With a systematic approach to identifying the hot companies in a sector, connecting to them, and then evaluating the best opportunities, hopefully you’ll be able to decide between a few offers.  Even if there’s only one offer on the table, there is always room for (at least some) negotiation.  This post doesn’t going into general tactical approaches of job offer negotiation, but rather focuses on the fact that with startups a significant part of compensation is related to equity or options.  So optimizing a startup offer involves not just one key figure – salary – but also the option package.

Nearly all startup employees receive a number of options figure in their offer.  It is essential that you ask the “number of fully-diluted shares outstanding.”  The details surrounding stock options are often complex and confusing for non-financially-oriented individuals.  It is best for employees to understand as much as possible about their option grants (this subject could be the topic for an entire series), but the first place to start is to ask how many outstanding shares there are.  From that point, one can calculate the percentage of the company an employee will own and a better gauge of the magnitude of this compensation component.  It surprises me how many startup employees I know who are excited to have received a grant of x number of options, but never bothered to ask what relative percentage of the company that translates into.  So the number of shares you receive (e.g. 10,000) is irrelevant (regardless of how big that number is) without knowing other numbers which they (likely) won’t tell you unless you ask.

There are numerous places on the web where you can benchmark the amount of cash and equity compensation for any given function, level, and startup stage.  Ask The VC has a number of posts on compensation and benchmarks: http://www.askthevc.com/blog/archives/compensation/index.php.  First, make sure you’re in the typical range.  If you’re an order of magnitude off, then you have a severe set of mismatched expectations, which isn’t starting a relationship on a solid footing.

I’m continually surprised how many employees fall into the (often deliberate) trap of “we’ll take you on for six months and re-evaluate your compensation level then.”  Even when this is offered in earnest because of a unique situation and individual coming in with a largely undefined role, inertia usually sets in and leaves the employee fighting an uphill battle after those six months.   At a board level, VCs and other members don’t like to see someone recently hired already receiving new options or a salary raise after a short period of time.  Their expectations about a six-month trial period were never set (or they’ll forget it anyway), believe me.  The board’s bias will be to spend those resources on hiring new talent or to retain those who have worked at the company longer and harder.

A startup has two levers which it can pull in any offer negotiation.  Both are limited resources, but it’s opaque how truly limited they are.  On the equity side, each startup has a fixed option pool from which they’re drawing.  It could be running low or it could have been recently “refreshed,” but it’s not necessarily the right signal within a negotiation to ask about this figure.

On the cash side, every startup will sing a song about being cash-strapped… and some of them really mean it.  The best proxy for how a startup views its cash spending is office space.  Look how the company views its office space – are you in a dingy warehouse where CEO sits in a cube with the rest of the company without an administrative assistant?  Or is the CEO a corner window office in a multi-story building with a nice view and an admin who answers his calls?

So with imperfect information about where there might be some wiggle room and available flexibility, there’s a guide as to how to focus the negotiation.  The following matrix lays out a general strategy of which dimension to push during a negotiation – keep in mind the grays in the in-between.

	Senior-level position	Junior-level position
Early-Stage	Equity –  Your salary will be brought to market standards as the company progresses and hires people with equivalent seniority, but this opportunity is the one major bite at an equity piece.	Cash – Any VC-backed companies will have standard equity ranges which you’ll fit into and would raise eyebrows at the board level if deviated from.  Plus, at an early stage, the risk-adjusted outcome of that equity is rather low.  Instead, push for just a little bit better cash comp.
Late-Stage	Cash+Equity +Terms – When the company put together a defined role put out req, they had idea on equity spend and guaranteed comp.  I’d push on both but then also bring up other terms (vesting acceleration, severance) of employment which can be much more impactful in the long-term upside/downside scenarios.	Equity – By this time in a company’s life-cycle, the salary compensation is likely market level.  You’ll have more luck arguing to be aligned with the imminent outcome in pushing for some additional equity compensation which is better risk-adjusted at this stage.

   
These above are general guidelines… I very often am asked “how should I negotiate my offer?”  Of course there are nuances and different situations depending on mid-level people, where functionally in the organization the employee role, gradations in stage/history of company, etc.

One final thing to remember is that star employees will be re-greened (i.e. granted additional options during the course of employment) along the way, but it will always be on a new vesting schedule and rarely ever close to the amount of your initial grant.  Whenever you leave a startup, you’ll be leaving some equity on the table.

In following the my four-part series on finding a startup role, you should be on your way to a great statup gig.  Good luck.

Evaluating a startup as a prospective employee is tough, especially when you compare to VCs.  Venture capitalists have an information advantage – startups are required to be fully transparent about everything before a VC invests in it during weeks if not months of diligence, but prospective employees are limited to just a few questions they ask during a series of interviews with only a few people at the company.  Plus, VCs often will have met the Founder/CEOs of many of a particular startup’s competitors, so they’ll have an even richer understand of the market landscape.   With all of that information advantage, venture capitalists additionally have the luxury of building a portfolio to spread their bets and are still wrong more often than right… but you only get to choose one employer every few years!

