How To Work At A Startup That Will Make You Rich

How To Work At A Startup That Will Make You Rich

Do you want to work at a startup that will make you rich? Well, who doesn’t?

In this post, I give you the inside scoop on how you can work at a startup that will make you a lot of money, and accelerate your career in the process.

Before I give you the details, you need to know a few things –

Successful people in the startup world are not the hardest working or the smartest.

But they are some of the savviest.

They realize that your salary is peanuts compared to the hours you put into the startup.

They know that the real money is in the startup’s equity.

And contrary to popular belief, it is easy to find and work at a startup that can make you rich.

In this post I will show you step-by-step exactly how you can do it. I’m not making this up, I have been through it 🙂

Define Your Risk Tolerance

The first step is to decide how much risk you can take. But before you do, let’s learn about the different kinds of startups.

Startups are classified based on their funding stage.

Funding stages range from Angel round to Series D+. Typically, startups that are further along in funding stage have been around longer and have a more mature product. Whereas startups at initial funding stages offer you potential to make more money. But they are also at a higher risk of failing, in which case you don’t make any money.

6 stages of a startup - How to work at a startup that will make you rich

Here’s a breakdown of a company’s state during each series of funding:

  1. Pre-seed or Angel Funding
    1. At this stage, the product is just an idea. Founders typically pitch these ideas as powerpoint slides or a UI mockup. The main goal of acquiring Angel funding is to create a Proof Of Concept (POC) of the product.
  2. Seed Funding
    1. Now the company has already created the POC. Seed funding is usually $0.5M to $2M dollars and is used to research the product’s market.
  3. Series A
    1. Here a startup grows from a baby to a toddler. It is a big milestone for every startup. Series A funding is used to polish the product and execute on its monetization plan. The company is expected to embark on a revenue growth trajectory in this phase and its success metric is usually user acquisition.
  4. Series B
    1. Series B funding is used to make the startup a growth machine. In this stage, the company builds its sales, marketing, and business development teams in addition to product and engineering. It is expected to continue on the user acquisition and revenue growths
  5. Series C
    1. This is another milestone for the startup. At this stage, the company has proven market traction, a growing user base, and climbing revenue. Now it’s time to scale. Series C funding is used to amplify the growth trajectory and reach triple digit growth.
  6. Series D and onwards
    1. A company in these stages has a very low likelihood of failure. The funds are mostly used to fuel growth and achieve higher scale numbers. Companies also expand internationally in this phase.

 

So how do you decide which Series startup is right for you? It boils down to just two things:

  1. Your risk tolerance for the startup’s failure. There is a higher risk of failure with lower series startups.
  2. The amount of time you are willing to wait before you get rich.

Low Risk Tolerance And Fast Exit

Series D+ startups are the safest bets. They have a higher likelihood of going IPO in the next 2 to 4 years, so you can cash out fast.

If you are like most people, you should work at a startups that is Series D+. An IPO gives you the best return on your equity, and there is a high probability that a company at stage Series D or later would go IPO.

Joining a later stage startup also means you wouldn’t have to wait too long to cash your equity.

Moderate Risk Tolerance And Slow Exit

An acquisition is another exit avenue for a startup. But it may not be the best for you as an employee.

Many startups between Series A and Series C get acquired in a way that employees get close to nothing in return of their equity. This is because equity terms usually state that the Venture Capital investors get a certain amount of payout before anyone else. Any remaining capital is then shared amongst the founders.

A small sum is also left for you, but on the contingency that you will stay with the acquiring company for a couple years after the acquisition.

But you can do better than that!

If you work at a startup that’s Series D+, then acquisition may not be such a bad deal. If the company has strong numbers and you have significant vested equity, there will be enough money on the deal to flow around. And you will do well.

startup exit options and risks by funding round - How to work at a startup that will make you rich

High Risk Tolerance And Questionable Exit

Now let me warn you against Pre-seed and Seed companies.

These companies are really good learning grounds for developers. Because there is just one mantra: Execute, Execute and Execute.

But if your goal is to work at a startup that will make you the most money, you should stay away from them. Because it’s very likely that they won’t be around next year.

You should work for Series A to C startups if you have a high risk tolerance and not in a hurry to make money.

Series A through Series C companies fall somewhere in between.

If you have a high risk-tolerance and are not in a hurry to get rich, you should work for these startups. They will give early stage equity which will amount to a lot of money if the startup goes IPO or gets acquired.

The risk is that the startup will fail or get acquired unprofitably before hitting an IPO. But I will now show you how to choose the right one to maximize your chances of success.

Research Which Companies Maximize Your Chances of Making Money

Now that you have identified your risk tolerance and know what stage startup you want to work for, it’s time to research the right companies.

3 Qualities of A Successful Company:
– A higher valuation at each series round
– Executive team has industry veterans
– Strong sales and marketing teams

Startups with a high likelihood of success will have the following qualities:

  1. A higher valuation at each Series round. This will tell you is the company is growing or plateauing. And you don’t want to join a plateauing company because a plateauing company is a dead company.
  2. At least one industry veteran in the executive or advisory team that also has a history of success. This is especially true for post Series B companies. Early stage companies may get away with it if the founders are disrupting the industry. But in order to scale, a company needs someone that already has industry connections and knows its market.
  3. They boast multiple partnerships with other companies, products, services or consulting teams. This tells you that the startup has good marketing and sales teams. Both are crucial to its success. You can make the best product, but if you don’t market and sell it, you’re dead.

