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Avoiding Zombie Startups

203 points by zerogvt 8y ago

ttul 8y ago
#6 Have a crystal ball that can predict the future. Since the success of a startup is often based on unpredictable changes in markets, technology, or world events, even if you follow all of the other steps here to avoid a zombie startup, you may end up in one. And you may avoid a startup that was really onto something. Okay, so I am being a little satirical. But honestly, if it was so easy to pick winners, VCs would invest in far fewer companies. As an individual trying to pick the winner, you have close to zero probability of being right.
- __exit__ 8y ago
  Agreed. Until you do not enter a startup, it's hard to know how it actually works. During interviews and preliminary hiring-talks they may sell the pitch as if everything were wonderful, but potentially, the unfortunate reality could be that things are not that nice.
  - ummonk 8y ago
    And then you lose what, a few months of your time? Certainly a significant investment but hardly the end of the world.
    - __exit__ 8y ago
      Losing a few months once in a while may be bearable, and even worthwhile as a positive experience towards a more selective criteria regarding future workplaces. However, I would argue that depending on one's need and situation, time is gold, and jumping from one zombie startup to another continuously may not be feasible.
    - wsy 8y ago
      It hurts your CV, too. You can do this once, but if you stay for only a few months at 3 startups in a row, I probably wouldn't hire you anymore. The risk is too high that you would leave the 4th startup as well.
      - DBCerigo 8y ago
        I haven't found that this has hurt my CV, or more specifically my ability to get hired by subsequent startups, at all, in fact the larger amount and larger variety of my proven expertise from working at multiple startups for relatively short periods seems to have only increased my ability to land jobs. And further, the varied experience I got at them has very quickly removed the ross-tinted view of the startup world and taught me hugely on what to look for and what to watch out for. Disclaimer being that in each instance I joined in good faith, worked hard and added value to the company quickly (at least in the companies eyes), did my best to pragmatically resolve any major issue that happen to arise, and left once those resolutions reached a roadblock and that I felt I had made all reasonable attempts to fix things. On reflection it was always just a case of losing faith in the leadership of the company. My advice to anyone starting out would be to do your best due diligence (read about it) before joining, but knowing that you'll only get the real workings of place from actually working in it, and especially if you are inexperienced you will have likely overlooked some subsequently obvious warning signs (I sure know I did in the past!). Throw yourself into it 100%, get established, then assess the situation. Always do your best to give everything the benefit of the doubt, and be open to being wrong, until you really just have to admit that you're right (or in reality you _think_ you're right), then move on if you have to in the most considerate way possible. Future founders/leadership that I would want work with would (hopefully) understand my decision-making at those times, and would be confident enough that they could instil the motivation in me to continue to follow them long term.
  - deleted 8y ago
    [deleted]
- ummonk 8y ago
  Well if you do your due diligence, look for startups which offer proper equity to employees (which is sadly very rare), you have an advantage over VCs. You get the option to quit or continue working at the company and earn the rest of your invested stock. The trick is to shop around, evaluating each startup while you work for it, until you find one that has hit the jackpot and made your unversed equity very valuable.
  - simplecomplex 8y ago
    Buying 10 lottery tickets instead of 1 makes no practical difference to the odds of winning. Of course every VC, CEO, and founder will say otherwise, since they're incentivized to get people excited about their investment. VCs also place more bets in a single year than the number of startups anyone could hope to work at in a lifetime.
    - ummonk 8y ago
      But you can improve your expected returns if you get to double down on one of your lottery tickets when you know it has a high chance of winning. You invest little time in the startups that seem likely to be unsuccessful, and a lot more time in the startup that is on a path to success.
    - ttul 8y ago
      And this is why most people should just get a high paying engineering job and invest whatever excess into an angel fund.
mooreds 8y ago
It might be more interesting to write a post about how to exit a zombie startup once you've joined one, or how to determine the zombie status from the inside.
- kristopolous 8y ago
  You're usually valued and crucial at one. So try to fix it and give them the option of firing you if they don't like it. Identifying it is when they say things are going to happen but they either don't get done or some shadow of that thing gets halfway done 6 months too late. Also you may be in because it's a hot idea. If you see other companies pop up with the same idea and they are actually moving and yours isn't, then leave. First to market is irrelevant if the first people are bozos who can't scale. Everyone will steal their idea and the original innovator will trip over their shoelaces.
  - mooreds 8y ago
    > Identifying it is when they say things are going to happen but they either don't get done or some shadow of that thing gets halfway done 6 months too late. This is it! You just saved me from writing the blog post. I haven't been part of any rocketship startups, but have been part of successful bootstrapped ones, and unsuccessful zombie ones. The difference was the ability to: * state a goal * execute to achieve said goal My guess is that the chosen goals are the difference between mildly and wildly successful startups, but if you can't state a goal and execute, you're in a zombie startup. It may pretend to be alive, but it's not.
- ummonk 8y ago
  Yes, I think that would be the most useful piece of advice (and probably something that inexperienced employees right out of college, tend to be particularly bad at).
gdhbcc 8y ago
What are the big drawbacks of joining a zombie startup? What should I look out for? I'm currently considering an offer from one that basically ticks every checkmark on the list, so I'd love to know what is bad about it
- officialchicken 8y ago
