When should you leave a start-up?
“5 sure signs that a good startup is going bad” came up in my Zite magazine. It’s a pretty good read, well worth jaunting over there to read it. (Go ahead, I’ll wait until you return.) It’s written for entrepreneurs, and it got me thinking about my list of start-up warning signs for employees.
In any start-up, employees are most at risk when things go sour. (I’m referring to any non-founder not covered by an employment agreement with a severance plan.) They always have the least control and information, get the least notice of their termination, and get the smallest (if any) severance. Employees — who are the warp drive of any start-up — virtually always fare worse in every way than do founders and senior execs.
Everyone starts off hoping and believing the company will thrive and grow, and eventually have a successful financial exit/transition. Yay, team! But you also better know when to look for the Exit, because being the last rat off a sinking ship is no fun.
You could argue this is true for any company. Yes, but it’s more important for start-ups than for larger established companies.
- Start-ups conjure up (and rely upon) all sorts of “the right stuff” imagery and social pressures. We all drink the Kool-Aid, which can make us stay on longer than we ought to.
- In a start-up, things can go very wrong very, very quickly… One day you’re the CEO’s buddy, and the next day you’re a goat.
- A start-up often doesn’t have other departments or projects in which you can seek refuge. If your company is all about one product, and that product’s a dud, now what?
- A start-up has less financial, HR, and legal oversight than larger companies. Translation: It can become a “screw the hoi polloi” festival.
I’ve tended to stay too long with a sinking start-up. My belief in the company vision, my loyalty to colleagues and friends, or wanting to “fight the good fight” tended to blind me to what was, in retrospect, obvious. I hope I’m getting wiser with age… I also hope I never get to test that thesis.
There are always exceptions, but 99.999% of the time you’ll be sorry you don’t heed these signs:
One missing or delayed paycheck. I don’t care what the excuse is, start looking for a way off the boat right now.
Founders who don’t learn from mistakes. Everyone makes mistakes! But not learning from mistakes is bad news. Leave.
Secret Board of Director packages. Every employee should get a copy of, and be invited to contribute to, Board meeting packages. Compensation agenda items being put before the Board (e.g., voting on employee stock options) shouldn’t be shared. Occasionally there might be sensitive vendor or customer negotiation information in the package, and that also shouldn’t be shared. Everything else should be.
If the founders claim they can’t share Board packages or slide decks because [insert odd reason here], it means your founders hoard information and/or are lying to the Board or you. Buh bye.
Board of Director negative surprises. The Board should never be negatively surprised. This is a rule of the universe right up there with gravity, electromagnetism, and the greatness of ’60s and ’70s rock music. There is a direct correlation between your Board being surprised and your founders being goofballs.
It’s the founders’ job to inform the Board about major differentials against the plan between meetings, and to give realistic descriptions of the company’s status. If the Board is surprised, the founders are whacked in the head. For example, if they told the Board quarterly revenues would be $700 K, and reveal at the next meeting for the first time that revenues were only $25 K, they have massively failed.
Founders with selective memories. A team can’t work if you have to document meeting conclusions in writing because someone’s got a porous memory. I don’t care if it’s innocent or malevolent. It’s corrosive and saps energy.
Surreal staff meetings for more than a month. Even the best teams have periods when things seem a little odd. It could be because of heightened group stress due to a deadline, more than one person needing a vacation, or whatever. Just because you walk away from a meeting thinking, “What the heck was that all about?” doesn’t mean it’s time to leave. Good teams are self-correcting systems, and you need to give yours a chance to repair itself.
But if the situation feels surreal for a month or more, take heed. Your emotional IQ, subconscious, or [insert belief system] is trying to warn you.
In [redacted] I worked for a start-up that had two social psychopaths for founders. Our exec staff meetings start feeling distinctly not right. I couldn’t put my finger on the reason, but each one had at least one out-of-kilter decision. I even described working there as “surreal” to my closest friends. My ESP was confirmed after two months when the founders made a very ill-considered (read: stupid) staff change.
Maybe staff members are avoiding a topic, or not confronting someone’s obvious bad behavior. Or trying to not admit that a decision upon which they bet their ego was wrong. Or any of a hundred other odd kinds of behavior. As Buffalo Bill said on Deadwood, “Listen to the thunder.”
Your health declines. Your weight’s gone wacky or you’re getting sick more often? Your body is sending you a warning. You need it written in big uppercase block letters? Get out now.
You obsess about the company during personal time. Dude, it’s not your company. It’s a job that should be enjoyable and fun, and invigorate your mind, and from which you can learn. And maybe, someday, provide a nice financial pop upon a successful exit. If you’re mentally churning over the day’s events or have trouble sleeping, you’ve lost your balance.
Obsessing about what’s happening in your company is a red flag that things are not right. Yeah, you might save the day just like your favorite movie star. Or you might get burned in the end and treated like crap. Care to place bets?
A founders’ list would be different and shorter. Founders are expected to stay put. You dudes have a big chunk of the company, in return for which you get to harden the fuck up and go down with the sinking ship. (The hoi polloi get the Schadenfreude of remembering all the times you said they didn’t grok your vision’s awesomeness.)
The list would also be shorter for those covered by employment contracts with a severance. Congratulations on having a severance package but be careful what you wish for. Severance agreements will bias you to stay longer in a bad situation, which is, after all, partly what they’re designed to do. You start thinking how you’d be better off if you could maneuver into being terminated without cause, instead of quitting. Or you start documenting events so you can claim leaving with good reason. Before you know it you’ve gone insane. But that’s a blog post for another day.