Here is how you can find such companies.

  • Launch Ticker
    • This is how I stay up to date on the market. Launch Ticker summarize all startup news in two daily emails. So you can now have information on funding rounds, growth numbers, IPOs pushed directly to you.

launch ticker

  • Breakout List
    • Breakout List is the best place to find companies that are on a growth trajectory. It categorizes companies into two ‘early’, ‘mid-size’ and ‘late’. Focus on ‘mid-size’ companies if you’re targeting Series D+ and ‘early’ companies if targeting Series A to Series C.

breakout list 2017

  • Angel List
    • AngelList has been the go-to platform to find startups. It’s flooded with startups, but you can use filters to narrow down the list. It tells you how much the money the companies have raised and sometimes their valuation.

 

Angel List

Here’s how to you use Angel List:

Go to angel.co/companies and use filters to narrow down on your criteria.

angel list filter by size

Once you click on a company, it will tell you how much money they have raised.

angel list how much money raised

It also tells you who are the investors. VC firms like Khosla and Sequoia are known to pick more successes than the average VC.

Going through these steps will help you narrow your list to just a few companies. Also remember to filter them by your personal priorities.

Crunchbase

Once you have a list of companies that fall in the funding stage you are targeting and align to your interests, let’s find out whether they have the 3 success qualities I told you above.

Crunchbase can give you information on the year over year growth of the company.

Go to Crunchbase.com and search for the company name.

It will tell you how many rounds it has raised. Click on on ‘Rounds’ link to see the details.

crunchbase airbnb funding rounds

Click on the recent ones and compare them to make sure the company valuation had been increasing at each passing round.

airbnb funding rounds details on crunchbase

In our example, Airbnb has been growing at only 12.5% per year.

airbnb growth per year

If you were to join Airbnb, your equity would most likely not skyrocket in the next two to four years. The IPO wouldn’t fare very well either, because majority of tech startups that IPO have 30% per year growth or higher.

But don’t cross out Airbnb just yet. Paysa tells us that Airbnb gives software engineers an annual equity package of $233,000. A quick google search shows Airbnb has transitioned to RSUs, which means you aren’t dealing with options anymore. So even if the value of this equity may not grow very fast. It may even drop by the time Airbnb IPOs. But its high present value makes up for it.

airbnb software engineer salary on paysa

You might not be find a company’s valuation on Crunchbase. Sometimes companies are very secretive about these kinds of information. But the word almost always gets out. So a quick google search should give you their valuation.

Crunchbase also gives you information on the company’s executive team and advisors. Make sure there is at least one that has decades of experience in the company’s industry.

If that checks out, read all recent press reports for the company on Crunchbase. It will give you additional information on its financials and whether it has been in any lawsuits or other problems recently.

Now go through the rest of the companies on your list and follow the same process.

steps to find and work at a startup that will make you rich

Linkedin

Once you have filtered your initial list with Crunchbase data, next step is to research the companies on LinkedIn.

Linkedin is the hub for professionals. By 2017, it had 500 million users! This means that no matter what company you’re looking at, most of its employees are using LinkedIn.

Companies on a growth trajectory need more people to fuel their growth. This means they have to hire a lot of people, and fast! We can use LinkedIn to track how many people are joining a company each month. This gives us real data on the company’s performance!

You’ll need LinkedIn Premium to get that information. Here’s how you can get it for free. Just click on the ‘Try LinkedIn for Free’ button on your home page.

linkedin premium

Then select the business plan.

choose premium plan on linkedin

And start your free month. Make sure to cancel your subscription before the end of the month if you don’t want to pay for it.

buy premium on Linkedin

Let’s go through an example and compare Flexport with Shyp. They’re both Series B startups and have pretty good stats on Crunchbase. Let’s see if they’re really all that good.

LinkedIn suggests that Flexport has grown over 100% in the past year, and 5X in the past two years. That’s impressive!

LinkedIn total employees for Flexport

But when you search for Shyp, the results aren’t that rosy. It’s actually losing more people than its hiring! Red Flag! You don’t want to work at a startup that’s losing employees.

Linkedin employee growth for shyp

Go through this process for all companies on your list and you will end up with startups where you’ll end up making a lot more money on top of your salary.

Companies that make data-driven decisions can make 12X more money. Imagine how much more money you can make as an employee if you use data effectively! You can easily 5X your salary if you just using the tactics above. I know I did 🙂

After you select the startup you like, here’s my surefire way to get interviews at those companies.

Conclusion

If you think the only way to get rich is to start your own business or endlessly climb the career ladder, think again!

With very little effort, you could be adding hundreds of thousands of dollars to your bank account every year!  You do it by strategically choosing the right startup to work. In the post I mentioned just 3 steps to find such companies (Scroll up to see a lot more details):

  1. Identify which Series startup you want to target.
  2. Make a list startups in that stage using Breakout List and AngelList
  3. Use Crunchbase and LinkedIn to research those startups and only keep ones that fulfill these criteria:
    • Have a higher valuation in each series round: it shows a growth trajectory.
    • The leadership team includes industry veterans: sign that the team understands the market and has industry connections.
    • Boast partnerships with well-known companies: means the company has performant sales and marketing teams

If you follow this strategy, you’ll be putting in the same 8-10 hours of work. But reaping 3X times your salary!

Let me know in comments below which companies you end up targeting.

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  1. Rosa

    This is a really informative and useful article. Thanks!


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