No More Hustleporn: Here’s the uncomfortable truth no one wants to say out loud to startup employees: 90% of the time, joining a startup is not a good economic decision.


Tweet by Dhruv Vasishtha
https://twitter.com/dvasishtha


   @dvasishtha:  
 
     
      Here’s the uncomfortable truth no one wants to say out loud to startup employees: 90% of the time, joining a startup is not a good economic decision.
 
  The outcome will likely be zero, if it’s >0 you will be paid out last, and own a fraction of a fraction of the business. But…
 
             @dvasishtha:  
 
     
      Your job as a startup employee is to do two things when choosing a company:
  - Pick one that is solidly derisked or appropriately compensates you for the risk you’re going to take
  - Pick one that provides you sufficient non economic value in areas like growth, impact, or learning
 
             @dvasishtha:  
 
     
      A few ways to vet a de-risked startup:
  - High caliber founders (top 10%)
  - High caliber coworkers (top 10-20%)
  - Product market fit
  - Pathway to grow at minimum 50%+ YoY
  - >18 months runway
  - Clean terms from investors
 
  The above = your equity has a chance to be worth something
 
             @dvasishtha:  
 
     
      A more direct way would be to value the business 8-12X next twelve months revenue if it's growing >50% YoY.
  --> Ask for what ownership your shares = on a fully diluted basis
  --> If the # > the amount raised, determine how much your equity is worth minus exercise costs and taxes
 
             @dvasishtha:  
 
     
      A couple of ways to evaluate if a startup will allow personal growth:
  - The team has well defined scope for roles and structured thinking around when / why someone’s scope should expand to support the business
  - Expanded scope is high priority and relevant to the business
 
             @dvasishtha:  
 
     
      Ways to evaluate if a startup will enable learning:
  - emphasis on customer impact and outcomes —> have a strong QBR process to show customer roi
  - maniacal focus on tracking business health metrics
  - team has domain expertise@+ high potential folks who punch above their  weight
 
             @dvasishtha:  
 
     
      I hope more startup operators have honest conversations about what their teams will get out of joining the@.
 
  For better or worse there’s a disincentive for most investors and founders to have these discussions but the transparency will lead to better aligned / operating teams.
 
             @dvasishtha:  
 
     
      Or just do smart employee friendly things to attract top talent:
  - be generous with equity
  - pay market rates
  - don’t overhire and instead coach up existing folks
  - increase exercise windows
  - offer early exercise
  - focus on margin and path to profitability / shareholder value