Why Should You Leave Your 🦄 Startup?

You recently joined a unicorn startup.

You checked news and the their funding status on Crunchbase.

You checked reviews on Appstore, Glassdoor, Blind and Layoffs.fyi.

You even reached out to a few folks who recently left the company on Linkedin!

Everything seems to be good: culture, growth, runway…

You have done your research! 👍

I’ll give you that!

What now?

Don’t just sit back and relax! Stay observant while you are in the company!

You are in the best position to evaluate the company when you are working there.

Perhaps you learned that the metrics are good, the founders are focused and your coworkers seem very smart.

If that’s the case, then your strategy should be probably stay there for a really long time.

Now let’s get back to the reality…

The topic today is:

Why should you leave your FAILING 🦄 startup?

To start, not all 🦄 succeed. Only 0.006% of startups reach unicorn status, and most of them fail.

Source

There are currently 1,400¹ unicorn startups.

Do you think all 1,400 will go public successfully?

YC Group Partners, Michael Seibel and Dalton Caldwell provided an optimistic estimate that roughly one-third of these 1,400 startups could potentially achieve an IPO. Obviously, two thirds of them are not going to work out.

If you are in the failing ones, what does it mean for your stock options?

The founder of your company won’t tell you this:

If you joined the unicorn that is late stage, your strike price of your options is going to be tied to the valuation that the company raised at, so if the company is sold for less or if it’s overvalued, your options are likely underwater.

The later you joined the company, the higher your strike price will be and that’s gonna be most of the people as the majority join when the company became a unicorn.

Even if there’s an acquisition, you might have to re-interview as most companies don’t want to take on every employee from an acquisition; moreover, if you are at a higher level, you probably will have to take a title downgrade.

You have to be smart

🫣Don’t follow mainstream press.

🫣Don’t follow memes on Twitter.

🫣Don’t think that because smart investors invested in the company, it must be doing well.

🫣Don’t believe in any authority figures that claim this is going to be a good bet.

🫣Watch out for using the announcement of fundraising as a signal of how well the company is doing.

If you are already working at the company, here are some:

Very practical tips

• Look at revenue metrics: This is the north star metric that drives the value the company will be acquired for. Check the dashboards and ask:

  • How much revenue is the company currently generating?

  • Has the revenue been growing in the past 3 months, 6 months, or a year?

  If your company is making 50 to 100 million in revenue or more a year, that’s pretty good.

  If your company is making 50 million or less in revenue, you should look at product analytics such as retention, whether the user really like the product, whether there’s true product market fit.

• Look at product analytics: You should have access to some of the product metrics. The best indicator of whether you have a good product is through customer behavior. Do users sign up? Are they actively using the product? Do they renew?

• Look at the founders and management: Do the founders seem checked out? Are they present in the office? Does it look like the senior management is engaged? Do they look like they are competent? Do the messages at the all-hands seem to align with the reality?

• Look at your colleagues: Do you feel your coworkers are busy and are good at what they do? One signal that the company is not doing well is that “everyone good is kind of left and the people that are left are just doing make work to try to not get laid off.” Sometimes the founders of the company “don’t want to do layoffs to keep the fiction going that the company is doing well.”

Where should I go next?