Choosing where to work and who to work with, at any given time, is one of the most important decisions you have to face. Work is how you build your wealth, the way you develop your skills, and the source of many important relationships in your life. And all of these areas can constantly be on a path of growth if you act consciously on them.
In the last seven years, friends, coworkers and job applicants that I interviewed have asked about the questions and topics that I present here. The broader question “should I work at company X or Y” also popped up multiple times during this period. As a result, I decided to write this blog post so I can just point to it as a reference in the future and maybe help reach a wider audience.
I’m not touching on the subject of salary as a criterion and I’m also not addressing whether you should build your own company. Here I dissect the scenario of joining a company as an employee, whatever the position - individual contributor, middle manager, executive.
When I consider the question of where to work, I think of it in terms of growth. There are plenty of objectives when choosing a company to work for - maybe impact, lifestyle, personal satisfaction. They are all valid and dependent on what your purpose and outlook on life are. However, here we will be discussing strategies for wealth construction, personal connections and professional development.
Let’s dive in.
I think this is the most important criterion to consider when joining a company. The few people you spend most of your time with will disproportionately impact your life, model your mood and behavior, and may act as the driving or resisting force for your growth. Aim for colleagues with high trust, the ability to excel in areas you want to learn, and connections to other great people.
If your intent is growth and you have the power of learning, find a team where you think you’d be the dumbest person in the room. That’s a good thing because:
1. You have a lot to gain just by being around those people. They’re going to expose you to relevant topics and knowledge that you didn’t know existed in the first place, thus acting on your second order ignorance. The greater the difference between what they know and what you know, the higher your learning rate will have to be. No matter how much you develop yourself, a room like this will always exist somewhere - sometimes even in other teams in the same company.
2. You’re not really going to be the dumbest person in the room. If a team of high performers embraces you, it usually means that you have something of value to bring to the table. Make sure to understand what it is that they’re looking for and that you can provide. Talent comes in many flavors.
The insight here is that there’s a sweet spot that you should search for in a group of people. They should be the smartest, most knowledgeable, and highest-performer possible, as long as you’re still able to add value to them with your own skills and expertise. This last part is important because if you can’t rise to the occasion, you won’t last on the team. In other words, be the person with the most to learn who still makes the cut.
Before accepting the job
- Ask to meet the people you’re going to work with (especially your peers and leader). Several companies have already incorporated this into their selection process so that everyone involved has the opportunity to evaluate if the hiring is a good fit.
- When meeting them, ask yourself: what kind of knowledge or skill does this person have that I would pay them to teach me? Aim for teams that would earn you the equivalent of a bachelor’s degree.
2. Purpose and Culture
Believing in what you’re doing is a critical part of your path to success. Your chances of producing your best possible work will plummet if you don’t personally care about it, and your growth will stall.
Most people don’t have one single passion in life. Some do, and for those people, doing anything else would be painful and feel irrelevant. But for most of us, there is a multitude of interesting areas with intensities that vary over time. So questions like “what’s your one true passion in life?", “what gives your existence meaning?” and “what’s the one problem in the world that keeps you awake at night?” may add little value to the process of choosing where to work.
If you don’t have a single answer to what you want to work with, you need a simple test that determines if a given company would be right for you: the company’s actions must be aligned with your values. Notice that I didn’t point to their mission, motto, or whatever they say they do, but rather what they actually put out in the world. When your company frequently does a number of things you disagree with, it’s hard to feel motivated, whereas when they do things that make you proud often, you feel energized and dream big. There’s a famous anecdote of when John F. Kennedy visited the NASA space center, and saw a janitor carrying a broom and sweeping the floor. He walked over to the janitor and asked what he was doing, to which the janitor replied: “Mr. President, I’m helping put a man on the moon.”
Akin to purpose, a company’s culture may make or break your experience as an employee. This is relevant because the more you identify with a company’s purpose and culture, the more comfortable you’ll feel to stay for the long run and build your career, connections and wealth.
Before accepting the job
- Instead of just asking what their core values are, ask how they are implemented in company policies and day-to-day life.
- To better understand if you would work out at this company, ask this: what kind of person would be extremely successful elsewhere, but not here?
- Ask what their communication style is and what you should expect in terms of processes like leadership 1-on-1s, performance evaluations and recurring meetings.
“You are not going to get rich renting out your time. You must own equity - a piece of the business - to gain your financial freedom”
Naval Ravikant, co-founder and former CEO of AngelList
Whenever possible, join a company that enables you to participate in the upside of its financial growth. One of the best and most common ways of doing so is by owning equity.
Owning a part of the company helps build your wealth in a non-linear manner, different from earning a salary. That way of growth is much more efficient than renting out your time because a company has an almost infinite upper bound on growth by leveraging software, media, capital and labor. Earning a salary doesn’t offer those leverages and is much more constrained by the time you have available to sell and how much you can charge for that time.
It used to be the case that only founders and investors participated in a company’s success through equity. Nowadays, around 16% of the company’s ownership before the IPO is in the hands of employees. So, before joining, ask about the possibility of receiving equity grants, stock options, employee stock purchase plans, phantom stock or other similar forms of compensation.
