I saw this post on Blind and found it very interesting. It was about how to choose startups that can give you liquidity fast with a high level of certainty. I have saved a lot of these Blind posts on my notes app. Can’t share all of them as they go again commonly shared advice. This I can.
Time: 2019-2021 Cash: 250K Bonus: 324K Total Cash: 574K Stock: 3.6M Total Comp (2.25 yrs) $4.17M
I was hired pre series A. We scaled rapidly right into an exit to a FAANG company. Company was ~3 years old at the time of acquisition.
🚀Here is how to re-create this scenario and join a company that may actually reach a liquidation event, because if not, then why bother?
✅ 1. Look at the leadership team and founders - are they super strong?
•Do they have a history of acquisition or liquidation events in their past?
•History of taking companies to IPO?
•History of building and scaling large products to large markets?
•This reduces risk for investors meaning the business will be well capitalized and therefore increase the likelihood of a liquidation event for you and the team.
•They’ve simply done it before! You will also learn much more.
•Note on the CEO IMHO: In today’s market - I prefer having a CEO that is engineering/product driven, not a business/Ops minded CEO. Will net a better outcome.
✅ 2. Look at the investors - are they truly top funds or just mediocre ones?
•Do the VCs have a history of funding world class CEOs/companies?
•Are the angels well known in their respective industries?
•You can tell a lot about a startup (and their likelihood of success) based on their cap table.
✅ 3. Look at QoQ growth rate for key metrics like ARR, NRR, UA, or other meaningful KPIs.
•35% QoQ ARR growth is a super strong benchmark, and when you’re super early, it can be 50%+
•Also, is the product great? Like really great?
•Don’t be shy to ask for these metrics. If they aren’t growing rapidly out of the gate, there is inherently more risk.
✅ 4. Headcount growth, and time in between capital raises/funding also tell a story for speed of growth and the company’s trajectory.
• Are people staying and joining? Or leaving. Linked In Insights tells you this on the company page.
•🦄 Path to unicorn in 5 years: “T2-D3” (Triple ARR twice, double ARR thrice - $millions)
•Starting from 2M ARR: 2-6, 6-18, 18-36, 36-72, 72-144 = 🚀
•If a company took 6 years to raise their series A (or even 4 frankly) and then another 1-2 to raise their B, and then their C, that ain’t it. Check Crunchbase.
•Some companies do find their way and then scale rapidly later to catch up, but it’s rare.
•Let us all start optimizing for liquidation outcomes here, and think about this stuff when weighing joining a startup vs a developed ‘rest and vest’ company.
Using these points you can start to make an educated guess on the likelihood of the startup making it to a successful liquidity event for a large multiplier, or not.
If the company does have these characteristics then join every time, you’ll go further in your career and earnings.
As I have cut down my Twitter usage and don’t post all my rants, I am finding it difficult to come up with things to write about. So expect fewer posts going forward.