Want To Work in Startups? Go Work For The Man First

Clippers Lakers Basketball

I had an economics professor who used to talk about the value of unique skills as a competitive advantage. He would use Kobe Bryant as a metaphor, saying “The Lakers pay Kobe Bryant because there are very, very few people who can do what Kobe Bryant does”.

I’ve been reflecting on that in terms of my career, and also because I’ve recently been working with some young people right out of school and looking to break into the startup scene. I look at the generalist vs. specialist debate from the perspective of my career, and also from the perspective of having to hire people at startups.

My Own Experience

I have always been a generalist. This was not a conscious decision. It was more a result of being  kind of geeky, a little ADD and not particularly sure of what I wanted to do when I grew up.

So, I’ve now held roles in marketing, product management, UX research, strategy, business development, sales and bartending.

I can say without question that I would have risen faster from a career standpoint if I had specialized in a functional area. Working in early stage startups, I’ve been able to get by because I’ve learned a lot of ways to add value to an organization, but I suspect I’ve also been pretty lucky and have a tendency to out-grind people.

As A Hiring Manager

Most of my experience hiring has also been in early stage startups. I’ve been in a half-dozen environments that we’re ‘in utero’ in terms of their  infancy. In all of them, almost without exception, I would prefer to hire people with some type of domain expertise rather than a ‘jack of all trades’ employee who I can put on anything.

Here’s my advice if you want to work in startups:

DRIVE A WEDGE [OR A BEACHHEAD IF YOURE INTO THE WAR ANALOGY] AND BUILD FROM YOUR BASE.

You can always go more general. Getting specialization as your career advances is significantly more difficult. I suggest that young entrepreneurs get great at something and be able to deliver in a functional area. Learn to code front end, learn BD or acquisition marketing, get your design on. The idea that specialists can’t run companies is a complete myth.

Go Work For A Big Company To Break Into Startups

If you’re out of school and you want to get into a great startup, you should consider going work at a big name brand company and get some functional specialization or a year or two.  Why?

  1. You can add a name brand to your resume. This matters when you’re raising money or trying to work at a startup. People will tell you it’s not important but it matters.  The girl who worked at Google out of school is going to get funding over the exact same person who worked at a failed startup out of school.
  2. You’ll get a structured process for skill development. I realize that there are a ton of online tool for learning skills, but the structure and process that big companies place on employees can actually be pretty beneficial when you’re just getting out into the world.
  3. It’s easier to go from big to little than little to big. It’s hard to spend ten years in early stage start ups and then get a job at Bloomberg.  It’s far easier to spend 2 years at Bloomberg and get a senior role at an early stage startup [or raise funding] because of your functional expertise and the brand on your background.

Lazy Thinking Vs. Pattern Recognition

We all use our past experiences and outside examples to help us solve problems or opportunities that we’re currently facing. 

Using analogies and history help us develop an understanding of the risks in a business. These tools can be incredibly useful (and efficient) for both entrepreneurs and investors in the early stage. Diving into where past companies succeeded, struggled and failed can help an entrepreneur focus on the right pain points, and borrowing analogies from other industries can really help an outsider quickly understand what the business is all about: this is often exemplified in the “X for Y” tool used by many entrepreneurs raising capital or selling their idea to someone new.

Examples:

“We’re building the Amazon for legal services”

“It’s kind of like a Netflix for babysitters”

“Picture the Apple of waste management”

etc…

When these tools get us all into trouble is when we we engage in lazy thinking and convince ourselves that we’re using our pattern recognition.  Here are a few land mines I’ve witnessed in conversations:

1.  Using what you knew about acquisition costs five years ago to make assumptions about today.

2. Incorrectly applying dynamics of one industry to another because they ‘seem’ similar. For example, the music industry is not like the film industry in a number of very important ways, but it’s easy to lump them together because they feel like they should be the same.

3. Using big rule of thumb assumptions like “SMBs are hard to market to” without digging into a company’s distribution plan.

4. Assuming complex problems are insurmountable because no one has solved them yet.

5. Using pedigree to drive 90% of your assessment of a team.

6. Assuming the industry dynamics have gone through a recent disruption, are now mature and won’t be changed again.

Google is probably the most famous example of an incredible business that started out as a ‘bad idea’. In 1999 David Cowan from Bessemer famously tried to avoid meeting Sergey and Larry when they were building their search engine. David used pattern recognition and hit two land mines: he assumed because the founders were students they weren’t doing anything serious, and he assumed that the search market movie had already been made. Neither of those assumptions ended up being right, but because 90% of the time those assumptions would have been true, it’s easy to overuse them and miss opportunities.

I think the art in early stage investing is avoiding these land mines – it’s where all of the opportunity lies.

Being Fair With Equity

I met with a friend last night who is considering a role in a pre-Seed stage startup that she was excited about.  She had a lot of great questions about how she should structure a negotiation for coming on board.  I gave her the answers I had from my experience, but wanted to dig into the topic a little this morning to see if there are some good guideposts out there to leverage.

It turns out Joel Spolsky pretty much closed the book on this topic with this response.  I wish I had this five years ago, so I’m sharing it here in the hopes that it helps someone else along the way.

I’m not going to repeat Joel’s entire framework here (you should go read his response), but I will call out a few points that resonated with me:

  • His ‘risk-layer’ approach is the right way to think about equity. The 2-3 people who start out with a blank page are taking all of the early risk and are entitled to the largest share of equity. If you are coming into a startup with a salary, you are probably not in that first risk layer and shouldn’t have an expectation that you are.  At the same time, if you are the first ‘non-founding’ employee and you’re a catch, you should think about that second layer and what you feel is the right amount to ask for.
  • The notion that ideas are essentially worthless is a great point, and this is a movie I’ve seen a number of times in the past.  It’s not that ideas are worthless, nothing could happen without them, it’s just that they aren’t worth valuing in terms of founding equity because it’s too difficult to assign value to them, and outcomes will be 99% determined by execution.
  • All equity (founders included) being subject to their equity vesting is a great idea.  To be perfectly honest, I’ve never, ever seen this and I don’t think it will ever become the rule, but it’s a really smart idea.

Most importantly, the theme on fairness and transparency really resonated with me.  Fairness, above everything else, is the most important piece of this equation.  Not that everything in these negotiations has to be perfectly ‘fair’, but in the end everyone needs to feel that they were treated fairly and with respect.  The probability of success from early stage to liquidity event is so, so low and the only thing propelling the company forward is the team.  If great people feel that they’ve been treated unfairly, they will bolt when a better opportunity comes along.  The subject of equity can be the most important conversation you have with your employees, be transparent and be fair.