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Are You Right for a Startup?

February 20, 2017

Article formerly published by CarDash. The ideas and opinions presented in this article are solely those of CarDash and do not reflect the ideas and opinions of RepairSmith.

Many people are intrigued by the idea of working at startups, but without a strong startup background it’s difficult for both an employer and an applicant to know whether there is a good fit.

I’ve interviewed hundreds of people seeking startup work, hired dozens, and made plenty of mistakes along the way. Hiring mistakes are painful both for the company and the person hired. In this article I will share how you can better think through whether you’re truly a potential “startup person”, and what the big deal about the distinction is anyway.

The Danger of Chasing Romanticized Jobs

Romanticized jobs include professional athletes, fighter pilots, models, actors, or all-powerful wall street Gordon Gecko market makers. Choose whatever floats your boat, but there is a reason some people recommend to “never meet your hero.”

With tech leaders serving increasingly heroic (and sometimes villainous) roles in society, Silicon Valley startups have attained romanticized status.

The problem with romanticized jobs is that expectation often varies from reality, especially for founders and key early employees.

I observed this concept in my time in the Marines and the Army Special Forces, which are both romanticized by Hollywood to some extent. I saw many people who thought they wanted to be an action hero Green Beret until they got blisters the size of baseballs, tried carrying 100+ pounds on their back, or realized that they have to deploy to a hot desert where the the most likely way of dying was not in a glorious battle but from an arbitrary explosive on the side of the road placed by an illiterate farmer paid $5 to kill you. This is not exactly the glamour that one may have expected.

For most who pursue the Special Forces path, one of the above or hundreds of other realizations eventually hit, which is why so few actually finish the pipeline. They either underestimated the difficulty of the journey or overestimated its glory. Both are common career mistakes, as they are with startups. Chances of success are low, so you better enjoy the journey itself and be in it for the long haul.

A Special Note for Those Considering Being a Founder

Climbing Mount Everest is another romanticized idea. Conquering the world’s tallest mountain is a tremendous challenge and I understand its allure. It requires that you climb through a death zone where it’s a question of when, not if, you die by staying there. There are hundreds of bodies scattered along the ascent; a literal graveyard of morbid landmarks.

A pre-positive cash flow startup is in its own death zone; if you stay there it’s a question of not if but when you will die. Venture capital is like an oxygen bottle which extends your life, but there is no certainty you will get more as you struggle to reach the glorious summit.

Many people attempt to climb Mount Everest and realize they didn’t actually want it enough — but it’s hard to know for sure until you test yourself. It would be an odd life decision to climb Mount Everest without climbing smaller but still fearsome peaks first. Similarly, with some exceptions, I would recommend working at a startup before founding one.

As an entrepreneur, you can’t just be in love with the idea of being at the summit. You have to be able to enjoy, or at least endure, the struggle to get to the top. Else there is no way you will make it.

I want to acknowledge that startups are of course not the Special Forces nor are they Mount Everest (which I’ve never climbed). The point is not just to say that they are hard because there are many hard jobs and there are plenty of challenging lives you can pursue. However, if startups are the undertaking you choose, it’s best to know they are right for you.

Signs You May Be a Good Startup Fit

1. You appreciate the difference between risk and uncertainty

Let’s say you have two decks of cards made up entirely of red and black cards.

The first deck has half red cards and half black. The second deck of cards has at least one red card and at least one black card. The person preparing the decks has no knowledge of you or the following question.

You are now to bet that the top card is red. Would you rather bet on the first or second deck?

As Robert Sapolsky explained in his book Behave, the odds of a red card are the same in both decks (50/50). However, the first deck represents certainty while the second deck represents ambiguity. The important take away is that the risk is the same so you should be indifferent as to which deck you bet on, but the ambiguity is different so most people don’t perceive the risk correctly.

Ambiguity triggers the amygdala, a part of the brain associated with anxiety and stress. As part of the limbic system, it processes emotion but not reason or language. It’s why even when presented with a statistical explanation that the odds are the same for both decks, most people still prefer to bet on the first deck and have a hard time explaining their “feeling.”

