Questions to Ask Before Joining a Startup • Hacker News Board

Re: Questions to Ask Before Joining a Startup

#331

Post by jasode » Tue, Nov 27, 2018, 2:34 PM UTC

untangle wrote: post #326

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…

> For most employees that are minority shareholders, dilution is a side-effect calculation in the realm of academic trivia. Dilution is not a purposeful strategy in this situation. No, your logic would only hold for a public company with shares priced by a liquid market. For a startup, percent ownership of fully-diluted shares is the key metric. (Other secondary factors, e.g. liquidation preference are also relevant.…

>, percent ownership of fully-diluted shares is the key metric.

We are talking about different things.

I was talking about "dilution" as a verb/action that describes a _change_ from a starting % of ownership to a lesser % of ownership. The post I responded to was talking about dilution events.

Employees cannot realistically make calculated strategies around dilution _events_ because they are not on the board-of-directors and can't veto the founders to not accept additional round of funding. In any case, whether the employee's shares experience 1, 3, or 4 dilution events is not something people typically care about. What they want to really know is if they get wealthier.

On the other hand, if an employee is offered a # of shares as an incentive to accept a job, then yes, it's good to know if that means 0.10% or 0.05% ownership. It's smart to know if an employee is getting typical equity percentages in the industry that's commensurate with the role and timeline of the startup. (Some examples.[1]) However, that's a metric at a particular point in time and it's not a "dilution event" from the perspective of the employee.

[1] https://www.holloway.com/g/equity-compensation#_there_are_no...

Re: Questions to Ask Before Joining a Startup

#332

Post by romeisendcoming » Tue, Nov 27, 2018, 2:50 PM UTC

nradov wrote: post #306

nostrademons wrote: post #305

Earlier quoted context omitted.

It's a solved problem for a given problem domain . The "best practices" for software development depend very heavily on which particular industry you're writing software for, and senior developers in one industry are basically incompetent when it comes to working in a different industry. I've worked in finance, I've worked on search, I've worked on casual Javascript games, I've worked in compilers & devtools, and I'v…

The vast majority of software startups are attempting to solve previously unsolved business problems using mostly the same technology stacks as everyone else. The basic principles of CI/CD are pretty similar regardless of language or tooling, and should now be understood by any competent senior developer regardless of whether they work in gaming or avionics or whatever. Applying those CI/CD principles absolutely help…

I'd agree that most are but if you move into scientific computing startups the problem domain is much different and CI is a nice to have. It's much more about R&D.

Re: Questions to Ask Before Joining a Startup

#333

Post by jartelt » Tue, Nov 27, 2018, 3:22 PM UTC

zacharycohn wrote: post #286

jartelt wrote: post #227

Earlier quoted context omitted.

But without those 3 rounds, your company likely wouldn't have gotten to the $100M valuation. Sure, if you can get a company to a $1B exit without raising any funding and avoiding any dilution, that is the best case. But, in reality most companies need to raise capital to grow. You accept dilution because the value of your shares should go up assuming the company is executing well and putting the capital to go use (i.…

Right, but consider if OP's other option was a Google/Amazon/Apple with total compensation at $250k a year. They could have worked in a stable environment with guaranteed $1M in compensation after 4 years, vs unstable and very demanding job with a low likelyhood of $1M total compensation over the same time horizon.

Sure, but that is a separate argument. I agree that working at Google/Amazon/Apple probably gives most people the best income over time. The point is that if you work at startups dilution is not your enemy.

Early Uber employees got diluted like crazy, but they will probably do well when they cash out (or already did in secondary offers).

Re: Questions to Ask Before Joining a Startup

#334

Post by nradov » Tue, Nov 27, 2018, 4:13 PM UTC

romeisendcoming wrote: post #332

nradov wrote: post #306

Earlier quoted context omitted.

The vast majority of software startups are attempting to solve previously unsolved business problems using mostly the same technology stacks as everyone else. The basic principles of CI/CD are pretty similar regardless of language or tooling, and should now be understood by any competent senior developer regardless of whether they work in gaming or avionics or whatever. Applying those CI/CD principles absolutely help…

I'd agree that most are but if you move into scientific computing startups the problem domain is much different and CI is a nice to have. It's much more about R&D.

If we agree that CI is nice, and it's essentially free, then why not have it?

Re: Questions to Ask Before Joining a Startup

#335

Post by JangoSteve » Tue, Nov 27, 2018, 4:21 PM UTC

nostrademons wrote: post #307

nine_k wrote: post #277

Earlier quoted context omitted.

This is very true. But setting up CI is a day's worth of work, and pays off almost immediately. Having reasonable logging in an app of any serious size is a cultural thing; it takes exactly as much time to write as bad logging, and saves oodles of time every day when you have to discover and fix issues. Compare it to building a motorbike. Yes, you want a prototype fast. But if you have all your tools stored as one bi…

The issue with all of these things is that in a startup you don't know what the expected behavior is . You only can find that out, for sure, by putting it in front of customers and having them pay you for it - which often requires building the product or at least some approximation of it first, and may need to be repeated dozens to hundreds of times before you find something that is a.) useful b.) worth paying for c.…

I've been telling people this for years. Automated tests are a good way to ensure that updates and iterations don't break existing expectations. But expectations come from users, so if you don't have users, you don't have expectations, you only have guesses. You're usually better off getting your guesses out in front of users so you can establish expectations, and then build your automated tests around that.

