I get an email or 2 every week from employees at large companies who have interviewed at a startup wondering if “startup X” is good, will do well, or “is a good bet”. Most of the time I dont know about the startup or the founders, so I tend to focus mostly on the market trends and the problem the startup is trying to solve.
Occasionally I will also get folks sharing their salary and ownership details with me (mostly junior folks) who would like some advice on how to negotiate a better salary or more stock options.
I used to be rather dismissive of the negotiators and ask them to focus on the learning and experiences, but that turns off most people I think. They wanted advice on how to negotiate better and here I was telling them what they were getting was good enough.
Instead, I decided to develop a framework to think about the opportunity and the startup role.
The first thing you want to ask yourself is why you want to work at a startup. Or leave your current job and join another startup. If you are at a big company (and have been there for a while) and have made a good salary and are looking for a “big retirement win from 3-4 years of work” at a startup that’s going to go public, then it is very hard to choose the right startup.
If you are however at a big company and looking to learn more and get a different set of experiences, you will likely have expectations that can be met.
Predicting which startups will do well is hard. In fact, over the last 10 years, given that most companies are raising a lot of money in private markets, it is harder to “get an exit” and make it big (financially speaking) in a short period of time.
Lets start with your objective.
If you are looking to make “risk free money in a short period of time” with your talent, you will get a small reward. A role that similar to your big company role and with a pay package that fairly consistent.
If you are seeking to learn how to be an entrepreneur and master how to start a company, you are better off joining an earlier stage startup than one that’s “sure to go public in a year or two”.
If you are looking to make more money than your current role offers and advance your career, it is best you join a later stage startup that’s looking to scale.
Startups that are less than 2 years young are the riskiest, will offer the most in stock and less in pay. Especially if they have only raised a series A.
Startups that are 2-5 years young and have done one or two rounds of institutional funding will likely offer good pay and decent benefits but limited upside in stock options.
Finally, “unicorns” which are over a billion dollars in capitalization will offer compensation that’s commensurate with your current pay and benefits and even more limited upside in terms of stock options.
If you are looking for the “perfect role” with the “most awesome pay”, that’s equivalent to your current pay and “huge upside” in stock options with guaranteed returns, that does not exist.
So, my recommendation is to decide what’s important to you – steady pay with strong benefits, but learning a new technology or being part of a new culture – then join a later stage startup.
If you decide that being a part of a fast growing startup which has some traction but still has potential to scale, where you will learn and grow with the company, is important to you, then join a venture which has been around for about 3-5 years.
Finally if you wish to learn how to start your own company after this one’s done and want to learn the fundraising elements of the startup, understand how to market and scale the business, then join a much earlier stage startup.