  Unless you are a founder, look for product-market fit, growth and revenue. Think like an investor. Otherwise you will show up one day and are told, "We have to let everyone go". Or a permanent 50% salary cut with no notice the day before payroll.
- jforman 8y ago
  Worst case: it's a stressful waste of time that doesn't help your career. Stressful because the company is already in distress. Maybe the employees aren't aware, and maybe even the founders themselves are too naive to be aware, but the founders will be heavily under the gun to find a path to satisfy the hype they've built up. Or they'll check out if they don't even care to get back on the path. Waste of time because you won't learn anything in a flailing, failing company. Doesn't help your career because of the lack of learning and growth opportunities within a distressed company. Nobody will be impressed by the entry on your resume. Will likely hurt because of the opportunity cost, even. I disagree with the author that being an early employee is a solid path to make you wealthy — that only happens when a company experiences sharp growth after you join and finds liquidity at a much higher price than your option price. That happens but is rare. A better benefit is to jump-start your career and get experience you wouldn't be able to get at a BigCo. For that all you need is upward mobility in a well-performing startup. And you won't get that at a distressed company.
- vinceguidry 8y ago
  Seeing a friend of mine go through that rigmarole more than once, my observations are that zombie startups simply aren't nice places to work, it's always crunch time, you're always piling on tech debt, and wiping your ass with the equity grant will serve you better than waiting for it to vest. The culture can turn hostile in an instant, and toxic management hires can come out of nowhere and upset the apple cart just to make their company look good for the mirage of an aquihire. The founders don't give two shits about your career, mental health, or really anything, just meeting the next milestone.
codingdave 8y ago
Let us cut off an underlying assumption of the article - that only rocket ship startups with massive exits are worthwhile places to work. That simply isn't true. A long, slow, stable growth of a bootstrapped company can still give a lucrative exit because there is no dilution. You also can be a multi-millionaire with simple saving and investments, no "exit" needed. Non-funded startups also can produce less stress as you get profitable and nobody is pushing you for a billion dollar exit. You can decide as a group if you want to push for something larger or just enjoy the ride and have more time with your family. These are not bad things. As was mentioned in a few threads over the past few weeks, nobody lies on their deathbed wishing they had done more work and spent less time with friends and family. While VC-driven startups can give you a large exit, so can playing the lottery. Don't fool yourself into thinking this is a guaranteed get rich plan. By all means, try it if you have the time and energy and enjoy the work. But if you don't have the passion and energy for VC-funded startups, then admit that to yourself and do something else.
- intellectronica 8y ago
  Working for a VC-backed startup is definitely not a guaranteed get-rich-quick scheme, but working for a low wage at a no/slow-growth "startup" is a guaranteed stay-poor scheme.
  - mathattack 8y ago
    I disagree. It depends on how sticky it is with the customers. I recall a small mortgage data vendor who owned a tiny niche of the market. They had ~3-5mm in revenue and 7 employees, several of which who were admins. Most made better money than in comparable jobs. The founder did extremely well on a cash basis. He didn’t need expensive salespeople because he had saturated the market. He couldn’t retire young, but I’m pretty sure he owned his house and could send his kids to whatever school he wanted. This is just one too of mind data point.
    - B0btheBuilder 8y ago
      The parent comment wrote one sentence. How did you miss the "working for a low wage" part?
jgh 8y ago
is it just me or does the link to their website not work? Is a non-functional website a good or a bad indicator? Edit: www works, https://thefamily.co https://thefamily.co doesn't...but the link in the post points to the second one.
- mygo 8y ago
  it means they didn't set up their DNS records properly.
scarface74 8y ago
But here in the real world outside of the HN Silicon Valley bubble, most would be statistically better off working for a company with a mostly guaranteed combination of salary+guaranteed stock over a known vesting period that is competitive with the market. If the company is private, negotiate for a salary that’s competitive with the market. “Competitive” doesn’t mean that everyone is going to move to SV and work for a FAANG.
commandlinefan 8y ago
Now that I've got quite a bit of experience behind me, I've started to become very attuned to "savior-seeking": somebody (or a group of people) who underestimated how difficult building a business was going to be and is now underwater, desperate for a lifeline. Although I (sort of) sympathize with the position they're in, I also know that I don't have the magic that they expect, or the 24/7 availability they're going to need, to dig them out of the hole they've put themselves in.
michaelbuckbee 8y ago
This seems well intentioned, but it strains credulity on a couple fronts: 1. This article is referring to VC backed startups, which generally speaking 9 of 10 die. Are you going to statistically better at picking a winner than a VC (consider also that you aren't diversifying your investment as you only work at 1 startup at a time). 2. While transparency is indeed key, there are levels. It's unlikely any company is going to be so radically transparent as to tell you the details you'd need to actually determine their financial fitness going forward. Consider that Telltale Games last week managed to both hire a new developer, move them across the country and then call them into a meeting to let them know that they'd be let go along with most of the rest of the company in a massive layoff. That's a lack of transparency as to what is happening _within_ the company. 3. VC backed startups are just inherently volatile. I worked for a YC company that raised between $75-$100 mil (keeping it vague) and they were more or less insane: just weird unforced errors and oddness and Steve Jobs complex. They recently closed as their round failed due to a combination of IP theft, "Trump trade issues" and inability to execute in the face of more advanced competitors. It's often not just one thing that pushes a startup from "rocket ship" to "zombie", it's everything. 4. Being an early stage employee (non-founder) is a rough spot. Typically you're taking less on salary because of "generous" equity. However, you're also expected to work founder hours. As liquidity events have diminished, so have opportunities to actually cash out. All that being said, I'd still encourage people to work for a startup, but to do it on their own terms: to learn, to get a new experience, to try and set yourself up to do your own creation. Please just don't rely on picking a rocketship.
