Joining a startup

[delta0]

A bit about me. I’ve been working in engineering and tech for around 17 years now. Last year I was approached by a startup looking for a CEO/CTO. They are band of experts that are looking to turn their ideas into a product. Whilst I’m not a product manager I am very good at developing ideas and turning them into highly viable prototypes. This is basically my role at the moment.

The good part is I was also approached by a VC who was the one that recommended me to take this role. The area they are working in is exciting and in my domain of expertise as well.

The bad part is the usual giving up a stable job that pays well. I have good amounts of savings but those I want to make sure they are left to grow towards my FIRE number. So I need to make sure I’m at least paid enough to cover my expenses which are a bit silly at the moment due to combination of living costs, mortgage and nursery. Basically nearly £75k I need after tax. My wife works which helps a bit on that. We are negotiating on pay so this opportunity may not work out if they can’t come in with something that covers my day to day costs. If it was 2 years from now I would have no nursery costs and I think I will have cleared my mortgage in my current job so living costs come down. I’m weighing up whether I should just hold on for this as things become basically risk free from then.

Anyway back to the point of the thread. Has anyone else been in this sort of position? How did it go? Any advice?

 

[randomshenans]

What is on the table in terms of base / equity / future benefits such as performance related bonuses etc? Makes a big difference knowing these things!

 

[delta0]

What is on the table in terms of base / equity / future benefits such as performance related bonuses etc? Makes a big difference knowing these things!

At the moment the details are not there on that. This is going to be a major factor in this decision. Assuming this is satisfactory then knowing more about what people’s experiences are who have done this kind of thing before would be great. I would be jumping out of corporate life into this role which has a lot of unknowns for me.

 

[FishThrower]

How long has the start up been operational? How many employees do they have?

 

[delta0]

How long has the start up been operational? How many employees do they have?

They have 4 employees. There are some advisors as well with one from a very big player in the industry who I know. They have been doing this for about a year. The employees are mostly researchers with an academic background.

 

[FishThrower]

They have 4 employees. There are some advisors as well with one from a very big player in the industry who I know. They have been doing this for about a year. The employees are mostly researchers with an academic background.

only you would know the answer. , if you are living a comfortable life with your current job and salary, I would personally stick with it unless you absolutely hate it . a year is too early for a start up in my opinion as there’s still a lot of risk involved of them going under

 

[Housey]

Id want to know who funds them (are they solid investors), the stage of that funding (probably just some seed cash at this stage, maybe series A with VC in the mix) and plans for future funding, growth plans and their runway based on their current burn rate (how much they have to go at current burn rate). Vital to understand this if you are moving from a secure job and don't be taken in by the "when we sell" plans. Who is the key stakeholder, what culture does he/she seek to create and frankly, do you trust them.

I would not sell yourself cheap, if you need 75K you really need 100K and I would also want some protection, so 6 months of notice for the risk of stepping out of security. Don't take the mindset of "I'm sharing a risk with my fellow share holders" because you are at different points of the journey. I'd want to know the equity of the current employees and investors and my ability to impact the direction of the company in reality. Nothing worse than playing with someone else's train set who hates people telling them how to play with it.

Could be a great opportunity to define a career and retirement.....or like most them hard work for little reward and far less money that expected when sold. Working with VC's can be really interesting mind.

 

[delta0]

only you would know the answer. , if you are living a comfortable life with your current job and salary, I would personally stick with it unless you absolutely hate it . a year is too early for a start up in my opinion as there’s still a lot of risk involved of them going under

It has its ups and downs but otherwise considering the security it gives in a few years there is a strong case to stay. I do expect I will do the startup thing eventually. I’ve been fortunate enough to deal with identifying startups for potential acquisition so I have a good idea of what needs to be done. In a few years the risk won’t matter but right now it does unless I want to eat into savings during the bad times.

Id want to know who funds them (are they solid investors), the stage of that funding (probably just some seed cash at this stage, maybe series A with VC in the mix) and plans for future funding, growth plans and their runway based on their current burn rate (how much they have to go at current burn rate). Vital to understand this if you are moving from a secure job and don't be taken in by the "when we sell" plans. Who is the key stakeholder, what culture does he/she seek to create and frankly, do you trust them.

I would not sell yourself cheap, if you need 75K you really need 100K and I would also want some protection, so 6 months of notice for the risk of stepping out of security. Don't take the mindset of "I'm sharing a risk with my fellow share holders" because you are at different points of the journey. I'd want to know the equity of the current employees and investors and my ability to impact the direction of the company in reality. Nothing worse than playing with someone else's train set who hates people telling them how to play with it.

