Why Everyone Wants the Same Founding Engineers Right Now

You look at the windsurf character AI world and the value prop for being an early employee versus a founder in recent memory hasn't been so great necessarily.

It's almost this weird conundrum of you want your talent to be wanted by other people, but not enough that they actually leave no matter how quote unquote therapy. Like a chatbot may sound, it should never be granted the accreditation of a licensed therapist.

Close cousin of responsibility is liability, and most companies do not want the liability for what LLMs spit out because it's probabilistic and not deterministic.

Welcome to the Learning Corner by Precursor. I'm Mia Farnam and I'm joined by RGP and Managing Partner Charles Hudson, where we will be talking through the articles and Goodreads that caught our team's attention over the past week. Our Our first topic is a piece from the San Francisco Standard titled the Hot Girl at the Club How Founding Engineers Became Silicon Valley's Biggest Catch with top engineering talent being snapped up by capital rich foundational model companies or big tech, and with the role of a founding engineer at an AI company evolving, this search for the right candidate has become nearly impossible. The article highlights how in the pre AI era, a founding engineer's responsibilities centered more on coding and technical skills. Now, with AI tools offloading much of the coding work or being perceived to do so, founders expect far more from their founding engineers. Enticing equity stakes and generous compensation packages are being offered to attract top talent, and having access to strong candidates has become almost like a valuable currency exchange between VCs and startups alike. Add in the fact that VCs are preempting technical talent earlier and earlier to become founders off the bat with way more equity than a traditional founding engineer typically had in the pre AI era, and we've really got ourselves in nonstop scramble for talent across the ecosystem. So along with so many other dynamics across venture and startups today, this feels like such a whirlwind shift from the pre AI days. Wanted to start with your thoughts first on everything mentioned in the article.

I read the article and I was like, wow, people are really going to great lengths to find talent and I think there's a lot of interesting things happening all at once. One is the supply of people who actually have real world experience at the frontier of AI is limited and we don't make a lot of new ones every day, so the competition's fierce. Second, a lot of these companies have tons of money and in a world where all of your competitors have money unless you're meta who can make, you know, nine digit offers to candidates for a typical startup. You are a well funded, well resourced startup competing against other well financed, well resourced startups. So money probably isn't the currency. So you have to get more creative in terms of how you woo these people. And the third thing is you look at the windsurf character AI world and the value prop for being an early employee versus a founder in recent memory hasn't been so great necessarily, necessarily. And so it's threading this needle of finding people who are good enough to work for you and who are talented and who don't want to be founders and have this skill set, but don't want to be founders and start companies themselves and be in charge. And you know, when I read this article, my instant reaction was to the extent we are in an AI bubble, and I believe we are, but like there are always tech bubbles. This is one of those moments we'll look back on and say maybe that was a sign that things had maybe gotten a little out of hand. Which isn't to say that founding engineers aren't incredibly valuable. I've seen them have huge impact in our portfolio companies, particularly ones where there isn't a strong CTO in place, or there is a strong CTO in place, but their horsepower capped. So I don't know, I hope that at some point that we get off the boil on this stuff. I think it's getting, it's getting a.

Little crazy question for you because a lot of the conversation in the article centered around attractive equity packages that they're extending to founding engineers. Most of the time for founding engineers, you'd see, see maybe attractive cash comp bonus structures, but their equity is a lot smaller than a founder. Now we're seeing really large amounts of equity being extended to these founding engineers. Can you walk through some of the potential consequences of something like that?

Yeah. I talked to somebody who gave a large founding engineering grant to someone. I said, how did you get to that number? And he said, well, we're going to hire fewer engineers. So he's like, before I would have had this equity pool that I would have had to spread across a larger number of people. Since we're hiring fewer people, I can give this person more. And I was like, that actually is consistent. That tracks. I think the tricky thing is you got to make sure that you've got vesting in place and that the folks are going to stay. Otherwise you end up with someone who comes to your company for we'll say, 12 months in a day and leaves with a fairly large equity grant. And now you've got this hole on your cap table where you've given equity to someone who has certainly provided service to the company but is no longer there. And I've seen so many cases, founding engineer or not, where founders have looked back and said, wow, if I'd known we were only going to have access to that person for a year, I would have made a different offer. So I think we will see the downstream effects of this in a few years, probably. But the flip side is giving a founding engineer a huge equity grant can also be a huge motivator and signal to that individual about how much you value their contributions. So I always felt like the whole point of the founding engineer thing was, you're not a technical co founder, so I don't need to give you personal 25 to 50% of the company, but I want to also find a way to give you more than 50 basis points of equity. So I'm going to create this new title called founding engineer, which sounds like a founder, but it isn't a founder. And so I can rationalize giving you more equity than I'd give you as a regular employee, but not as much as a co founder.

