Introduction
I’m part of the early team at a startup as one of the first employees hired by the founder. I often get asked if I started the business, or if the company is “mine”.
In my mind, the answer’s quite clear: “no”, and “not quite” (see, I may own shares, but I wouldn’t say the startup is “my company”.)
But that got me thinking: what’s the difference between me, one of the first employees hired by the founder when the company was still just starting out, versus the founder herself, who started the company?
Here are 5 ways where founders and employees differ, no matter how early of an employee you are.
Vision
Arguably, the most important distinction to make between founders and employees is when it comes to the vision of the startup. Founders, and founders only, are the ones who own and set the vision. It’s the founders who have an idea of what they want to build, what problem they want to solve or how they think the world should be.
Employees, on the other hand, execute on the strategy to achieve this vision. This involves working together with the founder to devise the strategy, and breaking it down into the tactics that the team will implement. Employees shouldn’t be setting the vision, as the key distinction between a founder and an employee is who owns the company. The people who own the company, i.e. the founders are the ones who should have a say as to what the vision of their company is.
While this separation in ownership of the vision exists, it’s still important for early employees to understand the vision. It’s the founder’s responsibility to communicate to the employees what the vision is and why. Employees may often ask questions to ensure that the founders are clear on their “why” behind the vision, but ultimately it’s the founders who set this vision.
Essentially, any startup or company is just a story. It’s the story that founders come up with as to why their company exists and why they are the ones to solve certain problems. As part of this story, you’ll have numerous employees, investors, mentors, and supporters write certain chapters, but the author of the book is the founder at the end of the day.
Equity
Founders will undoubtedly hold more equity than employees, even the earliest ones.
This is because, at the end of the day, the company belongs to the founders, so they’re the ones who should benefit the most from any financial upside achieved by the company.
The equity that founders and early employees receive is a reflection of their risk and value to the startup. While joining a company in its early stages is risky, starting a company is always riskier. Founders are the only ones in the company who go on the journey of taking an idea in their head to creating real value for real customers. Even if employees join the company early on, they’re already walking into something more than an idea: there’ll be some revenue, a handful of customers, a make-shift service or MVP of some sorts.
There’s no question that the people who are most valuable to a startup are the founders. They may not necessarily be the smartest: it’s likely some of your employees may be the world’s best software engineers, growth marketers or sales people. However, without founders who bring these people together, build a high performance culture and own the vision, the company won’t be able to grow much at all.
In some startups, founders will set an equity strategy where the equity an employee gets needs to be earned. In one of the startups I advised for, equity was not offered as part of the compensation package when employees joined the company. Instead, after a 6 month probation period, employees and founders would then have a conversation about equity depending on their performance over these 6 months.
Safety
The idea of safety in a startup can often be overlooked, especially in the early stages where the founders and early team are so hellbent on growing their user base and getting revenue through the door. However, safety is an important factor and a key differentiator between founders and employees.
It’s the founder’s responsibility to ensure the safety of their employees are being met, and not the other way around. Founders are responsible for their employees safety since these employees are the ones who have decided to take a bet on the founder and follow by joining their startup. In return for this, founders need to ensure that their employees feel psychologically safe.
A common example that founders need to ensure this happens is when startups run into financial difficulties. If your runway is nearing its end and the founder’s have pulled all the levers they can to reduce burn rate, often the question of taking a salary cut will come up to stop the bleeding.
The difference between founders and employees lies in who takes a salary cut. Yes, early stage employees may end up taking a salary cut, but the difference between founders and employees is that founders would be the first to opt to take a salary cut. Employees should not be expected to take a salary cut, especially if it affects their financial safety.
At the end of the day, working in a startup as an employee is a job. Employees have bills to pay and food to put on the table. Yes, founders do too, but founders do not and should not view working in their startup as a job in the same way that employees do.
Incentives
Like I said, working in a startup for an employee is a job at the end of the day. Yes, employees may have a range of incentives, from short-term financial gain, long-term financial upside, opportunity to learn or build their network, or the possibility of making global impact.
Founders have a different set of incentives to employees. There may be overlap when it comes to global impact or long-term financial upside, but you’d be hard pressed to find a founder who’s incentivised by short-term monetary goals or being able to build out their network. Being a founder and building a company is not the best way to achieve these things.
Founders and employees differ on incentives for being part of a startup, because they have different motivations in life. If you speak with any founder, you’ll find that they are often motivated by changing the world or solving a problem for a set of people. They are so driven by this that they cannot fathom working in another company to achieve this vision. The only way to create the change they want to see in the world is to build a company and solve the problem themselves.
Roles and Responsibilities
In an early stage company, there’s a lot that needs to be done. However, there are still some responsibilities which are solely left for the founders.
Founders are responsible for owning and setting the culture, building the team and fundraising. Yes, as a startup grows founders will hire people to help with this, such as talent acquisition managers, HR teams and accountants. However, founders are the ones who own the culture, and it is the founders’ decisions and actions which set the precedence when it comes to company culture.
In contrast to founders, employees are typically hired to execute on a specific set of tasks. The best founders surround themselves with the best technical talent and hungriest people when it comes to hiring employees.
Founders may have certain departments or portfolios that they oversee, but the role of a founder is never easy to define. Their role often changes as the company grows. There comes a point in time when they will stop working directly on the product or interacting with customers every day, and switch their focus to building out the best team and setting long term strategy.
Conclusion
On the outside, it may be hard to distinguish between founders and employees, especially employees who joined early on and helped the founder with building a product and launching this into the market.
However, within the company, there are clear distinctions between founders and employees. What separates a founder from an employee, for me, ultimately comes down to the personal why behind each of them. This affects all the other decisions within a company, from who sets the vision, what equity to give out, and who has what responsibilities.