There are two sides of the coin in evaluating choices of selecting amongst a number of startup roles you’ve hopefully surfaced after reading my first two posts in this four-part series about strategy and uncovering startup opportunities.  On one hand, of course, you’re joining a startup for the upside.  Not just financial upside, but also the upside of making an impact in an organization, working in small teams with other exceptional people, involvement with cutting-edge technology, and working with other motivated people.   So most of your calculus in selecting the right startup role should involve understanding the company’s market and business plan in executing toward a grand vision.  Is it shooting for a big market?  Does it have a truly transformative innovation?  Are there exceedingly inspirational leaders in the company?  When there are unique and strong external & internal tailwinds which can push a startup forward, there is more opportunity and overall upside for all employees.

The other side of the coin in evaluating a startup opportunity is to assess risk and mitigate downside.  This approach is similar to that of a venture capitalist’s, but unfortunately you likely don’t have all of the access and information that a VC does.  So what is a prospective employee to do?  The only way to truly beat the unfair advantage is to join a startup with people and/or industry you know prior.  Then you have information knowledge that the “market” does not.  So any situation which plays into your own background knowledge of a market or people you’ve worked with in the past gives you a leg up to understanding their chances for success.

But if your connection into a company didn’t illuminate you with unique insight into the startup’s business risk, you can still be discerning in your selection process even if the startup isn’t going to open up the whole kimono on their business / financials.  There are a handful of questions which you can legitimately (and should) ask a startup during the interview process which serve as useful indicators of financial health, opportunity, and promise for the company:

• How many employees did/does/will the company have six month ago, now, six months from now, a year from now?  Employee count is the strongest (but not a perfect) proxy for management’s and investors’ outlook on the business.  Start-ups hire ahead of growth (or at least predicted growth), which translate into a viable company, a healthy work environment, and future internal opportunities.  Financial figures and projections are helpful indicators, certainly, but are often a distortion of the full picture (especially early on in a company’s cycle).  And depending on what level of position you’re applying for, the company may not be that forthcoming with detailed financial information.  The growth in employee count (or lack thereof) directly signals how much work needs to be accomplished how rosy the expectations are.
• Which VC firm provided the most recent funding round and when was it?  VC brand name matters, but only as a general guide as an indicator of promise, not reality.  If a brand-name VC is an investor, it means that at one time one single partner at the firm saw enough promise in the venture to make a bet on it – it doesn’t mean that a company is doing well now.   And there are many reasons why a not-as-blue-chip investor would be in a company with real promise: prior relationships he has with the entrepreneur, specific domain expertise/understanding of a sector, capital requirements for the business, or other dynamics around the round (price, hustle).  The timing of the last round is also important – the closer you are to joining a company in conjunction with a financing event, the more recently validated it is by a professional investor – but also the value of your financial upside is less.
• What is the burn rate and how much cash is in the bank now? Even if a start-up is successfully executing, it could still face a cash crunch if it is not yet profitable.  Employees should ask to find out how much longer the company will ride without the infusion of another round capital.  While the actual answer to this question won’t necessarily provide a definitive answer about the ability for the company to access both cash and additional capital, it will open up a discussion about it.
• Has there ever been a down round, inside round, a flat round, or a CEO change? Any of these three events are an indicator that the startup has faced some difficulties in the past and may not be on track moving forward.  If one of them has occurred, prospective employees should seek out as much information as they can the context of the situation.  After all, there are exceptions to the blind assumption that these are a black mark (e.g. a founding CEO stepping aside to make room for professional management could be an indicator of successful growth).  However, if any of these issues have arisen, it is a signal to dig deeper into the health of the business.

Of course, any prospective employee should evaluate a startup job opportunity just like any other, evaluating both the role itself and the business to the best degree possible.  The answers to the above four questions help uncover the issues that are unique to joining a startup which are critical in reading the tea leaves about what’s really going on underneath the covers.  The next and final post in this series will deal with how to negotiate a startup offer once you’ve received one.


PE/VC-backed companies fare better in terms of growth in sales, profitability, wages, exports and R&D investments, a study by Venture Intelligence shows.According to a new study by Venture Intelligence, a leading research firm focussed on Private Equity and M&A activity in India, PE- and VC-backed companies are growing significantly faster compared to their non Private Equity-backed peers as well

Once you’ve figured out whether you want to find a very early stage startup or a late stage one (the topic of my first post in this series), the real hard work begins.  There’s a sea of information, both in the blogosphere and residing in the heads of everyone your informal network, which an individual job-seeker needs to wade through to find strong startup and the right role in it.

My advice: search for heat, but don’t follow - evaluate.  Whether it’s early or late, there are always a certain set of startups within a particular ecosystem that are generating all of the talk in the community.   On the early side, it's repeat founders coming together again or early runaway traction in an early beta that generates buzz.  For later-stage, it’s a high-priced financing round, tipping scales on widespread adoption, rapid hiring, or credible information on successive revenue-growth quarters.  But remember, heat is often a good indicator of an attractive startup, but it’s neither a necessary nor a sufficient condition to finding the right startup to join.

