So, You Want to Join a Startup
So, You Want to Join a Startup
Hop Aboard the Rocketship đ
All,
First of all, thank you for the lovely birthday wishes! I heard from many of you that youâve felt the same way lately, whether itâs been triggered by a birthday, or just a heavy day of social media scrolling. Whether youâre 25 or 35 or 45, being stuck in a temporary comparison trap really resonated with you⌠and I hope the newsletter nudged you to affirm the choices and paths you have taken.
Hereâs a link to an article in the Atlantic: âHow To Want Lessâ by Arthur Brooks, who writes great, thoughtful long form content about living a happy life. I found the article especially relevant in light of my birthday post.. Thereâs many great nuggets of wisdom in there, but one of my favourites: Brooks talks about a âreverse bucket listâ that focuses not on the end outcome of having more, but instead on the intrinsic forces that make one happy: love, family, relationships, purpose in work.
I also hope that youâre enjoying the first few weeks of Lunar New Year, according to superstition, that when you welcomed the Year of the Tiger, you didnât swept the house (âsweeping away good luckâ), or wash your hair (âwashing away your good fortuneâ), or eat porridge, because (AND I QUOTE), âPorridge should not be eaten, because it is considered that only poor people have porridge for breakfast, and people don't want to start the year poor.â (China Highlights)
In case youâve ever wondered what value is core to all Chinese people, regardless of location, or religion⌠the phrase we say to each other at this time of year in addition to âSun Lien Fai Lokâ (Happy New Year), is: âKung Hei Fat Choiâ which literally translates to: âGreetings, become rich.â
One more fun and hilarious fact about Chinese New Year, and it being the year of the Tiger - apparently in Chinese history, historically, would-be parents were warned about having a daughter in the year of the tiger, for fear they would be âtoo strong, too dominant and too hard to marry off.â Ah, deeply rooted cultural patriarchy.
So, happy sassy Tiger lady new year everyone! We made it through the fog of the longest January ever, and now we can move forward with kicking off 2022 properly.
This week in the newsletter, weâre going to chat about career moves from corporates to startups. Iâve found that around this time of year, Iâve noticed a number of people in my network that work for larger companies start thinking about making a move - often to a smaller, high growth company.
It makes sense, weâre on the other side of year-end reviews, and once bonuses hit bank accounts, a lot of people feel emboldened to make the leap to a completely different career profile - perhaps even one with more risk and lower near-term pay.
I went through the same career decision many moons ago, leaving investment banking (a company with 250,000 employees) to join a small fintech startup (a company with 5 employees).
In case you recently subscribed, you can read about my own career journey in my intro post, where I share about the many hats Iâve worn in a variety of finance roles:
âYouâre probably wondering if the internet really needs another newsletter filled with self-help advice/affirmations in muted pastel colours, and what gives me the right to write one?
As for the formal intro, LinkedIn will tell you in broad strokes Iâm a career finance professional. Iâve spent time in financial institutions large (Goldman Sachs then J.P. Morgan) and small (8 person fintech startup then 80 person fintech startup). Iâve been at operating companies, and am now in VC. Iâve overseen capital markets, operations, business development, and as a one-time Chief of Staff , everything else you can think of.
In response to my post on âAll the Jobs Iâve Loved Beforeâ I had someone specifically refer to my stint at a âtiny mess of a startup #1â, and asked if Iâd write a post on tips on this topic, so that others that are thinking about the making the move donât end up in the same situation.
Itâs interesting because startups have blown up. BLOWN UP. They are everywhere. If you can generate a sweet looking logo in pastel colors, and stand up an Instagram or website, congratulations you are a startup. I largely jest, but there are seemingly an infinite amount of companies popping up everywhere, and getting funded by venture capital. By the way, the number of venture capital firms is also exponentially exploding, which is fueling this phenomenon.
Because there are so many different types of startups, in different industries, in different stages, tackling different problems - itâs hard to recommend tips across the board, and to caveat: my experience is merely my own. But I will try my best, and Iâll lean on the collective experience of my colleagues at some of the startups Iâve worked with. Many of them had similar backgrounds to me - toiled away in large corporate finance or consulting roles, craved exciting roles with mission-driven companies and wanted to make the leap to something that was faster-paced. The other vantage point I can humbly offer is from currently sitting on the other side of the table, at the type of firm that backs these startups - what things to potentially look for.
Everyone *thinks* the most important question to ask when joining a startup is,
âWill the startup crush it to generate me a massive outsized payout?â
So as a starting reminder: Startups fail. Everyone knows the adage that 90% of startups fail.
Additional food for thought: Sometimes they fail in a slow and painful way.
The 90% stat doesnât capture the timing of said failure - research concludes that 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.1
In the recent bull market, it seems like every company is âup and to the rightâ, experiencing massive growth, with revenue growing year over year. It seems like the majority of startups are doing really well, and many are making it to successful multimillion or billion dollar exits. But realistically, this last market run is still a pretty small cross section of time. And Iâd suggest that joining a startup that charges hard at something and then fails quickly isnât even the worst outcome - itâs the languishing for a longer time period without obvious traction or focus. The corporation that youâre at now might not grow 1000% year over year, but they are likely pretty clear on the direction of their growth.
