
When to join a startup - tomblomfield
http://tomblomfield.com/post/136759441870/when-to-join-a-startup
======
golergka
I seem to learn the same lesson again and again from all the press about
startups and my own experience (both as an employee in many and CEO/Founder in
another). If you join the startup for the money (doesn't matter if you mean
salary or equity), you're going to have a bad time. But if you expect to get
experience, career and professional growth out of it, you can get pretty
awesome results regardless of how successful startup turns out to be.

~~~
rrrrtttt
Reading Hacker News, I get the impression that tech startups are the only
sector of our capitalist economy that has transcended the profit motive and is
apparently serving a higher cause.

~~~
gragas
I love this, but at the same time I have to be wary.

I'm torn between thinking of Hacker News as benevolent or delusional and self-
righteous.

I get the benevolent vibes when I see comments like golergka's. I get the
delusional, self-righteous vibes when I see founders and VCs comparing
themselves to JP Morgan and JD Rockefeller, saying "Hey! Look! I'm just as
important as those guys!" "Silicon Valley is important!"

That said, Silicon Valley may very well be an important part of history. But
the self-centeredness makes me wary.

~~~
Apocryphon
I don't see golergka's comment as falling into some sort of SV "VC-istan"
delusional thinking. Joining a small, expanding company _is_ an excellent way
to build experience and career growth. It's just in SV we call those small
businesses "startups" and accord them some sort of inherent moral superiority.

~~~
gragas
I said

>I get the benevolent vibes when I see comments like golergka's

I think his comment is benevolent, not delusional.

------
justin_vanw
The first day (actual founder) or the day before the papers are for the A
round are officially signed. These are the actual and only correct answers.

If you are the founder you get the best deal overall on expected value.

If your offer is generated before the A Round closes, you can negotiate equity
at a pre-A-round valuation, but you are never exposed to any pre-A-round risk,
and you can negotiate a post-A round salary that is contingent on the round
closing.

~~~
heurist
What would you say is a good amount of equity for being an early engineer
(effectively technical lead) at a seed-stage startup? I'm at my first and
don't know if I'm being compensated fairly, though I do enjoy the work
greatly.

~~~
birken
Depending on your skill level relative to everybody else, probably 2-5% would
be a good range, though it also would depend on what your salary is. Less than
2% and either you are being paid a lot or you aren't that important to the
team (or you are important and are underpaid).

~~~
mpdehaan2
I think 1% to even 0.5% is pretty likely - at which price maybe you might have
to accept something maybe 15-20% below market. I would love to see early
developers at this stage get 2-5%, though I think that would be hard for some
to push all the way through (past the CEO if applicable, board who has to sign
off on the cap table and doesn't want the option pool to be too low too soon,
etc).

But would it be fair if you are good and putting in that much work? Hell yes.
But likely you're good, and hopefully the work/life balance isn't that
lopsided either. Are you going to get it? Unlikely.

~~~
justin_vanw
I joined Milo.com about a month after the A round was closed, everyone post-A
was given between 0.1 and 0.3%. If you are joining early seed round, you would
probably expect around 30k in salary and between 1% and 5%. The question is
how much do they want you to join, and can you sell yourself a little bit.
Find out what their pain points are that you think you can honestly attack on
day #1 of joining, and make sure they know you intend to fix those problems
ASAP. Then tell them what you think is fair, and let them agree to that (or
don't join). As an engineer you shouldn't try to negotiate too much with a
founder because: If they are bad at negotiating, the startup is going to fail,
and if they are good at negotiating they are going to convince you to take a
really bad deal (and you will be happy about it).

If you are an engineer that is good negotiating, you shouldn't be joining
someone else's startup (you should be working on your startup, even if you are
15).

------
codingdave
Coding jobs have about a 2 year half-life. If they have enough funding to pay
you for 2 years, regardless of whether or not they succeed, then it is as
stable as any job, so just take the paycheck and do the work.

Any job that doesn't have 2 years of reasonable stability need to be evaluated
by your passion for the project. Do you want to take on personal risk because
you believe in the project? Are you willing to lose money over it? Are you
willing to lose time over it, and be broke at the end? Does this project
improve the world, and do you want the work to be done even if you do not
personally gain from it? Positive answers to those questions may lead you to
join up.

But if you join a startup because you hope to get rich from it, you are
gambling. There is nothing wrong with that choice, but you should see it for
what it is - gambling your time for a small chance at future money.

~~~
kriro
There are a ton of programming jobs that have a much longer lifetime. There's
plenty of "lifers" in the business software or infrastructure software worlds
for example.

