

Worst time to join a startup is right after it gets initial VC financing (2009) - bretthellman
http://cdixon.org/2009/08/24/the-worst-time-to-join-a-startup-is-right-after-it-gets-initial-vc-financing/

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diego
This post is short-sighted and simplistic. Worst in what sense? The decrease
in equity is countered by the increased stability because the company has
money in the bank.

There are people whose risk profiles make it unacceptable for them to join a
company before it reaches a certain degree of stability. For those people, the
second the company has closed a VC round might be the best time to join. I've
hired people in that exact situation; they only made the leap to a startup
when I was able to guarantee that we'd have enough money to pay them for a
while.

~~~
rdl
He's arguing that there's a discontinuity. It's better to join just before a
major funding event vs. just after. It becomes steadily better as time passes
after the funding event (assuming the company makes progress at the right
pace), until the next funding event.

Joining right before the series B is probably better than right after the A,
from an equity maximization perspective, weighted for risk. Of course, being
an early hire right after the A makes it more likely you'd be in a senior
role, or at least get a lot of great work done before the B, but your equity
grant is not likely to increase.

~~~
flyinRyan
I would have expected the worst time to join to be right before a funding
round because of your value getting horribly diluted. I know there was lots of
talk of this some months back (and scumbag companies like Zynga trying to one
up the evil) and assumed this practice would get even worse. Has that not
happened?

~~~
ry0ohki
In absolute terms, but the comparison is not what you personally gain and lost
before the VC, it's a comparison of what you have now and what the next person
hired will get.

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joejohnson
The error he's making is that personal risk is different from the company's
risk. Just after receiving funding the company isn't any less likely to fail
(well, maybe slightly less), but a job with this company now offers a steady
income for longer than was guaranteed prior to greater funding.

So, in fact, just after funding might be a great time to join a company.

~~~
nostrademons
If you're looking for a steady income for a while, why not join a big company
or research lab where that's guaranteed?

~~~
geebee
That's an important question to ask yourself. And the converse is equally
important: "if you're willing to work with a low and very unreliable income
stream for a while, why be someone else's employee?"

The "early employee" in the middle can be a tricky spot. There's a phrase I
read on HN a while back "the founders get rich, the early employees get
screwed, and the late employees get paid."

I think this phrase does a better job identifying a risk than an
inevitability, but it is worth thinking about.

~~~
nostrademons
Right, which I think is the point of the article. The "after series A" point
is sorta in no-man's-land, where if you're optimizing for potential returns it
sucks, and if you're optimizing for stability it sucks.

~~~
geebee
There is one potential difference, though, which is in the value of a full
paycheck in the short to medium term.

Some people may feel they just can't afford to forego a standard, market rate
salary, and they wouldn't want to join a company that has a high chance of
disappearing next month or failing to make payroll. But beyond that, they're
not terrified of the idea of losing their job and looking for a new one. I
think we may overstate at times how easy it is to get a job here on HN, but
clearly there is a large population of strong programmers who can be picky
about what they'll take and still get a decent job offer within a month or two
of looking.

I remember Marc Andressen writing about this on his blog a while back - that
in a very tech dense place like silicon valley, startups aren't quite as risky
as they might sound. A total meltdown in hiring is an outside risk (like the
couple of years immediately after the first dot com bust), but otherwise,
people often build up such a strong network and skillset through startups that
they may have more "job" stability, if it's defined as the ability to _get_ a
job (I hear this referred to as "career stability").

None of this necessarily means that _post series A_ is quite the right spot to
be in. That might still have too poor a stability vs opportunity ratio. But
some sort of "early employee" be the right spot for people who would like to
optimize for potential returns under a strict constraint of earning a market-
level (or close to it) salary.

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ojbyrne
I think there's a fairly important consideration that he misses, especially if
you lack experience. Right after the Series A is when you're most likely to
gain useful experience and work on interesting stuff. Before the funding,
you're often just in survival mode, and just building the simplest things
possible. Later on, job roles become more rigid, and most of the
design/architecture has solidified.

Correspondingly, this might be the most fun/interesting time to be at a
startup.

------
dllthomas
Another thing that's missed, that doesn't seem mentioned in the comments
thusfar, is that we're not looking at the odds that this company succeeds;
we're looking at the odds the investment I made pays off. The odds that a
company that already deserved investment succeeds should only be increased a
bit by getting funding now (as opposed to later or as opposed to getting by
without it). However, the fact that they raised the money means that someone
else thought they were at least so likely to succeed (and bet on it) and that
should increase _my estimate_ that this company will succeed more than the
cash infusion will increase their actual chances.

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woah
>I’ve met a lot of entrepreneurs, but even the smartest are usually barely on
par, intellectually/analytically/etc, with average/mediocre hedge fund
analysts (just from my own personal experience). There is a reason for this;
make startups more compelling for smart people to join; value human capital at
its intrinsic worth, and pay accordingly; after all, that’s what the VC money
is for half the time, right?

-from his comments

~~~
rdl
Haha. I hope that was a troll, or at least someone who is now unemployed in
either the hedge fund industry or startups.

~~~
rosterman
"being a pretentious asshole" is often confused with being smart in the
financial industry. hence the disconnect.

------
sharkweek
note this post is from 2009 [edit -- now reflected in the title]--

I think the top comment makes a pretty solid argument

 _You're an entrepreneur, which means that your risk profile is high. Mine
too! That's why we're leading companies, not joining them.

I look at our current economy and see instability everywhere, which has made
me even MORE risk tolerant. Being in an entrepreneurial company that's trying
to do something new and/or differently seems safer than almost anything else,
but few people seem to share that perspective.

Most people just aren't cut out for the inherent instability of an early-stage
start-up, and the lousy economy has many people clinging that much more
tightly to what they know. _

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scotty79
I'd say it's a best time because then the poor blokes finally have some money
to pay you properly. Also it's not their own money so they may feel generous.

Unless you are working for startups only for the hope of hitting a jackpot.
Then the OP is probably right.

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atas
He forgot: "...all other things being equal", which would make his point
practically useless.