If the ambiguity of the second deck makes you overly tense and nervous even when you know there is equal risk to the first deck, then that might be a sign you are prone to miscalculate risk and would perform better under more certainty.

The reality is that if you’re a paid employee, startups are actually not risky, they are just uncertain.

Startups definitely carry a significant opportunity cost, but where is the risk? Risk of what? That the startups disappears after 12 months? So what? Unless you are dedicated to climbing a corporate ladder for your entire career then working at a startup only builds skills and makes you even more appealing to others who value entrepreneurship, which should be the crowd you seek anyway if you are considering yourself a startup person.

Consider two people; one with five years of experience at Google and another with four years of experience at Google and one year at a startup (regardless of outcome). Who is more well rounded? Has more attractive skill sets? And more marketable? And does it matter? Are the two not doing incredibly well either way?

Startup experience only makes you more valuable… unless you yourself don’t value entrepreneurial experience.

Note: If the cards stumped you, don’t worry. They do for most people. It’s only one item of ten on this list.

2. You’re not afraid of complex failure

We fear what we don’t know and don’t understand. Most of our fears may actually be phobias driven by emotion and irrational aversion rather than a rational risk-reward calculation.

Once we understand that fear is exacerbated by the unknown then it becomes easier to understand why so many people have a fear of failure. They just haven’t experienced much failure in their life, and they probably don’t want to start breaking that “winning streak” now.

The problem with not wanting to break a winning streak is that you end up playing more and more defensively and begin losing the edge that made you successful in the first place.

So let’s dive right into failure for a bit and make ourselves more comfortable.

The first failure type is what I call controlled failure — or failure that was in your control. You just didn’t take the right steps to succeed. You didn’t study enough. You didn’t do sufficient due diligence. You misread someone’s character. All things you could have hypothetically done correctly. Many top performers are generally ok with this type of failure because they see it as a chance to improve.

The second failure type is uncontrolled failure. Ambiguous situations in which despite hypothetically making the best decision every step along the way, you still fail. This is isn’t very satisfying, is it? Many top performers have problems with this type of failure because they are so ambiguous.

Uncontrolled failure is difficult because they go against all of our social conditioning. Schools don’t give tests which are impossible to pass. Your close relationships in life may be strained but they are never beyond mending — if you both want them to be. Jobs are always within reach — if you just perform well enough, gather the right credentials, and interview well. We are raised with a “can do” attitude and every obstacle put in front of us as children, adolescents, and young adults generally have a path to succeed. It’s just a question of knowing the right approach. After all, how many times do parents give their kids challenges which are impossible to succeed at? Sounds rather sadistic, doesn’t it?

So there are three types of people when it comes to handling failure.

The first are those who are just not comfortable with failure in general. They feel embarrassed. They feel less self-worth when they fail. They should stick to the safer possible paths in life and definitely avoid startups.

The second type have embraced the Silicon Valley motto of “fail fast” and are always improving their game by learning from their mistakes. They see life as a game in which if you practice every stage long enough you will eventually unlock its mysteries and advance to the next level. These people can perform quite well at established startups due to their drive to learn and succeed, but may not be mentally prepared for the ambiguous world of truly early stage companies.

The third type of person focuses on learning from their failures just like the second, but are better to accept things outside of their control. Unlike video games, there are stages that cannot be won no matter how much you practice. Why is this important? First, it means the person will be able to handle failure that was outside of their control without the depression and emotional drama which typically accompanies the roller coaster ride of startups. Second, it means they may also be more adept at identifying when to pivot or move on.

One of the hardest things at startups is to know when to display resilience and continue on a known path versus when to change direction. Change too early and you’ll never unlock the next level. Stay too long and you’ll run out of time. Somebody who can be at ease with their own failure and have the wisdom to know when it was controlled (learning opportunity) or uncontrolled (time to do something different) is a great fit at startups.

3. You did entrepreneurial jobs as a kid or in college

There is typically no better indicator of future behavior than past behavior, although it is certainly not absolute else we would be much better predictors of the future.