Think of heat as a sign outside the restaurant, but not the menu.  You're looking for the right dish.  (My next post in this series will explore selecting the right startup).  Yet it’s important to look for heat as part of a process in systematically identifying a potential set of startups from which to select.  Heat is a guidepost which will lead your journey, but remember to pay attention to those interesting stops along the way without all of the glittering lights.

The right approach is to think broadly but network and search to ask specifically.  You want to cover as broad ground as possible, but be very targeted when talking to people within the startup ecosystem or utilizing resources in it.

DOs for a systematic rather than haphazard startup job search:

• Pick a specific vertical or theme (e.g.  mass-customization ecommerce, mobile-local platforms, technology-enabled education), identify all of the startups within your geography, and network to anyone within the company to find out their hiring pace.  If it sounds like they’re hiring generally, then is the time to be intentional about who you talk to in the company.  At first, you're just looking for early indications of success.
• Ask startup service providers (lawyers, accountants, commercial bankers, consultants) which one of their clients is getting the most traction this year.  People plugged into the know can of course potentially connect to many startups, but the more specific request the better.   Then you should ask additional very specific questions: which is their favorite startup with a SaaS sales model, or which has the most experienced CEO, or which has the best investor at board meetings?  Specific questions spur new ideas.  General inquiries get lost in the shuffle.
• Look back at all of the companies which have announced financings (in your geography and target stage) with new outside investors in the past quarter.  They’re hiring by definition because they just raised capital.
  
• Look for specific roles in specific outlets for general opportunity.  For example here locally in Boston, dedicated startup job boards are actually fairly fruitful: VentureFizz, Greenhorn Connect, and Web Innovators Group.  If these companies are actively posting positions, there are good things happening at the startup.  Even if the role posted isn’t a fit for your skillset, you’ve still identified companies where there’s hiring broadly, so there may be a role for you.

DON’Ts:

• Don’t ask a venture capitalist “are there any job openings in your portfolio?”  It’s too generic and won’t right any bells.  Ask a VC which company in their portfolio is hiring the most people right now and are there openings which fit?
• Don’t waste too much time looking through VC’s endless portfolio pages.  The good are interspersed with the bad and the ugly.
• Don’t tell people you’re a great business guy looking for a technical team with an idea/product which needs business acumen – this general search rarely culminates in anything.  Usually a strong team of that profile knows they have specific skillsets missing and are looking to fill those with (a) functional specialist(s) rather than a swiss-army-knife individual.  Or the team is weak and really needs a jack-of-all-trades business type, but isn’t self-aware that they need the help.

Within a short period of time of following a systematic approach to identifying companies with heat (and perhaps a few which don't but sound promising nonethless), you should have a list of a half-dozen or dozen which have good potential.  Next, find your way to get introduced to someone at those startups.  LinkedIn is the best online tool to explore your network, but you can also accomplish this in person by going to tech networking events and asking around for introductions.  Of course, finding a more senior level person at the company is better, but given the (hopefully) ever-growing pace of a hot startup, usually nearly all employees can put you on their hiring evaluation path because they frequently have implemented a specific process for it.

At the end of the day, you’re joining a startup because of the excitement and upside that comes along with it more than just being another job.  So systematically making a list with some of the strategies above shouldn’t be a chore, but rather a fulfilling exploration of what’s out there.  Learning about new companies, new projects, new technologies, new roles should interest you -- or perhaps a startup gig isn’t for you.  The tough part is the next topic in this series: narrowing it down to the right venture.

Geo-location has come to this: After three weeks in review, Wheretheladies.at, a web app that aggregates Foursquare checkins by the female gender, is now available on the iPhone. The concept OF A BIG COMPASS POINTING YOU IN THE DIRECTION OF LADIES is so unprecedented that Apple actually called co-founder Jeff Hodsdon on his cellphone to ask about the app during the review process.

Co-founded by Path’s Danny Trinh and Hodsdon, Wheretheladies.at the iPhone app ranks nearby locations by the number of females who have checked in (using a dictionary crawl and permutation logic when gender isn’t available) as well as helpfully points you in the direction of the critical mass of ladies in your vicinity.

We previously called this service “evolutionary advantage,” as it is essentially nerds using technology to circumvent Darwinism. The fittest now includes those who have smarts, or at least smartphones.

Hodsdon says that the difference between Wheretheladies.at and apps like Assisted Serendipity is temporal. Wheretheladies.at only counts check-ins with in the past 30 minutes to ensure that ladies will be there when you arrive, “When it says 10 ladies are at Elbo Room that means in the last ~30min.  I think that is key.  It’s about where to head to right now.”

Right now the app only works in San Francisco, but the team is working on getting it to other cities. When I asked if they would ever build  Wheretheguys.at, Hodsdon quickly replied, “I’ll start on that now.”

Update: Hodsdon emails me seconds after this post went up, “Oh! I forgot to add! We’re going out tonight to celebrate.  Where ever the #1 spot is for ladies is where we will be :) Updates come from @wheretheladies too.”

You can find out where they’ll be by downloading the app here.