- lmm 8y ago
  > Consider that Telltale Games last week managed to both hire a new developer, move them across the country and then call them into a meeting to let them know that they'd be let go along with most of the rest of the company in a massive layoff. That's a lack of transparency as to what is happening _within_ the company. Does that mean there are no companies that do better than that, though?
dullroar 8y ago
Disclosure: I worked for various "startup" companies starting in 1991 through 2005. One got bought by a large company and made me some money, but not a life-changing amount. Some others variously went into "zombie" mode. One got bought by a company that simply milks the existing customer base for support revenue. One failed outright. That said, when the first company was bought, there was a product that the buying company didn't want to continue to support. Some friends of mine made an agreement to take over that product, and started a company to do so. They never grew the customer base that much - it was a niche product. However, they were able to continue to work together as friends, have decent paychecks with 100% company-paid insurance, and after about 15 years, sold out to a company for enough to allow for comfortable (not rich) retirements. This was all on purpose and was discussed frequently by them - "Do we want to grow, or do we want to enjoy what we're doing, have some free time, less stress, and remain friends?" I've always thought that was a FINE model for a company, if you can pull it off. I always wanted to work there (did some consulting for them), but they could never grow quite enough to hire me. Ah, well. :)
- kenhwang 8y ago
  That's the story of the startup I work for as well. It survived long enough to find it's niche product and then stabilized. Everyone had decent pay and great hours. Eventually an exit opportunity came around and we all made some money. Parent org lets us keep maintaining and developing our niche product more or less independently. The more ambitious execs moved up into the parent org, but the rest of us remain friends working at a comfortable job.
- sombremesa 8y ago
  Those aren't really startups though, at least according to Paul Graham. Those are more akin to small businesses. A startup is born to scale exponentially.
  - GreeniFi 8y ago
    PG’s definition is only one, very VC-oriented definition. I think a layman’s definition would be a new for-profit organization started to solve problems, likely but not exclusively, using technology to do so.
bogomipz 8y ago
The article makes a couple of references to "public actors": >"Business angels investing with strong tax incentives, universities or companies filling up their marketing brochures and public actors who aren’t betting their own money at all are a couple examples. So don’t settle for “We’ve raised a Series A”: Ask with whom and look them up. If you see that the money raised just comes from public actors, ..." Could someone say what is a "public actor"? I am not familiar with this term.
- prablenha 8y ago
  The government.
  - bogomipz 8y ago
    Could you elaborate? Where does the government do angel investing?
    - sulam 8y ago
      I don't think anyone limited it to angels. And governments do investing all the time, they just don't always call it that. Solyndra and 38 Studios are two notable failures, for instance.
      - bogomipz 8y ago
        Indeed, I misinterpreted that passage. Thank you.
    - hef19898 8y ago
      Governments also invest indirectly through big contracts, hard to come by so. SpaceX and NASA come to mind as one example, also an exception at the same time
  - sulam 8y ago
    Arguably pensions, too. Although I don't know of pensions that invest in startups, it wouldn't surprise me to find out there are some given the market these days. I would also argue that corporate investing arms tick this box. It's "other people's money" twice removed. In fact, the degree to which you're betting other people's money is probably the rubric here. Angels are investing their money (usually -- crowd funding has made this murkier). VC's are betting an LP's money, and if they fail to return value they will have a hard time raising another fund and will eventually "die". (VCs are the real zombies in the startup ecosystem!) Other entities are further away from the money and the consequences they will feel if the investment doesn't pay off. I'd also look at motivation. This is another area where governments and corporate investing often fail. Governments are usually motivated in ways that aren't aligned with the startup world, and invest money in ways that seem irrational (at least to a startup) as a result. Corporate investing arms are often treating their investments as an extension of corporate development as well as a way to get an option on ideas that either formally spin out of the company or that people leave the company to start. All of these are subject to distortions that pull them away from focusing solely on chance of success.
mygo 8y ago
They make joining a startup seem like it's supposed to be a get rich quick scheme. Focusing on how someone can buy shares at low price and sell high kind of only selects for one kind of company -- the VC funded company whose entire goal is either an IPO or an acquisition. What about the startup that has no plans for acquisitions nor IPO's, and is not in the business of giving out shares to employees, yet can pay their employees great competitive wages with benefits? Most startups fail. Opting for equity that might be worth more tomorrow at the expense of liquid cash today doesn't sound much different than buying a lottery ticket and hoping you picked the right numbers. Why not look at the offer at face-value instead? Is there decent pay? How much BS will I have to deal with? Is there opportunity for career advancement (if I care about that)? If I have to leave, will I be more competitive in the marketplace? Will I have a life outside of work?
mlthoughts2018 8y ago
The first sentence... > “People tend to underestimate the financial opportunity that startups represent for early employees.” I would laugh if it wasn’t so sad.
- rocky1138 8y ago
  I had to read it twice because I thought i must have missed a "not" or something to match my expectations of where I thought the sentence was going.
tenpoundhammer 8y ago