Could be a great opportunity to define a career and retirement.....or like most them hard work for little reward and far less money that expected when sold. Working with VC's can be really interesting mind.

You are right. They are seed and looking for series A which is why the VC said you need a CEO/CTO and recommended me. Runway is about 3 years. Working with VCs is definitely interesting. I used to work with this one before and he became a VC last year. He’s always had an aptitude for this and should have done it sooner. He also has an incredible network.

Your insights on this are really good. Also very interesting about the 6 months of notice.

 

[EvilRob]

How would a startup be missing a CEO? Isn't the founder the CEO? Who is leading the company now and what are they going to be doing once you join?

 

[Jokester]

How would a startup be missing a CEO? Isn't the founder the CEO? Who is leading the company now and what are they going to be doing once you join?

The CEO is effectively the business owner - but, he may be aware that his strengths don't lie in running in the business, so he might be looking to have someone who can deal with that if he's a technical person.

 

[dowie]

There isn't usually a single business owner so to speak in the case of startups rather you'll often have more than one founder. The founders tend to have a big chunk of equity then the early investors (an accelerator perhaps and some angel investors and later VCs etc..) and the employees* too. For example, there were two guys I went to uni who founded one, one took the CEO position, the other the CTO position but they both had equal amounts of equity.

*Employees are given substantially less than those deemed to be cofounders, for example; a "founding engineer" (typically the first non-founder employee) could maybe get 1% even though he is often almost as critical to the success of the company.

One example of when a CEO might be hired rather than one of the founders taking that position is academic research being commercialised, you can find some ML professors who are cofounders of more than one AI/ML related startup. If there's already investment in place and a small team then it's more akin to a music company putting together a boy band than a band starting from scratch and later getting signed.

Still, the CEO position is important so you'd need to be granted a chunk of equity, it's just that it may be more like 5-10% rather than say the 30% a founding CEO might have after some initial investment.

Maybe also worth trying to reach out to CEOs of other companies the VC who approached you has perhaps done this with in the past.

 

[NickK]

Id want to know who funds them (are they solid investors), the stage of that funding (probably just some seed cash at this stage, maybe series A with VC in the mix) and plans for future funding, growth plans and their runway based on their current burn rate (how much they have to go at current burn rate). Vital to understand this if you are moving from a secure job and don't be taken in by the "when we sell" plans. Who is the key stakeholder, what culture does he/she seek to create and frankly, do you trust them.

I would not sell yourself cheap, if you need 75K you really need 100K and I would also want some protection, so 6 months of notice for the risk of stepping out of security. Don't take the mindset of "I'm sharing a risk with my fellow share holders" because you are at different points of the journey. I'd want to know the equity of the current employees and investors and my ability to impact the direction of the company in reality. Nothing worse than playing with someone else's train set who hates people telling them how to play with it.

Could be a great opportunity to define a career and retirement.....or like most them hard work for little reward and far less money that expected when sold. Working with VC's can be really interesting mind.

I see:
* academics - no sense of commerce
* VC - lost/loosing patience with academics a year in..
* high risk and you have high value - at ceo/cto, for that risk so I’d look at £160k+tax and equity. If the VC wants you they know your worth and reputation. That’s not out there money at C level (I was over that in my previous role but it was a turn up sort **** out for the ceo with all the stress and pain).
i’d check up on the VC to understand their way of working, also the same on the founders - last thing you want is being asked to make miracles out of madness that you brings you into conflict based on entrenched founders.
If you’re ceo and cto - then it smells like the VC is concerned.. a year on seems a long time to go in a direction without commercialisation.

 

[dowie]

I wouldn't necessarily assume that the VC is losing patience with them, he might be but keep in mind that even some of the most successful founders in the world relied on experienced hires in senior positons; Larry and Sergey brought in an experienced hire as CEO at Google (Eric Schmidt), Zuckerberg brought in an experienced COO (Sheryl Sandberg) at Facebook

Secondly, while this is "C level" it is for a 4 person company with only seed investment so far.

 

[D.P.]

They have 4 employees. There are some advisors as well with one from a very big player in the industry who I know. They have been doing this for about a year. The employees are mostly researchers with an academic background.

This is a very ear.y stage start up so don't expect a high salary, any security but try and negotiate a decent share and see what happens in a year. 75K after tax is likely far too much for this stage.

Also things like requesting 6 month notice might not have much weight. It is normal for a start up to have less than 6 months runway and what are you c=going to do when the company is bankrupt?


Lastly, CTO and CEO are very different roles so it doesn't make sense to have this combined. Normally a founder, especially an academic doing a spin-off, will be the CTO but will require someone else to manage business, strategy and investor relations.

