How to spot a startup winner 📈

New / Strategy
liquidone

New Strategy

BIO
Looking for my next move.
liquidone
Dec 25, 2021 533 Comments

Edited:

I was hired pre series A. We scaled rapidly right into an exit to a FAANG company. Company was ~3 years old at the time of acquisition.

🚀Here is how to re-create this scenario and join a company that may actually reach a liquidation event, because if not, then why bother?

✅ 1. Look at the leadership team and founders - are they super strong?

•Do they have a history of acquisition or liquidation events in their past?

•History of taking companies to IPO?

•History of building and scaling large products to large markets?

•This reduces risk for investors meaning the business will be well capitalized and therefore increase the likelihood of a liquidation event for you and the team.

•They’ve simply done it before! You will also learn much more.

•Note on the CEO IMHO: In today’s market - I prefer having a CEO that is engineering/product driven, not a business/Ops minded CEO. Will net a better outcome.

✅ 2. Look at the investors - are they truly top funds or just mediocre ones?

•Do the VCs have a history of funding world class CEOs/companies?

•Are the angels well known in their respective industries?

•You can tell a lot about a startup (and their likelihood of success) based on their cap table.

✅ 3. Look at QoQ growth rate for key metrics like ARR, NRR, UA, or other meaningful KPIs.

•35% QoQ ARR growth is a super strong benchmark, and when you’re super early, it can be 50%+

•Also, is the product great? Like really great?

•Don’t be shy to ask for these metrics. If they aren’t growing rapidly out of the gate, there is inherently more risk.

✅ 4. Headcount growth, and time in between capital raises/funding also tell a story for speed of growth and the company’s trajectory.

• Are people staying and joining? Or leaving. Linked In Insights tells you this on the company page.

•🦄 Path to unicorn in 5 years: “T2-D3” (Triple ARR twice, double ARR thrice - $millions)

•Starting from 2M ARR: 2-6, 6-18, 18-36, 36-72, 72-144 = 🚀

•If a company took 6 years to raise their series A (or even 4 frankly) and then another 1-2 to raise their B, and then their C, that ain’t it. Check Crunchbase.

•Some companies do find their way and then scale rapidly later to catch up, but it’s rare.

•Let us all start optimizing for liquidation outcomes here, and think about this stuff when weighing joining a startup vs a developed ‘rest and vest’ company.

Using these points you can start to make an educated guess on the likelihood of the startup making it to a successful liquidity event for a large multiplier, or not.

If the company does have these characteristics then join every time, you’ll go further in your career and earnings.

#Liquidity #Tech #Startups #Equity #Startup

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TOP 533 Comments
  • New
    hugh jarse

    New

    hugh jarse
    3 yoe and you’re an expert. lol.

    you forgot the #1 most important factor!! LUCK
    Dec 26, 2021 12
    • Quantum / Eng
      82f3be36

      Quantum Eng

      82f3be36
      God damn hugh this speaks to me on a spiritual level
      Dec 31, 2021
    • Convoy
      XWIF21

      Go to company page Convoy

      XWIF21
      What’s is agile? It’s still abstract for me. Using scrum makes u agile?
      Jan 6
  • How did you get hired as VP with no degree?
    Dec 26, 2021 6
    • New / R&D
      vganwrkr

      New R&D

      PRE
      Qualcomm, Microsoft, Maxim Integrated
      vganwrkr
      Congrats! Seems like a lot of work but with a good reward.
      Btw, what type of Vp role were you in? Operations? Finance?
      So did you essentially have the knowledge that someone in an accelerated MBA program would have?
      Apr 5
    • New
      AgLt14

      New

      AgLt14
      VP is not all about rolling up your sleeves, that's called title inflation.
      5d
  • Roblox
    mextr

    Go to company page Roblox

    mextr
    ⚠️ Survivor bias alert. ⚠️
    Dec 31, 2021 3
    • Amazon
      2022 .

      Go to company page Amazon

      2022 .
      That's a huge blanket statement to say that having agile is a red flag.

      Most teams ive worked with that use the word "agile" to describe their process do something that only vaguely resembles agile/scrum, picking and choosing the parts that work with their own team dynamic and preferences.

      In fact I've seen teams that call themselves agile range from absolute micro-management that slows everything to a crawl (as you described), to absolute free for all.

      So I would say that it is less of a red flag and more of a meaningless term on its own.
      Jan 1
    • Amazon / Sales
      rXCk42

      Go to company page Amazon Sales

      rXCk42
      Most everything they're saying is true, apart for a few weird generalizations, but most of it is obvious (look at previously successful founders. Look at T1 VC portfolios) or unactionable (how are you gonna get a job at a yc startup founded by a guy w two previous IPOs while it's still in series a - cause that's where the money is) And yet they're making it seem like it were iterable wisdom they unearthed through their own experience. If it were as easy to discern what startup will be successful as OP suggests, there would be only successful startups and no or very few failed ones, since VCs are doing the exact same thing as a full-time job and actually putting millions of $ where their mouth is. This is like a dogecoin millionaire offering investment advice.
      Jan 1
  • You mentioned the key well - be lucky :) Kidding aside, congrats!
    Dec 25, 2021 0
  • New / Strategy
    liquidone

    New Strategy

    BIO
    Looking for my next move.
    liquidone
    OP
    Good question - I’m thinking about doing a post surrounding this on strategy for researching the right companies. I actually start with the best VC funds, go deep into their portfolios, then reach out to the talent department of the VC and ask for an Intro to the company. Works way better then going direct to the company.
    Dec 26, 2021 12
    • @Mgmt Please elaborate a bit more about the yearly sit-down with A2Z partners.

      Bunch of questions:

      Was this a group meeting? How did the first meeting happen? Who set the agenda for the meeting?

      What does it mean to find ‘design partners for their investments’?
      Dec 31, 2021
    • New
      fosnebsm

      New

      fosnebsm
      Did you get a chance to write a post about it?
      Dec 31, 2021