Joining a Startup

In the last few weeks, I've talked with a number of friends about career changes. Some are feeling antsy and just want to move, others are starting their own consulting, and others are starting and joining startups.  While I've done all the above – to varying levels of failure success – I thought I'd share the things I've learned along the way.

Under no circumstances am I being critical of any friend or associate's startup, this is about patterns.

First, everyone does everything. Check your ego at the door. In the first startup I was with, I was in charge of adding reporting to the eCommerce application and taking the garbage out. Was it an effective use of my time? Not at all. Did it have to be done? Yes. Did we have the money to hire someone else? Nope. If your startup is renting office space, you probably won't have to worry about this… but who signs for packages? Who re-orders coffee? On the flip side, you could be the one taking technical questions at the next investor pitch or invited to the big customer Christmas party.

Next, there's no career path. In most companies, the chain of command is clear. As you prove yourself – and the need arises – your title grows. Startups don't have this structure. If you're a senior developer or team lead, likely the only people above you are the CTO/Director of Technology and the CEO who are also likely The Founders. Short of fraud or malfeasance on their part, you're not moving up. On the flip side, since everyone does everything, you'll likely get a taste of those roles and responsibilities without the full responsibility. Further, if you cash out and make millions, you don't need a career path.

Next, you never have enough money. I don't care that they've gotten $1M in funding, they need more. If you have a team of 10 (developers, designers, a PM, etc), you can easily have a burn rate of $100k*/month… so you have 10 months to a) get cash flow positive or b) get more funding. Throw in infrastructure like office space or servers and it gets worse. On the flip side, with things like Amazon EC2, Slicehost, etc, your server infrastructure is now a fraction of what it was 5 years ago.

* $100k/month burn rate assumes each person makes an average of $7k before taxes. After you add taxes, a simple benefits package, a few paid holidays, the monthly cost goes up. From the business plan books, personal experience, and doing this myself, this cost runs 33-50% of base pay. I chose 42% to make the math easy. 😉 YMMV.

Next, v1.0 never looks like the original Vision. If v1.0 drifted closer to what customers are willing to pay for, this is a Good Thing(tm). The problem comes from the investors. People who were willing to put in $1M for the original Vision may not be willing to put in anything for v1.0. Or they may put in more. Until you ask them, you don't know. Or worse, until the check clears, you don't know.

Next, every founder believes in him/herself. I've never heard someone say “I'm going to start this company to be a total failure!” It doesn't work that way. In fact, most entrepreneurs/innovators are wildly optimistic… they wouldn't invest their time, energy, blood, sweat, and tears to try it otherwise. I'm not criticizing that at all, I'm one of them. Of course the founder puts in their own money, they're already convinced. The problem comes in convincing the next person, the investor, the trial customer, and the paying customers. This is fundamentally different.

And finally, most startups don't explode, they fizzle. The money is running out… people are getting nervous… the people in charge are hard to get a hold of… and then a paycheck is late. “Don't worry,” they say “there was a mistake at the bank, it will be deposited in a few days.” And that check does come a few days later. Then the next one is just a little later. '”Don't worry,” they say “the customer paid late, the checks will be a week late.” Except that you don't get this one in a week. In fact, an additional week passes and the next pay period comes but a check doesn't.

Before you know it, you've been working 2-4 weeks without pay and your bills are still due. You can try to stick it out – I have yet to hear of one time that worked – or find a new job. The problem is that now you're not thinking clearly. You're panicked, your significant other is stressed, and even the cat is looking a little forlorn.

Overall, does that mean that I dislike startups or wouldn't join one?

No, not at all, but I would go in with my eyes open and ask hard questions:

  • Are you okay with doing menial work just because it has to be done? Are you okay with not getting a better title but doing more than it normally entails? Are you okay with your job description being a “minimum”?
  • How much funding have you gotten and when? What are the prospects/timing for new funding?
  • Are you willing to talk and listen to customers, investors, the market, etc to help refine and expand the product? Can you also get excited about the v1.0 that looks nothing like the Vision that you signed up for?
  • Do you have money set aside for if things fizzle? When I joined my last startup, I had six months worth of income in the bank and through careful management and a few small side projects, I extended that to almost 12 months. Can you do the same? Is your family willing to live through that?