> He’d be taking a 40 percent pay cut to join them, but he would have his hard problem and would get to run his own data-science team. Nick and Chris had allotted an equity pool that was larger than average, and they were making Tevye a generous offer—in a highly theoretical sense. San Francisco was full of people walking around with their pockets stuffed with 1.2 percent of nothing...Tevye signed up. He asked to begin on January 27, roughly two weeks before Nick and Chris’ money was set to run out.
This is precisely why "What's your runway?" is such an important question to ask before you accept a job offer from a startup.
> This is precisely why "What's your runway?" is such an important question to ask before you accept a job offer from a startup.
Let's say you did ask the question and got an as-honest-as-you-can-expect answer. (two months, but we're soon to close a million-dollar round) How does that really help you make your decision? You could look at them and try to judge whether they might make their round, but you're probably better off in Vegas.
If I've read the article right, runway doesn't mean what it used to mean anymore. You can keep raising small amounts of money for a good while before investors will give up on you, and even if the company ends up folding, you're still working and getting experience and making connections.
> Let's say you did ask the question and got an as-honest-as-you-can-expect answer. (two months, but we're soon to close a million-dollar round) How does that really help you make your decision? You could look at them and try to judge whether they might make their round, but you're probably better off in Vegas.
How doesn't this help you make a decision? Given the number of opportunities out there today, including opportunities outside of Startupville, there's no reason an experienced or talented candidate has to gamble on a startup that might not be able to make payroll if a funding round doesn't close in the next n weeks or months.
By the way: there's no such thing as an "as-honest-as-you-can-expect" answer. There's an honest answer and there's a dishonest answer. A founder, executive or hiring manager at a startup should be able to look you in the eye and tell you how much runway the company has based on its current cash position, cash flow and burn rate. Anything less, including an answer that distorts what "runway" means (hint: funding that you expect to raise but haven't yet raised doesn't count), is a huge red flag that you ignore at your own peril.
> Given the number of opportunities out there today, including opportunities outside of Startupville, there's no reason an experienced or talented candidate has to gamble on a startup that might not be able to make payroll if a funding round doesn't close in the next n weeks or months.
You're absolutely right. There's no compelling reason to work in Startupsville. If you're there, then you're already being fairly irrational. Knowing the (current) runway isn't going to make it any less so.
> A founder, executive or hiring manager at a startup should be able to look you in the eye and tell you how much runway the company has based on its current cash position, cash flow and burn rate.
Is this actually true, or a pie-in-the-sky wishful thinking thing? The article seems to paint the latter picture. I've been in situations where overconfidence and unrealistic optimism were the norm rather than the exception. Like auto sales.
You'll fall out pretty quick if you can't get with the program and insist on being a wet blanket. You have to get good at reading between the lines because nobody talks straight. Opportunities are there, but mostly only for the morally loose.
> You're absolutely right. There's no compelling reason to work in Startupsville. If you're there, then you're already being fairly irrational. Knowing the (current) runway isn't going to make it any less so.
I think you took my comment too far. Working at a startup isn't for everyone, and there are plenty of great opportunities outside of the startup world, but not every startup is a sinking ship that's hiring new employees when it only has two weeks of cash left.
> Is this actually true, or a pie-in-the-sky wishful thinking thing? The article seems to paint the latter picture. I've been in situations where overconfidence and unrealistic optimism were the norm rather than the exception. Like auto sales.
You decide what's important to you. If understanding the financial state of a company that's going to employ you is important, you have every right to ask questions. This is especially reasonable at a startup, where most employees are granted stock options. If a company offers you an ownership stake, why shouldn't it treat you like an owner?
You should turn your auto sales analogy around because you're looking at it the wrong way. If a used car salesman is trying to sell you a car and won't let you take a look under the hood, what are you going to do? Buy the car, or move on? The latter of course. So why would you join a startup if the "salesman" evades questions about what's under the hood of the business?
Just because there are a lot of people who are too naive or timid to ask questions doesn't mean that you should follow their lead. The latest boom has attracted a fair number of shysters to the Bay Area, but there are still plenty of honest people here who will level with you without hesitation. These are the people you want to work for and/or with.
> Working at a startup isn't for everyone, and there are plenty of great opportunities outside of the startup world, but not every startup is a sinking ship that's hiring new employees when it only has two weeks of cash left.
The ones with significant upside potential are. If a "startup job" is really just a normal job with normal job security and a normal paycheck, then you're never going to get the chance to strike it rich. It's just a slightly-better-than-average job.
> You should turn your auto sales analogy around because you're looking at it the wrong way.
No I think you read me the wrong way. I'm talking about you going into auto sales as a salesman, not you trying to buy a car. That's far closer to what you're doing by joining a garden-variety Silicon Valley startup.
> The ones with significant upside potential are. If a "startup job" is really just a normal job with normal job security and a normal paycheck, then you're never going to get the chance to strike it rich. It's just a slightly-better-than-average job.
Statistically few startups offer significant upside potential to rank and file employees. Period. It's not just because most of them will never have a liquidity event, or a big enough liquidity event, but because employees tend to receive so little equity and their equity is the most vulnerable.
If you look at some of the biggest startup exits in the past several years that produced the best outcomes for a large number of rank and file employees (Facebook, Twitter, etc.), you're going to find few if any that required those employees to take their chances on a sinking ship. Trust me: employee #500 at Facebook or Twitter, who received competitive salary and benefits, has done far, far better than 99% of the first 10 employees at 99% of all Silicon Valley startups.
The notion that joining a startup that's always a few weeks away from running out of cash is the only way to get "upside potential" is pure myth. It's simply not true. In fact, if you are motivated to "strike it rich", working at a startup as an employee is a horrible way to go about it. Well over half of the millionaires in this country are self-employed. You're statistically far more likely to get rich working for yourself/owning a business than working for a startup that gives you basis points in equity, or a percent or two if you're really "lucky."
> No I think you read me the wrong way. I'm talking about you going into auto sales as a salesman, not you trying to buy a car. That's far closer to what you're doing by joining a garden-variety Silicon Valley startup.
I don't know what point you're trying to make, but my point still stands: if you're contemplating a business transaction, whether it's buying a car or joining a company, you have every right to ask questions. And if you don't feel comfortable with the answers you receive (or don't receive), you proceed with said transaction at your own peril.
If I've read the article right, runway doesn't mean what it used to mean anymore.
Have you done the math on how small 2 weeks of funding really is? That should be your follow up question. $50K in the bank? with a $100K line of credit? or $8K in the bank and a vw golf as a backstop?
This is precisely why "What's your runway?" is such an important question to ask before you accept a job offer from a startup.