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Most startups fail. Bogus plans and an inability to close deals are probably just the signs that failure is coming for that company. As someone going to work

by pg 13y ago

Most startups fail. Bogus plans and an inability to close deals are probably just the signs that failure is coming for that company. As someone going to work for a startup, you're in much the same position as an investor. It won't be fun or lucrative to work for one that fails, so you're trying to predict which ones will succeed. In fact, it's even more important for you than for investors, because your portfolio consists of a single company. So I would suggest doing what investors do, and try (a) to learn as much as you can about how to predict which startups will succeed, and (b) analyze any company you're considering working for very thoroughly. I've written a lot about how to predict which startups will succeed. I'd look for a startup with very determined founders who are working on a problem that grew organically out of their own experiences.

7Figures2Commas 13y ago
> I'd look for a startup with very determined founders who are working on a problem that grew organically out of their own experiences. I'd go slightly further than that: look for founders who are working on a problem that grew organically out of their own experiences in an industry in which they have real domain expertise. A lot of today's startups are doomed to fail because the founders are trying to "disrupt" industries that they really don't know anything about and have no relationships in. Ironically, however, the people who have deep knowledge about an industry and the connections to navigate it often aren't what many prospective startup employees would consider "technical" (i.e. they don't "code"), so they're dismissed, particularly in places like Silicon Valley. Finally, it's worth pointing out that successful companies often fail to deliver attractive financial returns for employees beyond salary, so it's not enough to try to identify companies you believe have higher probabilities of success. You have to be able to negotiate a quality equity package with them. The average prospective employee is not going to be able to do that, especially in Silicon Valley, where: 1. Exorbitant valuations help justify miniscule equity grants for most employees. 2. A reliance on capital from professional investors (angels, VCs) results in dilution and the granting of preferences to certain classes of stock, leaving employee equity extremely vulnerable. The best advice I could give to someone wanting to join a startup who is driven, in part, by the potential for financial return, is to instead seek opportunities to partner with folks who are deep in a particular industry, preferably unsexy, who wouldn't get the time of day from an engineer in Palo Alto because they can't write code and are probably older than 35. These people are not hard to find if you leave Bubbleville.
- pg 13y ago
  We like domain expertise, but empirically it's not critical. The Airbnbs knew zero about the hospitality industry when they started. They just knew they'd had a life-changing experience when they rented out airbeds on their floor during a conference. The Stripes didn't know anything about payments before they started Stripe, except what any hacker who'd tried to process payments before Stripe did (that existing options were terrible). And it was because the Homejoys didn't know how to clean, and thus found themselves living in squalor, that they ended up starting Homejoy. It's also rare for a startup to succeed without making money for the employees. The founders have the same type of stock as the employees, so the founders generally can't make money without the employees also doing so. There are occasionally cases where a startup gets so close to death that it has to raise money on terms that wipe out all the existing shareholders (including the founders), and then goes on to succeed. But usually those successes are middling anyway. I agree about unsexy ideas though. All the startups I mentioned were unsexy ideas to start with, though their success has made some of the ideas seem somewhat sexier.
  - 7Figures2Commas 13y ago
    > We like domain expertise, but empirically it's not critical. That's quite a statement. Companies like AirBnB are exceptions, not rules. If you look at most of the top tech IPOs in 2013, which is as legitimate a way as any of identifying companies that have actually delivered liquidity to employees, there's domain expertise everywhere. Examples: Veeva - founder was previously at salesforce.com, PeopleSoft, IBM Marketo - founders hailed from Epiphany FireEye - founded by a former Sun Microsystems engineer Zulily - founded by Blue Nile execs Tableau Software - founded by university researchers who specialized in data visualization Rocket Fuel - founders all worked in ads at Yahoo RingCentral - founder previously sold a software communications company to Motorola Pretending that you can spot the next Mark Zuckerberg or Brian Chesky is a fool's errand if you're a prospective startup employee. Domain expertise doesn't guarantee success, but it is more likely to minimize certain risks, particularly those around market fit and sales. > It's rare for a startup to succeed without making money for the employees though. A founder who owns 4% of a $1 billion company gets a $40 million pay day when his company goes public. And chances are he's going to be receiving more equity if he's still a member of the management team. An employee who owns .01% of a $1 billion company gets a $100,000 bonus when his company goes public. Even if you own .1%, you won't net $1 million after taxes. This is not the type of "making money" many early startup employees are after. Simply put, the idea that owning a smaller piece of a bigger pie is better than owning a bigger piece of a smaller pie doesn't stand up to scrutiny in Silicon Valley because most startups don't go public at billion-dollar valuations and the vast majority of M&A deals are under $50 million. The odds that you are going to work at Facebook in 2006 or AirBnB in 2009 are not very high. Heck, the odds are that you won't even get an exit, so why not work for (or with) somebody who isn't figuring things out for the first time?

