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Saturday, October 15, 2011

Amusing Job Interview - Working For Free

I went on an interesting job interview. It was another "We want you to work for free." thing.

I was 99% sure before the interview, that they wanted me to work for free. I went anyway. First, I needed to go buy something. Second, there's always a chance that someone isn't clueless. Third, it's better than staying home all day.

Here's a tipoff. If someone is in a "shared workspace", it's 99%+ likely that they want you to work for free. If they can't afford a real office, then they can't afford to pay someone to write their product for them.

Am I pulling an Alyssa Bereznak, going on a job interview, just so I could ridicule them? I'm not shaming them specifically by name. (Surprisingly, they didn't demand that I sign a non-disclosure and non-disparagement agreement, as condition for talking to them.) There are probably many similar idiots. A lot of Craigslist startup ads want someone who'll work for free.

My mother's reaction was amusing. She said "Working for free must be a good idea. Otherwise, a lot of people wouldn't be asking you to do it."

Astonishingly, they had already raised $300k of venture capital, even though they had no product and no working website. Are venture capitalists really that clueless? Can venture capitalists tell the difference between two low-skill parasites and the next Mark Zuckerberg?

I met with two guys. They were so clueless that they didn't even notice that I wasn't clueless. They were grinning like child molesters. The expression on their face said "Wow! FSK is going to write our product for us! He'll do all the work, we'll own it, and we'll be multi-millionaires! I can't believe that we're about to trick someone into saving our startup!" They had raised some VC, but they weren't willing to part with their hard-stolen money until after they had a working website. I'd be writing the code for them, in the hope that they'd maybe pay me later.

"I'll work for free in the hope that I'll be paid later." is one of the stupidest ideas ever. It's a good deal for the employer, but you'd be an idiot to take it if you really believe that you'll someday get paid. First, you've already established yourself as an idiot who'll work for free. Why should they pay you? Second, when/if money does come in, it's going to be wasted on other things before paying you. Third, as a minority shareholder, there are two many ways to be cheated, even if the startup is successful. For example, if you have a typical "4 year vesting with 1 year cliff", you can work for 11 months and then get fired and get nothing.

Why would I work for someone else for free, when I can work on my blog for $0.10/hr? Why would I work for free, when I can work on personal projects and keep 100% ownership.

Their idea was stupid. Even if I wrote their lousy product and it worked, it wouldn't be worth $300k, much less the $10M+ you'd need to make the $300k investment pay off. It was a neat idea, but there's no way it'd ever be worth $300k, even if I implemented it exactly to match their fantasies.

Neither of them had written the code so far. They had partnered with a third guy, who gave up and got a real cash-paying job. They said "Our code is 95% finished. We just need someone to do the last bits." If you repeat a lie often enough, you'll believe it and your investors will believe it. What do you expect them to tell their investors? "The guy who wrote the code quit because we weren't paying him and he had to get a real job. It's nowhere near finished." No, you lie and say that it's almost done. If it really was 95% done, then their other partner would have finished it. It almost definitely wasn't done at all. It would probably have been less work for me to redo it from scratch, than for me to understand what the other guy did.

They did say one interesting thing. They said "If we can get 10,000 users, then we can raise more VC at a $2M valuation." Does that mean that, if I start a website and get 10,000 regular users, then it's worth $2M? My blog has 200 regular readers. If you extrapolate linearly, does that mean my blog is worth $40,000? That seems silly. I only make $5/month from AdBrite. A stock that pays a dividend of $60/year is worth approximately $1000. Plus, I have to keep writing new posts. I couldn't sell my blog to a fool, and have them expect to not lose my regular readers.

Most VCs really want to start a business that will have a State-backed monopoly in its market niche. VCs want to invest in a business that will be profitable even after the psychopaths and parasites take over. VCs don't want to invest in a business that requires intelligent leadership to stay competitive.

Seeing those clueless twits made me think "I should work on fsklicious and my other personal projects. They are better ideas than these fools had. Plus, I can implement it myself and bootstrap it, paying only for a domain, a Linode, and my time. I'm currently unemployed, so I might as well use the time beneficially."

If I had no emotional intelligence, I'd need to partner with a parasite in order to get anything done. Now, I can handle both things. I'd rather handle the other logistics of having a business, rather than being a parasite's employe and giving them ownership and control.

For my first few weeks of unemployment, I was feeling tired and semi-burnt-out. Now, my motivation is returning. I should get my act together and register a domain and buy a Linode. It's amazing how much it drains your energy, to work as a wage slave.

This is lesson #1 of software startups and web startups. Unless a co-founder is writing version 1.0, your startup is worth $0. I can't believe that VCs are dumb enough to fall for that. You need more than a powerpoint presentation and a slick pitch, to have a viable startup.

That's also a symptom of corruption in the economy. How did those idiots manage to score $300k in capital, while more deserving projects go nowhere? In a corruption-based economy, capital goes to the best liars, and not the best workers.

