List a project

Compensation when you join a half-built project as employee number two

What to ask for in salary, equity, and everything else when you are the first hire on a Failedups acquisition or a barely-funded indie startup. Written for the person joining, not the founder.

My cofounder equity post was for the cofounder. This one is for the first real hire, after the match has happened. You are employee number two on a project that may not survive the year. The comp package will look strange, and almost no internet advice was written for your situation.

Salary expectations meet the bank account

Forget what your last job paid. The number that matters is what the project can fund.

What I see closing:

  • $0 MRR, no funding. No real salary. Equity plus a stipend of $500 to $1k a month, often deferred until first revenue. If the founder claims they can pay $6k a month with no revenue and no investor, ask to see the bank statement.
  • $1k to $5k MRR, indie funded. $1k to $2k a month plus equity. The founder is probably not paying themselves much more.
  • $5k to $20k MRR, indie. $2k to $5k plus equity.
  • Pre seed funded, $200k+ in the bank. $80k to $130k a year plus equity plus a real employment agreement.

You are taking a 40 to 70 percent pay cut versus a normal engineering role. The equity is supposed to be the offset. Make sure it is real.

Equity ranges that are not made up

The standard “first hire equity” answer is 1 to 2 percent, which assumes a fully funded company with a salary that compensates for low equity. On a half-built indie project, it is different.

What I see close on Failedups follow on hires:

  • Employee, full salary band. 1 to 3 percent.
  • Employee, reduced salary. 3 to 5 percent. The extra equity is the discount on your cash comp.
  • Quasi cofounder, low or no salary. 5 to 15 percent. You are not on the cap table as a cofounder, but you are doing cofounder work.

The honest question to ask before you negotiate: am I building this company alongside the founder, or executing the founder’s plan? The answer points at which band you are in.

Vesting is not optional

Four years, one year cliff, monthly thereafter. Same as cofounders, same as everyone else.

I do not care if the founder says “we are too small for that” or “we trust each other.” Without vesting, the founder gets uncomfortable a year in and looks for a way to claw it back, or you walk in month seven with a chunk of the cap table the project cannot recover. Both kill the company.

If you cannot get vesting written into a real document, that tells you how seriously the founder is treating this. Walk.

What to ask for that is not salary or equity

Most second hires leave money and sanity on the table here. The negotiation has six or seven levers, not two. What I would ask for when cash is tight:

  • Revenue share for sales you bring. Close a $2k MRR account through your own network, get 10 percent of year one revenue in cash. Costs the founder nothing if you do not sell.
  • Milestone bonuses. First $1k, $5k, $10k MRR. Cash payouts of $500 to $2k each, paid from revenue you helped create.
  • Defined working hours. Half-built projects swallow your whole life. Write down “Monday through Thursday, 9 to 6, 24 hour Slack response outside that.” If the founder cannot agree, they are about to burn you out.
  • Ownership over a specific area. “I own the entire onboarding flow, including design” is worth more than a 1 percent equity bump.
  • Learning budget. $1k to $3k a year. Tiny line item, huge signal. Founders who refuse this will not invest in the team in any other way.

Contractor versus employee

You will probably be offered a 1099 or freelance arrangement. The founder does not want payroll or paperwork.

As a contractor: tax flexibility, the ability to bill other clients, no equity in any clean structure. Equity for contractors is legally messy and creates tax events nobody planned for.

As an employee: you get the equity grant, which is the point of joining a half-built project.

If equity is the point, push for the employee structure even at low salary. Otherwise take the contract gig. Do not take equity and the contractor classification together. Worst of all worlds.

The failure case is the base case

About nineteen of every twenty half-built projects I see on Failedups will be worth zero in three years. Your equity will not vest into anything real. Plan accordingly.

Do not take a 70 percent pay cut for 2 percent equity in something you would not bet your savings on. The expected value math does not work. The pay cut has to be offset by real equity, real upside, or the kind of learning and ownership you cannot get at a normal job.

The success case is why anyone does this

The other one in twenty hits real revenue. $30k MRR, then $100k, then a small acquisition or steady cash flow. Your 5 percent becomes $50k to $500k of liquid value depending on the exit. Rare, but it happens. The projects that get there have an honest founder, a product solving a problem they personally have, one repeatable distribution channel, and a clean cap table.

Founder side red flags

Any of these and the comp package does not matter, because the project will not make it.

  • No clear comp structure, just “we will figure it out as we go.”
  • Equity promised, no paperwork, no cap table, no agreement to point to.
  • No vesting. “We trust each other.”
  • Founder cannot tell you their own equity stake or vesting schedule.
  • Refusal to write down working hours, ownership, or termination terms.

Each is a story the founder is telling themselves about how this works out. Founders who tell stories instead of writing things down end up relisted on Failedups eighteen months later.

The real bet

As a second hire, you are betting on the founder more than the product. The product can pivot, the codebase can be rewritten, the market can shift. The founder is the constant. If they are honest and able to write down what they are offering you in clear language, you can survive most of what comes next.

Vet the founder accordingly. Ask what their last project was and how it ended. Ask how they think about the cap table. Ask what happens if you want to leave at month nine. The answers tell you whether the comp package is worth the discount.

The match itself happens upstream of all of this. The /for-cofounders page lays out how the introduction works, and the active projects list shows the kind of half-built work where this comp conversation shows up.