Considering offers at startups

A guide for new grads. A refresher for old hands.

Source: So many Trek memes!

Congrats on receiving an offer! Hopefully you and your prospective employer and well aligned and excited about the future. Here’s a rough checklist of things to think during this exciting time.

TL;DR

  • Question yourself with brutal honesty
  • Time is irreplaceable
  • Structure is an illusion
  • Avoid offer collecting
  • Working at a startup will not make you rich
  • Choose your master wisely
  • The onus for learning is on you
  • Read what you sign!
  • Negotiate your offer

Why do I really want to work here?

Then, of the answer, ask why again. Repeat a few times.

Be brutally honest. You can lie to other people, but you really shouldn’t lie to yourself. It’s o.k. if you don’t like answer. Could well be a call for deeper change.

If the truthful answer is to aggrandize your ego by “surviving” a fast-growing company, or something else less than noble, that’s fine as long as it’s honest. Use this truth as your north star, until you find a better one.

You’re signing a rental agreement of your mind and body. It is illegal to buy/sell fully capitalised labour (a slave), so the employment (rental) contract codifies an exchange of your time for money within some statutory bounds.

Time is irreplaceable, and with a startup you’re probably looking at several years, a non-negligible fraction of your life.

You probably don’t want to get in the habit of working for money, but that’s a story for another time.

Working with a startup takes a shift in mindset that many just aren’t prepared for.

School is about structure. Big companies are about structure .Homework feeds into quizzes; quizzes into exams, etc. Favourable performance review feed into promotions; promotions take you one step further along the career ladder. You know roughly what you need to do to get an “A” or a “promotion”, the measure of “success” for most folks.

Start-ups, particularly early-stage start-ups, tend to lack structure. The hierarchical pyramid capital has labour scrambling to climb is an illusion. A structure created for a certain purpose, e.g. extract the most labour at the lowest cost, no more, no less.

It’s all made-up.

This fact is at once terrifying and freeing. The world we live in, and the companies we “admire”, are created by white men (the unfortunate fact, why sugar coat), on aggregate no cleverer than you.

Attempting to find the ‘perfect’ employer is very much like attempting to find the ‘perfect’ mate (or attempting to beat the financial markets as an amateur weekend warrior). Don’t do it.

Source

Nothing is perfect, and the quest for perfection will probably lead to unhappiness.

In fact, startup employees usually get a very raw financial deal . Particularly for the first few employees, the risk and opportunity cost is very real. Financial return and ‘status’ (cult of the founder) are usually not forthcoming. It’s not uncommon for a founder to walk-away with 1000x more than the first employee. That said, at the right company, you’ll have the opportunity to learn a lot.

“Which is why the yoke of the four-year vesting cliff, the short-exercise window for options, and all the other tricks and techniques employed by cap table-designing masters are so effective.” — Signal v Noise

Unlike fully capitalised labour (slaves), we (rent-a-slaves, wage-slaves) have a modicum of choice in our masters.

The ethics and moral compass of the founding team is their most important attribute. Poor “manager” can become better if they recognize the problem and work towards bettering their skills. A lack of industry awareness by a serial entrepreneur can be addressed with a strategic hire. The unfortunate state of affairs is that a moral compass either exists, or it doesn’t.

There is an enormous power discrepancy between you and your employer, and this power gap will only grow as the company scales.

If they choose, Founders can completely fuck-over workers. Under our current economic system, capital pwns labour, so there’s not much you can do about it.

Given that everyone has a price, you want to pick a founding team who would need a very high price to fuck you. The best you can do is to try and choose wisely, and increase the cost of fuckage by reading your agreements carefully and negotiating (see below).

Talk is cheap. Founders willing to actually commit to their principles via Ulysses pacts are a positive sign. For example, the GPL for a commitment to free and open source software (FOSS).

Questions to consider include:

  • Has the company made a public commitment to anything but facilitating capital accumulation, e.g. B-corp or 1% Pledge.
  • How do the company, founders, employees and investors behave?
  • Does everyone act ethically?
  • Does the company dogfood?
  • Are founders ’the chicken’ or ‘the pig’?
  • Do employees support each other?
  • Are the investment terms fair, or extortionate (e.g. 3x liquidation preference with participating-preferred)?
  • Do workers have meaningful ownership?

The general unstructureness of startups means you’ll have a much freer hand to learn than at a larger company. Rather than structured training or formal professional development, the onus will be on you to decide what you want to learn and do it.

Questions to consider include:

  • Who would be willing+able to mentor?
  • What would you learn? Are these things I want to learn? How will learning these things help me grow as a person?
  • Where will this opportunity take me in the next 2–5 years?

Read your option and employment agreements carefully. Ideally, have someone more knowledgeable read it as well.

  • There are some unfortunately common provisions that, in practice, mean most startup employees cannot realize the value of their option grants.
  • The most egregious restrictive covenants and non-competes are probably unenforceable (e.g. no work in sector, ever again), but be vigilant about what rights you’re signing away.
  • Many also include draconian IP restrictions about the thing you build on your own time.

The company is under no legal obligation to explain the legalese in plain English, and the vast majority of companies will not. Rest assured, this is to your detriment.

A handful of forward-thinking startups will walk-through the options grant with you,¹ explaining what a bust, trade-sale, IPO, etc. would mean financially. All things being equal, this frankness is a very positive sign.

Tomes have been written on the subject. You should negotiate for fair compensation, but non-monetary comp (flex hours, annual leave, training) is often more valuable than an extra few $k (esp. after-tax).

As an entry-level employee you may feel powerless in a negotiation; however, for technical roles, it’s surprisingly hard to find and recruit good people.

Without rigid corporate structures, startups can be surprisingly flexible, particularly with hard-to-acquire mid-stage and senior talent.

If you don’t ask…

[1] Not an endorsement of eShares, but there on-boarding slide-deck is exemplary.

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