I was talking with a friend who recently made their first founding engineer hire, and she was mentioning how she's nervous all the time about a potential big tech company, a larger startup with more cash coming in and sweeping and taking them. And her question was, at what point will I be able to stop work worrying about that? I actually wanted to ask you that because I could go either way with where I'm landing.

I had the almost opposite conversation with somebody this weekend who said, Meta and OpenAI have not tried to poach our engineers. Does that mean they're not good? And I was like, don't think that about your own team. If you think your team is good and they're producing. But I think it's created this other worry of people, which is like, if I have good people, how do I keep them? And if I think I have good people and no one's trying to poach them, do I in fact, have good people? And so I don't know. I've always felt like as a manager, some of these things are outside of your control. All you can really control is like, do you create an environment where the people you want to stay want to be there? Do you try to listen to what they need and meet whatever needs you can? And ultimately, like, I've had People who worked for me who needed to make more money and I'm like I. I cannot pay that or needed to move across the country to be with a partner or had other things happen in life. Whereas I feel like I've done everything I can to make this the right place to be for you, but it isn't based on what you want now. Yeah, it's funny. On the one hand you have all this conversation about RTO and manager strike back and employers flexing their muscles on everything other than founding engineers and AI researchers. Yep, they're still in the like Covid 2020 work from home halo employees have power era.

To your earlier point about founders questioning if their people are good if none of the bigger companies are willing to poach them, it's almost this weird conundrum of you want your talent to be wanted by other people but not enough that they actually leave. And I think if you get stuck in that headspace forever, you prob end up making some really, really odd decisions internally if you're just constantly looking around and wanting external validation, which is I guess like such a large portion of venture. And being a target founder in general is sitting with those thoughts. Last question. Do you think that these CEOs are in the right for asking for different qualities and skill sets for their founding engineers? So I'm talking about them wanting most of these founding engineers to be higher level thinkers, communicators, product architects, and this was something that didn't really exist in the pre AI era. Or are they kind of over clubbing a little bit?

I think we don't really know. And I think this is an incredibly difficult time to be the CEO of a tech company, particularly a startup. Because on the one hand you're like, well do I hire technically brilliant people to be my founding engineers when I know that cursor replit Claude code codex is going to produce a significant amount of the output. So do I want someone who can work with slash supervise a coding agent, or do I want someone who can envision and architect a product and maybe help build quasi vibe code the first version? But it's a person who knows what tools to grab off the shelf and is a fast builder because speed is really at a premium, maybe even over quality right now. And I don't think anybody knows. And I'm seeing people ask the same questions about product managers. Do I want to classically train product manager in my company or do I want someone who's like really good with like lovable replit and these other tools who can, like conceive of the product, design it, and bring a quasi functional, even a functional version to engineering and talk to them about how we build something big. So I think everyone's rethinking these roles. And the problem is when you're the founder of a CEO of a company, you can't go off on the mountain and say, I'm gonna come back in six months with a plan. You have to live in the now. And I think a lot of people are trying to figure out in the now, what do I need. And in the now it feels more like people who have facility with the tooling and know how to coordinate this stuff. So the product archetype makes sense to me. But I hope people don't overcorrect, because you still do need the technical ability to know what good looks like. You need the ability to make architecture decisions. It's not that simple.

And the problem with living in the I don't know quite yet what I'm looking for added into the AI talent war is you will not know. And then you're going to be pushing insane compensation packages and equity packages without framing up exactly what you're looking for. And so you're buying something and possibly maybe overpaying, or not even overpaying, but you just have no idea what you've just purchased coming into your company because you haven't really set the plans. And it's not your fault because the ecosystem is constantly shifting.

I think there's going to be some people a year from now who are going to look back on the decisions that they made on role design and team architecture, and they're going to say we got it wrong. And I think everybody's trying to make the best decisions they can with a high degree of uncertainty.