I say "usually" of course, because there are certain things that constitute expectations that precede users, such as apps that handle sensitive information. Expecting that the app handles sensitive information appropriately before users confirm that they want their sensitive information handled appropriately would properly not be considered a guess.

Re: Questions to Ask Before Joining a Startup

#336

Post by romeisendcoming » Tue, Nov 27, 2018, 4:27 PM UTC

nradov wrote: post #334

romeisendcoming wrote: post #332

Earlier quoted context omitted.

I'd agree that most are but if you move into scientific computing startups the problem domain is much different and CI is a nice to have. It's much more about R&D.

If we agree that CI is nice, and it's essentially free, then why not have it?

What use is it if it is too dangerous|volatile to use?

Re: Questions to Ask Before Joining a Startup

#337

Post by Judgmentality » Tue, Nov 27, 2018, 5:00 PM UTC

jakecodes wrote: post #145

Judgmentality wrote: post #129

Earlier quoted context omitted.

> GitLab may be an anomaly and YMMV I think this is the crux of his argument. Of course there are outliers, but 90% of the time (I don't know the actual percentage, but I'd venture it's around there - if we're only talking about money I'd say 99.9%) someone will be happier if they go to a more established company. And people are often disillusioned when their equity becomes worthless, because for years they were told…

Do you have links to any data that shows the statistics on my luck?

There are a lot of assumptions in my argument, but the one with the hardest data will be how many startups succeed. Most people don't join startups thinking they'll fail (they understand it might fail, but if you knew it would fail would you still join?)

Of the high-growth tech startups we're looking at, here's an analysis pointing towards 92% failure rate - https://s3.amazonaws.com/startupcompass-public/StartupGenome... - I suspect the real number is actually much higher if we're including seed stage companies.

Beyond that though, it's mostly me piecing together anecdotal evidence of disgruntled startup employees who left for larger companies and regret not joining immediately after college. There are of course plenty of people who join for the experience, for the smaller team sizes, the autonomy, etcetera. But I think my argument is largely driven by equity. Unless you'd happily except the job offer without the equity it's pretty hard to refute that people join startups because they want equity. And that equity is almost never worth it. If you aren't a single digit employee number at a company with a 10 digit exit, and this is still assuming you didn't get fucked by dilution because of asshole investors, the math just doesn't add up.

The odds of being in that cohort is much less than 1/1000, probably closer to 1/10000. It would take me a bit of effort to find a hard number on it (looking at total number of employees at large exits, find large companies that failed, approximate number of employees at various other startups) - but I actually know people that were employee #X at a company with a 10 digit exit who didn't get screwed by investors and they still would've been better off going to Google in terms of financial compensation.

Also I think a lot of it is ignorance. Many people at startups don't realize how much better it could be at a FAANG company because they've never worked there.

Re: Questions to Ask Before Joining a Startup

#338

Post by MuppetMaster42 » Tue, Nov 27, 2018, 5:01 PM UTC

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…

I agree wholeheartedly with your last point.

At my last company they had no equity going in, and added it on Jan 1st a year later. When I spoke to the founders about raises for the engineering team, the CTO looked at me funny.

"we just gave everyone stock options, why do they need a raise?"

Why?

Because a few of the engineers had young kids that were just starting school, and equity on a 1 year cliff won't pay those fees.

Because in Sydney there are enough start-ups that any one of the engineers could get an offer for 10-50% more base salary with options on top.

The founders were genuinely great guys, but they couldn't see the wood for the trees.

Re: Questions to Ask Before Joining a Startup

#339

Post by aecs99 » Tue, Nov 27, 2018, 6:17 PM UTC

sroussey wrote: post #234

aecs99 wrote: post #186

Earlier quoted context omitted.

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 le…

You must have been doing multiple interviews per month, every month, for those five years in order to get to the stage of getting an offer from a majority of the 60 companies. That sounds exhausting!

I did. Once I joined the companies that did not openly answer my questions during interviews (about finances, strike price, etc.), I ended up realizing all the negatives/problems of the companies from the inside.

Then on, I had only two choices: (1) ignore the problems and not worry about future, or (2) act fast and start interviewing until I have options if something goes wrong. I chose the second option, and hence a lot of interviewing.

Re: Questions to Ask Before Joining a Startup

#340

Post by texmex20 » Tue, Nov 27, 2018, 6:17 PM UTC

foobiekr wrote: post #213

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'd add one more to the "valid reasons": rehab You see guys working late at their little startup and maybe thing you should tell them it’s not going to happen. Because honestly for most of them it’s not. But... I want to make the case that it's OK. Even if it’s never happening they may be happy. If one stops viewing startups as $$$ opportunities and starts viewing them as rehab from the soulless corporate jobs full o…

I'm currently deciding whether or not to go with a startup for the first time and this post really resonated with me. Thanks!