Itâs also difficult to research or diligence the probability that a startup will crush it. When youâre interviewing with startups, it can be really hard to discern what their actual growth metrics are and if they are in fact, crushing it⌠All startups claim to have an infinite number of possible customers and the best possible solution to sell to them all. Itâs hard to tell which one will be the rocket ship, or unicorn, or whatever the buzzword of the moment is.
So that first question is impossible to answer with certainty, but⌠âprobably notâ is a good starting place. Some potentially more relevant questions to start with then, are the followingâŚ
Internal Questions
What will I learn here?
In my opinion, this is the most important question to think through⌠Even if the company does not end up as a unicorn, there are many reasons to join. For me, when I was evaluating joining a startup, I was comparing the opportunity to going back to business school⌠and I rationalized that joining a startup would teach me similar things, with more accountability, and the opportunity to have outsized impact. As long as my payout was more than -$200,000 (or the hefty price tag of an MBA), and I was learning a lot, it was a good trade for me. (Spoiler: I am not currently on a rocketship. Or yacht. The first startup I worked for failed fast. But it was still very worth it, for example, I learned to build operational processes from scratch, build a team, and manage a budget). If you started with the assumption youâd spend several years at the startup, and then it failed (middle of the bell curve described above), would you have learned a valuable skill that would improve your career down the road, even without a massive payout?
Am I in a position that will change as the company scales and am I ok with that?
Again, a question the removes the eventual outcome of the business. Every startup has drivers of a business (critical focus areas), and everyone will vary in their proximity to those drivers. Are you building something or selling something? Does the company need your role in every single stage of its growth? Many people think startups are fun because they are able to experiment and pivot if something isnât working out⌠but what does that mean for your role? If the company is testing a specific business line, and pivots by instead developing a second business line, how transferable is your role? Are you comfortable with this change, and will you have learned what you wanted to learn (see the first question⌠this is why I believe that first question is so important). Even if the company is in fact going up and to the right, startups change tactics all the time, and the people required at each stage and in each experiment are different.
What kind of knife am I?
I saw this in an old David Perell newsletter, and it resonated so much with me.
The Knife Theory of Hiring: When you first start a company, you need Swiss Army Knife people who can do a little bit of everything. â Once your company gets big, you need a bunch of kitchen knife people who do one thing very, very well.If you join a startup early on, itâs typically a bunch of smart generalists that are all tackling a multitude of problems. But when you get into later stages, and execution mode, you need people that are each the individual best at what they do. Not all swiss army knives grow with the company and not all swiss army knives want to specialize. Do you want to add value in the early days as a generalist, or do you have a skillset or expertise that will be applied to a specific problem or business challenge? How does that align with what the company needs?
External Questions:
Are there adults in the room?
In startups, adults can be defined as one of two things: 1. someone that has some experience or credibility to helm the ship; or 2. someone that does not yet have the experience or credibility to helm the ship, but has the humility to hire or consult others that do. Of course, itâs not always easy to glean this from the interview process, but take a look at the full management team - how was the team evolved, does the founder or CEO bring on people from backgrounds different to theirs? Do they bring on people more experienced than them?
Are there adults on the board/cap table?
Companies will often brag about the brand name firms that have invested in them.. and in some ways this is very legit. Well-funded, respected venture investors have the ability to keep the company funded, connect the company to the right customers and networks, and cast a brand aura that get other people interested. One step further than checking the names of the investors on the cap table is checking the history - have investors continued to invest over time to support the company? How involved are the investors in the progress of the company? Investors care a lot about the good companies in their portfolios, they also care a lot about the companies that arenât doing well but they conviction in and believe they can help. Investors cannot care equally about every single investment in their portfolio, thereâs a segment of the portfolio that they donât believe in, and arenât putting much more energy or resources into.
And finally, hereâs a question completely unrelated to the type of work and financial backing, and again, doesnât have much to do with the outcome of the company.
Instead of asking what the eventual payout will look like, what will the day-to-day be like?
The culture at startups can tend to be a certain way. Every startup Iâve worked at is chock-full of really nice, brilliant people, many of whom are mission driven, but at small companies with the audacious goal of wanting to change the world - there exists a certain type of alpha/bravado. It makes sense - definitionally, startups need to believe they are better than everyone else in the world at achieving its mission.
This has implications for the cadence of work and the culture, though maybe not in superficially obvious ways. Even with surface level perks (e.g., bring pets to work, free snacks), if a company is venture-backed, they are tasked with achieving astronomical growth, and it is not for the faint of heart. You may work long hours and things will be erratic and panicked at times - how does that align with the other parts of your life and your life stage?
As I re-read this, it sounds a bit like a cautionary diatribe about the dangers of joining startups⌠đ I hope instead it comes across as merely pragmatic! Of the people in my network that joined startups, many are still happily at startups (though not always the one they started with), some pivoted to firms with a bit less risk (either slightly later stage or corporate spinouts), some went back to corporate and some became founders themselves.
Resources/Links
AngelList - pretty comprehensive repository of startup companies, jobs, news to start your research
âHow to Know if Joining a Startup is Right For Youâ (Harvard Business Review)
Cool ladies doing cool things: Being Canadian, I want the winter Olympics and their athletes to get the credit and recognition of their summer Olympics counterparts⌠so here is skier Eileen Gu, who appears to be the raddest person ever. She is not only now a gold medal winning skier, she is a model, American, but competing for China, and was raised by a single mom. (NYTimes)
https://www.investopedia.com/articles/personal-finance/040915/how-many-startups-fail-and-why.asp