I never thought of myself as an entrepreneur until I started my first company. Looking back though, I have always been entrepreneurial. In 8th grade, a candy called Super Lemons became incredibly popular but was only available in rare Asian food stores. I found one such store 4 miles from our house, which doesn’t seem like much but it was the farthest I had ever biked on my own and I had to navigate a 4 lane expressways with heavy traffic.

I saved money and bought a couple bags at a time. I would then sell individually wrapped Super Lemons to my fellow students for a quarter each. That was my first business lesson in supply and demand.

I then worked full time in the summers after 9th, 10th, and 11th grade but never had an employer. I printed “kid available for work” flyers and distributed them to all the houses in my area. I worked seven days a week doing yard work, landscaping, babysitting, cleaning, and whatever I could find. Eventually I had enough work that I needed to employ fellow students to help. That was my first business lesson about scaling.

Toward the end of high school and learned the importance of investing in skill sets. I taught myself HTML and started building business web pages instead of fences. My ability to create value immediately went up.

There is absolutely nothing impressive or special about any of these stories. Today many kids are building web pages and apps, starting successful clubs, leading social circles, and making things happen in one’s community.

The question is, can you look at your past and identify entrepreneurial spirit? And assuming you can… did anyone tell you to do it, or did the drive come from within?

4. Your career is trending toward smaller companies

If I see a resume with more than 12 months at a legacy enterprise company and there isn’t more recent meaningful startup experience then it’s difficult to take that person as a serious startup fit. People with an startup mentality would go crazy working at such a big company for more than a year (golden handcuff acquisitions aside).

However, there are certainly some good processes and habits that one can pick up at big companies. Additionally, having big company experience makes it easier to appreciate the benefits of being in a startup later through the tough times.

What I believe is important is the trend in one’s career. For example, my former VP of Engineering started his career at a very large company, then became a Director of Engineering at a medium sized company, then was the #1 employee at my company, and then went on to start his own company. He is a superb startup person and his career trajectory showed it. He benefited from his bigger company experience in knowing what was worth emulating and avoiding.

If one spent most of their career at startups then that’s a clear positive signal that they are likely a good startup fit. If not, the trend in career direction is key.

5. You’re never satisfied with the status quo

If there’s one thing that gets you upset is “doing things because that’s how we’ve always done it.” Hearing that from somebody raises your blood pressure and causes you to cringe.

At a big company, wise advice may be “you should let this one go. You’ve got to learn how to pick your battles.” But that’s not good advice for success at a startup. I’m not talking about battles which are immaterial or petty, I’m talking about battles which people don’t want to touch because of politics, incompetency, or fear.

When you let battles go by accepting poor performance, bad decisions, or broken processes for the sake of status quo, a small part of you dies. The sum of these deaths by a thousand cuts becomes crippling. Some people acquiesce and accept, and some revolt and reject. Startups are for the latter.

6. You makes things happen and get your hands dirty

At a larger company, a senior person is mainly a decision maker. They are influential and sought after. People bring them ideas and they make decisions. While they show initiative, their job is sometimes more about managing people, schedules, and workflows than it is about making things happen.

In a startup, you are responsible for generating your own ideas and there aren’t people around to take care of the details for you. Everybody needs to get their hands dirty. CEOs are still ordering office meals. Everyone books their own travel. And nobody is going to work on that customer contract for you.

My head of growth has customer calls directed to his cell phone while we’re testing a new product. As CEO, I still have all intercom traffic buzzing on my Apple watch… and I answer them even when I’m on my gym’s stair climber.

At a startup you have to do all your own dirty work — the non-intellectually satisfying parts of actually getting things done.

7. You don’t follow the herd

Did you go to the same university as all your high school peers? Did you study the same thing as your immediate circle of friends? Seek the same internships? Same jobs? Listen to the same music? These are all signs you may not a good startup person, or at least you weren’t at the time.

