In today’s episode of The Startup Chat, Steli and Hiten talk about how to deal with your employee’s side project.

When an employee begins a side project, it’s easy to think that that project will affect his or her productivity. However, this is not always the case and in fact, doing a side project can actually increase the productivity of an employee.

In this episode, Steli and Hiten how to decide if an employee should be allowed to do a side project, examples of side projects that are ok, the difference between a side project and a hobby and much more.

Time Stamped Show Notes:

00:00 About the topic of today’s episode

00:20 Why this topic was chosen.

02:20 Hiten’s take on this issue.

03:44 Redlines to look out for.

04:50 Examples of side projects that are ok.

05:22 Why your priorities should be your work.

05:40 The difference between a side project and a hobby.

06:41 What side hustle means to Steli.

07:50 Why running a side startup can affect an employee’s productivity.

10:46 Why the discipline of an employee is crucial when deciding if he should be allowed to do a side project. 

3 Key Points:

  • Some of these things are required for these people’s happiness.
  • As long as the project is not competitive with the business then it’s cool.
  • Your priorities should be your work.


Steli Efti: Hey, everybody, this is Steli Efti.


Hiten Shah: And this is Hiten Shah.


Steli Efti: And today on The Startup Chat, we’re going to talk about how to deal with your employees’ side projects. So here’s why I want to talk about this with you, Hiten. Just got an email from somebody that was asking me… He basically, he has a small team of five people in a startup, and he discovered that one of his developers is working on a side project, on a little app on the side. It’s something that he didn’t know about and kind of like just stumbled over it, and he was kind of conflicted about this. I think that this is something that a lot of entrepreneurs go through, especially probably less experienced ones, where maybe you’re a bit more, I don’t know, afraid of the energy and time commitment and work that your employees put into your company, versus potentially putting into their side projects or something that could turn into their own business one day. And I have gone through this… a journey of this of myself. I think when I first started as an entrepreneur, I was maybe not as cool with it, and I’ve become a lot more cool with it and even would hire people that had very prominent side projects and tell them that I would support them with them. And if, in a couple of years, those side projects grew bigger, they could go on and do that full time. And that has happened successfully many times before. And I’m sure you have a bunch of good examples, bad examples. So I just thought it would be a fascinating topic to talk about from a founder perspective. How should you think about the side projects of your employees? Good, bad, encourage it, discourage it? What’s been your experience? What’s kind of your take today on this topic?


Hiten Shah: I think it’s… There’s two answers I have. I don’t really have a take. I haven’t experienced this a lot in my businesses, and when I talk to people about it, I think it’s cultural. Is it accepted or a norm at the company you’re at? Is the leadership, founders, whoever, are they encouraging it, okay with it? How do they view it? And then what do you want, as a team member, in a company too? And then there’s a piece that’s like… So I guess there’s more than two things, but there’s a piece where it’s like legally what are you allowed to do and not do based on the agreement you signed? Yeah, so I think it’s a topic that’s definitely something where I see a lot of people doing… Or I see an increasing amount of people do freelancing on the side just because…


Steli Efti: On the side, okay.


