Thao Nguyen

A former colleague and I were reminiscing about a time we worked together at a certain startup, and what that experience taught us about what to look for in our next play. That conversation pushed me to think through my own framework for picking a company, especially an early-stage one, since that is all I have ever known or worked at.

More than a few people I have talked to seem to have the following mental model when choosing a company: think like a VC investor. Would you invest your own money in this company?

When I first moved back to startups from investing, that was my main mental model. I was too fresh off the boat to think otherwise. I applied long-term, rational thinking to the process. What is the upside? Do I see an exit? If so, why, when, and how much? My economist father would be proud.

That seems like a valid (and even sophisticated) approach. In a way, by owning a piece of the company I work for (which is common in startups), my incentive alignment is similar to that of an investor (just with a much smaller payoff). But the crucial difference is this: as an employee, I think disproportionately about, and am therefore disproportionately impacted by, the founding team, the founders, and other early employees. A founder who is an absolute star in the eyes of an investor might not be so in the eyes of employees. As an employee, you will spend 8–12 (if not more) hours of your day thinking (agonizing?) about your work and your company's founders. As an investor, the only time you would think that much about a portfolio company is either (i) when things are going really well and you are fielding multiple intro requests or press coverage, or (ii) when things are going really badly and you are trying to save the company. Most investors would say the latter is more likely. Hence, they do not like having to think a lot about any one portfolio company in particular, and they would rather spend their time finding the next investment.

So that leads to one additional dimension of the mental model above: do you actually like the founders as people? VC investors would like you to think they are best buddies with their portfolio companies, when in reality it does not really matter as long as the economics work. It certainly helps if everyone gets along and enjoys each other's company, but it is not even in the top 10 reasons to give someone millions of dollars, especially when rival firms also want to invest.

Or maybe it requires a new mental model: think about the next startup you consider joining less as an investment (equity is good, but cash comp is king), and more as a marriage. And I am married, so I do not use this analogy lightly.

You should do so because you will spend the majority of your waking hours thinking about this relationship and making (or trying to make) it work.

Because even when people tell you your career is not your identity, nor does it define you, you will start to believe that it is. And I do not personally think anything is wrong with taking pride in, or feeling disparaged about, one's work (you should feel all the feels!).

Because when things work out, being successful / accomplished is an amazing feeling (even when fleeting). But when it does not, you cannot help but feel bitter, and you might need a lot of therapy to get out of that hole.

So yes, if you are thinking about joining an early-stage company, treat it like you are about to get married. Have your list of non-negotiables in place, and make sure you know what compromises you can make.

Because if you are lucky, you are in it for the long haul. And if not, prepare to be a little bit heartbroken.