Intro

In the startup world usually someone comes up with the money, but they need someone else to implement their ideas. Because it’s a startup, by definition they’re not generating revenue and are burning money, so the engineer/s they’re hiring must be (extremely) underpaid compared to their market value. If you’re a software engineer, at the beginning of your career, be careful!

Be very wary of accepting an extremely underpaid job for small equity (like 2-3%) of a startup that is not making money and has 90% chance of failing.

image-title-here Source: Catalin Avram - photo taken in lovely Brașov, Romania, Apr 23, 2025

A Gamble

Unless you accept the fact that you’re entering a gamble, don’t accept this kind of agreement. Usually people write and talk about startups that take off (like Facebook, airbnb, instagram, etc) or others that flop (too many to count). These are the happy cases. Let me talk about a personal experience, where I spent 8 years of my career deadlocked in the purgatory of businesses.

Purgatory

What is the purgatory of businesses? Well, it’s when your startup doesn’t take off, but doesn’t flop either. For whatever reason, it just barely floats.

That’s what happened to me. Without going into all the details, I was one of two co-founding engineers (and another two non-engineers, with money), who didn’t put any money, but accepted pay (lower than market value) and percentage points of the company. Initially it was 50-50 with the main co-founder who was financing. Then, in a very short time, my shares became something like 2-3%.

The problem is, for those 2-3% I was working neck on neck with the other founders, the ones that had 50% combined. Now, if the startup had failed fast, it would not have been a problem - a few years of experience, and off I go somewhere else. But the startup didn’t flop. But it didn’t make it big either. It just floated. And, as in Dostoevsky’s “The Gambler”, the more time goes by without payout, the more you hope a bigger payout comes. So I kept working and working and using all my energy on this business without thinking about any personal growths, because that is for me to think about “after we make it big”.

The Wakeup

The wakeup call happened for me about 6-7 years into the startup, when I had already moved from Canada to Romania to save on living costs so I can take a salary cut so we can keep the business going. In that particular sunny day, in Bucharest, I met with a friend who was visiting from Canada - who is about roughly same age as me and also a software engineer. Having followed a more typical software engineer role, my friend was telling me that he got to a point where he works for a consulting company and bills about 1k/day. I was making about 3.5k per MONTH, 25% LOWER than what i was making 6 years before, when I started.Also, even though I had about 8 years of software development experience at that time, it really counted for less, because my software development experience was so niche and focused on THAT startup, i had missed out on important skills and technology trends.

Six Weeks Notice

With this information in mind, I started looking around and noticing there are plenty of well paid freelance contracts which were better suited for me and better reflect my skills and usefulness. This is a topic for another blog post, or even a book, but I was completely open with my friend co-founder engineer about the situation we’re in, and he then re-wrote the stuff I was working on in another technology he was more familiar with, basically removing my last lifeline from the company and allowing the other two cofounders (the ones with money) to basically fire me. I was given 6 weeks notice and a promise my backpay would be paid, and I had to brush off my CV/Resume which I haven’t touched in 8 years at that point.

Conclusion

If you take small salary, with small equity, you will:

  • NOT have any power of decision in the company
  • NOT have time or energy to pay attention to your career as a backup plan
  • Act like a cofounder (be on call, work until burnout multiple times, etc etc) but with an order of magnitude lower for payout (if it even comes).

For example, in my story, if the company would have cashed out for, say 10M, I would have gotten 200k out of it after 8 years of pain, and the main cofounders a little over 5M. The difference is HUGE.

The moral of this (true) story is that money rules and that you have to be very careful if you’re getting equity and LITTLE money as co-founder, because you will end up stressing and working just as much as the other co-founders that come up with the money. And in the end, you will put your career on hold, whereas the other co-founders will make all the right connections, such that when shit hits the fan, they can just continue with their connections as if nothing happened.

Outro

I have many friends on LinkedIn who know me personally and might not have known the entire truth. There’s ofc so many more details to the entire story, but when it comes to accepting low pay for equity, the story holds true and nothing was left out.I also have professional friends who work or are in startups that are well funded and managed. I do NOT have a problem with those. You can get equity AND good pay (market value) - that is not the problem. You can also be a co-founding engineer that gets no pay, but own big chunk of the business (say 30% or more) and have control of the decisions - that is also good. I am specifically warning agains working for half or less than half of what you’re worth for only a few percentage points.