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#338087 - 08/10/2010 16:31 Startups...
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
When considering working for a startup, what types of things do people tend to check into first? Business plan, investments, and share of the company when it may go big seems to be the major factors to look at, anything else?
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Tom

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#338088 - 08/10/2010 16:34 Re: Startups... [Re: drakino]
hybrid8
carpal tunnel

Registered: 12/11/2001
Posts: 7738
Loc: Toronto, CANADA
Is it something you will find fulfilling? Do they have money to pay you right now? Do you believe in the product(s)?
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Bruno
Twisted Melon : Fine Mac OS Software

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#338090 - 08/10/2010 18:03 Re: Startups... [Re: hybrid8]
matthew_k
pooh-bah

Registered: 12/02/2002
Posts: 2298
Loc: Berkeley, California
Presumably with a startup you're betting job security and money for a chance at bigger money down the road. If you make up numbers for IPO/acquisition value, what percent of the company you might own at that point (be sure to understand dilution) and how likely the company is to succeed, you can at least calculate an expected value.

You also get to work in a different environment, where there's very little in the way of existing turf, and you're welcome to take on as much as you want and prove you can do it. The things you learn and the people you'll work with may well make the experience worth it even if it doesn't pay off this time.

When looking at a startup, by far the biggest thing to consider is the team, specifically the founders. The business plan will almost certainly change, the product will change, but the team is going to be about the same.

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#338094 - 08/10/2010 19:44 Re: Startups... [Re: matthew_k]
wfaulk
carpal tunnel

Registered: 25/12/2000
Posts: 16706
Loc: Raleigh, NC US
Originally Posted By: matthew_k
Presumably with a startup you're betting job security and money for a chance at bigger money down the road.

Or, like me, you just hate working for a large company.
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Bitt Faulk

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#338095 - 08/10/2010 19:55 Re: Startups... [Re: wfaulk]
matthew_k
pooh-bah

Registered: 12/02/2002
Posts: 2298
Loc: Berkeley, California
Quote:
Or, like me, you just hate working for a large company.

Yes,
Quote:
You also get to work in a different environment, where there's very little in the way of existing turf, and you're welcome to take on as much as you want and prove you can do it. The things you learn and the people you'll work with may well make the experience worth it even if it doesn't pay off this time.

:-)

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#338179 - 11/10/2010 19:59 Re: Startups... [Re: drakino]
TigerJimmy
old hand

Registered: 15/02/2002
Posts: 1049
I'll give you the 4 factors that one of my mentors used in evaluating whether a startup company was going to make it successfully to an IPO or buyout or some other kind of equity success. These are controversial, and there are exceptions, but I think he's right on in most cases:

1. The company must have a differentiating technology that provides a significant barrier to entry. You don't want to go to work for a company that has a neat little gizmo but one that google or microsoft could reinvent in 3 weeks if they put a couple of good developers on it. Ideally, they should have something legitimately different in underlying technology and something that nobody has been able to figure out, not just the first mover to solve a not-so-complex problem.

2. There must be an identifiable market that is ready to embrace the differentiating technology. While a small market of technologists will buy something to see how it works, the company will not succeed until it has identified a broad market (it need not be a huge market) that is prepared to invest in the technology to solve business problems. The best way to determine this is not to simply ask if they have customers (because someone will buy ANYTHING), you want to ask to see 3 or 4 "quantified customer success stories", where they have been able to show how the technology resulted in a business benefit to the customer.

3. (Now we're getting into the controversial part), the original technical founders of the company need to have stepped aside from executive management to focus exclusively on product development and innovation. The simple fact is that the skills needed to raise money, run a sales team, work with investors, and manage a rapidly growing company are very different from the skills required to solve the hard technical problem that was the original reason the company was formed.

4. (Related to #3), the company must have a sales-oriented culture. Once the shiny new gizmo has been created, what determines the company's success at this point is getting people to buy it. Investors and the market pay a premium for growth, and growth is defined as year-to-year increase in sales. That's just reality. If you want to make a big score at a startup company (and that's why most people work at startups, because it's too much work otherwise), then the focus needs to be sales.

Paul Graham has quite a lot to say about startup companies on his web site, which I think is fantastic.

I've worked at a few startups, and when all 4 of the above were in place, they succeeded. Along the way, I learned the difference between a startup and a "restart", which is a company that has failed, but is on life support. Large investment companies will often keep a company barely alive rather than close the company and take a writeoff on the balance sheet. Avoid these companies of the walking dead...

Happy to share whatever else you'd like to know...

Jim

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#338187 - 11/10/2010 21:45 Re: Startups... [Re: TigerJimmy]
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
All really good info, and it's helping me do some specific research ahead of my face to face talk. Thanks for the insight so far.