Well, our next piece comes from Platformer News, titled the States Are Coming for AI Therapy Bots, the article explores ongoing political debates and efforts to rein in AI tools that market themselves as offering therapy, quote, unquote. Notably, this has become a bipartisan issue, with lawmakers on both sides actually working to restrict the claims these tools can make and the influence they can exert on consumers. From a therapeutic standpoint, the urgency really has grown in light of some troubling incidents, such as Meta's chatbots falsely claiming to be licensed therapists and young adults turning to bots when considering suicidal thoughts without any human intervention in the loop. These events really have intensified calls for accountability. At the same time, while there are significant concerns about chatbots substituting for clinical care, the technology has created more accessible avenues to receive support and introduced a new, possibly more approachable format for delivering therapy in quotation marks. And we're going to dive into that problematic wording as well. Ultimately, the piece concludes with the author Casey Newton, arguing that no matter how quote unquote, therapy, like a chatbot may sound, it should never be granted the accreditation of a licensed therapist. This raises the question, where should responsibility lie and how should it be distributed among the different players in the space? So I wanted to ask you kind of where you're thinking these days.

I'm going to get this wrong, but there's an old I see it every now and then IBM thing that says computers should never make decisions because computers can never be held responsible. And it's interesting, when I read the article I was like, you know, for a long time a lot of people said, hey, we shouldn't have state by state regulation because it becomes impossible for startups to operate. I'd say, well, we already have that in healthcare, so I would say that it makes it impossible for startups to operate is hyperbole. All the regulated industries have usually federal and state regulation, so it is possible. I will not say it is friction free, but it is possible. And I think the alternative is if you don't want state by state licensing, you have to at least take the posture that you're being responsible. And I think this is an area where I think when it's all said and done, you know, there's always the we talked about this in our team meeting. The close cousin or responsibility is liability. And most companies do not want the liability for what LLMs spit out because it's probabilistic and not deterministic and they don't actually know what's going to come out when you put in a chat. But at the same time, I don't know that the companies have gone as far as they could have on safeguards to prevent some of these things. And in every interview I've seen lately with Sam Altman, he's mentioned that a lot of people are talking to ChatGPT as if it were a friend or a therapist. I know that there are lots of people who are using tools like character AI to have like extended conversations and explore topics. So I think in the best case framing of this, we have a shortage of clinicians who are skilled and able to meet the demand for mental health services. So the best case scenario is that the lighter weight versions of mental health problems, not the things that require either medication or like serious clinical care, that AI becomes A safe way to offload some of that burden from the system so that the limited supply of clinicians we have can attend to the most severe people. The worst case scenario I can envision is that people just start to treat these things as if they're licensed therapists and listen to what they say. And I think the thing that always makes me nervous is LLMs are pretty good at telling you what you want to hear. They can be a little pleasy at times, and that's not always the right angle or approach when you're trying to work through a difficult issue. Sometimes a good therapist or a good advisor will tell you something you don't want to hear or will hold the mirror up and help you see something that's like uncomfortable to see. And it's not clear to me that this version of LLMs and AI powered therapy products. And look, I know there's some, some newly funded or heavily funded companies that have promoted a more responsible approach or they're going to build LLMs that are specific for this. You know, you and I and the team have met a ton of companies that are using AI for therapy. And all of my questions when I meet these founders are not technical. It's like, where is your moral compass? Where do you think these products should? And there's this tension. The people I've met with the strongest moral compass are worried that somebody with a lower ethical bar will grow faster and will then earn the right to sort of the terms of what the ethical bar standard for these products should be. And so I don't know. It's very difficult and I think state by state regulation was inevitable as these stories about individual people getting themselves into trouble came out.

And we've seen this across healthcare and digital health across time. I feel like when Headspace came out for the first time, they went through their severe ups and downs on privacy, security, et cetera. I think sometimes I have to remind myself I live in a venture bubble where I use AI more than the normal person. And so I think you said this two days ago, it's stuck with me. Of I used to use AI or ChatGPT constantly just because that's just the nature of my job. It's helpful for me getting familiar with the tools, but because I've used it so much, I've learned how it engages with me and how it doesn't push back on me. So because of that I've started to pull back and I know where my boundaries are, of where I can extract value. The normal average American does not use AI that much. And so I don't think at this current rate can make that distinction of when a chatbot is adequately creating guardrails around what's actually something that they can deliver from a therapeutic standpoint, which is where I have so many concerns here. Also, from like the moral compass standpoint, it did make me also think about who the players are in this argument of who has responsibility. And I was going to ask you if I'm missing anyone on this list or your perspectives on in general, but I guess in my mind I was thinking it's going to be the founders of these foundational LLM companies, the consumers themselves, the parents, I assume, of underage kids who are going to be using these. Similar to social media, policymakers, investors. The list really goes on like, is there anyone I'm missing there? Or what are your thoughts there?

