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Questions to Ask Before Joining a Startup

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Re: Questions to Ask Before Joining a Startup

#111

Post by jiveturkey »

woolvalley wrote: post #100
mikestew wrote: post #73

Earlier quoted context omitted.

I see this advice bandied about, and I have to assume that I've just never hit on one of those companies, or there are somehow two classes of interview candidates. Because I'm 0-3. And, when I think about it, hell no I'm not handing a cap table to some senior dev candidate. Higher up the chain, maybe, but not some NCO[0] with a fancy title. Taken another way, when companies refuse to give you the numbers to properly…

What happens if your cap table is public? I would imagine if your wooing investors, they will get to see the cap table + more even if they never invest. And VCs talk to each other, so they can probably find out if curious from other VCs. Why all the secrecy?

I've only ever heard of one company with a public cap table. After a bit of googling, I found them again: https://open.buffer.com/buffer-open-equity-formula/ . EDIT: lol the same link is in TFA.

The problem with a public cap table is that it amounts to a public salary database. Usually companies (and employees) don't want everyone to publicly know everyone else's salary. When people do jobs you don't understand (like marketing, for the tech crowd here), or are perceived as underperforming, removing all doubt about their compensation breeds contempt.

Anyway, even buffer doesn't publish enough information as they don't publish the "preference stack". Whether by design or an oversight is hard to say. And you can't really publish it as it will lead to difficulty recruiting as candidates get soured by the prospect that investor's real equity is better than their sweat equity.

Sure, VCs talk but (speaking as a not-VC) I doubt they are going to share cap tables and such. They are busy people. If you, as a VC, care, talk to the company yourself. Even if they would share peer-to-peer, you are not a VC so you are not going to be privy to this VC-public info.

Re: Questions to Ask Before Joining a Startup

#112

Post by icedchai »

_bfhp wrote: post #36
i_am_nomad wrote: post #18

Earlier quoted context omitted.

Liquidation preferences mean that some shares have rights that others don't. In a liquidity event (IPO or acquisition), the people holding the "preferred" shares get paid out first, according to the number of shares and the valuation of those shares. If all the cash and other assets from the acquisition are given out to them, then anyone else holding the less-preferred shares get nothing. Usually, the founders and VC…

I don't even understand what half the words here mean and the alienation of human beings still comes through. We can offer advanced college calculus in public high schools but we can't teach basic finance. I don't think anyone but a handful of workers at my job understands any of this

If you can program computers you can definitely understand startup finance. It sounds more complex than it really is! Unfortunately, all the jargon confuses people and they wind up getting screwed...

Re: Questions to Ask Before Joining a Startup

#113

Post by mbesto »

seibelj wrote: post #42

The only valid reasons for working at a seed-stage / series A startup: You are a founder. They are working with a technology or in an industry that you specifically want to work with and it is very hard to work on it professionally, and doing side projects are infeasible. You need experience and you have no other option to get experience. You are getting a significant title bump that moves your career forwards. Inval…

> You are getting a significant title bump that moves your career forwards.

To add to this. The title of "early member of " holds a lot of weight in SV circles. Whether or not you legitimately helped those companies in the early days, it's a strong signal that you are valuable. And those doesn't have to be a company that necessarily had a huge exit or has a strong economic reputation. For example - early engineer of Yahoo? Ya, people probably think you're worth one's salt.

IMHO - I think this is the main driver people join startups. It's taboo, but vanity feels much more tangible than equity.

Re: Questions to Ask Before Joining a Startup

#114

Post by icedchai »

jiveturkey wrote: post #41
ironchef wrote: post #20

Earlier quoted context omitted.

Good call. I was going to suggest they should be able to see: * preference stack * strike price * last valuation with board/investors If you can't get those, then unless the equity is just butter to you, walk .. as you don't really know what the comp looks like.

so are you saying you’ve ever been able to get those numbers? i never have.

I have... but you have to be within the first 10 employees or so.

Re: Questions to Ask Before Joining a Startup

#115

Post by tdumitrescu »

nlh wrote: post #64
jasode wrote: post #54

Earlier quoted context omitted.

