How to Choose a Startup to Work for by Thinking Like an Investor • Hacker News Board

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#41

Post by ryandrake » Mon, Jan 07, 2019, 7:52 PM UTC

dawhizkid wrote: post #35

ryandrake wrote: post #29

Earlier quoted context omitted.

And really, only a) offers a meaningful shot at “getting rich”. A late stage growth company is not going to 100X its equity value in 5 years. No rank and file employees are getting f-you money there. If there’s one thing I’ve learned after two decades in the industry it’s if you care about earning good money, you can either 1) gamble on the 0.01% chance that you picked the right startup or 2) get on to the Senior Exe…

Even with (a) it's tough. If you're employee 1-13 you're getting maybe 10-20bps. At a unicorn valuation that is $1-$2m before you take into account dilution, liquidation preferences, taxes, etc etc etc.

I totally agree, which is why I have not worked for a startup or small business for close to a decade. And I’m by nature a gambler! It’s just they in the current climate the %unicorn x %share x valuation expected value calculation is not favorable to employees. Even for employee 1-10.

All it would take i think is for companies to start offering larger stakes to employees, with the other two factors remaining the same, and the math might make it worthwhile. But they won’t do it.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#42

Post by sulam » Mon, Jan 07, 2019, 7:54 PM UTC

icedchai wrote: post #36

dawhizkid wrote: post #19

Earlier quoted context omitted.

IMO there's only two paths that really makes sense now when considering a private co. Either a) join super early (e.g. penny strike price) with a meaningful % of total company (at least 10 bps) OR b) join late stage growth co that offers RSUs over options (e.g. "Softbank" stage cos). Joining a "middle" stage co where you are offered expensive options is the worst, since you've missed out on the early upside and you t…

I wouldn't consider 10 bps (0.1%) meaningful. Early stage is very, very risky.

Agreed. 10bps is considered low for me to get for as an advisor (I've been told that directly). The "founding engineering team" (ie, up to 8 people) is getting more than that.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#43

Post by sulam » Mon, Jan 07, 2019, 7:56 PM UTC

dawhizkid wrote: post #35

ryandrake wrote: post #29

Earlier quoted context omitted.

And really, only a) offers a meaningful shot at “getting rich”. A late stage growth company is not going to 100X its equity value in 5 years. No rank and file employees are getting f-you money there. If there’s one thing I’ve learned after two decades in the industry it’s if you care about earning good money, you can either 1) gamble on the 0.01% chance that you picked the right startup or 2) get on to the Senior Exe…

Even with (a) it's tough. If you're employee 1-13 you're getting maybe 10-20bps. At a unicorn valuation that is $1-$2m before you take into account dilution, liquidation preferences, taxes, etc etc etc.

If you're employee 1, you should be getting 1% or north of that. If you're employee 13 you're probably getting 25-50 bps if you negotiate.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#44

Post by techslave » Mon, Jan 07, 2019, 7:58 PM UTC

> However you will learn significantly more, build a stronger network, and accelerate your career trajectory much faster by joining a successful startup than an average one.

smack forehead Yes, what ever could I have been thinking before! Yes, yes, I should only be joining a successful startup, not an average one!

> steep career trajectories, like Jeff Dean, Marissa Mayer or Chris Cox.

Yes yes! New plan: be Jeff Dean!

> Next, you need to evaluate the strength of the team and market

Unfortunately, this is not realistically possible for most non name-brand candidates. The company is not going to entertain the amount of inquiry (due diligence) you would need to pursue.

> Evaluating the relationship between founders is as important as evaluating the founders themselves.

Indeed it is! Good luck getting access to do that ...

This article is just more hyperbole from triplebyte. I wonder how their business is doing ...

https://triplebyte.com/careers:

> We've already achieved profitablity

But if I may quote from this article:

> one thing we learned at YC was not to be fooled by large absolute numbers. What matters most is the growth rate.

triplebyte, put your money where your mouth is and advertise your top line growth rate, not the fact that you are profitable. When your fee is on the order of $30k per hire and your infra and operating costs are low, I expect you to be profitable.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#45

Post by shoo » Mon, Jan 07, 2019, 7:58 PM UTC

As an "investor" you should consider the range of asset classes available to you when deciding how to invest your time and labour.