Reading the comments on this an post and many others about compensation and payouts makes me feel like I'm losing my mind. I grew up in a lower-middle-class house where both my parents worked for the postal service. Both parents worked strange and/or long hours and they performed very physically demanding work. I can remember several cases of them being out of work because of injuries. We were never poor but we never had extra. Meaning we always had food and cable television but rarely went out to eat or went on vacations. I took a major liking to computer programming and pursued that as a career since high school. I find it unbelievable that I make a good living off of doing a job that I find really enjoyable and plus I make great money doing it. My first job out of college I started working for a major manufacturer of PC's and printers and I started off with a higher salary than what my dad was making at the time, $65,000. I thought I was rich and set for life. Working in the software industry makes me feel like I'm on another planet, I'm just excited to keep getting a paycheck every two weeks and then I read discussions about people chasing lotteries or trying to pull in 250k with bonuses. I don't think it's bad to maximize your earning potential but the figures and mentality around feel so foreign to me. All that to say it's just a weird experience going from rural Oregon to the software industry and see the massive difference in lifestyle and the relationship people have with work.
- throwaway5752 8y ago
  You're not losing your mind, same here. I think a lot - particularly on the younger side - have done almost nothing besides software in a serious way. A lot of people have no perspective on how hard life is for a really large chunk of this country. The "go away to southeast asia and live on a beach for 6 months to reset yourself" is the one that makes me feel most out of touch. If/when we have another crunch some people will have very rude wake up calls.
  - tenpoundhammer 8y ago
    Thanks for the affirmation, the software community can be an isolating place for people living outside the main stream.
  - s73v3r_ 8y ago
balls187 8y ago
Here is my opinion on why you should join a startup (or any company for that matter) in order of descending importance. 1. You like the people, and they like you. 2. You like what the company is doing. 3. You need a job.
- gwbas1c 8y ago
  I like to add: Won't go out of business tomorrow Of course, what "tomorrow" is, is highly dependent on your personal situation.
- philprx 8y ago
  4. I don't know all that is required, I'm going to learn, I love to learn, and the hiring company is ok with me learning and not having 100% skills mastery. Often the case in startups. Cf. post/discussion about "hiring unproven people" earlier on HN.
mrnobody_67 8y ago
Best risk adjusted returns come from late stage startups - Series C or D typically - for VP level roles that get 1% grants ($4-$10m value over 4 years). Highly de-risked. At year two or three the company will also likely top up the equity if they want you to stay... just negotiate a 10 year exercise window, so you're not writing a check on your way out the door. For whatever reason, why individual contributor equity grants fall off a cliff after Seed or Series A, the VPs remain relatively constant even as the value of the company goes up 20-50x while risk plummets.
jiveturkey 8y ago
Rather thin and worthless article, not really deserving of what looks to be on its way to a 100 comment article. Very first sentence: > People tend to underestimate the financial opportunity that startups represent for early employees. um, no, absolutely, emphatically not. This article is written by a person whose job is headhunting for startups. So off the bat, the bias is off the charts. It's exactly the opposite. People (employee candidates) tend to overestimate the financial opportunity, both in value and likelihood. > But being good at picking which startup to join as an employee means, in part, being as diligent as an investor. Diligent sure, but nowhere does the article explain such diligence, and anyway investor diligence is not anything like employee diligence. All the points have flaws, but one general theme stood out, that they are pushing equity vs salary.
rocky1138 8y ago
These are all great points but they assume you have the financial freedom and the understanding that you'll actually get offers which gives you the freedom to pick the perfect startup for you. Most of the time, in reality, I've had to pick from one or two while my savings are quickly dwindling.
megamindbrian2 8y ago
Woohoo, immigration!!
poulsbohemian 8y ago
While it's true that you are unlikely to hit it big as a startup employee, I think the article misses some of the real reasons to not join a zombie startup. I worked at one many years ago and the problem was there was no place to take your career. The stock wasn't going anywhere, compensation was lackluster, the company wasn't going to expand, and thus the only way to get a promotion was to sit there and build personal connections, IE: not based on merit, rather on drinking buddies / nepotism / etc. The career challenges - responsibility, technology, etc were not great. So, it was a good place to be an alumni in terms of connections, but there was no other benefit.
MaintenanceMode 8y ago
Zombie startups can hurt people in more ways than just a lack of a big payday. I joined a zombie startup. I wasn't there for the quick money or the get rich quick scheme or anything like that. Yes, the potential of a payday was part of the equation, but I joined because I hadn't been at a startup in 15 years and I was in a place in life where I had alignment on motivation, financial stability, ability, and desire to contribute. I went in wanting to work hard, do great things and have a lot of fun in the process. If there were great financial rewards that would've been great. So, it's not all about the money. I lost a year of my career working at this dump that turned out to be a zombie. And it's a facepalm now, but all the warning signs were there: great coverage in the press, awards, prizes and so forth, a continuous source of funding through VCs and private investors, lots of customers, etc. I didn't see the warts until it was too late. It wasn't until a few months in that I realized that it was operating like a comfortable place to just put in 8 hours a day for most people. The bureaucracy was worse at this 200 person company than it was at the large company I'd left.
SZJX 8y ago
Late comment though I'm not sure if point 2 about awards and press coverage is true. Surely you can't spend all your time on marketing but you still need to gain traction somehow? I would like to see some opinions on this.

