Saturday, October 27, 2007

Is it too late to join this hot startup?

I occasionally get questions like: "Is it too late to make a lot of money by joining company X?" This is very silly, because if you've already interviewed with the company, you'll know the situation better than I would, and therefore, you'll know better than I would.

Having said that, there's a very old adage, which is that it's better to have a small piece of a big pie than a big piece of a small pie. Too many people forget that, thinking that they'd rather join a smaller startup (or one that has a smaller valuation) than to join one that's already rather established. Believe it or not, even in early 2004 pre-IPO, I had a hard time persuading engineers that no, it wasn't too late to join Google and still make a lot of money.

And of course, if you do really well at Google, the founder's awards, bonuses, and so on will make you wealthy, so if you're really really smart, joining a big company like Google even at a very late stage makes a lot of sense. You'll work hard and climb the ladder, and Google has the resources to reward you at levels most startups can only dream of.

I joined Google in 2003. When I joined, I was told the company was valued at $X. I called up one of my VC friends and asked if he thought Google was worth that much. He said, "No matter how much the valuation, trust me, it is far below what the market will actually pay." That VC friend, by the way, is now at a certain hot Silicon Valley startup with what many would consider insane valuations. And that's typical of most Silicon Valley startups. So no, if the company you're talking about is a pre-IPO company, no matter how lofty the valuation you might have been told or talked about, if the company is successful, it is not too late. The key, of course, is whether the company will be successful (which is in the long term more important than anything else). And if I could predict that, I probably would have had a career doing things other than writing software.

There is another secret about startup stock options that not many know, and I won't say much about it because then it'll become common knowledge, but suffice to say, it's one of the few games where the game is actually rigged in your favor, if only you had the courage to take advantage of it.
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