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Questions to Ask Before Joining a Startup

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Re: Questions to Ask Before Joining a Startup

#181

Post by landryraccoon »

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…

There’s a gotcha here. The VCs can disproportionally dilute early employees that they think are worth less by issuing new shares/options to founders or new hires.

It’s not true that everyone will always be diluted equally. Someone who isn’t involved in politics or paying attention to investor terms (oh, like an engineer maybe?) is more vulnerable to this.

Re: Questions to Ask Before Joining a Startup

#182

Post by pge »

ironchef wrote: post #20
gesman wrote: post #11

Option piece is misleading. You own 1% of options and company is bought for $10m. Your payoff? Likely $0. He forgot to mention preferred shares given to VC’s with liquidation preferences that likely never disclosed to new engineers. This is what makes new engineer to sacrifice his salary for a possible liquidation even that likely either never happens or there is no money left for him after VCs took their xN ratios o…

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.

if the company won't share the preference stack with you, look up the total amount of capital the company has raised (or ask the question that way - that may be more likely to get an answer). In most cases, the preference stack = total capital raised.

Re: Questions to Ask Before Joining a Startup

#185

Post by TuringNYC »

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…

I've found the 12-item Joel Test to be great.

https://www.joelonsoftware.com/2000/08/09/the-joel-test-12-s...

PS: Yes! Shockingly not all startups use source control.

Re: Questions to Ask Before Joining a Startup

#186

Post by aecs99 »

gammateam wrote: post #174

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…

So true! I've interviewed with several startups (about 50-60) in the past, over the course of 5 years. I had offers from most of them, while some of them rejected me after the interviews (for whatever reasons they had). Your comment is so close to reality (based on my interactions). Some laugh, some genuinely have no clue, some act arrogant (you can either join based on whatever limited information is provided, or leave), and some say they don't share any such information.

I've worked at two startups in the past. The first startup tanked. When interviewing for the next role, I did ask these questions, but had no luck. Ended up taking an offer with 15% increase over my last role. Two years of work, and I find out that this startup too, is on its way down. Eventually ended up moving to a big company.

Re: Questions to Ask Before Joining a Startup

#187

Post by angersock »

jakecodes wrote: post #116
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.

How old are you? Are you supporting a family? Where do you live?

What's the amount of your salary? What's the value of your equity compensation? How much time do you get off?

(your benefits may not be as good as you think)

Re: Questions to Ask Before Joining a Startup

#188

Post by decebalus1 »

dang wrote: post #161
decebalus1 wrote: post #105

Earlier quoted context omitted.

Do I need to provide data breakdown to prove that an anecdote is just an anecdote? I'm trying to figure out if you're trying a full fledged 'On the spot fallacy' or just a basic 'shifting the burden of proof'.

The flamey unsubstantive sort of comments you've posted in this thread are just what we're trying to avoid here. If you'd please review https://news.ycombinator.com/newsguidelines.html and follow the rules of the site, we'd appreciate it. HN threads are conversation. Anecdotes are the life blood of conversation. This is an internet forum, not a peer-reviewed journal.

Noted. Thanks. I will quote you on `Anecdotes are the life blood of conversation. This is an internet forum, not a peer-reviewed journal.` in the future, if you don't mind.

Re: Questions to Ask Before Joining a Startup

#189

Post by TuringNYC »

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?

Yes, it is possible to have 1.25 or 1.5x first money out liquidity preference. I'm not sure how common that is though, but I've seem it multiple times.

Also note, you can end up with negative returns since you may have paid taxes on the options.

SEE: https://www.nytimes.com/2015/12/27/technology/when-a-unicorn...

Re: Questions to Ask Before Joining a Startup

#190

Post by alain94040 »

zerr wrote: post #149
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…

Can't you ask for preferred stock instead of common? Isn't it a common case?

Common stock is the common case... Unless you are in a strong negotiating position, common stock is what you'll get.

A company can't easily give you preferred shares. Someone has to define what preferred includes: rights to elect someone on the board, right to oversee spending decisions from the CEO, etc... It costs money to structure preferred shares. You also can't piggy-back on a preferred class that already exists, unless the investors that "own" that class are happy to dilute their privileges with you (highly unlikely).

Common stock always exists, by definition, in a corporation. So it's easy to give it to you.

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