~~~
codingdave
Yes, there are, which is why i used the term "half-life".

But if you are the type to be a lifer at a job, you don't need advice on when
to join a startup in the first place.

------
flashm
This should be titled 'When to join an externally funded startup'.

It's a whole different ballgame if you join one that's actually making a
profit and doesn't need someone else's cash. Get in as early as you can, if
you like the idea and can see it's got longevity.

~~~
pc86
I think you're referring to a business, not a startup. The definition of
"startup" has been tranformed into basically "a business that is primarily
based on a website or mobile app," which it is not.

Startups rely on fast growth. If you have a very narrow market or your end
goal is $200k/yr in profit, you are by definition not a startup.

If you're actually a startup, you should not have any profit in the beginning.
You should be pumping that money back into the company _and_ seeking external
funding in order to pour gasoline on the fire.

There's nothing wrong with having a business instead of a startup (personally
I prefer the bootstrapped business route) but to say that it's a startup is
not accurate.

~~~
dTal
>The definition of "startup" has been tranformed into basically "a business
that is primarily based on a website or mobile app," which it is not.

Only in the Hacker News / Silicon Valley echo chamber.

~~~
rudolf0
What's wrong with "a new fast-growing company that primarily sells, or deals
with, technology"?

------
iss
This is a really great article. I've been asked several times about the right
moment to join a startup, but truth to be told, it really depends a lot on
your expectations. Do you want to join a super early stage company and do
whatever is needed or do you prefer to join a funded and work on a very
specific role. Important questions here:

1\. What are your expectations? 2\. Are you a generalist or a specialist? 3\.
Do you want to work in a small room with two or three guys with a pay check?
4\. Do you want to join a more established startup, but have less impact?

Make sure you understand the pros and cons of each option!

~~~
Disruptive_Dave
Here's another overlooked tidbit: There's a good chance your skill set that
was so valued in a 3-person early-stage startup will be significantly
diminished when it turns into a 10-person, funded machine. Generalists are
awesome when you're scraping your way through experiments and the "do whatever
you can think of to increase sales this week before our investor meeting next
Thursday" type stages. But I've seen those generalists left out in the cold
when it comes time to focus and scale.

~~~
patio11
_I 've seen those generalists left out in the cold when it comes time to focus
and scale._

A particular subclass of this problem: the person who heads up your (pick a
department randomly) Marketing from e.g. your seed round through your Series B
is a) likely to be young and on-paper unprepared to run a Marketing department
with 10 direct reports, b) likely to have a perceived lack of gravitas, c)
likely to lack industry connections. Your VC fund and/or senior management may
decide to bring in someone More Appropriate For The Role when you need a
Director of Marketing.

This presents a dilemma: what happens to the person who built your entire
marketing strategy when someone has just been brought in to own the entire
marketing department going forward? Is new person going to report to them? No,
that's an obvious non-starter. Are they going to report to new person? A
surprising number of people would prefer to not have perceived issues with the
existing team (most of whom were, after all, hired by the existing employee)
deferring to that person rather than their new titular boss.

This is a time at which you either pray you are listed as a founder of the
company or the founders are willing to go to the mattress for you, because
otherwise the outcome is "Thanks for your service; best of luck in your next
job."

~~~
kasey_junk
This is one of the things I find so pernicious about startup options. One of
the literal, best outcomes for all parties in that case (which I agree with
you is surprisingly common) is for that young early career person to happily
make room for the new regime, often by leaving to work at another startup or
something new.

But the way options work they are incentivized to stick around when it doesn't
make sense and penalized if they do want to move on. That same early person
probably does not have the capital to exercise their options when they leave.

~~~
patio11
Yep. Not representative of an individual who might have motivated my comment,
but:

Seed round: "Marketing Bob, you'll be employee #2. 1% -- 4 year vesting, 1
year cliff. You'll do everything from writing blog posts to attending
conferences to talking to every single customer."

B round (2.5 years later): "Marketing Bob! Great news: we're now worth a
billion dollars! That owes an incredible amount to your heroic efforts! You
have excellent ability to become a co-founder at your next gig! Which starts
whenever you want it to! We strongly recommend you start planning for it right
now, and we'll even clear your calendar for the next two weeks to allow you to
devote all of your efforts to planning! We hope you are socially aware enough
to understand what we are saying here!"

Marketing Bob may well be CEO Bob at his next gig, but he'll be entering it
being a) fired and b) having had ~$3.75 million stolen from him. (One would
hope that the co-founders would go to the mattress with their VCs when the VCs
say "Come on, vesting, we all know how it works. _Of course_ the employee
stock pool gets the 37.5 basis points back. That's like twenty engineers -- we
need every point now!")

