Should You Quit Your Job At A Unicorn?

As far as you can tell, the metrics are excellent. Yes, the founders are extremely focused. Yes, your colleagues are very smart and you are very impressed continuing to work with them. Yes, you should probably stay a really long time. Yeah, I mean like that's kind of what Google looked like, what Facebook looked like.

Welcome to Dalton and Michael. Today we'd like to do a follow-up on a video that we recorded a year ago. That video was, "Why You Should Leave Your Fang Job." We all know these people that want to just tell you their darkest secret, which is they wake up every day and they like dream of quitting. Like they have fantasies of quitting every day. Those are people that probably should quit.

This video is about why maybe you should leave your failing unicorn startup. A tricky topic, and let's say signals—we don't know, we don't have all the information—but there might be some hints, there might be some signs you want to be looking for that it might be time to reach greener pastures. If you're an employee of one of these companies, you probably have the best perspective, a better perspective than investors, maybe sometimes even better perspective than founders. Yes, on what's really going on.

So maybe we should start this by saying there are 1,400 unicorns now, is that right? Yeah, wow! Well, I'll ask you. I don't know what you think. Do you think all 1,400 will go public successfully? I think the odds are pretty slim that they're all doing amazing. Yeah, I think that's a fair statement.

And so if you kind of divide this out, even if you're really optimistic, like what do you think an optimistic count? What percentage of the 1,400—being super optimistic—they do an IPO and everyone's really happy? A third! I'm just making this up—a third? Third! Great!

So in that case, two-thirds of that 1,400, it's not going to work out. And I think what's unfortunate is that like when things don't work out, employees usually don't. They are the ones who take one for the team. They're usually in the category, take one for the team. Right?

And again, like brass tax, what this means is your equity, most likely, if you joined a unicorn that is late stage, why the strike price of your options is going to be tied to the valuation that the company raised at, yep. And so if the company is sold for less or if it's perhaps overvalued, your options are likely underwater. Right? This is just simple fact of life. And often, the people running these companies don't love this line of questioning, and so we're just sort of telling you the truth, which is, you know, the later you joined a company, the higher your strike price will be on options.

And so the folks that are most likely—most of the people hired at the end of the—you know when they became unicorns, a lot of people came in. So the strike prices are very high. Yes! And so, man, you just need to be smart.

Yes, well, and the second thing is if they do end in an acquisition—and many will end in an acquisition—oftentimes you have to reinterview for your job. Like often times they don't want to bring everyone over in the acquisition. And so that's tricky. And also, you might end up at the big tech company you were running away from. That's right!

When you're doing a startup, so I think I'd love to put in a kind of a little bit of a note here. I think that those 30% that will do well will probably do counterintuitively well. Like I think like really well. Yeah, like very well. Extremely well! Even going to work at those companies now is probably a good idea. Absolutely!

Yeah, and so I think that's what's so tricky about this is you have to be smart. You can't really be like following the press or stuff that—yeah—or like the memes on Twitter about what's doing well and not doing well. No, you got to attack. Let's be specific.

So, Michael, what would you do if you were an employee? Say you were a software engineer. Yes, at a unicorn. Yes. How—what would be the signals you'd be looking for to know if this was like a smart move to stay? I think the first thing I'd be thinking about is revenue. I would say that at the end of the day, um, when a company goes public or when a company is acquired for a lot of money, um, the market is looking at how much revenue that company is making and is that revenue growing?

And I would say that, you know, for example, if I'm at a company right now that's making 50 to 100 million in revenue or more, um, that's a unicorn! Like that's pretty good. Yeah, it's reasonable that it's a unicorn if they have 100 million plus in revenue. Okay, that pencils out, right? That's pretty good.

Um, I think that if I'm working at a company as like 50 million or less in revenue and as a unicorn, now I'm starting to ask myself the question: Do users like the product? What's retention look like? Are we charging as much as we could? Could we charge more? Do we actually have product-market fit? Do we actually have product-market fit? Again, not likely to be a popular question in management if you ask management this but, yeah, worth considering.

And I think a lot of these questions can really be answered by looking at what are the customers doing, right? I think what's so funny is that if you're an employee inside of a company, most likely the information you need to tell whether the company's doing well or not is like literally available to you.

Yeah, well, and I could imagine there actually may be some folks out there that work at companies where the information is not available to them. Is that okay? Like what do you think? Is that normal to not...? I would—what's interesting is that maybe, um, there's certain financials or certain, you know, cash on hand or something that are important for the company, or a Founder might decide to keep private. But I would say in most companies product analytics in some way or another is available.

Yep, it's like widely available. And so you can tell whether the users who are paying for your product are actually engaging with it. And man, I think that's like hilariously the simple leading indicator of whether you have a good product is you sold somebody the product, they've successfully onboarded, and they're actively using it, and then they renew on the business model of the company. Hey, they keep using it and they keep paying for it forever.

What we also need to attack is this idea that because a smart investor invested, my company's doing well. Yep! Like I just don't—I think that, you know, when you're the press or when you're on the outside having to judge, you have to use these kind of weird secondary revenue-focused indicators. Your only signal as an outsider is fundraising rounds.

And there can be companies that are still struggling, that aren't going to make it, they still somehow raise money. One trick, by the way, friends out there that's very common is a fundraising round may have happened a year ago, but they're choosing to announce it now.

