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.

Employees are most at risk when things go sour in a start-up. (I’m referring to non-founders not covered by an employment agreement with a severance plan.) They have the least control and information, get the least notice of their termination, and get the smallest (if any) severance. Employees — the warp drive of a start-up — nearly always fare worse than founders or senior execs.

Everyone starts off hoping and believing the company will thrive and grow, and eventually have a successful financial exit. 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. While this is true for any company, it’s especially true for start-ups.

• Start-ups conjure up 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.
• 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 has one product, and it’s a dud, now what?
• A start-up has less financial, HR, and legal oversight than larger companies. 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.

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, look 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 asked to contribute to, Board meeting packages. Compensation agenda items (e.g., voting on employee stock options), and sensitive vendor or customer negotiation information, shouldn’t be shared. Everything else should be.

If the founders claim they can’t share Board packages or slide decks because [insert reason here], it means they 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 accurately describe 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.

I worked for the start-up [redacted], which had two social psychopath founders. Our exec staff meetings started feeling not right. I couldn’t put my finger on why, 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 not admitting that a decision upon which they bet their ego was wrong. Or any of a hundred other odd behaviors. 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 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?

More fodder

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 if you’re covered by employment contract with a severance. Congratulations on having a severance package but be careful what you wish for, because they bias you to stay longer in a bad situation. 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.