Accepting an offer Monday, startup versus traditional... what should I be looking for

Sounds to me that you are interesting in joining the startup more than the large company. What on your mind is that you try to rationalize and compare the stability the large company offering against the possibility of success of the startup.

Since you are young (I just assume so, I'm 24) and have few dependencies and debts, if I was in your shoes, I'd decide to work where my passions would want to work. With the startup, you can make a much bigger impacts and have more freedom to create and innovate. Bigger company provide you a more stable life, but do you see yourself working there for 1, 2, 3 years?

My thinking is that you can always get a job with a traditional company. It's a matter of putting together a solid resume, working through the network of friends and recruiters to place yourself in the right place. On the other hand, joining a start up may offer you the chance to do something different. In a way, you can really learn a lot from working your way at the start up, wearing multiple hats -- these should be invaluable experience that you can brag about in your resume for future employees should you apply for a new job. Best of all, you still get paid working for this start up.

Here's my quick list to compare the pros and cons between the large company job and the startup job:

Large Company:

- you're a number, not a name

- what is the chance of you being able to do something creative?

- how difference the salary would be, compared to the startup

- benefits: insurance and dental are important, if you need insurance, then I'd do some research to see if you can get adequate coverage if you work for the startup company.

- 401K: nice to have, but don't let it determine your life now when you can follow your passion and do something meaningful

- you probably can get a job at a company anytime when the economy recovers.

Startup

- you're their 4th employee. 25% of the workforce.

- equivalent salary. Based on what you said, this should be enough to get your house.

- benefits, retirement: is there a chance for stock options? For retirement, how about starting a Roth-IRA for yourself (you should do this anyway regardless)?

- health and dental insurance: you can do some research so you won't get caught in emergencies without proper coverage, especially when you plan to have kids in the near future. If you're wife can get you on her insurance plan, then it's one less thing to worry about.

- sounds like your passion is here. You do want to work for the startup. Ultimately, what's your gut telling you?

Good luck!

Outstanding job of putting my thinking into writing.

If you're joining an early startup you're making a big bet on the quality of the founders and other early employees. How well do you know them? What's their track record prior to this startup?

Joining as an early non founding employee is not great on the risk/reward ratio. You take on almost as much risk as the founders with much less upside. If you think the company has a high probability of being successful it may be worth it, but I'd evaluate them very carefully.

All 3 are coming in with business experience in the industry.

I only know them from the interviewing process.

From what I've seen and heard there is a strong potential for rapid profitability. They are currently turning down venture funding, and going from using consultants to expanding the developer base.

strong potential for rapid profitability

Just as an FYI, every startup from pets.com to paypal has said this.

There is also a strong potential for a slow agonizing death.

Go with whichever one you feel will give you the most career AND personal network/contacts growth.

I was part of the slow agonizing death at a smaller company with 15 years history. It's not fun even when it's just your salary riding on it.

Founders always paint an extremely optimistic picture. You need to look at the facts, and decide for yourself. If you believe in their idea as much as they do (which generally won't be true), you're good to go.

Here are the questions I would ask:

Are they actively turning down funding or have they just decided not to seek it?

If the former, who have they turned down?

How much angel capital do they have?

What's their burn rate and runway?

Have any of the principals started companies in the past?

When are they going to add benefits?

Those things will help you assess stability.

Go with which one you think you will like the best, if the pay is similar. On HN people naturally assume this means a startup but sometimes the bigcorp is the correct choice. For instance, I would work at Apple before I took a job at another online music startup, but I'd work at another online music startup before I took a job at Oracle.

Upside for non-founder early stage employees is pretty bad unless the company is Google quality or flips in 18 months. I won't ever be an early stage employee again unless it's a weird situation that pays $100K+ per year. Founder, sure... early stage employee... no thanks.

I am wrapping up 4 months in a similar experience that hasn't worked out.

Before I accepted I put together a spreadsheet which calculated lost salary and opportunity costs versus potential return for a 2, 3 and 5 year period. I had to fudge some numbers but it was a really good exercise and recommend going through for your situation (ie: wife, house, future kids, etc...)

Regarding stock, some questions I asked along the way:

- How Many Shares / What percentage of company do I own? - What type of stock is it and what restrictions or exercise rights do I have. - How will my shares be diluted over time? - Can I see the term sheet being sent to potential investors?

After the calculations I was comfortable with the risk/return for me and did it.

But now 4 months later, they are out of money and starting Tuesday I'll be looking for something else.

Also, you may want to consider what additional benefits the large company has to offer, aside from just the "stability" supposedly inherent.

I say this just to balance out the conversation, because it seems like it's considered a given that it's a straight risk vs. reward between the startup and the large company. I'm not saying this is necessarily so, but if your potential spot in the large company is something that (e.g.) you will enjoy, will allow you the opportunity to learn new things, etc., take that into consideration as well.

Maybe this large company job could be a good place to go into a holding pattern for a while. You could be making income and still be on the lookout for another startup opportunity.

Good job with the counter perspective. My main concern is the risk of being overloaded.

Based on my last two jobs (1 year and 6 months) the larger companies are also subject to buyouts and layoffs. Based on the position descriptions, the large company would be joining a team that solely does middle ware, while the small company will be hitting a bit of everything.

Looking closer at the offers, with the possible bonus, the salary at the two places should be the same. As long as I avoid burn-out, getting in on the ground floor should present better experience and roughly equal pay.

Ok, it seems clear to me which way I'm leaning. This weekend should be more interesting as I'll be talking about with my fiancee's parents. I'm fairly sure they'll be arguing for the more conservative approach.

Thank you for the feed back.

What's your risk tolerance? Do you have living expenses for enough time to find a job if the startup doesn't pan out as quickly as hoped for?

I think the last addition to the question helps address this. At this point, I'm looking at getting married and buying a house in the next few months. It's salaried, with stock options.

What is their runway?

My current understanding is that they have several investors, and are currently turning down VC funding. I'll have to ask that explicitly.

I believe due to outside deadlines, they want to have the system fully up and running by July.

its a question of stability. you say you're getting married and want to buy a house, with kids in the future.

how financially stable are you? if you were to take the startup job, and it were to go south in 6 months or so, could you handle that? could you handle the wedding and house and kid while searching for a new job, if the startup were to go under? etc..

At this point, we're financially stable. My current unemployment seems to be running slightly higher then burn rate, and I have a fair amount in savings. The homes we are looking at are within the range of what we can cover provided that one of us still has a job, and the mortgage and one car payment will be the only debt between the two of us.

Is the startup giving you equity or options?

Options ... any recommendations on how to interpret these?

For each possible exit, multiply fraction of the company you're likely to have at that exit, the value of the company at that exit, and the likeyhood of that exit points and account for time. Add up those numbers.

For example, let's say that you're being offered 4%. Suppose that you think that there are two likely exits - a complete crash and burn and a $100M exit after four years and two rounds of 50% dilution.

We can ignore the crash and burn because 0*any finite number = 0.

If you think that the $100M exit is 25% likely, the value of the options is $250k over four years.

In reality, there are probably a couple of exits worth considering. Since big exits tend to be relatively rare, you'll find that much of the expected value comes from small/medium exits. (Redo the above with a 1% likelyhood of $1B, a 4% likelyhood of $100M, and a 10% likelyhood of both $10M or 20M exit.)

You should be able to ask them about the various exits.

Does your future wife's company have a benefits plan you can be part of?