Most profitable time to join a startup, considering failure likelihood

Agilent Technologies / Data you_again
Oct 24, 2018 21 Comments

Title says it all.

Pre-stage C? Etc.

Of course assuming startup is acquired or goes public, earlier is better.

However, accounting for higher failure likelihood for earlier stage, when is empirically the best time to join?

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TOP 21 Comments
  • MapR Technologies v5gfrj6
    Simple answer is to join early. Why? You get options at low low price and therefore you can buy them and leave if you change your mind. If you join later then the stock value is too high and leaving means you have to put in your hard earned money to buy. If the stock has appreciated then you also have to pay taxes on that appreciation and you may get hit with AMT. If however the company has high probability of success then they will switch to RSUs anyways.
    Oct 24, 2018 13
    • Agilent Technologies / Data you_again
      OP
      You can try to play the game and join a startup with a higher than 1% likelihood of ‘success,’ but that’s sort of besides the point. Assuming that you’re choosing completely at random , one could generate the above (not an unreasonable assumption).
      Oct 24, 2018
    • Agilent Technologies / Data you_again
      OP
      This seems like an obvious enough question with available-enough data such that someone has already done the calculation... perhaps not tho.
      Oct 24, 2018
    • MapR Technologies v5gfrj6
      They have... Google it ... it is less than 10% chance of success even after series d... and remember you don't get to play 100 times... you really only get a handful of shots at this... and company success definition is based on a positive outcome for investors...
      Oct 25, 2018
    • Square / Eng SQ
      Statistically it's never worth it to join a startup. On average, FAANG will beat the compensation for startups when you factor in the rate of failure for startups.

      You not only have to join a startup that has an "exit", but the exit has to be multiples higher than for when you joined. If you joined in series A then your grant may have been like 100k of options. Given that would have been 6+ years of your life in a startup, it would have need to have gone up to 2M worth. Otherwise you will have lost out on money from being at FANG from higher base, stock appreciation, rsu refreshers, promotions, and bonuses.
      Oct 25, 2018
    • Agilent Technologies / Data you_again
      OP
      Solid, SQ! The kind of quality, direct content I was hoping for.
      Oct 25, 2018
  • Okta nfc
    Around B/C

    They should have product market fit, some sales, and are looking to scale. There are still things to fuck up but many of those are survivable. Failing the first two are not.
    Oct 24, 2018 1
    • Agilent Technologies / Data you_again
      OP
      Refreshingly specific. Cheers.
      Oct 24, 2018
  • Facebook iBelieve
    Unfortunately, it really depends. Speed of funding rounds, company growth, monetization strategies are just a few of the factors that can change this answer.
    Oct 24, 2018 3
    • Agilent Technologies / Data you_again
      OP
      There must be a computable empirical joint distribution of joining time versus overall profit, which must have some peaks and valleys. (I’m living up to my “Data” badge on here I guess).

      What you’re saying, in these terms, is that at least from your knowledge, there’s no obvious structure there? This contrasts with the below assertion about earlier being better.
      Oct 24, 2018
    • Square Umwut
      This is like predict stock price or market trend then
      Oct 24, 2018
    • Agilent Technologies / Data you_again
      OP
      I guess. Under the assumptions that things continue to go as they have been (false, I know).

      Like if we take every individual that’s joined a startup within the last 10 years, plot the stage they joined versus their full profit in 5 years, let’s say, we could empirically measure this.

      Then take the maximum over joining stage of 5 year profit, and you have an approximate answer to my question.
      Oct 24, 2018
  • Facebook / Eng
    lmfao🙃

    Facebook Eng

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    lmfao🙃more
    impossible question to answer. depends on your money-time preference and risk aversion. for me, I don’t like the idea of exercising options and would likely only join a startup that had RSUs
    Oct 24, 2018 0