Shout out to James Cham, who, like, turned me onto this book, the Unaccountability Machine, the tldr. It's a big book on systems design, but it talks a lot about how systems can be designed such that really nobody has authority or responsibility or accountability. Their classic example is something happens when you're at the airline. You go talk to the gate agent. The gate agent's like, I can't do that. You go to customer service, customer service is like, I can't do that. And ultimately you realize the only person who can fix my problem is the CEO of this airline because nobody else has the authority or responsibility to fix it. And I worry what's going to happen is the parents are going to point to the LLM providers and say, you should make it so that your tool doesn't do this. And the tool providers are going to say, we can't really anticipate every use case that a person's going to use and it's not our responsibility. The policymakers are going to say, we're going to go to these companies and threaten them with policy or else. But policy is a slow tool and kids are going to be kids. And I think we've seen this movie before. It was called Social Media. And I'm not saying that we will end up in the same place, but I think that was a world in which the same set of players were largely around the table. There was great enthusiasm and some inkling about how things could go wrong. And in the end, like, nobody was really responsible. I think the stakes here are different. I won't say higher or lower. They're just different.

And I feel like we're still living with the repercussions of social media today. Like, as parents, I can't speak to it, but you're a parent, so maybe you can. And you and I have talked a lot about different companies that are aspiring to do wonderful things to create guardrails. And you and I had a good conversation around, yes, there's wonderful tools that you can use to help create guardrails and stop gates of being able to know when too much is too much time interacting with social media.

Yeah.

But at one point probably you should be able to kind of create that barrier as a parent and be able to kind of jump in and have like open conversations about that. The problem I think the difference is here between social media and ChatGPT is no 1 really knows what the outputs of these chatbots are and they change every three months and they're, they're building context on you all day. And so it's so difficult to be able to keep up and then create a safe environment. As a parent, I can imagine. So I don't really know how you can effectively step in right now, especially because also you're hearing it from two sides of people's mouth. You want your child to stay safe with AI and chatbots, but you also need them to be engaging with them in order to be very dangerous in the work environment in 10 to 15 years. So, okay, you want your kid to learn how to prompt and contextualize within ChatGPT, but not enough that they become overly involved. I don't know where that that stopgate is yet.

No one does yet.

Well, our last topic of the week is a piece by Mike Dauber from Amplify Partners titled why Most VC Firms Hire Associates Wrong and what We Do Instead. The article h highlights the reality that most venture funds have little idea how to effectively hire their most junior team members associates. Mike argues that much of this flawed decision making stems from a fundamental misunderstanding of what the associate role should be. Mike outlines two schools of thought on how firms hire associates. The first is the leverage model, which is far more common. I've found in this model, firms hire smart people from very predictable backgrounds. So banking, private equity, consulting, et cetera, keep them for two years and provide really no upward mobility due to the usual pyramid structure of the firm. The second is the development model where firms bring in people early and invest in training them over time to become partners. This approach requires significant time and energy from current partners, which makes them far more selective about who they hire, given the high opportunity cost. Naturally, it's clear that Mike and Amplify is in support of the second model. He closes the piece with the quote, if we keep treating the associate role as a transient chief of staff instead of a meaningful apprenticeship, we are going to end up with an industry full of people who learn the wrong lessons about what venture capital should be wanted. Your reflections on the piece. As someone who has done literally all the hiring here at Precursor, it's funny.

This is one of those articles, I read it, I had an immediate reaction. I was like, yes, we pretty much, at least I'd like to think through the development model at Precursor. But then I was like, you know, the US V Analyst Associate program has produced some amazingly talented entrepreneurs, investors and contributors to the venture ecosystem. And so I think some of this comes down to like, what kind of firm do you want to have? I could point to other examples beyond. I could look at Ann Miraco's two year chief of staff program has produced some really talented, excellent people. I think I'm trying to be too cynical. There's a set of people who get into venture capital because it involves managing far fewer people than an operating role would entail. And for many of those people, the optimal number of people they'd like to manage is zero. And so I think under the leverage model, it's not that you don't learn, it's that you learn something different. I think under the leverage model, the people who are successful, it's like a law firm or an investment bank, people who are successful are the people who learn how to make the partner more effective. It's not so much that you learn the craft, you learn how to be a good helper.

Right.

