GenuineVC David Beisel's Perspective on Digital Change

February 3, 2011

Much of the VC blogosphere commentary about startups covers venture and angel financing with advice focused on company founders.   But most people in the startup game aren’t VCs nor are they founders (yet)… but rather they’re employees of startups.   While the most frequent topic people informally ask me about is acquiring funding for a new venture, the second most frequent topic people ask are questions about joining an existing startup as an employee:

This post is the first of four in a series which covers each of those four questions above.

First rule of startups: Not all startups are created equal.

“I want to work for a startup.”  It’s a common statement, but a “startup” can be very different things.  The primary dimension on which startups differ is stage: two guys in a garage is definitely a startup, so is a thirty person company growing with a second round of financing, and so is a 250 person company preparing for an IPO.

The first decision, and the most critical decision, of what type of startup to join is based on the current stage of the company.   This selection is the most personal and subjective one, as it’s based on a person’s motivations for why they want to be a part of a startup in the first place (as opposed to just getting a job at xyz company) – desire to make an impact, better working in smaller teams, excitement to be involved with cutting-edge technology, aspirations of becoming a founder and/or a startup CEO, working with other motivated people, long-term financial upside, etc.  But this juncture is also where I see people make the critical mistake.

The biggest mistake I see is people going to Series A or B funded startup because they perceive it as “safe” with VC backing, but the only thing *temporarily* derisked is financing.  And that derisking is only for 12 +/- 6 months.   Yet the company hasn’t figured out product-market fit yet, hasn’t figured out its customer proposition, doesn’t have revenue… it doesn’t have traction.  As an employee joining then, you bear (nearly) all the risk as founders but an order of magnitude less compensation, recognition, and influence.

I believe that there are three opportune times to join a startup:

  1. As early as possible (or as you can stomach).
  2. When the train has already left the station.
  3. When there is a truly unique ability to learn, collaborate with specific people, or work in a special situation.

As early as you can stomach.  For some, the proverbial two-guys-in-a-garage-stage is the ultimate allure… but they’re not ready just yet to be one of those couple founders.   Push yourself hard to ask why not a founder now?  If the reason is the need for an initial idea, a specific skillset, time to develop a potential customer network, etc  – then the right answer is to find a role and company which fits that description so that after a few short years you’re ready… usually that’s not a seed-stage startup.   If the reason is that you haven’t done it before but just want to learn the playbook, then by all means joining an extremely embryonic team is the right next step.  Of course many people have current income requirements that the earliest-stage team can’t satisfy; hence, reality does dictate that this rule is amended from “as early as possible” to as “early as you can stomach.”

But if you’re stomach feels queasy reading any of the above, it really makes sense to jump ahead to a much later stage startup where the…

Train has left the station.   What I mean by this is that the startup is already on track, generating real revenue, rapidly growing (and hiring), and is clearly destined to be some type of success.  It’s unclear if it’s going to be either a “win” or a “monster win”, but a reasonable outcome is reasonably assured.  In other words, the train is left the station heading towards a destination and will get there if you’re on board or not.  Of course you’re going to make an impact (that’s one reason why you’re joining startup after all), but the company is already moving forward with its own inertia.

If you aren’t ready to be a founder soon, this point is the best place to join a startup.  Yes, it’s a larger and doesn’t have the same feel as “those early days,” but the benefits of joining this profile company are numerous:

  1. Learning – you’ll be in the pole position to see how a successful startup ticks.
  2. Reasonable exit in a visible time-horizon with some financial payoff – With an outcome probable, there’s a likelihood of nice payday (though certainly not a life-changing one).
  3. Instant association with success – Unless you’re a founder, people rarely remember when in its lifecycle you joined a company… just that you were there.  If this company is already perceived as a success – bing! – now so are you.
  4. Startup credibility You’ll earn startup credibility chops even though you weren’t there from the beginning.
  5. After successful exit people will leave to start own startup – Post-exit is most often when the magic of new company formation happens.  Employees take their newly-created financial assets, their domain credibility, and their uniquely acquired knowledge to start new companies.  This is the perfect time to have a unique opportunity.

Even though it is a smart strategy to join later in the game, realize that you just don’t gain some of the skills of being a startup founder here because you miss out on those early experiences (searching for a repeatable model, the emotional roller coaster, etc.).  If your end-game is to become a founder of a company, it should be acknowledged that you’ll miss some key components in a later stage company.  But that being said, if a founding role isn’t your plan, there are some people who are just better suited to the scaling stage a startup – and that’s a great thing.  These are people who are probably never going to be founders, but make great VP Engineering, VP Marketing, etc for late-stage companies… and they do it successfully again and again.

Learn and work with people or in a special situation.  Go extremely early or very late is the right approach 90% of the time.  The exception to the rule is just that – when there is an exceptional opportunity in the in-between.  There are situations where you have opportunity to work with someone renowned in industry.  Or you have a special skillset that would apply to your role.  The last reason to join a mid-stage startup, and the most compelling one, is that given your prior experience you have a unique perspective to recognize that the company has been or will be de-risked in some way that hasn’t fully been realized yet.  It’s easy to craft a story to cite one of the above cases is present, but the true test is truly convincing yourself that it’s true.

Regardless of what stage startup you join, the choice should be just that – something which you chose, a deliberate selection based on criteria that you’re optimizing around and the potential of upside, not a perception about safety.  You should be joining a startup because of your excitement about the role/situation, the company itself, and the opportunities ahead with the chance to change the world, not as a hedging strategy.

As I mentioned at the beginning, this post is the first of four in a series on finding the perfect startup gig.  In the next three I’ll cover the topics of finding interesting startup opportunities in a sea of companies, selecting the right role, and finally negotiating your offer.


About Me

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  • I am a cofounder and Partner at NextView Ventures, a dedicated seed-stage venture capital firm making investments in internet-enabled startups. Read More »

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Lee Hower




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  • robgo
     - 1 hour ago
    RT @bbalfour: Why Focus Wins - http://t.co/sfwTEvYNYP http://t.co/RxMvApOT2N
  • robgo
     - 1 hour ago
    @patk @polarisvc congrats on the new gig. Looking forward to working together
  • robgo
     - 16 hours ago
    Date night. Shockingly, first time at @FranklinCafe
  • robgo
     - 17 hours ago
    @km tell that to my father in law who put his daughters through college and funded his retirement off rental properties :)

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