>It's important to be aware of dilution events so that you realize when you accept the offer that your .025% will be more like .008% But you're repeating the same error of prioritizing the wrong thing: dilution. What employees ultimately care about is their wealth calculation: shares_multiplied_by_price . Example of the type of math people actually care about: 0.008% (because dilutions) a $1 billion company is $80k 0…

You’re entirely (technically) correct. The issue is that side-effect often comes into play because employees like to calculate potential future outcomes, and that’s done based only on overall company value (since that’s one of the only data points that’s available from past acquisitions). I’m sure you get this and I know the psychology of what an employee might hope for shouldn’t be relevant, but unfortunately it is.…

Another aspect of this is that if you join an early stage startup and work there 5-10 years without any new equity grants (such as the annual refreshers that many companies give) while the company grows and does new funding rounds, then you're getting screwed badly.

Re: Questions to Ask Before Joining a Startup

#116

Post by jakecodes »

seibelj wrote: post #42

The only valid reasons for working at a seed-stage / series A startup: You are a founder. They are working with a technology or in an industry that you specifically want to work with and it is very hard to work on it professionally, and doing side projects are infeasible. You need experience and you have no other option to get experience. You are getting a significant title bump that moves your career forwards. Inval…

I joined GitLab as #29. My work life balance has never been this good. I've been working here for ~3 years, my benefits have been excellent, I have learned so much. GitLab may be an anomaly and YMMV, but it has been the best company I've ever worked for, period. Nothing has comes close. In the end I love what I do. I don't agree with this post.

Re: Questions to Ask Before Joining a Startup

#117

Post by mbesto »

Questions 4 through 14 are likely not to be answered, or founders will be cagey about it. IMHO, if you get stiff-armed and you're applying to be in the first 10 employees, then run.

My general view is if you're in the first 10 or so employees for a VC-backed startup, you deserve near-founder benefits (including financial transparency).

Re: Questions to Ask Before Joining a Startup

#118

Post by jiveturkey »

seibelj wrote: post #42

The only valid reasons for working at a seed-stage / series A startup: You are a founder. They are working with a technology or in an industry that you specifically want to work with and it is very hard to work on it professionally, and doing side projects are infeasible. You need experience and you have no other option to get experience. You are getting a significant title bump that moves your career forwards. Inval…

valid: you do not enjoy big company politics. (you’d rather have small company politics)

valid: you want a sense of ownership and responsibility. if you don’t perform, there is a noticeable effect on the company.

valid: you want to be in an environment where others are just as committed as you to the success of the company. you want to treat your work as an endeavor, not as a means to a paycheck.

Re: Questions to Ask Before Joining a Startup

#119

Post by ummonk »

mbesto wrote: post #113
seibelj wrote: post #42

The only valid reasons for working at a seed-stage / series A startup: You are a founder. They are working with a technology or in an industry that you specifically want to work with and it is very hard to work on it professionally, and doing side projects are infeasible. You need experience and you have no other option to get experience. You are getting a significant title bump that moves your career forwards. Inval…

> You are getting a significant title bump that moves your career forwards. To add to this. The title of "early member of " holds a lot of weight in SV circles. Whether or not you legitimately helped those companies in the early days, it's a strong signal that you are valuable. And those doesn't have to be a company that necessarily had a huge exit or has a strong economic reputation. For example - early engineer of…

The fraction of startups that achieve that level of name recognition is even more miniscule than the fraction of startups that achieve successful exits and let you break even financially.

Re: Questions to Ask Before Joining a Startup

#120

Post by ummonk »

jasode wrote: post #8

>It is also important to note that early employees experience more dilution events. An example of a dilution event would be raising another round of funding. This is another reason why joining a company early should offer more equity. I disagree that it's important to note that early employees experience more dilution events. I know you're trying to educate but this type of advice unintentionally misinforms people an…

It's important to note dilution events because startups typically pitch their equity based on hypothetical future exit scenarios, without accounting for dilution.
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