Even if they did have a $1M budget to build their website, they'd blow it hiring someone clueless. If they really were willing to shell out some cash, they would have hired a skilled liar, and not a competent programmer. The only reason they considered me at all, was that they were hoping I'd be dumb enough to work for free.

I should have told them "Learn how to write software and do it yourself.", but they probably thought "Only losers write code." Plus, they didn't have the intellectual capacity to handle it. I also should have said "You have nothing. If you're honest, you should admit you've got nothing and give your investors their money back." There's no chance of that happening.

One of the guys was very buzzword compliant. His speech was a word salad of buzzwords, without making any sense. Can't VCs notice that? Are all VCs and State leaders like that, buzzword stream-of-consciousness without any real thinking?

It was very interesting, seeing those two clueless fools. On the one hand, it was offensive that they wanted me to work for free and make them millionaires. On the other hand, it was reassuring. If those two clueless twits can start a business and raise $300k of VC, then I can surely do better!

However, VCs would probably not return my phone calls, at least until I have a working product and users. By then, I probably wouldn't need VC! However, if I go the non-VC route, I'd need about 100k regular users, to make enough from Adbrite ads to be "ramen profitable".

This meeting made me think about VC some more. I had some interesting observations.

Raising VC is a full-time job by itself. Every day I spend meeting with VC is a day I don't spend improving my website. Every VC will string you along. They won't make a formal legally-binding commitment. They do want to string you along, in case you are successful, and they want to invest.

Those idiots were thinking "A bunch of VCs are stringing us along." as equivalent to "A bunch of VCs are really interested in our business." A VC isn't going to give a direct no, because he always wants the option of investing later. It's kind of sad that nobody explained to them. "Your business idea is stupid. You'll never get anywhere if you expect someone else to implement your vision for free."

Suppose I start a website and it's successful. I decide to raise VC. I raise $1M at a pre-money valuation of $1M.

Does that mean my shares are worth $1M? No.

First, I can't take that $1M and pay it out to myself as a dividend. The VC will expect me to hire employees and spend that money. Also, the VC may expect me to take no salary or a reduced salary, because I'm part owner. The difference between my fair salary and actual salary is a partial gift to the VC.

Second, once I get VC, I can't try to build a stable business with $200k in revenue. If I'm 100% owner and the only employee, $200k in revenue would be awesome. Once I raise VC, I have to swing for the fences, because the VC wants to cash out for $500M+. In that sense, my interests aren't aligned with the VC. I'm happy with a stable medium-income business. The VC wants to be ridiculously profitable.

Suppose I do have a business that generates income to support my rent and food. After that, any further gains go 100% to me, rather than having to give a cut to middlemen. Once I raise VC, my extra productivity gets given to the shareholders. In effect, I become the VC's employee. (However, it is worth it to get VC, if the extra growth potential is worth more than the equity sold. Most of my good ideas are bootstrappable, rather than one where VC would be a good idea. For an agorist business idea, VC is pointless.)

Third, the VC will demand I cede control of the business to him. There are many clauses that the VC can use to cheat me. No matter how good a lawyer I hire to represent me, there are "standard clauses" and various loopholes that can be used against me. The VC might demand re-vesting of founder shares, which means I give up my ownership until I vest. If there's founder re-vesting with a 1 year cliff, then the VC can fire me after 11 months and I get nothing. The VC might demand liquidation preferences, giving him greater effective ownership. The VC will demand that I hire a CEO of his choosing. Also, the VC could fire me and then mismanage the business and squander any remaining assets. (see the story of Ars Digita for a good example of how VC can end in disaster)

So, even if you do raise VC at a valuation of $X, your shares aren't worth $X. You can't cash out your shares for that value.

I shouldn't bother wasting time with VC. Right now, a VC wouldn't answer my calls. Once I have a working website and a reasonable number of users, I don't need VC anymore. If I raise VC once I'm moderately successful, I'm effectively gifting my bootstrapped business to the VC.


Anonymous said...

I have my own small business. It generates enough cash for my needs and some left over at the moment. I bootstrapped it myself. I have regular sales. I've sold to a vast number of famous companies, departments and organizations. I've sold to many world famous companies that won't even interview me!

I have some annoying friends/acquaintances. They don't understand things like FSK understands things.

One of my friends thinks I must be staggering rich and successful and have money pouring out of my ears. This is incorrect.

Another one of my friends thinks I'm a loser for running my own small business. He thinks the fact that I haven't wasted weeks of my time chasing venture capital money means I'm a disillusioned loser than has a chip on his shoulder!

Another one of my friends thinks I'm a loser for working for myself and thinks I should get a corporate job.

None of the above is true.

Ironically I have a stable job and save more money working for myself than I ever managed in a corporate job. I am not stressed out for working for a bully and fool.

The correct thing to do is to cut fools out of your life.

Anonymous said...

Your conclusion about VC is the same conclusion that musicians reach about record labels.

Record labels will only sign you if you have fans/followers. But if you have fans and modest buzz already, you don't need the record label.

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