Truth is the beginning of beautiful outcomes

With the year 2022 coming to an end, the reflection starts. Though an eventful year, it was a serendipitous reconnection with an old friend that sets the stage for the new year.

At this point, I have not seen my friend for a few years. two things become noticeable as he is catching me up on the important events of the past years in his life: a) he’d gone through a lot and b) this process had led him to newly-found clarity. Despite narrating difficulties in several areas of his life (social, work, self-esteem, and his relationship with his partner) he radiated happiness and had a refreshing confidence about him. I was very glad to see a friend doing well and intrigued to understand the inflection point. And I asked.

Through a series of events, he reached a breaking point in life. A change was necessary. And so, he came up with a plan to declutter and refocus. He made a list of all the areas that seemed to be important, both in the present and the past, including things like skills in sports, appearance, relationships with others, and career. For each of these areas, he assessed himself honestly and also phrased precisely his future expectations of himself for that area.

His description of the process was “humbling yet, illuminating”. Reflecting on his life’s state and comparing past and current needs enabled him to focus on what truly mattered.

Several unnecessary behaviors and obligations were cut loose. For instance, he realized that being overly athletic was not an area he excelled (he said 5/10) yet also not a top priority. It was a remnant of high school; an unfulfilled desire to be good at football and accepted by his classmates. Once he acknowledged this as a desire of the past, it was easy to remove any expectations. Instead of stressing about his athleticism and overall fitness, he accepted that he does not need to worry about it. The knock-on effect was he actually lost weight and was fitter since the last time I saw him. 

I thought of this exercise to be honest, wise, and powerful. It acted as a reminder that opting in is a choice and so is opting out. We can choose what we want to fight for and, just as importantly, what we don’t want to fight for. Battles that once made sense to us but no longer do, there is merely a reflection of an image long gone. 

The truth might sting. Then again, truth is the beginning of beautiful outcomes.

And so, at the overture of 2023, I wanted to share the questions I am asking myself: What do u care enough about to have expectations for yourself? What do you want to be good at? And, what is the weight you need to shed to move forward? 

Should you work for a startup or big tech? Calculating the payoff

Courtesy of the clickUP blog

Make millions, lifelong friends, and a professional wolfpack for the years to come. Also possible: leave with no money, work for a minimum wage hourly rate or less when overtime is accounted for, and burn out. In the world of extremes, this is a good description of the startup experience.

So how should you be thinking about joining a startup? Is it worth leaving the cushy, well-paying job?

There’s no crystal ball and every choice is unique. In the end, it’s your life, your choice, and if your gut tells you to go for it, then don’t bother reading further. You have your answer. 

If however, you’re on the more popular side of the camp, where options are swirling in your head inconclusively, then this is for you. 

Know what you want. 

Ask yourself, “what is it that you want”. Is it money? Acknowledgment or perhaps challenging yourself?

The older I get, the more I take seriously the question of “where do you see yourself in 10 years”. Have an answer to that and you can reverse engineer your way to the end result without feeling like you are groping in the dark. 

The experience element

Are you next to the action? 

Startups are great for learning; unless you’re the last cog of the machine in which case you simply “do stuff”. You won’t even experience the actual journey. Business insights will be tainted by what the narrative told across the business. This is not pessimism. The unfortunate truth is that founders have to sugarcoat things a lot – if not outright lie -to their employees, since everything is shaky at the early days (pre-series B) of a startup. 

On the other hand, if you are the Founder’s right-hand and get exposure to investors, customers and get to witness the decision-making journey of a strong founding team, this is a golden ticket irrespective of the result. 

Are you a key employee? 

Key employees don’t have to be the first 10 people. Key employees can be employees in the formative years of the company, the first 500 employees of a 5,000 person company, or any employee whose remit allows them to execute and learn on someone else’s account. 

Imagine you’re a director of marketing and you’re given a few million pounds to execute on a marketing strategy. The experience of having experimented and seen the direct outcome of your actions at scale from the front seat, are an automatic step change in your work capabilities and skillset. You’ve levelled up. 

Seeking an adrenaline rush or balance?

The ubiquitous, understated, unquantifiable issue of startups: can you deal with dedicating your life to your work? You will have to. 

On the other hand, your cushy job means socializing, going to the gym, and having personal time for family and friends. This is a trade-off that seems easy conceptually but just like bodybuilding, it’s hard every-single-day. 

The value of experience is delayed

Startups that grow like rocketships offer a scarce experience: the experience of seeing a constantly transforming, growing organization. This is critically important since there is no company that would not want to follow that trajectory nor is there another successful company that does not want to poach the “experienced hires” who were there for the ride.

Being part of this journey means that IF YOU LAST and if you become a key employee, then you can cash out that experience for the foreseeable future, and all sorts of doors open easily. Also, it’s cool.

Hopefully, this helps. Now, to brass tacks. The payoff. When does it make financial sense to join a startup? 

How to calculate the payoff

Before I get into specifics, there are a few principles: 

  1. Think about wealth, not money. 
  2. Aim at equity, not salary.
  3. Know your number, don’t settle for someone else’s. 

In the end, every startup succeeds when it participates in wealth creation. If you don’t think a startup can create wealth, don’t join, move on. 

