Business of Tech: Breaking in Early

Social Media Camp 2009 by deanmeyersnet

As a reformed corporate type, I often get asked by people with business backgrounds how to “break into” an early stage tech company. There is definitely no set path and it is highly dependent on the players already in the company. Occasionally, these jobs might be listed on LinkedIn, startup.ly or indeed. Keep in mind, however, that the earlier stage you want to go the more likely you will get your job through a networked search. Nothing beats connecting to people who can get you to the companies you want to work for. Here are some thoughts by stage of company:

Founding a company: If you have an idea that you are passionate about, starting a company guarantees you a job at a start-up. If you are a business person this will likely mean finding a technical founder and partner to work side by side with you to build the dream.  This does not mean finding a rent-a-coder or some guy that will work for 5% of the company. This means a real partner who will influence and help build the business.  Charlie talks about attracting a CTO and the list of questions you should ask yourself when looking for a technical partner on his blog. Outsourcing the technology piece can be done, but is generally more difficult and often times less successful.

There are examples of people bouncing out of the corporate world and into the startup fray, one that comes to mind is Michelle Peluso (ex-BCG), who founded Site59 that was sold to Travelocity for $43 million in 2002.

If this is the route you are thinking about, Entrepreneurs Roundtable and Startup One Stop is hosting a "find a co-founder" event in NYC next week.

Pre-Series A:  Generally the company has raised limited angel funds or needs to.  The venture is at a stage where the company may be still proving its model and is running incredibly fast.  They probably don’t have the time to figure out what they need from a hiring standpoint. Your pitch must be crisp on how you can help the company get to the next level and the value you bring. Be it generating sales, raising capital or identifying ways to monetize the platform, the founder is going to need to feel you bring a lot to the table right away.  Coming in at this stage takes significant legwork to find companies that might be looking for someone.

Post-Series A: This is usually the round where a known VC puts in a couple of million dollars.  The company has sold the “vision,” worked for awhile with a skeleton team and needs some help on a variety of fronts. This is also a good time to get into a company if you don’t have domain expertise, either in what the company is building or in any given function (finance, marketing, product development, etc.)  For someone who is an “all around” athlete, this is a good time to enter.

While a financing makes it easier for a company to pay someone from the corporate world, from a stock option/upside perspective it may also be the most risky time to join a startup.  I agree with Chris Dixon’s assertion that a Series A financing usually de-risks the company far less than the amount the equity grants drop. 

Post-Series B and beyond:  At some point after the Series B, job specs become more specific, a human resource manager is hired and a more formal hiring process becomes common.  Advanced degrees and fancy titles are also more appreciated at this stage – but this does not mean a start-up is looking for a cultural wrecking ball who calls for endless meetings and unnecessary analysis. You can command a good salary, probably competitive to many larger company offers you might get, with a small amount of equity for some nice potential upside.

Despite the perceived risks, you will likely have more job security than working at a big company these days.  You will at a minimum develop more tangible skills to bring to your next venture, whether another startup or your own company. 

Watching Foursquare Cross the Chasm

Foursquare has clearly picked up a lot of traction in the past year, but there’s been some mounting evidence recently that they are really about to hit a big tipping point.

Aside from all the high profile deals and user growth of late, here are some recent touch points just in my day-to-day life:

• I noticed Luke’s Lobster has a Foursquare mayor offer on the counter
• The new Tweetdeck features 4SQ on the welcome screen
• I casually mentioned 4SQ in passing to a ‘non-tech’ friend and they’d just downloaded it the day before

These little touch points are important harbingers. When they get populous enough, they tend to be in the process of merging together into a mainstream brand that will display incredible inherent velocity.

I remember this point in our adoption cycle from HotJobs. In the very early days, we had a sales gong for every time we sold an account to a recruiter. The rings were few and far between. Explaining our product was still a mouthful – the market paradigm wasn't there yet to just say ‘we're a job board.’

But effort over time, the strength of the idea, and luck came together to germinate little isolated patches of the yard:

• We signed some big accounts.
• Got some curiosity news hits.
• The product actually worked for some people.
• Competitors gained some traction and helped us create the market concept and footprint.
• etc.

The big tipping point for us was a Super Bowl ad. Richard Johnson mortgaged his house to pay for it. Not only was it the first year a crop of internet companies did Super Bowl ads – but bingo, our first ad got rejected for vulgarity by Fox. This PR coup meant we were featured in something like 80% of the news generated around the game. It felt like the world was suddenly rooting for us. Tom Brokaw closed his coverage with a thoroughly gratifying ‘sorry, this job’s taken.’

On a plane the next day, I overheard the people ahead of me talking about HotJobs – it was the first time I had ever heard a stranger mention the brand.

By the time I got back, the office was buzzing with not just everyone else having these kinds of ‘firsts’ – but with opportunity. As in – inbound opportunity. More incoming press, inbound sales calls, talented people wanting to join the team, biz dev deals, acquisition interest. It took a couple years to have gotten to that point but the actual moment of being there kind of did happen overnight.