203 points by zerogvt 8y ago

ttul 8y ago

#6 Have a crystal ball that can predict the future. Since the success of a startup is often based on unpredictable changes in markets, technology, or world events, even if you follow all of the other steps here to avoid a zombie startup, you may end up in one. And you may avoid a startup that was really onto something. Okay, so I am being a little satirical. But honestly, if it was so easy to pick winners, VCs would invest in far fewer companies. As an individual trying to pick the winner, you have close to zero probability of being right.

__exit__ 8y ago
Agreed. Until you do not enter a startup, it's hard to know how it actually works. During interviews and preliminary hiring-talks they may sell the pitch as if everything were wonderful, but potentially, the unfortunate reality could be that things are not that nice.
- ummonk 8y ago
  And then you lose what, a few months of your time? Certainly a significant investment but hardly the end of the world.
  - __exit__ 8y ago
    Losing a few months once in a while may be bearable, and even worthwhile as a positive experience towards a more selective criteria regarding future workplaces. However, I would argue that depending on one's need and situation, time is gold, and jumping from one zombie startup to another continuously may not be feasible.
  - wsy 8y ago
    It hurts your CV, too. You can do this once, but if you stay for only a few months at 3 startups in a row, I probably wouldn't hire you anymore. The risk is too high that you would leave the 4th startup as well.
    - DBCerigo 8y ago
      I haven't found that this has hurt my CV, or more specifically my ability to get hired by subsequent startups, at all, in fact the larger amount and larger variety of my proven expertise from working at multiple startups for relatively short periods seems to have only increased my ability to land jobs. And further, the varied experience I got at them has very quickly removed the ross-tinted view of the startup world and taught me hugely on what to look for and what to watch out for. Disclaimer being that in each instance I joined in good faith, worked hard and added value to the company quickly (at least in the companies eyes), did my best to pragmatically resolve any major issue that happen to arise, and left once those resolutions reached a roadblock and that I felt I had made all reasonable attempts to fix things. On reflection it was always just a case of losing faith in the leadership of the company. My advice to anyone starting out would be to do your best due diligence (read about it) before joining, but knowing that you'll only get the real workings of place from actually working in it, and especially if you are inexperienced you will have likely overlooked some subsequently obvious warning signs (I sure know I did in the past!). Throw yourself into it 100%, get established, then assess the situation. Always do your best to give everything the benefit of the doubt, and be open to being wrong, until you really just have to admit that you're right (or in reality you _think_ you're right), then move on if you have to in the most considerate way possible. Future founders/leadership that I would want work with would (hopefully) understand my decision-making at those times, and would be confident enough that they could instil the motivation in me to continue to follow them long term.
- deleted 8y ago
  [deleted]
ummonk 8y ago
Well if you do your due diligence, look for startups which offer proper equity to employees (which is sadly very rare), you have an advantage over VCs. You get the option to quit or continue working at the company and earn the rest of your invested stock. The trick is to shop around, evaluating each startup while you work for it, until you find one that has hit the jackpot and made your unversed equity very valuable.
- simplecomplex 8y ago
  Buying 10 lottery tickets instead of 1 makes no practical difference to the odds of winning. Of course every VC, CEO, and founder will say otherwise, since they're incentivized to get people excited about their investment. VCs also place more bets in a single year than the number of startups anyone could hope to work at in a lifetime.
  - ummonk 8y ago
    But you can improve your expected returns if you get to double down on one of your lottery tickets when you know it has a high chance of winning. You invest little time in the startups that seem likely to be unsuccessful, and a lot more time in the startup that is on a path to success.
  - ttul 8y ago
    And this is why most people should just get a high paying engineering job and invest whatever excess into an angel fund.

mooreds 8y ago

It might be more interesting to write a post about how to exit a zombie startup once you've joined one, or how to determine the zombie status from the inside.

kristopolous 8y ago
You're usually valued and crucial at one. So try to fix it and give them the option of firing you if they don't like it. Identifying it is when they say things are going to happen but they either don't get done or some shadow of that thing gets halfway done 6 months too late. Also you may be in because it's a hot idea. If you see other companies pop up with the same idea and they are actually moving and yours isn't, then leave. First to market is irrelevant if the first people are bozos who can't scale. Everyone will steal their idea and the original innovator will trip over their shoelaces.
- mooreds 8y ago
  > Identifying it is when they say things are going to happen but they either don't get done or some shadow of that thing gets halfway done 6 months too late. This is it! You just saved me from writing the blog post. I haven't been part of any rocketship startups, but have been part of successful bootstrapped ones, and unsuccessful zombie ones. The difference was the ability to: * state a goal * execute to achieve said goal My guess is that the chosen goals are the difference between mildly and wildly successful startups, but if you can't state a goal and execute, you're in a zombie startup. It may pretend to be alive, but it's not.
ummonk 8y ago
Yes, I think that would be the most useful piece of advice (and probably something that inexperienced employees right out of college, tend to be particularly bad at).