If the startup you’re considering is not offering a generous pool of equity, move on. Because, what is a startup? Fundamentally, it’s a speculation on a potential future. And when it comes to private markets, there’s only one way to participate in the speculation: equity.

Finally, know your number; don’t compromise for someone else’s. Forget the spiel about “the pool is maxed” or “no one has more stock than this” or the even more offensive – and my personal favourite –  “people with twice your years of experience make this”.

You’re not an amateur experience seeker. You’re a professional playing the game and you ought to have a threshold number and stick with it. What is the ticket you’re looking for when the startup exits?  It does not matter if you like the business, the founders, or the setup. It’s likely that your number is not possible to be met. Can this business get you where you want to be? If not, don’t compromise, move on. 

How much can you really make?

Total Equity owned x Exit Value – tax. 

The total amount you will receive from your time at a company is basically the vested options you end up with by the time there’s an exit minus the tax you pay. Simple right? 

Well, no. 

Let’s start with an example. 

Assume you’re offered a job at a hyper-growth startup. By that I mean a company that is growing in terms of people and VC inflow way faster than the mean of the industry. Imagine a company that grew from 0 to 100 employees within a year and raised £10m in 12 months in Seed and Series A. Since the startup is raising way more money than average, the dilution is also quite high and the startup is valued £30m. 

You’re offered to join by the time they’re 50 people. Your offer includes options worth 0.2% of total equity (£60k) and a salary of £100k which I will leave out since salary would be matched in lots of places – and is not a wealth-creating mechanism -. 

So, how much do you stand to gain? 

Let’s move on with our scenario. The business raised meteoric rounds of £50m at £150m and £300m at £900m and gets sold. You’re left with about 0.08% of a unicorn (in dollars) or £720,000. 

Now let’s divide by the number of years it took to get here. We are on a rocketship, so let’s say it’s 3 years and the return per year is £240k. But what about tax? Let’s say it’s EMI qualified (the UK tax incentive for early employees of businesses) and only taxed at 10% and the market value was negligible to acquire shares so won’t even calculate it. This leaves us with £216k per year. 

But judging an option based on the outcome is not really precocious approach. What you need to think is the expected payoff is and since a lot of things can go wrong and at early stages, even if you’re in a rocketship, can you really be that sure? I will be generous and assume 50% certainty (at Series A!) to exit the business. 

As a result, before you take the job, you are looking at shares worth £108k per year which is very different from your original 0.2% of £900m. 

And I am not finished. As competition rises and alongside it pressure does too, the startup succumbs to dealing with terms that are not beneficial for you. There might be liquidation preferences, a bridge/down round (the valuation drops) and suddenly you end up with a much smaller amount. 

The allure of big tech

Now let’s say that you get a job at a FAANG business. At a mid-senior level, a Product manager/engineer in one of these businesses can make £130k and another £200k in stock and bonus which may I add is often exercisable from the first month i.e. you can treat it as cash. You also have a sign-on bonus and performance bonus – you can double your stock-.

Let’s also assume that an 8% year-on-year increase on the total compensation is an average scenario. 

In this case you’re expected annual payoff is ((£200,000 + £216,000 + £233,280)/3) or  £216,000 pre-tax or £108k after tax assuming your 50% tax rate on RSUs

In other words, the best case startup scenario is the average at Big tech. 

Some other things to consider: 

  • Getting fired from a startup is not uncommon. 
  • Big Tech keeps offering stock, startups don’t usually until much later. 
  • There are very few UK businesses that have exited with more than £1bn in value.

So if money is the reason you’re joining, the option is simple. 

Follow your gut, or follow your plan 

Progress is not linear. Whether that is experience, money, or career, we make plans only to see them fall through.  

One good startup will leave you with experiences, opportunities, and money for the next decade at best or with some learnings that stick with you for the rest of your life. 

But as a person that has done both and has passed on opportunities for the right and the wrong reasons, I want to leave you with this: if you can follow your gut instead of a plan, do that. But if go with a plan, stick with it. In both cases, consistency trumps intensity and if you make a mistake, know it’s yours, not someone else’s. Good luck! 

The href attribute is not fit for purpose anymore

We reached the point where the functionality of the <href> attribute needs to be extended. Links within an article -like the one you are reading – aim to provide context or reference for the main object of interest i.e. the page currently accessed.

However gaining access to the contents of the link, means reprioritizing attention (change url, visit the link) OR not gaining value at the time needed (open tabs, read later).

In a low bandwidth world when internet protocols where still shaped, this made sense. Unsurprisingly, the mental model of the link is similar to a pointer in C.

Given that the utility is not fit for purpose anymore feels like rather than choosing it we keep it as we have not questioned it.

The notion of a “link” could be much more versatile, such as a) being embedded like <video>, b) adding controls similar to autoplay and c) becoming intelligent i.e. selecting the most relevant bits of the referenced source to show as an interstitial within the article. 

Mostly, this would be a better experience but it also would have a heavy implication on traffic distribution. Users would visit less sites and thus consume less ads. You can immediately see who’s losing in that scenario (hi google). That being said one’s loss, another’s opportunity.

This is a geeky topic I would like to talk about. Hit me up if you have any thoughts on it (technical/commercial) – might be interested in building something in the space.

Alternatively, if you’re reading this and thinking of building solo, still do text me. I could use a better reading experience online and would be your first user.