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Any demonstrated success of a startup signals to partners, investors, customers and employees that the future is bright and these parties adjust their actions (often to the benefit of the startup). Unicorn status is just one such signal(abient a very powerful one).

It's much much easier to hire good engineers at a lower payrate when the signaling is good because they actual believe the paper equity they get is actually worth something down the road.

In the same vein, positive signals and the good press that comes with it helps you win business. In our case (no where near a unicorn), but we were featured in a local paper. That paper was seen by the CEO of a company we were in negotiations with and were stuck down on a lot of DD work. They wanted all these assurances we would still provide services and won't just take the money and go bankrupt a year later etc etc.

CEO saw us described as the "next big thing in X" and intervened. He told us later he "knew" we were going to be huge and wanted to lock us in early as a partner. Contract was signed less than a week later.

Unicorn status is largely a vanity metric, but it's also a power signal that if used correctly, gives a lot of benefits to the startup.

What I find frustrating about this is if it leads a founder take liquidation preference multiples or other disadvantageous terms that drastically reduce my chance of seeing any payday as an employee. I've been around, so I'll take solid financials over juicy-looking smoke and mirrors any day, but my worry is the median startup employee is young and inexperienced enough that it probably serves the founder to play these games.

To reiterate my experience: Fought is an overstatement, but we worked hard to get 10 year options for our employees. No engineer we recruited or tried to recruit appears to have cared. They do care about valuation. That comes up all the time. This is across new and experienced engineers.

ps -- you can't blame founders for responding to the market. If potential employees overvalue unicorn valuations and undervalue 83b or long term options, well, I'm not capable of changing their minds. I sell to the market I have, not the market I wish I had.

Unfortunately, I think that ship sails when you take VC funding. Founders that can fundraise and run corporate BD/sales well and/or are experienced can mitigate this by having a stronger hand to bargain with, but it's just unavoidably the case that VC money comes with strings attached. They indemnify themselves differently from debt investors, but as you point out, that comes from liquidation preferences as well as preferred participation and more.

While I would say that it seems probable that many startup employees are young and inexperienced enough that it services the founder to play these games, I'd definitely say that the incentives are definitely in favor of this dynamic. It's unfortunate. I'd prefer solid financials and growth, just like you. The only real way to avoid this kind of game is not to play -- have an independently wealthy founder/stakeholder, or a very close relationship with an angel investment firm that can afford to be long term. It's challenging to find that from people managing Other People's Money.

There's a great piece of advice an experienced founder told me: the longer you wait to raise, the better off you'll be.

In my first startup we were so happy anyone would be interested in funding us we took on, in hindsight, some pretty bad terms. But having said that, our first raise got us onto a tech blog where a person reached out intrigued by what we did and turned out to be our best engineer.

It's really a calculated risk. Despite all that, since we got acquired reasonably early on, our engineers made a pretty solid return.

a company's valuation performance has always had a causal effect on business, even though academically it shouldn't.

banks found that out the hard way at the end of 2008, when companies wouldn't do business with banks with falling stock prices. even facebook found out the hard way after IPO when its stock was tanking and many tenured employees where questioning whether to stay. stock / valuation performance matters a lot.

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