Hexbyte Hacker News Computers Avoiding Zombie Startups

Hexbyte Hacker News Computers

Joining a startup can be a great financial opportunity; but picking the right ones is hard. If it wasn’t, there’d be a lot more startup investors! One mistake you shouldn’t make is joining a zombie startup. Here’s how to avoid just that.

People tend to underestimate the financial opportunity that startups represent for early employees. But being good at picking which startup to join as an employee means, in part, being as diligent as an investor. They make it a point to avoid zombie startups: companies that have the outside appearance of a startup but that aren’t moving that quickly and that are likely to always stay small, kept alive with suboptimal sources of funding (bad angel investors, subsidies, grants, etc.). They’re dangerous because they’re a toxic distraction for someone looking to grab onto a rocket.

Just like a VC who needs to diversify their portfolio, you’ll likely have to join several startups before finding one where the equity is worth the ride. That means the opportunity cost of staying at a zombie startup is very high, since you aren’t using that time to test out another one. So here are a couple things you should have in mind when choosing your next opportunity.

you don’t want to end up like these guys

#1 Don’t join a startup only because of the cash it has raised.

Sure cash can be a good indicator. It means they can pay your salary for some time. It means someone trusted the founders to some degree. But who backed them is just as important. The ecosystem is filled with people who might not really know what they’re doing or might not have particularly ambitious motivations. Business angels investing with strong tax incentives, universities or companies filling up their marketing brochures and public actors who aren’t betting their own money at all are a couple examples. So don’t settle for “We’ve raised a Series A”: Ask with whom and look them up.

If you see that the money raised just comes from public actors, inexperienced VCs with no track record looking for any shiny deal, or a public ICO but that no product has been launched, you should probably take that as a warning sign and flee.

#2 Don’t join a startup because of the prizes it has won or the coverage it got.

Good students like startup competitions because they’re sort of like school. If you practice you get good and you win. They like getting articles or being on TV because it makes Mom proud and reassured about their kid having given up their corporate job. But building a startup is about a lot more than being good at pitching, it’s about building things and selling them. Sure pitching comes in handy when you need to speak to investors or navigate through partnerships, but the time founders spend attending pitching competitions or speaking to the press is time they don’t spend making their customers happy. Startup awards or disproportionate press coverage actually tend to be pretty strong negative signals.

#3 Don’t join a startup in which the team isn’t properly incentivised equity-wise.

You might think this is an awkward conversation to have. But in startups, compensation tends to be a fairly transparent topic, especially when it comes to equity. Of course, the offer you are made will give you an idea of how generous the founders are in terms of equity, but don’t hesitate to ask about other employees. It’s not to compare, it’s to make sure they are in it for the long run and have an incentive to stay when the shit hits the fan. Because it will.

We take equity incentives so seriously at The Family — that alongside Florent (florent@ekwity.co) — we advise European startups on how to structure their employee equity plans so that everyone’s happy, committed and actually understands what they own.

#4 Always ask yourself why they are hiring.

In early stage startups, it’s well known that that the job you are hired for doesn’t end up being exactly the job you do. You’ll gravitate to where you add the most value because that’s what maximises the company’s odds of survival. At The Family, we’ve taken this to the extreme and sometimes hire high potential people with no specific role in mind at all, trusting them to find a way to add value.

But don’t join if the founders are hiring out of desperation. Or rather, don’t join if they’re expecting you to find the silver bullet. Again, this sounds obvious, but they’ll be trying to sell you their dream, so they’ll make it hard to figure out. What clues should you look for? Well, the best way is to make sure they know how to execute what you will be doing very well and are only looking to delegate because they have no time to do it anymore. If they are hiring because they’re desperately looking for a solution, they’ll likely end up micromanaging you. Once you fail to find the silver bullet, they’ll get pissed.

Of course this probably doesn’t apply if you’re bringing in a very specific expertise though (legal, financial etc).

#5 Companies can have different values but transparency is non-negotiable.

This is often the most striking difference with bigger corporate structures: employees in startups tend to be very aware of the state of the company’s business. But that’s not always the case. And it doesn’t necessarily mean that the company isn’t good and that it won’t succeed. It might. But remember that you might have to switch companies. So a secretive culture could turnout to be very costly for an obvious reason: If you are misled, you may end up trapped and working for a company whose fate is sealed. Again, that is an expensive mistake to make. Speaking to a couple of employees when you’re in talks with the startup is a great way to assess how transparent the founders are.

So you’re keen to join a startup?

At The Family, we’re committed to the idea that training and educating people benefits the entire ecosystem and that it’s also a great way to help our founders. That’s why we founded a free school for startup employees called Lion. If you’re in Paris and you’re interested in joining a startup, you should apply for the next session.

If you’re not in Paris but are still interested in joining a startup, please reach out (mathias@thefamily.co), our founders are always looking for talented people to hire and I promise I won’t feed you to a zombie.

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