Employees Risk More

Especially in early stage companies.

VCs scrutinize a company before they invest. VCs spread their risk across multiple investments. VCs invest money into startups. You invest time. VCs can raise more money. Nobody can raise more time (so maybe try that diet and exercise thing). And VCs spread their risk across a few companies. To you, betting on a startup is far riskier than an investor. Many top people are talking about it. And most startups share much more to investors than candidates.

How should you ask companies for information you need that they don’t normally share with candidates?

Explain your situation. Tell them the snag: why you should know as much (or more) than their VCs. Then ask the questions.

Here’s a template:

Your investors scrutinized your company when they invested. Investors spread their risk across multiple investments. You probably aren’t used to employees asking questions like your VCs. VCs invest money into startups. I will invest my time. VCs can raise more money. Nobody can raise more time. And VCs spread their risk across a few companies.

But I can invest my time in only one company; To me, I am taking a bigger chance than your investors.

What do I need to know to be all-in on your company?

You know you should ask what it’s like to work there. Here’s what you’re not asking but should:

Potential:

• How big is your market?

• How did you calculate that?

• What assumptions led you to that?

• What could make your assumptions wrong?

Shared Ownership:

• What percent of the company is my equity?

• How much bigger does the company have to be for my equity to be worth any money at all? (the “preference floor”). Make sure you account for your strike price.

• How much bigger does the company have to be for my equity to be worth more than what I would have made at a larger company taking the salary?

• In good and bad situations, how much more diluted will my equity be when there’s a liquidity event?

• What is the strike price?

• Did the founders get early liquidity? If so, did some employees, too? If so, which roles? Why those?