I also found these three articles about questions I should be asking:

http://blog.guykawasaki.com/2006/03/nine_questions_.html

http://genuinevc.com/archives/2005/10/18...g-a-startu.html

http://shukilehavi.blogspot.com/2007/05/five-questions-to-ask-before-you-join.html
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Tom

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#338191 - 11/10/2010 22:50 Re: Startups... [Re: drakino]
JBjorgen
carpal tunnel

Registered: 19/01/2002
Posts: 3538
Loc: Columbus, OH
Among my travels I made a good friend that was in the equipment leasing business. But not what you're thinking. They lease only equipment that costs over a million dollars and they lease to tech start-ups. His business is to determine which ones have a good chance of making it and then getting investors to finance the equipment so he can turn around and lease it. He has a very high success rate, which is why he still attracts investors when everyone else is struggling. If it's a company that produces any sort of hardware, maybe I can forward the company name to him and see what he thinks (although if they're not wanting to lease equipment, it's probably not worth his time to check out.)
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#338204 - 12/10/2010 14:50 Re: Startups... [Re: drakino]
TigerJimmy
old hand

Registered: 15/02/2002
Posts: 1049
That's all good stuff. You might want to find an old copy of "Crossing the Chasm", which is all about the importance of quantified customer successes beyond all else.

Technical people tend to think of a "startup" as a 1-6 person company with people toiling away writing code 22 hours per day in an apartment. Management / executive types tend to think of a "startup" as a 30-60 person company who now need professional management. Makes sense, because these folks don't add value in the 1-30 person range.

Point is, there's a big difference in the two. Most of the questions you posted apply more to the 30-60 person company. I completely agree that you want to know the rate at which they've been hiring people over the last 6-9 months and how many people they intend to add in the next 6-9 months.

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#338211 - 12/10/2010 16:42 Re: Startups... [Re: JBjorgen]
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
Originally Posted By: JBjorgen
If it's a company that produces any sort of hardware, maybe I can forward the company name to him and see what he thinks (although if they're not wanting to lease equipment, it's probably not worth his time to check out.)

Thanks, but in this case equipment is covered pretty well already by one of the existing investors. I don't think they are looking elsewhere at this point.

As for the state of the startup I'm looking at, they are a bit past the real early stages, and probably getting close to the management part. Should know more later this week.

If I do go for it, it will be an interesting shift. Last time I worked for a small company was in the late 90s. Definitely can appreciate getting back to that.
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Tom

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#338212 - 12/10/2010 16:49 Re: Startups... [Re: drakino]
hybrid8
carpal tunnel

Registered: 12/11/2001
Posts: 7738
Loc: Toronto, CANADA
I hear some guys are starting up Facebook2, that's not what you're thinking about is it? wink

Originally Posted By: wfaulk

Or, like me, you just hate working for a large company.


I just hate working. But I don't mind making money, that part's cool.


Edited by hybrid8 (12/10/2010 16:51)
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Bruno
Twisted Melon : Fine Mac OS Software

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#338267 - 16/10/2010 05:23 Re: Startups... [Re: hybrid8]
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
The interview was today, and I think it went well. The startup seems far enough along that I will avoid some of the early risks, and there is a pretty big chance this company will at least do well enough to exist for a few years. The initial launch of the product they are making is coming soon, and once that happens, it may lead to them having many more high profile customers. Already they have a big one in the space they are entering, along with interest from others.

Structure wise, it doesn't seem like there's going to be a big management shift in the near term. They have two very technical guys at the top leading the push on the product side, and a strong business guy right alongside them helping to deal with that part.
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Tom

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#338369 - 19/10/2010 18:33 Re: Startups... [Re: drakino]
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
Well, heard back today, and they aren't sure where I'd fit in to their current needs in a full time capacity. They do want to maintain contact though, so maybe down the road.
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Tom

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#338756 - 29/10/2010 01:43 Re: Startups... [Re: drakino]
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
Minor update, this did end up happening, and I'm in the process of wrapping things up at my current job, along with planning things for my move. I'll have to post more about it when I have time to catch my breath, likely sometime in early December, maybe.
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Tom

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#338757 - 29/10/2010 01:44 Re: Startups... [Re: drakino]
hybrid8
carpal tunnel

Registered: 12/11/2001
Posts: 7738
Loc: Toronto, CANADA
Wow, that was quick. "Down the road" doesn't usually mean 1 to 2 weeks. smile Congratulations. How far (from where you are now) will you be moving?
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Bruno
Twisted Melon : Fine Mac OS Software

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#338758 - 29/10/2010 02:14 Re: Startups... [Re: hybrid8]
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
Across a good chunk of the country again. Not sure exactly where I'll land, but general area will be Orange County, CA.

Two weeks to...ugg, hello big list of tasks...
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Tom

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#338763 - 29/10/2010 11:21 Re: Startups... [Re: drakino]
larry818
old hand

Registered: 01/10/2002
Posts: 995
Loc: Fullerton, Calif.
Where in OC? It can take an hour or more to go across the county and 2 to LA, so you definitely wanna live near your office.

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#338765 - 29/10/2010 12:01 Re: Startups... [Re: larry818]
JBjorgen
carpal tunnel

Registered: 19/01/2002
Posts: 3538
Loc: Columbus, OH
Well, you'll either love it or hate it. I grew up in Anaheim. Get ready for the rat race.
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~ John

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