We felt an incredible sense of confidence from that point forward – there was no going back – it’s not that the work was done, or challenges didn’t exist - but we had hit this point where a certain degree of success was just ensured. It’s like when you know you’ve won in solitaire, and you do the winner’s exercise of just playing out the rest of the cards.

Maybe at that point we were a $100m company. What was left to determine was whether we could be a $500m company, which is roughly where we exited, or even a $1b company, which is what we had the potential but not the wherewithal to become.

Our run would last I think another 36 months or so after that tipping point – and I would say it was specifically those 18 months just after the tipping point that involved such pure peak-zone enjoyment of our success. Not only was everything flowing, but idealism still characterized the effort.

From the outside – it seems like Foursquare is just getting into that 18-month-ish joy zone. I have to imagine that a lot of people there are becoming different human beings in the process, and forming relationships and experiences to be drafted on for entire careers. I hope that’s the case, and that it’s as energizing on the inside as it looks from the outside.

It would be great to see 4SQ execute to the tune of a $1b company. It takes almost miraculous endurance and personal capacity to develop both a market and a company to maturity -- the latter being the far more formidable.

Regardless, I hope they are enjoying every second of this – it is so fun to watch - and I for one am so glad to support it and participate in it even just thru my humble little East Village check-ins.

Good luck guys, pass the lobster!



Microcap bubble? One data point.

There’s been a bit of a brouhaha lately around “super seed” funds and speculation of whether we are experiencing a seed bubble.  At least to me, it certainly has felt like there has been a ton of early stage activity, although whether this qualifies as a seed bubble or not, I think it’s too early to tell.  But what is apparent is that there is a ton of new microcap firms that have emerged or closed a new fund in the past 6-12 months alone, and it feels like the pace of new microcap firms being funded is only accelerating. 

In the first half of 2010 alone, I could track down the funding or founding of at least 13 firms or incubators.  This ranges from groups like Founders Fund raising its third fund, to Ron Conway raising $10m for SV Angel, to groups like Betaworks and YCombinator closing VC rounds ($20m and $8.25m respectively).  Other names on the list for 1H 2010 include Floodgate, Lerer Ventures, Lowercase Capital, Lightbank, Right Side Capital Management, IA Ventures, Tomorrow Innovations, plus a few  others that I happen to know have had at least a first close on a new fund.  I’m sure I’m missing some.   Regardless, that’s a run rate of 26 for the year.

Compare that against 2009, for example… there’s Founder Collective, YCombinator (yes, they raised another round last year), Social Leverage, and a handful of regional incubators (Capital Factory, Nextstart, Shotput Ventures).  Any others?   A healthy seven, but nothing compared to the 26 run rate of 2010.

As far as I can track down, it looks like 2008 also had seven firms founded or funded including relatively well known firms like True Ventures, and Harrison Metal.  Other firms I can find include Genacast Ventures, CrossCut Ventures, SproutBox, LaunchCapital and FreeStyle Capital.

I went through this exercise all the way back to 2005 (starting with YCombinator, Maples Investments, Felicis Ventures and Founders Fund), and here is the plot I get:

While the numbers are small overall, it certainly seems like 2010 is the year of the microcap.  Curious, I looked up the same metric for VC funds raised (from Thomson Reuters – CA-based VC funds only).  

Of course, looking at this data on purely a funds raised basis instead of a dollars raised basis gives a different view -- not all VC or microcap funds are created equal.  For every >$100m Founders Fund raise, there are several funds like Lerer Ventures closing an $8m fund.  But can’t help but wonder how much of a bellwether fund raises are.  What do you think?  Are we in ’95, or later?  Or is this the wrong metric to look at?

The EarlyStager Approval Matrix

For our inaugural post, we thought we'd be a little self-reflective - and send a gesture of unity to our brethren and sistren across the early stage universe. Being a group of NYC'ers (f ya!) - what better way than to rip off one of the best gambits from a local rag - the New York Magazine Approval Matrix (n.b. imitation is the sincerest form of flattery).

We thus kick off our blog and humbly submit to you The EarlyStager Approval Matrix - A Start-Up Taste Barometer. (Cue the Bravo TV Show Pilot.)  Please comment aggressively, distribute, counter with alternate versions - let's get it on!

Team EarlyStager



I Can Haz EarlyStager

With great excitement - and a mere four months and several bottles of wine beyond our Feb 15 initial target launch date - we bring EarlyStager to life!

To introduce ourselves - we are Beth Ferreira, Emily Hickey, Alexis Juneja, and Sarah Tavel - from Etsy, Tracked.com/Hashable, Curbed, and Bessemer Venture Partners, respectively.

We've collectively been working on early-to-mid stage internet companies for several years now, from various sides of the ecosystem.

Our intentions with this blog are both to revel in the early-stage subculture and to talk some shop re: the "intricately managed miracle" of trying to build a hit start-up. You can read more about our intentions here.

We'd also like to take a second to give a big thank you to Charlie O'Donnell for introducing us. Charlie does a lot very visibly but he also works behind the scenes to try to pull the community together - muchas gracias!

And that's it for the ice-breaker!

Team EarlyStager