per.quest

Tom Blomfield: When to join a startup

From tomblomfield.com
Something has changed in the last few years which has made an increasing number of people want to join startups. It seemed to start around the time the Social Network movie came out - perhaps it’s just a coincidence, but part of me imagines a group of MBAs sitting around watching Justin Timberlake play Sean Parker, thinking that actually a billion dollars would be pretty cool.

When choosing a startup to work at, people often overlook one of the most important factors, which is the size and stage of the company. I’d argue this is sometimes even more important than the industry or the idea itself.



Bootstrapping, aka two people in a bedroom

The startup was recently formed, and the company might not even be legally incorporated yet. There’s no funding and no-one is taking any salary. You’re two, three or four people in a bedroom living on baked beans, working all hours of the day to get a working prototype to show to customers or investors. The only people using your website or app are a couple of sympathetic friends and your mum.

Someone else tried to convince you to join a different startup a year earlier, but they had no funding and zero customers. They wanted you to work without a salary in return for 1% of equity, which sounded like a scam to you. You’re glad you picked this startup instead. You might not be getting any salary, but at least you’re joining as a co-founder with a double-digit equity stake. You jokingly talk with your cofounders about which island you’d each buy when you sell out for billions in a few years’ time.

The product vision is vague and broad, but you’re working every day to try to validate it with customers. Anything is possible. The entire direction of the company might even be changing from week to week.

Because nothing yet exists, you need to bring it to life with a combination of energy and raw self-belief. There’s little specialisation and no hierarchy; everyone does whatever needs to be done. It can be exhilarating.

It can also be exhausting at times, lasting months or years before you find customer traction or funding.



Seed-Funded

Now the company has a working prototype, a few dozen regular users and £250k of seed funding. It’s enough to pay a handful of people low salaries. Since you’re too big to fit in a bedroom, you’re renting desks at a coworking space or scrounging them off a bigger startup.

You cut a lot of corners, but seem to ship an incredible amount of code. People you don’t know personally start to use your product and it feels awesome. You’re working hard to spread the word, perhaps even starting to earn a little revenue from your first paying users.

You join at this stage for 3% equity plus whatever basic salary you need to survive. You talk about which cities you’d buy houses in when the company sells.

You might join as the first professional programmer or designer, but you’re still more-or-less on your own. When you join, your first job is to go to the Apple Store and buy yourself a laptop because no-one thought to order any equipment. There’s no “mentorship” from more experienced colleagues or even code-review, simply because the company is still too small.

“Marketing” consists of one of the founders emailing your funding announcement to TechCrunch

As an employee, you have a significant say in the direction of the company, although the business model might still shift substantially underneath you. Even if you’re not making the decisions, you hear about them immediately.

There’s still a good chance that the company fails to find “product-market fit” and goes bankrupt without raising more money. Your mum tells you that you should have stuck with your well-paying job at Oracle.

Series A

The company has raised £3m from a big-name VC and the team has grown to 10-15 people. You’ve got your own office with your logo on the door, or at least your own area in the coworking space.

The investor makes you submit quarterly cashflow reports, so you start keeping accounts for the first time. This is done by whoever has Excel installed on their computer.

The company eventually hires an office manager to ease the burden of administration on the founders. They set up a payroll provider and start doing peer reviews.

You join the company to do a specific role, but you spend your first week or two figuring out what you should actually be working on. At least they remembered to buy you a laptop, a desk and a chair.

There are 3 or 4 engineers in the team, so you start to do code-review and set up a continuous integration server. You lament all the technical debt that was accrued by those idiots who arrived before you, slowing down the pace of feature development.

A new product direction for the company is decided in a meeting of the three founders; this is presented in an “all-hands” meeting of 12 employees. The company sets out a quarterly product roadmap, and you’re asked what you think should be prioritised. You pick the projects that most interest you.