Some things to keep on your radar when having equity at a company:
1. It is standard practice to have a one-year cliff and four to five years of vesting period. That means that if you leave before one year, you get nothing. After that, you get one small installment of your equity every month, summing up to 100% in four or five years. That works as an incentive for a long-term commitment to the company.
2. Receiving equity almost always means you’re going to pay taxes on them, depending on the format of your grant and your tax residence. Be especially aware of stock options because they can be taxed when you receive the grant, then again when you exercise your options, and then a third time when you sell your stock. Also, beware of double taxation if you own equity in a foreign company.
3. Especially if you’re joining a startup, owning equity doesn’t necessarily mean that you’ll get rich. In fact, most startups fail and there’s a high chance of walking away empty-handed.
4. There’s this thing called preference stack on which you should educate yourself and ask about when joining the company. In a nutshell, if there is a liquidation event such as the sale of your company, investors could have the right to cash in before other stockholders (typically founders and employees) and are sometimes guaranteed a multiple of the amount they invested. That is determined by each investor’s liquidation preference and could significantly impact the value of your equity and even make it worthless. A great book to learn more about this and other intricacies of venture capital is Venture Deals by Brad Feld and Jason Mendelson.
Before accepting the job
- Ask if you can receive part of your compensation in company shares. If you get any, ask what percentage of the company your shares represent and how much it would be worth according to the company’s last valuation.
- Ask what their preference stack looks like.
4. Financial health and long-term viability
If you’re investing your time in building your wealth through the wonder of equity ownership, it always pays to think like an investor. If you’re younger, investing your time now is probably even more critical of a decision than investing your money. What you have to consider is whether that company will increase its value (and therefore the value of your equity) in the future.
Making sure the company is on a path to success is useful not only to have a reasonable probability of financial growth, but also to give you peace of mind that you’ve made the best possible decision when joining (and to focus on doing your best work instead of looking around in doubt all the time).
If you are considering joining a team in a C-level, VP or other executive position, chances are you’ll talk directly with the CEO at some point, or at least someone else on the management team. So it should be easy to ask these questions, and I would say it is probably expected that you ask them.
On the other hand, if you’re not in an executive position, asking these questions shows that you have a bird’s-eye view of the company’s situation in the market and can understand the challenges from a macro perspective. That signals a higher seniority level and should help you make a strong impression as a valued professional.
Before accepting the job
- Ask what problem this company is solving and how big the addressable market is. How big does management want the company to grow, how long will it take to get there and how are they planning to do it? (remember, not every company wants to be a unicorn)
- Ask if they have been growing in revenue, customer acquisition, traffic, or other North Star metric lately. If so, why is that? Has this growth been organic and sustained, or have they burned cash to bring in customers even without proper product-market fit?
- Ask if they are profitable. If not, how does their runway look like? Have they received investment?
- Find out who the competitors are and what advantage the company has over them. Then, ask yourself: why are you considering joining them instead of one of their competitors?
Suppose some time has passed, and everything went well - you met amazing people, they helped you grow, you received equity and now the company is worth a lot more than when you joined. How can you capture financial value from this success?
Enter liquidity. Liquidity is the ability to turn an asset into cash. If you’re being compensated with shares in a listed company, you don’t have to worry about liquidity - you can sell your shares as soon as they are vested (and over the lock-up period). However, when owning equity in a private company, you should consider ahead of time what your company’s exit strategy is going to be.
An IPO is probably the most prestigious and most longed-after exit strategy. Your company must reach a certain maturity point before it can file for an IPO and become public. After a lock-up period, you’ll be able to sell the shares you own in the company.
If your company’s exit strategy is an IPO, one thing to consider is the time it usually takes for this to happen since its foundation. This varies between companies and industries, but here are a couple of examples: for a software business, the median time between founding and exiting has been nine years. For e-commerces, it has been six years, and for hardware companies, eleven years.
Some companies have a buy-back policy for employees, in which you have the right to sell your stock back to the company upon leaving. Other companies operate in industries where it is common for bigger, publicly-traded companies to acquire smaller players, which could mean that your shares in the original company could be swapped for publicly-traded shares from the buyer company - and you’d get liquidity. However, it may also mean that you’ll have to wait for a second vesting period, especially for higher management positions. Mergers and acquisitions are the most common type of exit for private companies, so keep an eye on that.
Before accepting the job
- Ask what their exit strategy is. Then, consider how long this will take and if that time frame is aligned with your expectations.
- Find out if there have been acquisitions in this industry (and the size of those deals) to determine if that could be a path to liquidity.
All the items I lay out here won’t ever be simultaneously perfect. If the stars aligned and every aspect of a job offer was exceptional, you would probably not be reading this article to make such a no-brainer decision. However, in the real world you have to consider trade-offs and make choices. For example, maybe a company doesn’t offer you a lot of equity but has a solid liquidity proposition. Or perhaps it has a stellar team that makes up for a culture that is not super strong yet. Just keep in mind that the sooner you start thinking and acting purposefully towards growth, the greater your results will be.