The irony is in most professional services businesses, that's how you utilize junior people. That's what junior attorneys do, that's what junior bankers do, that's what junior consultants do. Your job is to amplify and provide leverage for the senior person. And then when you become senior, you will have done all of the low level tasks and you will have task mastery. So you can then train and also evaluate the work of other people. But that tends to work better in a scaled environment. And the irony is we have firms in our industry that are becoming so large and scaled that they probably could, you know, Bessemers had for a long time the, you know, associate vice president. So you, you can run a venture firm like a professional services business that scaled. You can't run a boutique venture capital fund, not that way. And so I think that's, that's one thing to consider that I wouldn't say that it's always a bad thing, but it is a very partner centric model and probably not great for developing talent. The development model comes with a different set of costs that I've at least encountered. One is limited. Partners will ask you why are you spending so much time on management? I'm paying you to invest and support portfolio companies. Why are you dedicating so much of your time to management? Because I do a one on one with each of you almost every week. Plus interns, plus the interns, plus our team meetings, plus one off things that I work on with each of us projects. And what I tell our LPs is you don't get the benefit without the investment. So my belief is if I don't spend time with our team getting to know you well, understanding your strengths and weaknesses, trying to give you work that will challenge you and help you expand and grow, but also giving you the autonomy to write checks yourselves. That's the investment I'm making. And when people leave after we've made a big investment, it does hurt. I'm like, wow, we put a lot of time and energy into like developing that person. But that's, that's the job. Yep, that's the job. And I think if you want to have a boutique firm, I think of Precursor as a boutique or a specialist firm and I think of Amplify as a specialist firm. I think the development model is more personally satisfying to me. The idea that we can like choose people, get to know them over a long period of time, give them more responsibility and autonomy and hopefully have them grow into being partners is to me a really satisfying role. Because if with the high turnover leverage model, if you want to grow your partnership, you got to go outside of the firm and find people that you know and, or like and bring them in. And the comforting thing about the development model, if you get it right is by the time people make partner, you have a lot of tape on them. And it's not just the investment tape, it's cultural, you know, that they fit in at your firm. I turnover leverage model. If you want to grow your partnership, you got to go outside of the firm and find people that you know and, or like and bring them in. And the comforting thing about the development model, if you get it right is by the time people make partner, you have a lot of tape on them. And it's not just the investment tape. It's cultural. You know that they fit in at your firm. They know that you, they came up with the values that your firm cares about. You've seen them over a pretty long development arc and there's trust. And so if you ask me like if the choices are bring in an outside person that you know well but you're not really sure it will fit in your environment, but save all of the management time or make a bunch of management investments that you know won't all work. You know our LPs ask me what are you going to do if. If the great people you've develop developed leave. And to your comment about the AI founding engineers I worry about all the time. I'm like, we have great people here and I'm putting a lot of energy into making this a great place to be. But I expect other people will also see in them what I see in them. So my job is to like make this a great place to be.

The piece also notes that the best early stage investors are natural collectors of people. And I like that term building really genuine relationships over time. As a result, Mike says firms often don't need to post open positions and can instead draw talent from within their networks. I will say in our own case, nearly all of our interns have come from literally a broader Internet search and some of them, myself included, have gone on to become full time employees at the fund. So we have a similar approach as it comes to our submission form as well. So I wanted to pick your brain about the strategy.

I'm helping somebody right now find a job in venture. And I told her, I said every venture fund is both, both always hiring and not hiring at every moment in time. And if you went to their website or asked around, there's probably no public role available. But every venture firm I know is always thinking about, I would say the most recent addition to our team there wasn't really a wreck for that person. It was just like, well we need this person on our team because she's fantastic. Yeah, we will create an opportunity here. And I think that's part of what makes getting into venture hard. Especially if you're on the outside looking in, you sort of don't know. I tell people there's all these clues. People who just raised a new fund or people who recently made promote there. There are some like tells but they're imperfect.

Yes.

And I think it's, it makes it really hard for people outside of the industry to figure out. They'll think wow, that firm hired an associate. I didn't even know they were hiring. I was like, well they, they were. They just didn't want to be public about it because they didn't want 5,000 resumes.

Yeah. And I think that's like the the difference between I reflect on my time and big consulting versus a smaller boutique fund is if you're in a big consulting firm and you want a promotion the next year or you want to hire more people under your team, you can't really snap your fingers and have an open discussion with the CEO of your consulting firm about that. They typically there's just there's no layers to do that. A smaller fund like we can have that discussion openly especially around hiring of like what do we need today? What are we seeing within our interns, et cetera. And there is freedom and a mechanism in order to kind of be flexible there. So there's so much to be gained from that model. We are all out of time today. Thank you Charles for stopping by. Thank you to our listeners for popping in as well. We will talk with you all next week. Please like and subscribe in the meantime time. Thanks. Bye.