Oct

Joining a pre-VC startup

Posted by: sameer in hiring, madhouse, startup

Madhouse is talking to a number of exceptionally talented individuals for senior/middle management positions. Some of them have expressed apprehensions around joining at lower than market salaries and the risk of being associated with a company at a startup mode.Here are some of the thoughts I have been sharing with them. I would love hear some experiences, thoughts from the community.

Joining a pre-VC startup is not only a job or a career choice; it’s a lifestyle choice. This is truer for folks who join in early and join as part of the early management team (senior/middle). It is an opportunity for the brave, for the fighters and for a select few.

It offers an amazing opportunity to make significant contribution towards building of an organization in its formative period. The job responsibility is extremely demanding and challenging with relatively less support systems; a lot of untouched, challenging problems to solve; some of the most talented people to work with; a lot of energy in the air; a culture which believes it is fine to make mistakes. It offers an opportunity to rise fast, faster than most of your peers, provided you perform and live up to the challenges of the startup lifestyle, culture and speed at which things move.

People who can make a difference at this stage will be people, who believe in the success of the venture, the opportunity, the team, the philosophy of the organization. These are the people who will form the DNA of the company. People who will be hired or will join at this stage will not do so for the current financial benefits. That’s not the key decision making criteria. They know that they will be more than compensated financially, with the salary revisions and the stock options.

Along with all that comes career growth, various kind of learning, experience to go through the grueling startup pains and coming out a winner; a fighter.

Later on, when the company gets VC financing , though the challenges still remain the tone; the color; the intensity of the challenges change. The pace of evolution of the culture of the organization slows down. The number of ESOPs for similar positions reduces substantially. The opportunity to lay the founding blocks may no longer be there.

This entry was posted on Wednesday, October 25th, 2006 at 11:17 am and is filed under hiring, madhouse, startup. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

15 comments so far

Deepak Shenoy

What you want to be careful about is getting a stock option plan written down and documented. The biggest pain point when VCs etc. come in is that they tend to replace management, and the new folks that come in may not want to keep the verbal agreements of the founders.

Most founders find it difficult to create a stock option plan that makes sense. It’s tough when you don’t know how to structure it, especially in India where the regulator does not register private options.

I personally think that if anyone’s concerned about “being associated with a startup”, they should not be hired, regardless of qualifications.

Lower pay: no pain, no gain, pal. But as much as you quantify the pain (in terms of X lower than market salary) also quantify the gain (payoff is Y higher than 5 year market salary)

October 25th, 2006 at 6:47 pm

Udit

Startups should ideally hire only those who believe in the companies product/service and its projected trajectory of growth. At the same time these are the guys who would be willing to part with cushy well paying jobs to risk all with a startup.

October 26th, 2006 at 3:44 pm

Pallavi Gupta

There are pros and cons on hiring a very capable hand on the management team who doesn’t own equity –

- How to maintain motivation levels; as thought of will the gmable pay off one day tends to have a major impact…afterall one gets paycheck every month and stock options will realize after x years.

- What happens when VC’s come in and managment changes happen

- The company is not mine, but I am expected to work as its mine…..

October 26th, 2006 at 6:22 pm

Santosh

I am not sure I understand why potential candidates consider it to be a _risk_ to be associated with a startup. Some Startups ensure above market salary. Even if salary packages are at or below market-levels it is the founders who take the majority of the risk.

What I look for in talented candidates is,
1. If they identify with the spirit of the product and the company,
2. If they already value the startup culture,
3. If they believe that working in a startup offers opportunities never offered by larger companies.
4. less so – understand how private equity works

October 29th, 2006 at 9:28 am

Rajiv

Yes. Its a lifestyle choice. Its like embarking on an adventure not knowing what to expect or whats going to happen next. Its like a thriller whodunit in which the team together solves the mystery. Its plain unadulterated fun.

Not for the faint hearted.

October 30th, 2006 at 11:27 am

Ketan

While it is good to advocate and practice “join a pre-VC start-up” theory, how does one ensure that the risk adjusted payoffs of such a startup are more than the payoffs of conventional cushy jobs for the same period. I took a leap of faith a year back, and even though the ride has been very adventurous, I havent been able to quantify the gain.
Can someone help me out here.

October 30th, 2006 at 3:31 pm

Pankaj

Joining or doing a startup is not for everyone. It doesn’t matter what country you’re in. It takes a certain amount of energy, self-discipline, and faith – along with all the other things people have mentioned above.
I have been involved with a few failed and one very successful startup. My advice to people considering joining a startup, do it if you’re more interested in learning above everything else. A startup is where you will learn more than any of your peers at a large organization. You will have more responsibility and you’ll have to dish out much less BS than at a large organization. If you’re afraid of working 18 or more hours a day, seven days a week, then go to a large or more established company.
Startups will usually pay less than market, but they will provide you with an experience that will be quantifiable when 1) you leave the startup and look for a job at a large company and layout your skills and experience and 2) if and when your startup grows up, you ask management to adjust your total compensation to be more in line with the market. Of course, there are many other factors involved but that’s beyond the scope of a comment.
Stock option plans are very difficult to structure and put together even in places like the US, unless you’re an experienced entrepreneur and know exactly how things are done, or if you have deep pockets to pay the right lawyers. I’m sure in places like India it’s much more difficult since the legal and business infrastructure for startups is in its infancy.
To the entrepreneur, isn’t it a bit early in the life of a startup to be thinking about middle management? My experience has taught me that the most nimble (and many times chaotic) startups are the ones that have very flat organizational hierarchies.

I’d like extend my comments to a full post on my blog, if that’s ok with Sameer.

October 30th, 2006 at 10:01 pm

guglanisam