Yes! And it looks like they just raised, and that is not true. Yes! So watch out for using the announcements of fundraising as a very reliable signal.

Yes! So Michael, in terms of market timing, one thing that might be interesting to think about if you're currently working at a unicorn, a very late-stage company, is now might be a good time to consider going to an earlier stage company as an employee.

Yes, because it's less likely their equity is super overvalued and there's lots of room for advancement. So how would you think about this if you were an employee at one of these companies? Well, one, I'd think that, you know, you've gathered a lot of experience, and so you might have an opportunity to have more responsibility to an early-stage company, um, which would also probably get you more equity.

Um, I would say too you could use many of the hints that we gave you to judge that early-stage company, and you can actually do a bit of a comparison to get a vibe for like, oh, like this really stage company seems like it's doing better than my old stage company.

And I think the third thing is that, um, what's funny is I think it's a little counterintuitive, right? It's the moment where your friends are going to be like, "That's stupid!" like, "Yeah! Why would you go to a smaller company that's not a unicorn?" Exactly right!

And it's so weird—in my life how many times the dumb move at the moment was the smart move later, and vice versa. Like it is just over and over again.

Yeah! And so the dream setup is you go to an earlier stage company that has the same revenue as the unicorn you were leaving and on tenth the valuation. Does your option strike price is much better and more responsibility? You have more responsibility! That's a pretty good trade. That's not a bad trade at all!

That's not a bad trade at all! Um, and of course, you could always start a company as well, which is just the Uber version of the same trade. Exactly!

Yeah! So I think what I would say is this is tricky, right? I think that when we made the video about Fang, fortunately or unfortunately, I think that, you know, Google is going to look very similar five years from now as it looks now.

Yep! And I think that for those of you who are at unicorns, um, it can really go either way. So you have to be careful, right? You could leave a unicorn and that company could do great and you could look back five years from now and say like, "I made the exact wrong decision." On the flip side, you could be the person, you know, shutting the lights off and five years from now being like, "I made the right decision," so make sure that you're actually doing your own analysis here.

I think is the point I want to make—like make sure you're doing first principles analysis, you're looking at data, you're not believing any hype.

I think another point to make is the concept of job hopping. Job hopping is not good either. So sometimes you'll see people that swap; they go to a new unicorn every 12 months or 18 months. It's very hard to ever build a good career or to build expertise or even make a lot of money doing that kind of stuff.

So again, I don't want folks to interpret what we're saying as, "Hey, you should be a job hopper and just switch jobs." To the extent you are working in a place where, as far as you can tell, the metrics are excellent, yes, the founders are extremely focused, yes, your colleagues are very smart and you are very impressed continuing to work with them, yes, you should probably stay a really long time.

Yeah, I mean like that's kind of what Google looked like, Facebook looked like. And so again, just to go through things, I would look at if I were someone in one of these companies trying to decide if my company was doing well. Yes, all the stuff Michael said, but other signs that I would be looking for is: do the founders seem checked out? Are they in the office? Maybe you don't have an office; maybe it's a remote company, but like does it actually seem like senior management is like engaged?

And in reality, sometimes when a unicorn is doing poorly, management will just completely be on Mars. Yes! Like the numbers will all be bad, but they'll be like, "Oh, we're doing better than ever!" Like that kind of crap. WeWork isn't a classic example of this.

So you should actually be looking at senior management and the founders and just make a judgment if you think they seem like they're competent.

Yeah! And again, this is different. Sometimes the press lionizes people that aren't super competent. The press shouldn't be involved in this decision, so you should make your own decision. It should be like: does the message in the all-hands line up with the facts that you see?

Yeah! Does it seem credible?

Yeah! I also would look at what the rest of the people that work at the company seem like, and do they all seem busy? Do they have enough to work to do? Yes! And do you just feel like your colleagues are good?

Yes! 'Cause one signal of a company that's going—not going well is that everyone good has kind of left and the people that are left are just doing make-work to try to not get laid off. There's kind of a malaise.

Yeah! And often, the founders of these companies won't want to, you know, do layoffs or whatever, to keep the fiction going that the company's going well.

Yeah! And so again, I think you can make judgments, you know. Hopefully, you're correct, but of just how good do your colleagues seem, and how much do they have really important work to do that's serving customers versus going through the motions, making pitch decks or slide decks or whatever it is that people do at companies.

Oh, well! Right? And so I think these are really—you have the information! If you're inside of the company, you have all the information way better than anyone else does.

Yes! And, um, and again, if this could all check out and you're like, you know what? This is going great, and I really like my colleagues and I'm learning a lot, then I should double down. I should work harder! I should try to get more equity.

So yeah, maybe that's the message that we want to leave is that, um, unfortunately, amongst these 1,400, not all are going to make it. Unfortunately, this unicorn label does not mean you're going to get in the money. Yep!

And you've got to think critically, and like, that isn't that life?

Yeah! And in a lot of life, you could be disappointed because other authority figures told you something is true.

Yeah! The authority figures said this company raised a lot of money; it's a very good bet; it's the next whatever!

Yeah! But ultimately, those authority figures aren't going to be around if it doesn't work out, and if there are you and if those authority figures are investors, they're hedged.

Yeah! So maybe every YC unicorn is going to make it, every single one! You heard it here—every single one! Dalton's personal guarantee.

Alright, great chatting!

[Music]

Thanks!

[Music]