INSUBCONTINENT EXCLUSIVE:
Silicon Valley has many dreams
eventually building a product that is loved by humans the world over and becoming a startup billionaire in the process.The more prosaic and
common version of that Valley dream though is to join an early-stage company right before its growth kicks into high gear
Sure, those early employees might only have a smidgen of equity, but that equity could be worth a whole heck of a lot if they join the right
startup.Every startup has a window of opportunity, a timeframe in which early employees can join while the stock option strike prices are
low and the equity grants are high
Join before the big uptick in valuation, and suddenly what might have been an otherwise nice couple of hundred K dollars in the coming years
becomes actually, well, in the Bay Area, a reasonably-sized domicile.Yet, that opportune window seems to be shrinking in size, making it
harder for potential startup employees to nail the timing necessary to garner their own best financial return.For every Roblox, which as we
profiled in-depth this week, took almost two decades to reach its current apotheosis, there is a Brex, which seems to reach unicorn status
is that Silicon Valley has simply learned how to grow even faster, even earlier
As venture capitalist Reid Hoffman and Chris Yeh discuss in their book Blitzscaling, there are now frameworks and tried-and-true techniques
to not just grow a startup, but to grow it at a dizzying rate
Through better marketing channels, growth strategies, and product development, we have indeed made progress at cutting at least some of the
time to better valuations.That rapid transformation from nothing to everything though gives very little time for early employees to discover
a startup through the grapevine when the financial conditions are still interesting.Half a decade ago, I wrote about the plight of early
reasoning then was simple: early employees take on pretty much just as much risk as their founders do, but for a fraction of the equity
Now, with startups jumping to unicorn status in sometimes as short as a handful of months, that risk-reward ratio seems to be even more
The rapid increase in the size and valuation of series A rounds of financing the past three years means that engineers and salespeople who
might have an employee number in the low double digits are suddenly seeing their options struck at a couple of hundred million in valuation
be made that joining these sorts of companies is precisely where the best opportunities lie
Sure, the valuations are already high, but these are startups with the financial resources and the backing that might allow them to compete
So maybe the equity is smaller and more expensive, but ultimately, if the startup is more likely to be successful, the expected value
function might actually be favorable.Maybe
Yet it is also hard to see how these startups, which despite their rich valuations have barely laid any foundation for success, are a safer
bet than a similarly-valued startup with years of experience under its belt and a growth strategy based upon dependable results
Even worse, early employees are perhaps taking even more financial risk, since the preference stack of the venture capital could mean that
smaller exits are particularly unfavorable to them.Plus, the shrinking opportunity window for leading startups means that the difference in
the week before the other
Blitzscaling is making a lot of people a lot of wealth, but early employees? Not so much.
