Retention – Talking an Employee Out of Leaving for a Start-Up

One of the most common reasons for leaving a large firm is to go to a start up and get “cash out the wahzoo.” Anyone who is not a DAT (dumb as toast) knows that there are great job and wealth opportunities at start-ups and .com’s but how does a manager (or a recruiter) talk someone out of such an alluring possibility? What are the pitfalls of taking a job in the dot com world? I’ve had the opportunity to work at two .com start-ups and to advise many more. In addition, as the Chief Talent Officer at Agilent Technologies, it is my role to understand the job opportunities at start-ups so that we can design more competitive offers and “dream” jobs in order to attract and retain the very best talent. POSSIBLE PROBLEMS YOU MAY ENCOUNTER WHILE WORKING AT A START UP INCLUDE:

• Although it depends on the industry, the failure rate is frequently well over 50 percent at start-ups.

• The environment is stressful and everyone has a sense of urgency. You live with the constant realization that you are constantly “living on the edge.”
• Expect to be on call 24 hours a day and seven days a week. If you are accustomed to a work/life balance… forget the life part. Eighteen hour days are the norm.
• If you need a great manager, excellent training and a long lead time to develop ideas you are likely to fail. People that run them are generally “idea” people so don’t expect a “Jack Welch.”
• The equipment you’ll have will likely be basic in that you’re more likely to sit on a “three legged” chair than at an executive desk. There will be no “infrastructure” like IT, or HR to help you in any way.
• The ability to make rapid decisions with inadequate information will likely set you up for failure if your next job is at a slower moving corporate firm.
• Everything you do will be a team effort. Individual contributors and owners can survive long in this environment.
• Employees and applicants must agree to non-disclosure. Even though your job is incredibly exciting you may not be able to tell a soul about it, which can be stressful and frustrating.
• Expect constant insecurity knowing that the “cash flow” monster may eliminate the entire company at any time with little on no notice.
• If you succeed you will probably either be bought out by a bigger firm or grow so fast so that you soon won’t recognize the company or your job.
• If the IPO goes well and you get wealthy you may eventually find that the excitement of the job was more important than the money and you surely will be bombarded by friends and relatives asking for money!

If an employee (or you) is going to “jump,” make sure they accurately assess whether this is the best start up opportunity for them. There is no magic answer but here are some criteria they should use in assessing opportunities.POSSIBLE CRITERIA FOR ASSESSING A START UP OR A.COM: FUNDING:

• Are they already funded?
• Are they funded by an “angel” (a single contributor) or by a venture capital (VC) firm? (The latter is often superior)
• Does a famous VC firm with a high success record fund them?
• How much money was contributed and what percentage of the firm did the investors take? (Over $10 million and less than 25 percent are good signs)
• Are they in phase I (first round) or have they succeeded to the point where investors are willing to fund Phase II?
• Is the VC firm actively participating in the management and staffing of the firm or are they just providing funding? (The former is a good sign)
• Is a leading executive search group working with the VC to provide management talent? (Yes is a good answer)
• Have the leaders of the firm had past success in start-ups? Have they had past failures, in which they have demonstrated their ability to adapt? (Both are good signs)
• How much unused capital do they still have on hand? Will it be sufficient to get them through their first year?
• Have major established players in the field (i.e. Intel, Microsoft) bought a partial ownership position in the firm (after the IPO)

PRODUCT / MARKET

• Are they first movers in their field or are they second or third in?
• Do they have an operational prototype? And are they in beta testing?
• Have they sold any of the products to major firms? Are any of the potential customers investing in the firm?
• What is their product’s competitive advantage? Is it easy to copy? Would you buy it? Is their product or service idea a WOW to you?
• Is a current market made up of a large number of small firms or is it dominated by one or two firms (the former is generally a superior answer) What do others say?
• What do market analysts, VC’s and executive search professionals say about the firm?
• Has the firm been written up in leading-edge publications such as Fast Co., Red Herring or Business 2.0?
• Have top grad’s from top schools joined the firm? What is their offer acceptance rate?
• What do employees, suppliers and customers say? You can call employees directly and ask them what they like / dislike. Visiting the site and talking to people can be an eye opener especially when the parking lot is still full at 10pm and they say they have a work/life balance.
• Is your boss a jerk? (Managers at start-ups are notoriously bad at people management. Give them situations and asked them how they would manage you? Ask other employees about the culture and management style.)
• Are you slated to work on projects that are exciting to you? Start-ups can have boring jobs also!
• What percentage of the stock will they give you? Is it in grants or options? (Grants are better) how long before you fully vest? (1 year with quarterly or monthly vesting is superior)

MISCELLANEOUS

• They appear in magazines that list the best places to work, the fastest growing companies, the coolest places to work, etc.
• Would you invest your own private money in the venture? Would you recommend it to your friends? (This is perhaps the most important item. When you take a job you become an investor because you are investing your valuable time. If you would be reluctant to invest you should be reluctant to take the job)

And if you are a start up and you are trying to recruit someone here are some arguments to try. SOME OF THE POSITIVE REASONS TO CONSIDER A .COM INCLUDE (THESE ARE GENERAL RULES BUT BE CAREFUL OF STEREOTYPING):

• You won’t have to kick yourself later in life for missing the opportunity to join the Internet gold rush.
• You will face incredible challenges and opportunities to make decisions far beyond what your experience level would allow at a larger firm. It’s a constant adrenaline rush.
• You’ll face few rules or hierarchy. Few levels mean fast decisions and broad (but shallow) job responsibilities.
• Generally you’ll be judged strictly on results, as opposed to qualifications, experience, or degrees.
• You will have the opportunity to work cross functionally and not just in your specialty area.
• It will be a casual atmosphere with a “work hard but play hard” mentality.
• You’ll have the opportunity to interact with top-level executives on a regular basis.
• There is a general energy level and excitement well beyond what you can anticipate at a larger more established firm.
• If you are a self starter, and a self directed learner you will almost immediately be given increasingly more significant work.
• As the organization grows you will be promoted rapidly, based solely on your experience with the firm.
• You will inevitably build strong friendships with others at the firm as a result of sharing ” boot camp” together. You’ll be the envy of your friends and everyone will ask you? What is it like to work at a.com?”
• Even if the firm fails, you’ll be highly marketable at other start-ups and even at larger firms that are striving to be more like .com’s. Recruiters will often stereotype you as being innovative.
• Stock certificates make great wallpaper in the event the start up fails!