It may be that startup people think differently, but I think it’s more that startup people act differently. All people are able to think about different career options. Non-startup people will make the decision that is perceived as safest and most well accepted by others. Startup people will look at what is the best decision for them and follow that, even if it means disappointing their parents, peers, and meaningless social expectations.

Peter Thiel believes people who don’t succumb to social pressure make the best entrepreneurs. “In Silicon Valley, I point out that many of the more successful entrepreneurs seem to be suffering from a mild form of Asperger’s where it’s like you’re missing the imitation, socialization gene.”

A startup has no blue print for success. A startup person needs to learn from others, but can’t look to their left and right to figure out their next decision. If you’ve been the kind of person who’s regularly made contrarian decisions from your peers then that is a strong positive sign.

8. You think of growth from the bottoms up

“This is a X billion dollar industry. We just have to capture 1% of it and we’ll make incredible returns” — that is one of the fastest way to signal to an investor that you don’t know what it takes to build a company.

The problem with the “we just have to get 1% of the industry” model is that there are many more than 100 people saying the same thing. Perhaps a million people. Business is extremely competitive, and instead of thinking from a macro level of “how to get 1% of the industry”, you should be thinking “how do we get our first customer” or “we have 50 customers, now how do we get our next 10?”

Non-startup people will obsess about Excel models and debate input assumptions which project month over month and year over year growth. Good startup people will have that same Excel model, but realize the rubber meets the road one sale at a time and are focused on that next sale.

9. You have a small company mindset

Just because somebody is at a big company doesn’t necessarily mean they have a big company mindset, and conversely just because somebody is at a small company doesn’t mean they have a small company mindset. Having a small company mindset however is essential for startup success, so let’s define that what means.

Let’s say that you work for IBM, a quintessential “big company.” You may work at IBM for 20 years and make 10 decisions a day, which is a total of 50,000 decisions, and on the day of your retirement IBM’s stock price will likely be the same whether you worked there or not.

While those decisions won’t affect the company much, decisions at IBM can significantly impact your own career there. Will it make you look foolish or smart? Will it help your next promotion or make you an outcast? Will it bring you praise or criticism? — It is therefore rational that at IBM you will bias your decisions based on how they affect you and not the company.

The above decision incentive paradigm is what I describe as a big company mindset, and it leads to a lot of politics, posturing, risk aversion, ineffectiveness, and phenomenon such as the Law of TrivialitySayre’s Law, and the Peter Principle.

In a small company each person plays a critical role in the company’s success. A new deal signed by a sales person may double the company’s revenue. An extra weekend of work by an engineer may solve the company’s most complicated technical problem.

In a big company, you tend to make decisions based on how the outcomes will affect you. In a small company, you tend to make decisions based on how the outcomes will affect the company.

10. You value equity

Big companies should be cash rich and equity poor. Startups should be equity rich and cash poor.

It’s fine to work at a startup strictly for its culture, but given the level of effort and uncertainty that goes into startup life, it doesn’t make much sense to do it without meaningful upside.

When considering cash vs equity compensation at early stage startups, one has to appreciate equity to have skin in the game. If you’re ok with not maximizing cash compensation and want to own a piece of the company you join, that’s another strong pro-startup signal. Keep in mind that of course startups are not all equal.

Final Thoughts

I’ll highlight a general fallacy I’ve heard from some who think of themselves as a start up person but don’t feel ready or think they need a greater level of savings before they enter a startup. That is a false hope.

It rarely gets easier to join a startup as you get older. The longer you are at a big company then the more you assimilate into big company culture. Assimilation is essential to be successful which is why I’m suspicious of anyone who spent a lot of time at a big company. Either you adapt to succeed or you leave.

The longer you stay at a bigger company, the more responsibility, pay, and status you accumulate. It becomes harder to leave, take a pay cut (so you can make it up with equity), and reset. You’re also more likely to have obligations such as a spouse, mortgage, and children. So there is rarely a “better” time than now.

Keep in mind there isn’t one “startup personality” and the above are only a collection of signals, not of definitions. If you want to work in a startup, you are the only one who can prevent it and the only who can make it happen.