by pg 13y ago

7Figures2Commas 13y ago

> I'd look for a startup with very determined founders who are working on a problem that grew organically out of their own experiences. I'd go slightly further than that: look for founders who are working on a problem that grew organically out of their own experiences in an industry in which they have real domain expertise. A lot of today's startups are doomed to fail because the founders are trying to "disrupt" industries that they really don't know anything about and have no relationships in. Ironically, however, the people who have deep knowledge about an industry and the connections to navigate it often aren't what many prospective startup employees would consider "technical" (i.e. they don't "code"), so they're dismissed, particularly in places like Silicon Valley. Finally, it's worth pointing out that successful companies often fail to deliver attractive financial returns for employees beyond salary, so it's not enough to try to identify companies you believe have higher probabilities of success. You have to be able to negotiate a quality equity package with them. The average prospective employee is not going to be able to do that, especially in Silicon Valley, where: 1. Exorbitant valuations help justify miniscule equity grants for most employees. 2. A reliance on capital from professional investors (angels, VCs) results in dilution and the granting of preferences to certain classes of stock, leaving employee equity extremely vulnerable. The best advice I could give to someone wanting to join a startup who is driven, in part, by the potential for financial return, is to instead seek opportunities to partner with folks who are deep in a particular industry, preferably unsexy, who wouldn't get the time of day from an engineer in Palo Alto because they can't write code and are probably older than 35. These people are not hard to find if you leave Bubbleville.

pg 13y ago
We like domain expertise, but empirically it's not critical. The Airbnbs knew zero about the hospitality industry when they started. They just knew they'd had a life-changing experience when they rented out airbeds on their floor during a conference. The Stripes didn't know anything about payments before they started Stripe, except what any hacker who'd tried to process payments before Stripe did (that existing options were terrible). And it was because the Homejoys didn't know how to clean, and thus found themselves living in squalor, that they ended up starting Homejoy. It's also rare for a startup to succeed without making money for the employees. The founders have the same type of stock as the employees, so the founders generally can't make money without the employees also doing so. There are occasionally cases where a startup gets so close to death that it has to raise money on terms that wipe out all the existing shareholders (including the founders), and then goes on to succeed. But usually those successes are middling anyway. I agree about unsexy ideas though. All the startups I mentioned were unsexy ideas to start with, though their success has made some of the ideas seem somewhat sexier.
- 7Figures2Commas 13y ago
  > We like domain expertise, but empirically it's not critical. That's quite a statement. Companies like AirBnB are exceptions, not rules. If you look at most of the top tech IPOs in 2013, which is as legitimate a way as any of identifying companies that have actually delivered liquidity to employees, there's domain expertise everywhere. Examples: Veeva - founder was previously at salesforce.com, PeopleSoft, IBM Marketo - founders hailed from Epiphany FireEye - founded by a former Sun Microsystems engineer Zulily - founded by Blue Nile execs Tableau Software - founded by university researchers who specialized in data visualization Rocket Fuel - founders all worked in ads at Yahoo RingCentral - founder previously sold a software communications company to Motorola Pretending that you can spot the next Mark Zuckerberg or Brian Chesky is a fool's errand if you're a prospective startup employee. Domain expertise doesn't guarantee success, but it is more likely to minimize certain risks, particularly those around market fit and sales. > It's rare for a startup to succeed without making money for the employees though. A founder who owns 4% of a $1 billion company gets a $40 million pay day when his company goes public. And chances are he's going to be receiving more equity if he's still a member of the management team. An employee who owns .01% of a $1 billion company gets a $100,000 bonus when his company goes public. Even if you own .1%, you won't net $1 million after taxes. This is not the type of "making money" many early startup employees are after. Simply put, the idea that owning a smaller piece of a bigger pie is better than owning a bigger piece of a smaller pie doesn't stand up to scrutiny in Silicon Valley because most startups don't go public at billion-dollar valuations and the vast majority of M&A deals are under $50 million. The odds that you are going to work at Facebook in 2006 or AirBnB in 2009 are not very high. Heck, the odds are that you won't even get an exit, so why not work for (or with) somebody who isn't figuring things out for the first time?