When Acceptance To A Startup Incubator Means Nothing

I’ve worked in IT for over a decade, but I feel like I’m always learning something new. Sadly not everything I learn is a new API or programming language. A lot of it is learning to avoid dysfunctional employment situations. And IT is a minefield of this. One of the things I learned recently is to be careful of startup incubators.

A few months ago someone contacted me about an opportunity as a developer at a startup. I arranged to meet him. Foolishly I didn’t ask for more details beforehand. I was admittedly impressed by his acceptance into a local startup incubator.

Turns out he was just out of college and building a new application, or really, had an idea for one. He himself had no technical background, so he was looking for developers. And then came the catch — the pay was in “equity.” Just “equity.”

I looked into the incubators standards a bit. And it turns out their “application” doesn’t really ask anything about a business’s actual ability to pay their employees. Let’s just say it’s not YCombinator. And I’m not sure people whose business model is founded on getting developers who regularly get paid anywhere from $40-$300 an hour to work for what is potentially nothing is really “Chicago’s brightest.” Furthermore it contributes to a dysfunctional culture in which only people who can afford to do this for “fun” dominate.

I don’t know much about labor law, but I wouldn’t surprised if equity-only arrangements are often illegal unless the equity represents a substantial (>20%) part of ownership.

As for people who have app ideas that can’t attract enough funding to pay employees, I’d recommend working in IT for awhile more to strengthen your management experience and technical expertise. Maybe learn at least just a little bit about how to develop applications yourself and especially how to manage their development.

And for those of us who are in-demand at startups, don’t waste your time talking to them unless you know if they are paying.