The Village View

Tuesday, December 16, 2008

Time to join a startup? - An academic exercise

I know a few folks who have left large(r) firms to join (existing) startups recently. I posed the question of if this is really a good time to join a startup to my fellow Enterprise Irregulars   because of the amount of both startup and large company experience in that group (Note: please don't read anything into this question, it's an academic question only on my part. I should repeat this in German just so there's no misunderstanding at HQ: Ich bin mit meinem Job sehr zufrieden, danke). 

Folks have come down on both sides of the question. Bob Warfield, who has considerable startup experience, comes down on the "pro" side:

This is a great time to join or found a startup.  Why?  Because a bad recession is like a treadmill EKG for companies, and especially for small companies.  It puts everything under so much stress that when you see a consistent source of good news, you know that company is strong.  In good times, the rising tide lifts all ships.  How do you know whether that sock puppet selling dog food on the Internet is really a good idea, or just the product of the Bubble?  There are no sock puppet opportunities that do well in a bad economy. 

Charlie Wood, who runs his own company AND is now a college student again, takes another view:

I would say that doing that [working for an existing start up] would be the worst of both worlds: you still have only one customer for your services, so your livelihood hangs by a thread. And since they're a startup, presumably they have less wherewithal to withstand the financial storm than does an established company. Worse yet, they may have VC's on their board telling them to "do the right thing for the company" and lay people off as a knee-jerk response to any bad news. And the news these days is mostly bad.

The follow-on points made by the group about what to look for in a start-up (if one were to ignore Charlie's advice)  were the salient points that I had neglected to raise.  The idea that came through loudest to me, and not surprising, is the question of funding. Now more than ever it's important to have funding to last you (probably a year or more) as well as to consider the source of that funding. The quality of the team came across to me as the next highest consideration (the funding then team order strikes me as perhaps reversed from more "normal" times). Other considerations raised were if the startup is, or is close, to being cashflow positive and how pasionate you are about the product/idea. 

I have to admit that current times probably make me a bit more risk adverse then normal (maybe that's because I had a "going down in flames" startup experience during the Internet bubble). However,  I'd be curious to hear from you if you have, or are considering joining a startup and understand what the thought process is. It's often interesting to see how different folks react to disruptive times differently. 

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