See Dan Luu's articles about "big company vs startups" and "options versus cash"

https://danluu.com/startup-tradeoffs/

https://danluu.com/startup-options/

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#46

Post by sulam » Mon, Jan 07, 2019, 8:00 PM UTC

ryandrake wrote: post #31

joshe wrote: post #28

Earlier quoted context omitted.

Sorry have to delete these, not comfortable with these comments sitting on the internet forever.

But public company RSUs are as good as cash because you usually can sell them the day they vest. Rule of thumb I think is to favor options from private companies and RSUs from public companies.

There _is_ a "neither fish nor fowl" moment where private companies start giving out RSUs. It has to do with the overall value of the company and the size of the offer package, and rules around how much you can vest in ISOs in a given calendar year. It also has to do with the exposure to employees (and ex-employees) as shareholders pushing you above the cap that requires you to report as a public company.

At any rate, it is fairly common to get RSUs in a late-stage private company. Uber was giving out RSUs 4 years ago, I believe, and has reportedly filed for a confidential IPO as of last month.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#47

Post by joshe » Mon, Jan 07, 2019, 8:04 PM UTC

techslave wrote: post #33

joshe wrote: post #28

Earlier quoted context omitted.

Sorry have to delete these, not comfortable with these comments sitting on the internet forever.

Either your explanation is unclear, or you do not understand RSUs. > RSUs [...] evaporate if you leave or are fired from the company. You can not purchase them like stock options. RSUs do not evaporate. Vested RSUs are yours outright. You cannot purchase them because they are already "purchased". > So you have to stick around until the company becomes public. In both cases, the RSU or the stock underlying an option,…

Sorry have to delete these, not comfortable with these comments sitting on the internet forever.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#48

Post by sulam » Mon, Jan 07, 2019, 8:05 PM UTC

techslave wrote: post #44

> However you will learn significantly more, build a stronger network, and accelerate your career trajectory much faster by joining a successful startup than an average one. smack forehead Yes, what ever could I have been thinking before! Yes, yes, I should only be joining a successful startup, not an average one! > steep career trajectories, like Jeff Dean, Marissa Mayer or Chris Cox. Yes yes! New plan: be Jeff Dean…

Evaluating the strength of the team and the market is something you can do with zero involvement from the company, and you probably shouldn't depend on them to tell you either even if they offered.

Getting a sense of founder dynamics can be harder, depending on stage, but it's easy if you're early enough. I interviewed at Dropbox when it was 20 people and it was obvious what roles Drew and Arash played, as an example. At a larger stage this is harder, but you have more public sources of information at that point.

Regarding Triplebyte's profits, you should be asking how fast they're growing.

Finally, we should all be Jeff Dean. :)

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#49

Post by joshe » Mon, Jan 07, 2019, 8:05 PM UTC

dawhizkid wrote: post #30

joshe wrote: post #28

Earlier quoted context omitted.

Sorry have to delete these, not comfortable with these comments sitting on the internet forever.

That is not true. You keep whatever you vest (i.e. typically stay at a company at least 1 year). That is the same for stock options. Typically companies that offer RSUs have achieved scale (your Ubers and Stripes of the world), so yes the upside is lower, but the "pros" are that it's more obvious to you what the value of the grants are and you don't have any cost to exercise them like with options. These companies kn…

Sorry have to delete these, not comfortable with these comments sitting on the internet forever.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#50

Post by throwaway190107 » Mon, Jan 07, 2019, 8:05 PM UTC

I think the author should produce some data showing this is a viable strategy before he gives people advice that could lose them hundreds of thousands of dollars. Other people have pointed out the statistical problems with this strategy so I won't restate them.

The author may sincerely believe in his own advice, but we should note that he did not, himself, get rich this way.

A dropout from elite UK universities, he founded a startup and exited for a small amount of money. Since then he has worked for Y Combinator, invested, and also founded a few companies.

Taggar has never, himself, been anything like a startup employee. And great for him; he seems extremely talented and maybe that route isn't for him. But his company (TripleByte) profits from directing talented people into these kinds of companies.