~~~
irremediable
This was a good example for finance noobs like myself -- what does the last
sentence mean, though?

~~~
nsp
37.5 basis points is 0.375%, the percent of his stock that had not yet vested
and this is returned to the stock option pool to be given out to future hires

~~~
loumf
Bob has 1%, so it's 37.5% of his stock that is not vested after 2.5 years.
(0.375% of the company's stock)

It's 25%/year with 4 year vesting (so 25 + 12.5 for the 1.5 years left)

------
noir-york
Great article. Best time to join: either as a founder, or post the Oracle
acquisition!

If you're going to take a risk, may as well maximise the risk/reward and be
(co) founder. In the mean time enjoy a well-paying job you enjoy in a space
that you'd like to disrupt; learn on the job, build your network, then leave
to found the startup that will disrupt your previous employer...

------
mpdehaan2
Generally, fairly accurate.

One word of warning - It would be nice if most startups became happy "CEO-on-
Forbes" unicorns at round C, but not all do. I've seen a startup take a
handfull of millions into Round F.

Which is of course, rather much the flunk round. And a lot of very health
companies continuing to raise many small series rounds.

I think most people know this - but don't equate funding stage _or_ amount of
money raised with startup success. A better gauge would be paying customers
and while you can't often get a feel for burn rate, find out as much as you
can.

All being said, I've had some good educational times on slowly sinking ships
too.

Sometimes the product is a little bit ahead of it's time.

------
ehartsuyker
> one two-hundredth, or 0.005% of the company

I'll take the former, please.

~~~
extesy
full quote: "one two-hundredth of a percent", which is indeed 0.005%.

~~~
tomblomfield
There was an early typo - fixed now.

------
petercooper
Yes, I'm missing the point (and I did enjoy the post!) but this: _After 5
years, the company has raised £100m at a £1bn valuation._

Has any recent British tech company/startup ever had such a raise? (Boo.com
did but that was 99.)

~~~
oddsockmachine
Anaplan just reached $1bn

~~~
randomname2
Not a UK company, right?

------
hectormalot
> part of me imagines a group of MBAs sitting around watching Justin
> Timberlake play Sean Parker, thinking that actually a billion dollars would
> be pretty cool.

My experience is that MBAs looking for money go into corporate roles, not
startups. Around me it have been the more idealistic ones that join or start a
startup, and for very different reasons than getting rich. e.g. feeling that
they can be more valuable here than in corporate, wanting to create something
new, etc. (all the normal reasons for start-ups, MBAs are no different)

disclaimer: I have an MBA, and I did apply to Mondo (did not work out, but no
hard feelings), and I usually don't daydream about making a billion dollars

------
neilk
This is more like "what it's like to join a startup at various stages".
Perhaps the implicit lesson is to match what you're looking for to different
stages?

In any case, this is changing all the time. The seed-stage startup in 2016
might be three or four people from all over the world, working over Slack.

------
Fuffidish
I joined as second employee after angel funding (seed stage) and a few months
before the first VC funding and got about 0.5% equity. After a series C this
went down to less than 0.3%... I didn't know anything about stock options
before joining, don't you think I should have negotiated for more? This
article says I should have got about 3% when I joined

------
cdnsteve
Great read, I especially liked the mum references.

------
charlotteley
The decision of joining a startup should not be money return. It is a gamble.
You use your stable salaries in return of dream and success. Pursue a dream is
always expensive but when you get old, you will have a story to tell.

------
stanislavb
Could it be more precise!? :)

------
k__
Join if they give you what you want. Same as with every company...

Want to work from home? Ask them. Most normal/bigger corps won't let you do
this. A Startup probably will.

It's also good if you like green field projects, haha.

------
KarlFreeman
These are great definitions of the stages of a "startup" but I'm missing the
point here?

Also, at some point, does a startup not become a company?

~~~
flashm
A startup is always a company, but not really a 'business' until it's making a
profit.

~~~
noarchy
>A startup is always a company, but not really a 'business' until it's making
a profit.

So is a newly-opened mom & pop grocery store, then, I guess. But that kind of
business isn't likely to generate blog write-ups.

~~~
kristianc
PG describes a startup as a company 'designed to grow quickly.'

------
aadamov
Spot on our trajectory for the last two years

