I'd never ask a prospective employee to work on a side project as a prerequisite to an interview, but I agree that it's almost mandatory to see that a dev has singlehandedly built and shipped a product if they're going to be a first hire at a startup.

This doesn't have to be a 'side project'; it could have been a new product with a small team at their existing company, or a job at a small startup with only a small handful of people, or even just a cool thing that they built in university.

A 'big company' developer, one that has only worked for large companies, that lacks this qualification, might be a good co-founder, but isn't really a good first technical hire.

The pay cut, though, is insulting. I won't ask an engineer to take a below-market rate to work for my company, unless they've got an equity stake that makes up for it. Which, frankly, moves them into co-founder territory.

Why? He's just saying that the guy should prove that he can (and is willing to) build something from end to end. That side project is a portfolio piece, essentially. That's reasonable if the guy has never done anything programming related outside of BigCo.

And he probably doesn't want teammates who are primarily motivated by money, because almost no startup can profit off of engineers at the same rate that large companies can. Being an employee at a startup is oftentimes not a rational financial decision, but it can definitely make the right sort of person much happier than working at a big company. You really need to understand that to judge this.

This also happens when you don't have a decade of experience.

I had a whiteboard interview (which are never fun) but did reasonably well. The owner sent me home with homework:

Implement a fully Ajaxified Frontpage 2003 clone web app.

I would regularly see this company posting ads on boards for all sorts of positions. When I showed up it was a dev house of 4 people including the owner and his wife as receptionist. Sometimes people aren't hiring, they're just looking for free work.