Optimistic Risk: When “Just Equity” Stops Working for Pre-Seed Technical Founders
On risk, incentives, and the limits of equity-only compensation at the pre-seed stage.
I started writing this in my notes app to reflect on my own experiences over the last few years. With the advent of vibecoding, the subsequent democratization of turning ideas into products, and products into startups, it felt like there might be latent value for the hoards of first-time technical founders finding themselves in similar positions.
Joining a pre-seed startup as a young, first-time technical founder can feel electrifying.
It feels like you’re leapfrogging peers at your day job. Like you’ve unlocked a shortcut to financial independence, or maybe even early retirement. You’re not just an engineer anymore, no. You’ve ascended to being both a founder AND an entrepreneur as well. A veritable goddamn wunderkind.
The part that’s easy to underestimate and hand-wave away when becoming a pre-seed technical founder is that it usually means you’re also the very first engineer. Often the only one. You’re writing the code, shipping the product, fixing production issues, and making architectural decisions that will either carry the company forward or quietly haunt it for years.
No big deal, right? You’ve held engineering roles before, and probably still do at your day job, but this is different. There’s no employment contract, W-2, or 1099. On paper, you’re a founder. In practice, somebody still has to do the work, and the work will never, ever stop coming.
And that somebody is you.
You’re both a founder and an employee.
You both run the company and work for the company.
You operate at the highest level and the lowest level at the same time.
In return, your incentive is equity.
You probably know what that means, or at least think you do, but let’s slap a loose definition on it anyway.
Equity is merely the promise of money, someday in the future.
And that promise only ever materializes through one of three events:
- The company is acquired
- The company goes public
- The company is bought out
Until one of those events occurs, your equity is worth exactly nothing.
Which means the real question you need to ask yourself is this:
How long are you willing to function as a founder, engineer, and possibly the manager of other engineers, while also working your day job, with no guaranteed compensation on the horizon?
Everybody has a tipping point. Mine was three years.
The truth of the matter is that a person can only be motivated to work so long without money. The only reason you, I, or anybody else on this planet works any given job is for guaranteed income, full stop.
You’re not working to finance the company, or the lives of others working for the company. You’re working to finance your own life.
Purpose, learning, prestige, and passion are all real, but they’re secondary. They don’t pay mortgages. They don’t fund retirements. They don’t pay vet bills. They don’t justify years of uncompensated labor if the downside is unlimited and the upside is hypothetical.
That mismatch is where most equity-only arrangements begin to break down.
The singular takeaway here is that when you get involved in a pre-seed startup, you must contractualize future compensation expectations early. Not as a full-time salary, not as life-altering money, but as a clear incentive tied to the company’s ability to pay.
That way, once the company becomes revenue generating and the right milestone is hit, there’s no guesswork about when money plus equity becomes your incentive.
That can take many shapes:
- X% of Y% of net profit
- A capped hourly rate
- A fixed monthly amount
Nothing huge. Poverty wages. Something to alleviate the emotional and financial pain of working multiple jobs.
The structure matters less than the existence of the agreement. Because equity alone is not compensation. Equity is risk.
And risk without boundaries isn’t brave, honorable, or charitable. It’s denial.