gdhbcc 8y ago

What are the big drawbacks of joining a zombie startup? What should I look out for? I'm currently considering an offer from one that basically ticks every checkmark on the list, so I'd love to know what is bad about it

officialchicken 8y ago
Unless you are a founder, look for product-market fit, growth and revenue. Think like an investor. Otherwise you will show up one day and are told, "We have to let everyone go". Or a permanent 50% salary cut with no notice the day before payroll.
jforman 8y ago
Worst case: it's a stressful waste of time that doesn't help your career. Stressful because the company is already in distress. Maybe the employees aren't aware, and maybe even the founders themselves are too naive to be aware, but the founders will be heavily under the gun to find a path to satisfy the hype they've built up. Or they'll check out if they don't even care to get back on the path. Waste of time because you won't learn anything in a flailing, failing company. Doesn't help your career because of the lack of learning and growth opportunities within a distressed company. Nobody will be impressed by the entry on your resume. Will likely hurt because of the opportunity cost, even. I disagree with the author that being an early employee is a solid path to make you wealthy — that only happens when a company experiences sharp growth after you join and finds liquidity at a much higher price than your option price. That happens but is rare. A better benefit is to jump-start your career and get experience you wouldn't be able to get at a BigCo. For that all you need is upward mobility in a well-performing startup. And you won't get that at a distressed company.
vinceguidry 8y ago
Seeing a friend of mine go through that rigmarole more than once, my observations are that zombie startups simply aren't nice places to work, it's always crunch time, you're always piling on tech debt, and wiping your ass with the equity grant will serve you better than waiting for it to vest. The culture can turn hostile in an instant, and toxic management hires can come out of nowhere and upset the apple cart just to make their company look good for the mirage of an aquihire. The founders don't give two shits about your career, mental health, or really anything, just meeting the next milestone.

codingdave 8y ago

Let us cut off an underlying assumption of the article - that only rocket ship startups with massive exits are worthwhile places to work. That simply isn't true. A long, slow, stable growth of a bootstrapped company can still give a lucrative exit because there is no dilution. You also can be a multi-millionaire with simple saving and investments, no "exit" needed. Non-funded startups also can produce less stress as you get profitable and nobody is pushing you for a billion dollar exit. You can decide as a group if you want to push for something larger or just enjoy the ride and have more time with your family. These are not bad things. As was mentioned in a few threads over the past few weeks, nobody lies on their deathbed wishing they had done more work and spent less time with friends and family. While VC-driven startups can give you a large exit, so can playing the lottery. Don't fool yourself into thinking this is a guaranteed get rich plan. By all means, try it if you have the time and energy and enjoy the work. But if you don't have the passion and energy for VC-funded startups, then admit that to yourself and do something else.

intellectronica 8y ago
Working for a VC-backed startup is definitely not a guaranteed get-rich-quick scheme, but working for a low wage at a no/slow-growth "startup" is a guaranteed stay-poor scheme.
- mathattack 8y ago
  I disagree. It depends on how sticky it is with the customers. I recall a small mortgage data vendor who owned a tiny niche of the market. They had ~3-5mm in revenue and 7 employees, several of which who were admins. Most made better money than in comparable jobs. The founder did extremely well on a cash basis. He didn’t need expensive salespeople because he had saturated the market. He couldn’t retire young, but I’m pretty sure he owned his house and could send his kids to whatever school he wanted. This is just one too of mind data point.
  - B0btheBuilder 8y ago
    The parent comment wrote one sentence. How did you miss the "working for a low wage" part?

jgh 8y ago

is it just me or does the link to their website not work? Is a non-functional website a good or a bad indicator? Edit: www works, https://thefamily.co https://thefamily.co doesn't...but the link in the post points to the second one.

mygo 8y ago
it means they didn't set up their DNS records properly.

scarface74 8y ago

But here in the real world outside of the HN Silicon Valley bubble, most would be statistically better off working for a company with a mostly guaranteed combination of salary+guaranteed stock over a known vesting period that is competitive with the market. If the company is private, negotiate for a salary that’s competitive with the market. “Competitive” doesn’t mean that everyone is going to move to SV and work for a FAANG.

commandlinefan 8y ago

Now that I've got quite a bit of experience behind me, I've started to become very attuned to "savior-seeking": somebody (or a group of people) who underestimated how difficult building a business was going to be and is now underwater, desperate for a lifeline. Although I (sort of) sympathize with the position they're in, I also know that I don't have the magic that they expect, or the 24/7 availability they're going to need, to dig them out of the hole they've put themselves in.

michaelbuckbee 8y ago

This seems well intentioned, but it strains credulity on a couple fronts: 1. This article is referring to VC backed startups, which generally speaking 9 of 10 die. Are you going to statistically better at picking a winner than a VC (consider also that you aren't diversifying your investment as you only work at 1 startup at a time). 2. While transparency is indeed key, there are levels. It's unlikely any company is going to be so radically transparent as to tell you the details you'd need to actually determine their financial fitness going forward. Consider that Telltale Games last week managed to both hire a new developer, move them across the country and then call them into a meeting to let them know that they'd be let go along with most of the rest of the company in a massive layoff. That's a lack of transparency as to what is happening _within_ the company. 3. VC backed startups are just inherently volatile. I worked for a YC company that raised between $75-$100 mil (keeping it vague) and they were more or less insane: just weird unforced errors and oddness and Steve Jobs complex. They recently closed as their round failed due to a combination of IP theft, "Trump trade issues" and inability to execute in the face of more advanced competitors. It's often not just one thing that pushes a startup from "rocket ship" to "zombie", it's everything. 4. Being an early stage employee (non-founder) is a rough spot. Typically you're taking less on salary because of "generous" equity. However, you're also expected to work founder hours. As liquidity events have diminished, so have opportunities to actually cash out. All that being said, I'd still encourage people to work for a startup, but to do it on their own terms: to learn, to get a new experience, to try and set yourself up to do your own creation. Please just don't rely on picking a rocketship.

