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Questions to Ask Before Joining a Startup

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Re: Questions to Ask Before Joining a Startup

#171

Post by jiveturkey »

OliverJones wrote: post #147

This is good stuff. I want to emphasize one point. A company may offer you options, or restricted stock units, or any sort of equity in the company. When they do this, they are asking you to invest in the company. They are asking you to buy your shares with your scarcest resource: time. Do NOT be the slightest bit embarrassed to ask any question you want about the company's capital situation, funding prospects, premo…

> And, remember, you can't pay your rent or buy groceries with unvested options. You need cash money for that.

You can't pay your rent or buy groceries with vested options either.

Re: Questions to Ask Before Joining a Startup

#172

Post by LaGrange »

jiveturkey wrote: post #118
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.

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

Are there big investors? Welcome to big company politics.

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

Responsibility? Sure. Ownership? Unless you're a founder or a big investor, haha, no. Unless you mean the corpo-speak "ownership," which is just another word for responsibility.

Responsibility might make the work more emotionally rewarding, but it also makes the work more stressful, so I won't sell it for free.

> valid: you want to be in an environment where others are just as committed as you to the success of the company.

They may measure the "success" in terms wildly different from you, the employee, though.

> you want to treat your work as an endeavor, not as a means to a paycheck.

Actually while I might want something more, endeavour doesn't pay rent.

Re: Questions to Ask Before Joining a Startup

#173

Post by jiveturkey »

derefr wrote: post #154
jiveturkey wrote: post #131

Earlier quoted context omitted.

please note that i am referring to the sense of ownership and responsibility that comes from being one of the important cogs. this is reality in a startup. i don't mean it in a legal/financial sense, and i am not referring to any extrinsic reward, eg financial upside.

> this is reality in a startup Five-year-old well-funded-and-profitable companies with 50 employees, where you as employee #50 are just there to toil away writing some dumb CRUD backoffice code—are still referred to as "start-ups." And, in fact, since the other kind of startup dies more often than it succeeds and grows into this kind, most startups that are hiring at any given moment are this kind of startup.

The context in this sub-thread is specifically seed or series A startups.

Re: Questions to Ask Before Joining a Startup

#174

Post by gammateam »

the answer to every question on this list:

"We are a private company and don't share this information."

Outside of the room, the Engineering team laughs at your questions, Operations and the CEO give each other quizzical looks before laughing too, and they go on to the next candidate.

You get smug satisfaction for not going with "THAT Company who cant answer simple questions", until a reminder about the rent payment comes in due and all you want is a 30% pay increase over your last/current role.

Re: Questions to Ask Before Joining a Startup

#175

Post by pge »

adtac wrote: post #163
alain94040 wrote: post #26

Earlier quoted context omitted.

The answer is hidden in your question: you own common stock. The investors got preferred stock. As the name implies, their stock has privileges. A common one is liquidation preference. They get their money back first, then the common shareholders get whatever is left. For an extreme example, say the VC invested $10M for 10% of the company, and then the company doesn't manage to grow, and gets acquired for the same $1…

Let's say the company gets acquired for $20M. Is it still possible for the other 90% to make $0? Or is the preference amount exactly equal to the invested amount?

Typically preference = invested capital, but there are exceptions where it could be more (usually only if investors were investing in a distressed situation)

Re: Questions to Ask Before Joining a Startup

#176

Post by angersock »

andbberger wrote: post #101
owens99 wrote: post #66

Earlier quoted context omitted.

This. As I always say, "If you are building a startup, over-engineering is a far bigger sin than creating technical debt."

That's just a cop out! Such a tired meme!

It's true though. What's your counterargument?

Tired memes can be tired because they're true.

Re: Questions to Ask Before Joining a Startup

#177

Post by cc81 »

sarthakjain wrote: post #167
latch wrote: post #4

I've been thinking about low-friction options for getting a sense of the engineering quality. I don't think I'm alone in thinking that technical debt and bad software development practices are a top concern. Being quite senior now, I'd feel comfortable asking: 1 - To see their CI dashboard 2 - To see a sample of their production systems stdout & stderr 3 - Asking to review a recent non-trivial commit (with the person…

Most early stage companies would have had terrible answers to these questions. Including Facebook/Google/Uber/Amazon. Which just indicates that it might not have been an ideal role for you which is fair. Being the first 2-3 engineers at a startup is not everyone's cup of tea. The risk in most cases makes no sense for a sane individual. Your questions indicate a sense of "safety" that an engineer might want from their…

CI/CD can be set up pretty quickly with modern tools. You can of course spend time over engineering with lots of different environments that you can create with scripts but just setting up a basic pull request->build->run tests->automatic deploy->promote to higher environments is like one days work for one person these days.

Re: Questions to Ask Before Joining a Startup

#178

Post by angersock »

jasode wrote: post #54
PacifyFish wrote: post #34

Earlier quoted context omitted.

I disagree. The most common way to predict payout is to compare to other companies' exit valuations. E.g. "Oh, company X got acquired for $250 million. We do something similar. If I own .025% of the company, I'd make $62,500 if we exited at that valuation. Cool." 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% if you're lucky enough t…

>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…

Real talk: most companies aren't gonna exit for $1B.

Re: Questions to Ask Before Joining a Startup

#179

Post by pge »

Spoom wrote: post #58
deathanatos wrote: post #37

Earlier quoted context omitted.

Are "liquidation preference" shares just tagged as being worth more than their actual value though? I can't reconcile how they could get paid "according to the number of shares and the valuation of those shares" and have there be nothing left over for the non-preferred stock. If the founders/VCs have any n% of a, say, $10M acquisition, that still has to leave money for everyone else, unless the total number of shares…

If you have preferred shares, you often have a "2X liquidation preference"[1] or other multiple. This means that you are guaranteed to get at least two times your initial investment in a liquidation event, even if the value of your shares at the time is less than that amount. This can (and often does) eat into the common stockholders' (e.g. employees) liquidation amounts. 1. https://www.businessinsider.com/how-liquid…

In my experience (~ 20 years at institutional VC funds), 2x preference (or anything above 1x) is extremely rare. It comes up only when there is a distressed situation, and the investors do not believe that they will receive any money beyond their liquidation preference (i.e. other junior liquidation preferences will consume the rest of the proceeds from the sale of the company).
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