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I'm going to be an undergraduate alum of where you went to B-school. It's definetely time for me to learn. I have a wierd situation due to my deparetment in which I finish classes in 5 weeks, but don'tgraduate until june. You know this scene- do you stay in Chicago? What is here? Or SHould I go and also be working towards my undergraduate,, knowing how crazy the undergraduates are?
(And We Are)
Take a screen shot of Marks comment and hold him to it :)
I like it because I would be 'punching above my weight', and because it is an idea that I would like to be associated with. However it will likely take a couple few years to get going, so as much as I enjoy learning, it could be a mistake..I guess the question to ask would be if I get no cash back, would it have still been worth it..
Is there anywhere I can find standard-ish compensation plans for startups, pre and post money?
Question that comes to my mind: For young people - do you suggest going the 'learn' route first to try and get the opening or jump straight into an 'earn' position since they can take risks. I know for me I decided to take the learn route (hence who I decided to work for).
Either way, certainly know who's door I'm knocking on for career advice now.
I feel like my resume could use the established company to 'learn', but my gut leans to the startup to 'earn', because I know it is what I am passionate about (the type of work, not the money). In my industry, it is always time to 'learn'. But most of what I know I have taught myself.
- you know when you aren't learning any more. Most people fall into a habit of just staying put.
- if you have a chance to move to a new role in your current company and continue to learn go for it
- if you can't it's time to look around. I would warn you (and others) that job hopping is also a problem. When I see people who worked for 5 companies in 6 years I usually won't hire them. No loyalty. So as with everything in life it's a balance
- as for when it is right to try and go earn - it's a personal decision. Most 24 year olds aren't ready to run their own show. But then there's Mark Zuckerberg and Bill Gates who go and prove us all wrong.
Good luck!
- almost no companies achieve $500 million exits. So your chances of being at that company are small. Even if you are your chances of holding on to your role (ask anyone who joined Facebook early), not getting diluted, etc. are small
- on the other hand, being the CEO of a small company gives you all the freedom in the world. If you run the show, for the most part you decide when and how to exit. If you don't raise too much money and 4 years in get an offer for $15 million but you own 45% of the company that's a pretty great outcome for most people. Do the math on what that would take in most other scenarios.
- the key advice I give to people who are ready to be the #1 is ... when you're ready go for it. If you're number 2 and you want to exit at $15 million but the CEO wants to shoot for the moon - guess who wins!
Great post!
Start your company. You will definitely learn, and you will still have a 1 in 30 (arbitrary chosen) chance at earning.
Topic is right on and relevant to a lot of people. I wish the article went one step further. I am interested to see if there is a calculator that anyone knows of that can tell you based on the share pool, stock owned and valuation of the company what the net results would be if your company sold for $XM. Of course there would be some simplifications/assumptions but that would be valuable to a non-finance guy/gal.
Thanks for continuing the series on Startup Advice. And I enjoyed hearing you on #TWIST.
But here's what you need to do:
- know the "fully diluted number of shares"
- know how many you own (e.g. the "% ownership of fully diluted shares")
- know how much money was raised in total and what the terms of the liquidation preferences are. This is complicated but VentureHacks and Brad Feld's site have great info www.feld.com
- when the company is sold (different in an IPO) the investors take their money back first. Depending on the liquidation preferences they make take more. This is more complicated because if the company sells for a very high price they MAY not take a liquidation preference. You really have to understand LP to do this calculation.
- Then you can begin to calculate how much you'd own of the remaining company. You also need to know whether you're vested and if not vested whether you have "acceleration on a change of control"
- It would be hard to build a calculator without knowing the terms of the company but at a high level this is the process.
You should check to see if you might be entitled to state and federal tax refunds for the last few years. The maximum tax on long-term capital gains in California is 24.3% --- 15% federal and 9.3% state.
"... so you’ll likely be taxed at a long-term capital gains rate. In California that averages around 42.5% so in my state after tax you’d make an extra $18,000 / year and that’s in a positive scenario!"
Your commentary is quite insightful, which is what should be expected from the best VC blogger in the genre.
Learning is part of their DNA.
In fact, they begin to value learning much more than $$. After understanding the foundations of business development, startup cycles, outside investors, and building multiple successful companies what's the point of more earning?
It's only the folks that haven't learned or earned enough yet, that get blinded by earnings. It's not the capital, it's what you can do with it that makes you a great founder.
Either way, great post. Got me thinking and I appreciate it.
Burn - being in a big company thinking you're going to learn and leverage your lessons into your start up career.
Doing the hard stop from the burn to learn or earn is difficult.
If you're in a learn situation and the founders swinging for the moon you're in it for a while and next thing you know you've got a mortgage and mouths to feed which makes leaving to go do the earn thing difficult.
Although stock options may help the employee feel more involved in the business (which is something that I would like, as the company founder), in the vast majority of real-world cases it's just a BS due to the same calculation point that you made in your article. And I do my best to explain it to them. To me, it is more of an employer's trick than a real benefit.
Indeed, there are people that wouldn't want to get involved unless they are offered stock options. If it's really a must-have for them, so be it.
About learning vs earning, I totally agree that the way to go is to start your own company or to get to be a senior exec. But you shouldn't try to learn 'everything' before you start your own company. I often see people that are "not yet prepared" to start a company. If they don't do it soon, most of them will never be prepared. You should start it trying to earn as much as possible from it, but most likely you will end up learning a lot from it... probably more than you would learn by working for somebody else.
In my own limited experience, it feels like I've learned more in the 18 months since starting a company than I have in the rest of my life. If you're in a position to bring together a team and take a shot at a promising opportunity AND you're young enough that your opportunity cost is pretty low, I highly, highly recommend it. There are few situations in the world that will lead to as much personal growth and professional development *in terms of true capability.* If you're trying to climb a corp ladder, it's a much riskier approach.
(I worked at a bootstrapped startup in college and for a venture-back co for a year after graduating. Both were important but can't even begin to compare to this.)
greatly enjoyed your article, just a quick question -
i graduated with a business/computers degree and am currently looking for a job.
i have been offered two opportunities - one at an established dev firm and another at a startup - both doing dev work.
at this point the earnings wont be great at either.
im not sure where i would be able to learn better?
thanks
- the people you'll be working with and;
- the kind of work they've told you you'll be involved with
Good luck.