You’ll certainly be able to earn more money at a big company, but the salaries are enough to live comfortably on. You get 0.5% in stock options with a salary that’s 10-30% below market rate. But you reckon it’s worth the gamble - if the company sells, you’ll be able to buy a really nice house in London. Still, it feels a long way off.

The marketing function is one full-time person who does everything from PR, paid advertising and social media. The founder no longer personally runs the company’s Twitter account. Your company regularly appears in the “ones to watch” articles in tech press.

You’ve got thousands of paying customers, and you occasionally see people in public using your app, which feels fantastic. Your mum isn’t really sure what your company does, but she’s happy enough because you’re being paid a real salary.

Series B

The company is now 2-3 years old and has just raised £10-20m. It’s using that money to grow the team, increasing headcount to 60 people.

The founders got tired of the dingy office, so they splashed out on somewhere with lots of exposed brickwork and glass walls. Everyone is sitting on Herman Miller chairs. You find these chairs online and see they cost £1000 each.

There are 3 or 4 people in finance and HR roles, and you’re presented with a company handbook when you join. You have a couple of days’ training, but you mostly figure it out along the way.

Marketing now has three digital advertising people, and people specialising in PR, content and community management. You’ve got millions of paying customers in several countries, and your company is regularly featured in the business pages of the press.

Engineering has been split into two or three separate teams, and they’re trying recruit graduating college students to fill the hiring pipeline for next year.

You join in a very well-defined role, after the team manager recruited you. You meet founders during your interview, but they don’t always remember your name now you work here. The CEO sees a management coach every fortnight.

A new product direction is debated at a board meeting, and senior management is informed by the CEO. Management let their teams know that changes are imminent. Most people are focussed on “repeatable processes” and scaling up.

The company doesn’t seem to release new features very often, but the app is used by some of of your mum’s friends, which makes her very proud.

Your salary is in line with what other companies are paying, and you get 0.05% stock options. You’ve already figured out which house you’d put a deposit on when the company sells. A sale seems inevitable at some stage.

Series C

You’re joining a unicorn! After 5 years, the company has raised £100m at a £1bn valuation. There are some strange terms in the deal structure that you’ve never seen before, but the company’s HR department tells you that’s just “legal stuff”.

When you join, you’re granted £50,000 of options, which you work out is one two-hundredth of a percent, or 0.005% of the company. Friends in other startups tell you to check what the investor’s liquidation preference is, but no-one at the company can seem tell you. They’re all too busy trying to guess when the IPO is going to be announced. You figure that any kind of payout is a nice bonus. The salary is pretty decent anyway.

You join in the company’s newly opened Dublin office, part of a new drive by the company to internationalise. You’ve joined as one of 6 new Sales Associates focussing on European enterprise sales. There’s 4 week intensive induction training programme before you’re allowed to talk to any customers.

The new office feels empty at first, but you’re surprised how quickly it fills up with new staff. You ask where the marketing department sit, but you’re told they’re in a different office.

You see the CEO on the cover of Forbes, but you’ve never actually met him.

Your mum is already using the app, although it’s starting to look a bit dated compared to some of the newer startups that are in TechCrunch.

Business Insider reports that the company has fired the new VP of Product and is pursuing a new production direction. She had only arrived from Twitter 6 months earlier. An internal memo from HR a couple of days says that the company’s doing some minor internal restructuring.

You see consultants in the meeting rooms, but you don’t know what they’re doing.

A month later, you gather for a televised all-hands meeting, broadcast from the company’s HQ. The CEO delivers a short speech announcing that the company’s been acquired by Oracle, explaining how it will accelerate the company’s ability to deliver on its vision. He thanks everyone for being part of the company’s incredible journey. People in the audience are crying.

HR follows up explaining that as part of the acquisition, some departments will be downsized. You’re told that your stock options are “underwater”. When you Google this, you find out that they’re worthless. You’ve got some friends in engineering who are being given Oracle stock as a “retention package”, but that doesn’t apply to anyone in sales. You wonder why you ever joined a startup in the first place.







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