can talk a good game up front, but generally within three meetings I've been able to tell the ones who are legit from the talkers.
  • Do I believe in the product?
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+1 for 'not options'! –  GrandmasterB Oct 10 '12 at 4:47
    
I would add, is the startup managed such that it is likely to succeed? Startups with no funding and no marketing and business plan, rarely work. Startups with a product that no one really wants don't succeed either. I learned this one the hard way (although I wasn't working for free). –  HLGEM Oct 10 '12 at 17:14

Of course, this is very subjective, each of us will have a different opinion. This is mine. The only situation I find that you will be in a win win situation is when you feel the project as yours too, and this means that you like the idea, you like the company, you like its values, but also you participate on decisions, on defining the company, its strategies etc. At last, that means that you are a partner, and that you probably own part of the company. At last, you are not working for free, because you are paid with shares of that company, that if it is succeful, might be worthwhile.

If you work for free, just to get the opportunity to get a job in the future, I don't think that is fair to you, even if you just want to build portfolio.

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When you are accepted, treated and empowered in a comparable way to one of the original founders.

I'd probably expect an ownership share of no less than half of the largest shareholder.

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When (if ever) is this a win win situation?

I would like to add-up to already suggested reasons when it is reasonable to work for start-up:

It would make sense to work on a start-up only if you have clear understanding of business model and want to gain experience how to run such start-up.

In another words, learning for free while being partially engaged with this project is also something that you would only gain.

However, this advice is only for a relatively newbie developer and may not work for everyone.

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