How to Choose a Startup to Work for by Thinking Like an Investor
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Re: How to Choose a Startup to Work for by Thinking Like an Investor
#2Rather than treating predicting startup success as an intractable problem, I think anyone considering joining a startup should act like a startup investor making a bet on how much the value of equity in that startup will grow over time. Startup investors do this for a living and that's essentially what you are too. You're investing your time and they are investing money.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#3it's funny to think of my own finances...I have a portfolio of stock from 3 startups now that has worked out surprisingly well
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#4Rather than treating predicting startup success as an intractable problem, I think anyone considering joining a startup should act like a startup investor making a bet on how much the value of equity in that startup will grow over time. Startup investors do this for a living and that's essentially what you are too. You're investing your time and they are investing money.
Hrm, the parallel feels really forced to me. You can invest money in multiple startups at the same time, to hedge your bets. You can't do that with your time if you plan on working full-time.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#5I worked at three startups before taking the current break I'm on - one I left before my stock was worth anything (would have paid out a small amount in an acquisition), another, the stock is now worth zero, and the third has a shot at being worth about a year's salary if current late-stage valuation is to be representative of a potential buyout/IPO (I'd say odds are alright this will happen). While I try not to think about it, because honestly the experience was worth it, I would have made far more over the last eight years of my career staying put at BigCo.
With that being said...
All three times, despite considering myself a pretty rational person, I got this strange psychological delusion when joining the startup that it was going to somehow magically make me rich. I think it's probably the "honeymoon" stage of joining any company. Things are awesome! The culture is fast-paced, chaotic, and offers plenty of opportunity! This is a rocket ship! It kind of matches the "what if" feeling of buying a lotto ticket. It's impossible not to imagine what might happen.
I think if I jump back into startupville, my cynicism toward the "get-rich-fast with these private options" will outweigh the bright-eyed, bushy-tailed sensation of my 20s.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#6This is how I've approached joining the last two companies I've signed on with. In the hiring process I ask to speak with finance and the founders to see if the company has the legs to be a real rocket ship. Remember that an interview is just as much about them interviewing you as it is for you to interview them.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#7Rather than treating predicting startup success as an intractable problem, I think anyone considering joining a startup should act like a startup investor making a bet on how much the value of equity in that startup will grow over time. Startup investors do this for a living and that's essentially what you are too. You're investing your time and they are investing money.
Hrm, the parallel feels really forced to me. You can invest money in multiple startups at the same time, to hedge your bets. You can't do that with your time if you plan on working full-time.
Sure, you can't diversify in parallel but you can in series.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#8This kind of advice is similar to the "get rich day trading stocks" narrative. It only sounds realistic if you are ignorant of the statistical probabilities involved (it seems most people are).
A vast majority of VC funds produce weak or negative returns. And this is after diversifying their fund investment across 10+ start-ups and assuming that 90% are going to be losers compared to putting that money in public equities.
You can't work for 10+ companies at once like a VC can. And even if you could, the odds are still against you. The idea that you'll be able to pick ONE winner at an early stage is, quite frankly hilarious and naive.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#9This is how I've approached joining the last two companies I've signed on with. In the hiring process I ask to speak with finance and the founders to see if the company has the legs to be a real rocket ship. Remember that an interview is just as much about them interviewing you as it is for you to interview them .
How likely is it that you as a potential employee get to see the books and know what's going on like that these days?
Honest question; seems like it's a tougher thing to get access to than for a VC, but maybe I'm wrong.
Re: How to Choose a Startup to Work for by Thinking Like an Investor
#10Rather than treating predicting startup success as an intractable problem, I think anyone considering joining a startup should act like a startup investor making a bet on how much the value of equity in that startup will grow over time. Startup investors do this for a living and that's essentially what you are too. You're investing your time and they are investing money.
If you look at total comp as a function of preferred investment price - exercise price, startup employees are underpaid left relative to big company / deck orb employees (or in other words, are overpaying for shares relative to investors). This is of course not considering any risk premium that employees would have due to inability to diversify.
Do you believe prospective employees, often with little experience in the startup world, can do a better job of picking winners than VCs can?