 

[Alex_L]

I’d agree especially around knowing the investors to get a sense of what their track record is given a lot of VC funds don’t actually deliver the returns they target….

Cavalier approach - Given where you are in your career what’s the risk of 12-24 month stint in a startup if the numbers work? It would be a small blip on your cv if it goes disastrously and pretty easily explained away as ‘scratching an itch’ particularly if you maintain your network whilst doing it.

Reading the thread I suspect the thing you’ll find in a company high on researchers will be the pressure is on you to be the ‘business’ side and therefore a more CEO role that focuses on execution of whatever idea they’ve got. So you may find your role is much more focused on the business side which may mean being a bit of a grown up dogsbody doing everything from recruitment to finance to legal to technology to marketing. May be brilliant experience but likely also stretching if you’re used to an environment with structures.

 

[OspreyO]

I think startup ups a fantastic way to leap frog your career and opportunities. They are high risk and time consuming especially in your role.

There won't be too many times those opportunities come up. I regret not embracing the few I had.

I would be trying to reduce costs and bank 6-12 months living costs to prep for it. Tighten the purse strings for a couple of years.

One startup I was working for didn't work out, there was a lot of dysfunction and I jumped ship. I heard the VC cut their funding by 50% after 3-4 years but they are still going.

Another relation was in one for the last 2yrs as a CTO and looks like they are going to be bought out which would be a great return.

High risk, potentially high return. Exciting though.

 

[Diagro]

I'd avoid it personally.

I did just this, was three of us.
Now it's 15 people.

My role has been reduced each time we had new staff. Now it's a much reduced role. However, with the expansion I'm still fully stacked out.

I used to be part of main management, however, last few months I was told the management meetings were cancelled... but then find that they were not, just that I had been removed from them.

I'm already looking for an out, but have 50k in options I'd loose. May go part time instead.

 

[EvilRob]

I'm already looking for an out, but have 50k in options I'd loose. May go part time instead.

Not really enough to be a significant factor in decision making is it? Unless you have good reason to believe the market price will be many times more in the near future and the vesting conditions will be met?

 

[OspreyO]

I'd avoid it personally.

I did just this, was three of us.
Now it's 15 people.

My role has been reduced each time we had new staff. Now it's a much reduced role. However, with the expansion I'm still fully stacked out.

I used to be part of main management, however, last few months I was told the management meetings were cancelled... but then find that they were not, just that I had been removed from them.

I'm already looking for an out, but have 50k in options I'd loose. May go part time instead.

That sounds like someone watched the social network movie. I can see that 50k getting diluted with a share split or locked in for longer time frame. Obviously someone at the top getting greedy.

That's the point of options it's a way of reducing salary and increasing staff retention. But unless they go public in a big way and the shares take off, the value of options is often not realised. I think I walked from about 30k in options, but I'd have had to spend another 20yrs in the place to release them.

I dunno if new staff leapfrogging old staff was that common in the past. Seems very common now. Where I am we've replaced about 75% of managers and product owners with new hires. Great paper qualifications but no business knowledge of the area they've been hired into. We've let the people who did have this walk away. Higher gaps in business knowledge across the organisation now.

Which tells me being new is of value. Being long term employee with experience isn't. At least not in your existing employer. Which just a variation of you need to move to make money.

 

[Diagro]

That sounds like someone watched the social network movie. I can see that 50k getting diluted with a share split or locked in for longer time frame. Obviously someone at the top getting greedy.

That's the point of options it's a way of reducing salary and increasing staff retention. But unless they go public in a big way and the shares take off, the value of options is often not realised. I think I walked from about 30k in options, but I'd have had to spend another 20yrs in the place to release them.

I dunno if new staff leapfrogging old staff was that common in the past. Seems very common now. Where I am we've replaced about 75% of managers and product owners with new hires. Great paper qualifications but no business knowledge of the area they've been hired into. We've let the people who did have this walk away. Higher gaps in business knowledge across the organisation now.

Which tells me being new is of value. Being long term employee with experience isn't. At least not in your existing employer. Which just a variation of you need to move to make money.

I have £50k at a £2 per share buy option. Current value based on its last value at fund raise puts each share I would be eligible for at £12.50~

It's a substantial number.

Fortunately for me, I'm still the only one who does what I do within the company, as its an integral role. Without my "department" there would simply be no one to sort the hardware for client installations. Without it there is no data stream. Without that, no one else can do anything.

My issue seems to be that I just chug along, making stuff available like I have done for 4 years. In a separate office 2 hours away from the main HQ.

Mabey I'm being silly... I do very much enjoy my current role. Just feel left behind in regards to the company management.