Hiten Shah: … They want to make more income, or they have a passion or something that’s not coming out at work. And so myself, as a sort of manager, I mean, there’s a case-by-case basis, in some ways. There’s a way to think of this as something where, as long as these things aren’t competitive to the business… Because I think that’s a no-no. It’s just not cool. It’s just not cool, right? And you’re still able to get your work done as well as you possibly can, there is a work-life harmony, work-life balance, your own personal happiness as a team member and thus your ability to contribute to the company that come into play here. So we have a designer, and he is a… He likes cars. He has a fixed-up car, and he’s part of a car club, and he sometimes on the weekend he’ll go… Like, they have a car meet-up, like a big one, and he helps organize it and stuff. Or he’s working on their website or working on their merchandise. It’s not like a side job. It’s not like a side gig. It’s not like freelancing. It’s just something he does. It’s a project, right? And it has nothing to do with work. So yeah, there’s stuff like that. I’ve had a couple of designers, and again I just mention designers because they’re just the ones that end up having this. They have a personal site. They were making a bunch of icons for people and things like that. Not for people, just icon sets and wanted to play around with it. So I wouldn’t say I’m the type of person to encourage it. I also wouldn’t say I’m the type of person to discourage it. I’m just the type of person that’s like your priority should be your work when it comes to how you’re making a living if you’re going to work at a company. So there are very rare exceptions where they don’t need to make a living, but they’re willing to work at another company. Some people are like that, but usually they’re working in a really large enterprise or a large company. So I look at it more like, from my end, on a case-by-case basis. And I look at it as some teams have this cultural thing where a lot of people have side projects. Other teams are way on the other end, where nobody does. And there’s, I think, folks in the middle. And then I think about it as like what’s the difference between a side project and a hobby, because everyone probably has a hobby? I actually… On Twitter, someone asked me about hobbies, and I’m like, “I don’t have a hobby.” I don’t. I think that’s just a construct, but that’s a whole different story. But a lot of people have hobbies or what they would call hobbies. Is that okay? I mean, look, ultimately we don’t control anybody. They control themselves. So I look at it as, again, case by case. And when I look at it as other companies and team members, some of these things are required for certain people’s happiness.