lmm 8y ago
> Consider that Telltale Games last week managed to both hire a new developer, move them across the country and then call them into a meeting to let them know that they'd be let go along with most of the rest of the company in a massive layoff. That's a lack of transparency as to what is happening _within_ the company. Does that mean there are no companies that do better than that, though?

dullroar 8y ago

Disclosure: I worked for various "startup" companies starting in 1991 through 2005. One got bought by a large company and made me some money, but not a life-changing amount. Some others variously went into "zombie" mode. One got bought by a company that simply milks the existing customer base for support revenue. One failed outright. That said, when the first company was bought, there was a product that the buying company didn't want to continue to support. Some friends of mine made an agreement to take over that product, and started a company to do so. They never grew the customer base that much - it was a niche product. However, they were able to continue to work together as friends, have decent paychecks with 100% company-paid insurance, and after about 15 years, sold out to a company for enough to allow for comfortable (not rich) retirements. This was all on purpose and was discussed frequently by them - "Do we want to grow, or do we want to enjoy what we're doing, have some free time, less stress, and remain friends?" I've always thought that was a FINE model for a company, if you can pull it off. I always wanted to work there (did some consulting for them), but they could never grow quite enough to hire me. Ah, well. :)

kenhwang 8y ago
That's the story of the startup I work for as well. It survived long enough to find it's niche product and then stabilized. Everyone had decent pay and great hours. Eventually an exit opportunity came around and we all made some money. Parent org lets us keep maintaining and developing our niche product more or less independently. The more ambitious execs moved up into the parent org, but the rest of us remain friends working at a comfortable job.
sombremesa 8y ago
Those aren't really startups though, at least according to Paul Graham. Those are more akin to small businesses. A startup is born to scale exponentially.
- GreeniFi 8y ago
  PG’s definition is only one, very VC-oriented definition. I think a layman’s definition would be a new for-profit organization started to solve problems, likely but not exclusively, using technology to do so.

bogomipz 8y ago

The article makes a couple of references to "public actors": >"Business angels investing with strong tax incentives, universities or companies filling up their marketing brochures and public actors who aren’t betting their own money at all are a couple examples. So don’t settle for “We’ve raised a Series A”: Ask with whom and look them up. If you see that the money raised just comes from public actors, ..." Could someone say what is a "public actor"? I am not familiar with this term.

prablenha 8y ago
The government.
- bogomipz 8y ago
  Could you elaborate? Where does the government do angel investing?
  - sulam 8y ago
    I don't think anyone limited it to angels. And governments do investing all the time, they just don't always call it that. Solyndra and 38 Studios are two notable failures, for instance.
    - bogomipz 8y ago
      Indeed, I misinterpreted that passage. Thank you.
  - hef19898 8y ago
    Governments also invest indirectly through big contracts, hard to come by so. SpaceX and NASA come to mind as one example, also an exception at the same time
- sulam 8y ago
  Arguably pensions, too. Although I don't know of pensions that invest in startups, it wouldn't surprise me to find out there are some given the market these days. I would also argue that corporate investing arms tick this box. It's "other people's money" twice removed. In fact, the degree to which you're betting other people's money is probably the rubric here. Angels are investing their money (usually -- crowd funding has made this murkier). VC's are betting an LP's money, and if they fail to return value they will have a hard time raising another fund and will eventually "die". (VCs are the real zombies in the startup ecosystem!) Other entities are further away from the money and the consequences they will feel if the investment doesn't pay off. I'd also look at motivation. This is another area where governments and corporate investing often fail. Governments are usually motivated in ways that aren't aligned with the startup world, and invest money in ways that seem irrational (at least to a startup) as a result. Corporate investing arms are often treating their investments as an extension of corporate development as well as a way to get an option on ideas that either formally spin out of the company or that people leave the company to start. All of these are subject to distortions that pull them away from focusing solely on chance of success.

mygo 8y ago

They make joining a startup seem like it's supposed to be a get rich quick scheme. Focusing on how someone can buy shares at low price and sell high kind of only selects for one kind of company -- the VC funded company whose entire goal is either an IPO or an acquisition. What about the startup that has no plans for acquisitions nor IPO's, and is not in the business of giving out shares to employees, yet can pay their employees great competitive wages with benefits? Most startups fail. Opting for equity that might be worth more tomorrow at the expense of liquid cash today doesn't sound much different than buying a lottery ticket and hoping you picked the right numbers. Why not look at the offer at face-value instead? Is there decent pay? How much BS will I have to deal with? Is there opportunity for career advancement (if I care about that)? If I have to leave, will I be more competitive in the marketplace? Will I have a life outside of work?

mlthoughts2018 8y ago

The first sentence... > “People tend to underestimate the financial opportunity that startups represent for early employees.” I would laugh if it wasn’t so sad.

rocky1138 8y ago
I had to read it twice because I thought i must have missed a "not" or something to match my expectations of where I thought the sentence was going.

