Platt Perspective on Business and Technology

The startup as a career path – Part 2: joining a startup team

Posted in job search and career development, startups by Timothy Platt on September 28, 2010

A few days ago I posted a first installment on startups as a career path with:

Part 1: Financial Analysis and the Stand-Alone Business Versus Franchise Decision

and I focused on this general topic from the perspective of building your own startup. In that, I focused on building from a good understanding of the Financials and the numbers involved, and with two basic startup approaches in mind as alternatives: building your own stand-alone business or entering into a franchise arrangement.

That posting still leaves open a third basic route: the possibility of going to work for someone else as a startup employee, and like founding your own business this leaves you with several basic options and issues. To start with, you can join as a full time in-house employee, or you can join in as an outside consultant. I have written fairly extensively on job search and on researching possible job opportunities in my Guide to Effective Job Search and Career Development but at this point I would point out a somewhat different set of resources for you to review at Startups and Early Stage Businesses and I point out:

Startups and Reality Checks – startups as viewed by consultants

as particularly relevant here. But I want to step back from that and divide up the universe of possible startups differently than I did in that posting. I want to divide startups for the purpose of this posting into two basic types:

1. Businesses that set out to meet more standard marketplace needs in underserved communities.
2. Businesses that set out as startups with a vision and mission of developing and offering a completely novel value proposition.

There are some basic questions you should be asking either way so I would start this by outlining some of the areas of communality and overlap.

• What type and level of experience do the founders bring to the table as they pitch their embryonic startup?
• Do they have experience working with or building a startup themselves, and if so were they successful at it?
• If not, do they at least approach this new venture with a clear sense that they have learned from their earlier experience?
• Have they worked for a startup or early stage business as an employee or on a contractor/consultant basis? If so what was that like?
• Are they investing in this new venture themselves with their own money, putting some of their own skin in the game? It is a very dangerous sign when the people you are meeting with are only willing to put in sweat equity in the business they are founding as its creators and leaders. Quite simply that means they have nothing to loose if they loose interest and back away, and they have no real commitment to follow through.
• Can they clearly and compellingly say what they are offering that would be unique and that could bring this venture to success? Here, that might be a clear and easy to understand outline of their unique value proposition product or service, but it can also be a clearly stated and convincing argument that there is genuine unmet need in the community and marketplace they would build in, for a more standardized product or service that people do in fact need and buy.
• Has anyone developed a business plan for this venture, and if not is one being worked on? Where does that stand? (For startup franchise operations, the business plan is probably fully developed and standardized for the franchise offering company. What is it like and what does it say about employees and their terms of employment if anything?)

Those bullet points were primarily all about the founders and their proposed business venture, and just turning to the employee at the very end. Now I turn more directly to your proposed role in all of this.

• What precisely are you going to be doing with this new venture? Keep in mind that startups have a seemingly endless number of tasks to complete and of all types, but they generally start out with absolute minimum headcounts. You can expect to be wearing a lot of hats with your job description evolving as the business does.
• Who will you be reporting to and how and how much access will you have to the others on this developing team for working with them coordinately?
• What type of a time commitment are you going to be making?
• Are you signing up to receive equity in the business in the event it does successfully launch, or for salary and benefits or for some combination?
• How much of a say will you have in how things are done in your area of expertise that you would be brought in to manage or work in? I have seen situations where people have found themselves with responsibility but no authority to make any real decisions over the activities, processes or results they are responsible for, and that is a formula for disaster.
• Would you be getting at least some compensation up-front for work done, coming to you as startup-expense booked salary, or would you be expected to “wait like everyone else” before receiving any compensation? Remember in this context that “like everyone else” is meaningless as this mixes in the founders who own this new venture and employees who will primarily or only be getting salary – when and if that starts, and perhaps benefits at some time yet to be determined.
• That bullet point is analogous in some key respects to the set of issues involved in the founders putting skin in the game, in the form of their own financial commitment. Be very wary of any founders who would bring you in but only offer equity share – no compensation for specific work done. Be equally wary of any founders who say they will pay you salary but will not and cannot pay even a modest proportion of that upfront. If they have not paid you anything and you agree to that, it is easy for them to see your contribution as not having had any real value, and particularly if they drop their project for building the venture and walk away.

If I sound a bit cautious and even perhaps a bit cynical here it is for a reason, or rather several of them – ventures I have seen flounder and even fail completely. And this brings me to my two numbered startup type alternatives, above.

If you are looking into that exciting new startup with the great new idea, you may be looking at the next Google or Facebook, or that next Microsoft – but you may be looking at something a lot less viable and both for strength of idea and concept and for capacity and willingness to follow through on the part of the founders.

• Insist that you need to know what type and level of commitment these founders are making in their own venture as a surety that they in fact take this as seriously as they claim, and that they will follow through and even when they start encountering roadblocks and problems – which always come up in one way or other.
• Tell them that you are willing to negotiate on compensation and want to hear what they have to say, but that you do need to be compensated upfront to a mutually agreeable level if you are to be able to work with them. If they are unwilling to entertain any up-front compensation, walk away. If it sounds like they are planning their startup with a goal of not having to invest in this themselves either, don’t walk, run.

If you are looking at a new venture that would simply be providing a more standardized product or service to an underserved marketplace and community, you are much more likely to find yourself talking more standard new-hire terms with the founders, just as you would with any hiring manager, and this is essentially certain for franchise operations. Here, you are moving into a more standardized job as this business is more standardized, and in both products and services, and in business models and processes that have been found effective for providing them.

• In any and all cases, there are some details that you really need to get in writing as a prospective new hire.

You need to see and be given opportunity to review an employment contract that offers terms and conditions of hire, your responsibilities on the job and details as to you your compensation. This may also include confidentiality and even non-compete clauses and a variety of other types of detail. (Note: it is a real give-away that the founders are not willing to invest in their venture if they are unwilling to offer you a real contract and even one obtained in boilerplate form from a site like www.LegalZoom.com.)

Timing is one type of detail you do want included, and that means when and how often and how soon you will be paid salary, and when any benefits would commence, as well as what they would be and what you may have to pay for them from your salary. An employment contract or accompanying document should also indicate how long your new employee probationary period will last and how you will be reviewed as it is completed. Basically, this should include all of the standard employee contract details, and if it is done correctly it may add a few extras that account for the fact that this is a startup you would be hired by. Unless you are an attorney, consider asking one to review this for you (an expense that may be tax deductable as a legitimate business expense.)

As a final thought in this posting I point out what should be obvious – approach this type of opportunity with your eyes open and with a due diligence perspective, in evaluating if this is a real opportunity and if so, if it is the right one for you.

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