Steli Efti: Mm. Yeah, I mean, I think on this one we’re pretty much on the same page. For me, as many times as we said this before, it depends, right? I think there’s a few things that are important to consider, though. A, to me, there’s a difference between a side hustle, a side project, or a startup on the side, right? So there are differences there. Side hustle to me is something that is like… or a complementary income. So some people, especially like developers and designers is a good example, they might make a little bit of money here and there opportunistically in a way that’s very easy for them to do. Maybe they were freelancing for many years before joining your company as a, let’s say, designer, and then they still get approached by people that want design contracting work, right, or freelance work. And they might just be recommending somebody else and taking a small commission for that, or taking on projects but giving them to somebody else to finish, but doing that very kind of inbound, very sporadically. Maybe it’s two or three times a year. It just happens when it happens. It’s very easy, light work, very little bit of income. It’s just very opportunistic. That’s very different from working on… From supplementing your income and being like every weekend I’m doing freelance work that I’m practically pitching and bidding for projects. And then I have to work and finish them on a deadline, and it’s because I want to make more income, and I can’t make that income at my full-time job. Those two things are very different in terms of the context around them, versus doing a side project where it’s like something that you start with the intention to do this on the side and grow it and eventually have hopes to do this full time, versus do this as a side project where the goal is really to learn a new language or learn a new toolset or create something that’s small that just creates this kind of monthly income and runs on its own, but never becomes really a big thing. It’s just like getting something to generate a few 100 bucks a month and playing with some new tools or doing some creative endeavor and then move on to another side project. There are people that are launching five, six side projects a year on the side. Those are very different things than somebody starting a side project with the hope and goal to turn it into a full company and something that’s going to become their full-time job, versus somebody doing another startup on the side, where from day one maybe they are co-founders and they are investors, and they’re having contractors, and there’s a whole team in place, and they have tons of responsibility and pressure. All these things are very, very different, and they all might work for your company and your startup. You might be totally cool with your employees doing that, or one employee doing that, or some of them. And they might all not work, or some of them might work and some of them might not. I would always be concerned if people have to do a side job to create the income they want. That would be a big red flag to me. Like, I would always try to figure out why can’t we help this person create enough value in our business to make the entire income they want to make here, versus having to do side jobs purely for the income. To me, doing some side hustle here and there and just generating easy income with kind of creative ways, so with things that are inbound, that’s just smart and healthy. There’s no distraction. There’s no long-term implications of conflicts there. Side projects, it depends on what kind of a side project it is. As you said, is it competitive or not? Is this also somebody that’s disciplined? Like, the person also matters. Some people can be very ethical and very responsible with their side project, and they will do their job and do it amazingly. And they will allocate certain time in their free time to work on those side projects, and they will be very, very disciplined and ethical about it. And some people get overly excited about their side project, and it takes over their life and over their work. And instead of finishing the work you’re paying them to finish, they use that time and that income to tinker around on their side project and do what’s fun for them. And that’s not fair, and that’s not cool. And doing a whole nother startup, but doing something that’s more involved, that has a whole team in place and all other things, that rarely works out. That’s just so demanding, and it has to be unfair to one or the other side. Maybe it’s going to be unfair for you, or it’s going to be unfair for those other people in that other startup because the person’s not putting in enough effort and time. I think the important thing, just to round up this episode on my end in terms of tips, I think the important thing is to be clear in terms of your expectations. I’ve heard this many, many times. There are companies oftentimes that will say, “Oh, we’re totally cool with side projects. We totally encourage it, and everybody should do one, and we’re totally for it,” because they feel like that gives them a positive image and that’s the cool thing to do. But then when people actually work on those side projects, people in the company get really upset. I heard this so many times of people telling me… Like, I’ve had conversations with employees and teammates that I would tell… And one person that I actually hired while he was doing, while he had left his last job to fully dedicate his energy to his side projects. I hired him, and I told him that it would be… For him specifically, it would be totally okay to keep working on his side projects, and I will support him and try to help him grow them to a degree where he could do that full time. And he told me, “You know what? My last boss told me the exact same thing, and then he wasn’t cool, and he was constantly making comments and being passive-aggressive, and it just created this negative vibe.” And then we ended up working for two years together, and multiple times he thanked me for giving him a totally different experience and being true to my word of like actually supporting him. But I feel like, if you tell people that you’re supportive of this, you should be all in on it and truly supportive and not just say it and then, when people do it, be passive-aggressive. So be clear and concise and keep your word in whatever you tell people. Is it okay? Is it not okay? What are the rules, or what are the guidelines? What’s the general culture within the company when people want to have side projects? And I know some companies go really crazy on this. Lately, I’ve seen one company specifically basically publishing a ton of content, encouraging people that do side projects and want to do something else to come and work for them as a supplementary income for the short term. Like, “This is a great place to come and work for a couple of months until you’ve figured out your side project and it’s big enough.” That, to me, is fascinating. It’s difficult to believe that that will work out for both sides really in a positive way. But that, to me, is too extreme maybe. But, yeah, today I’m totally comfortable with side projects, depending on what it is, who it is, and why they’re doing it. And then it’s all about being transparent and communicating really clearly and honestly with each other. If you work on a side project that you’re really passionate about and you think eventually is what you really want to do full time, don’t hide it. Don’t do it in secret unless you work in maybe some big corporation where it’s impossible. At least, if it was somebody on my team, I’d love for that person to come and tell me about it practically and say, “Today, it’s a small thing. I have a plan for the next 12 months to make it a big thing. I’ll keep you in the loop. I still do my job here, but this is kind of what my ambition is.” I love that level of honesty and transparency, and that would then make me go, “Okay, I’ll support it. What can I do to help you? How can we make sure this stays fair during the next 12 months for both sides?” And I would just check in with that person. And even if that person left, I would respect the honesty and transparency so much that I would lifelong be a supporter and be a fan of that person and that company or side project or whatever it is. So just be transparent and be clear about what the rules are and what your approach is. And when you tell people something, make sure that you’re just… you’re not just saying it because you feel like it’s the right thing to say or is the accepted thing to say, but just make sure that you will be able to live up to that. And if you’re not cool with side projects, if you don’t want anybody to have a hobby or a life and to ever work in any other way or make income in any other way, then just say it and just be honest and fair with them. Be like, “Hey, if you want that, this is not the place because this is the kind of culture. The kind of people I work best with are totally obsessed with what we’re building here, nothing else. And if that doesn’t seem cool to you, then this probably is not the best place for you.” Just be honest and frank. I think that always leads to the best results.


Hiten Shah: There you have it. Honesty, the best policy.


Steli Efti: All right, this is it for us for this episode. We’ll hear you very soon.


Hiten Shah: See you.