tenpoundhammer 8y ago

Reading the comments on this an post and many others about compensation and payouts makes me feel like I'm losing my mind. I grew up in a lower-middle-class house where both my parents worked for the postal service. Both parents worked strange and/or long hours and they performed very physically demanding work. I can remember several cases of them being out of work because of injuries. We were never poor but we never had extra. Meaning we always had food and cable television but rarely went out to eat or went on vacations. I took a major liking to computer programming and pursued that as a career since high school. I find it unbelievable that I make a good living off of doing a job that I find really enjoyable and plus I make great money doing it. My first job out of college I started working for a major manufacturer of PC's and printers and I started off with a higher salary than what my dad was making at the time, $65,000. I thought I was rich and set for life. Working in the software industry makes me feel like I'm on another planet, I'm just excited to keep getting a paycheck every two weeks and then I read discussions about people chasing lotteries or trying to pull in 250k with bonuses. I don't think it's bad to maximize your earning potential but the figures and mentality around feel so foreign to me. All that to say it's just a weird experience going from rural Oregon to the software industry and see the massive difference in lifestyle and the relationship people have with work.

throwaway5752 8y ago
You're not losing your mind, same here. I think a lot - particularly on the younger side - have done almost nothing besides software in a serious way. A lot of people have no perspective on how hard life is for a really large chunk of this country. The "go away to southeast asia and live on a beach for 6 months to reset yourself" is the one that makes me feel most out of touch. If/when we have another crunch some people will have very rude wake up calls.
- tenpoundhammer 8y ago
  Thanks for the affirmation, the software community can be an isolating place for people living outside the main stream.
- s73v3r_ 8y ago

balls187 8y ago

Here is my opinion on why you should join a startup (or any company for that matter) in order of descending importance. 1. You like the people, and they like you. 2. You like what the company is doing. 3. You need a job.

gwbas1c 8y ago
I like to add: Won't go out of business tomorrow Of course, what "tomorrow" is, is highly dependent on your personal situation.
philprx 8y ago
4. I don't know all that is required, I'm going to learn, I love to learn, and the hiring company is ok with me learning and not having 100% skills mastery. Often the case in startups. Cf. post/discussion about "hiring unproven people" earlier on HN.

mrnobody_67 8y ago

Best risk adjusted returns come from late stage startups - Series C or D typically - for VP level roles that get 1% grants ($4-$10m value over 4 years). Highly de-risked. At year two or three the company will also likely top up the equity if they want you to stay... just negotiate a 10 year exercise window, so you're not writing a check on your way out the door. For whatever reason, why individual contributor equity grants fall off a cliff after Seed or Series A, the VPs remain relatively constant even as the value of the company goes up 20-50x while risk plummets.

jiveturkey 8y ago

Rather thin and worthless article, not really deserving of what looks to be on its way to a 100 comment article. Very first sentence: > People tend to underestimate the financial opportunity that startups represent for early employees. um, no, absolutely, emphatically not. This article is written by a person whose job is headhunting for startups. So off the bat, the bias is off the charts. It's exactly the opposite. People (employee candidates) tend to overestimate the financial opportunity, both in value and likelihood. > But being good at picking which startup to join as an employee means, in part, being as diligent as an investor. Diligent sure, but nowhere does the article explain such diligence, and anyway investor diligence is not anything like employee diligence. All the points have flaws, but one general theme stood out, that they are pushing equity vs salary.

rocky1138 8y ago

These are all great points but they assume you have the financial freedom and the understanding that you'll actually get offers which gives you the freedom to pick the perfect startup for you. Most of the time, in reality, I've had to pick from one or two while my savings are quickly dwindling.

megamindbrian2 8y ago

Woohoo, immigration!!

poulsbohemian 8y ago

While it's true that you are unlikely to hit it big as a startup employee, I think the article misses some of the real reasons to not join a zombie startup. I worked at one many years ago and the problem was there was no place to take your career. The stock wasn't going anywhere, compensation was lackluster, the company wasn't going to expand, and thus the only way to get a promotion was to sit there and build personal connections, IE: not based on merit, rather on drinking buddies / nepotism / etc. The career challenges - responsibility, technology, etc were not great. So, it was a good place to be an alumni in terms of connections, but there was no other benefit.

MaintenanceMode 8y ago

Zombie startups can hurt people in more ways than just a lack of a big payday. I joined a zombie startup. I wasn't there for the quick money or the get rich quick scheme or anything like that. Yes, the potential of a payday was part of the equation, but I joined because I hadn't been at a startup in 15 years and I was in a place in life where I had alignment on motivation, financial stability, ability, and desire to contribute. I went in wanting to work hard, do great things and have a lot of fun in the process. If there were great financial rewards that would've been great. So, it's not all about the money. I lost a year of my career working at this dump that turned out to be a zombie. And it's a facepalm now, but all the warning signs were there: great coverage in the press, awards, prizes and so forth, a continuous source of funding through VCs and private investors, lots of customers, etc. I didn't see the warts until it was too late. It wasn't until a few months in that I realized that it was operating like a comfortable place to just put in 8 hours a day for most people. The bureaucracy was worse at this 200 person company than it was at the large company I'd left.

SZJX 8y ago

Late comment though I'm not sure if point 2 about awards and press coverage is true. Surely you can't spend all your time on marketing but you still need to gain traction somehow? I would like to see some opinions on this.