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Is There Safety in Early-Stage Today?

Written By: Chuck Brotman

Hiring

May 20, 2022

It’s harder today.

Running a new job search has become stressful & more difficult for GTM professionals. While demand for tech talent remains strong, news of layoffs and public market declines saturate social media feeds. Even optimists acknowledge it’s difficult to predict whether we are about to slide into a short-term recession.

Is now a time for sales, marketing, and customer success talent to prioritize opportunity with larger companies over mid-market and tech startups? Are the larger organizations more “stable”?

One could plausibly make the argument. While behemoths like Microsoft, Amazon, and Alphabet are announcing wage increases to minimize employee churn due to inflation, venture capital flow into earlier stage companies is uniformly slowing down. Many startups, in turn, are implementing hiring freezes and cuts to reduce cash burn rates and extend their runway. Even companies aggressively courting enterprise sellers may be looking to reduce their Customer Acquisition Costs (CAC) in other areas, which may not be favorable for those expecting marketing and product development support.

In this context, it’s understandably easy to conclude that now is a great time to index to large cap tech for job searchers.

From a talent perspective, however, I’m not sure I’d equate size with stability.
Looking back to 2008-2009, layoffs didn’t spare many of the larger tech brands. And while this period predates the emergence of mature SaaS, comparisons still seem reasonable. We face unique challenges today: a reduction in SaaS valuations related to rising interest rates and the potential for declining earnings themselves impacting multiples. If the Fed is hindered in its ability to inject greater liquidity in the market because of inflation, things have the potential to get worse. In these circumstances, larger organizations may feel compelled to make larger-scale cuts to business units and functions for their shareholders. “Last in / first out” is certainly not a phrase I associate with startups as much as larger companies scrambling to make broader scale cuts while mitigating litigation risk.

The point here is hardly to promote doom and gloom. We’ve never seen circumstances quite like this; many have made very plausible arguments that we are looking at a speed bump at worst, not a massive correction. None of us has a crystal ball, but there’s certainly a case for cautious optimism.

That said, I’d like to make a case here that now could be uniquely the time for job seekers to give startups and early companies more attention. But not all of them are created equal. What’s right for one individual may not make sense for someone else.
Here are some things I’d recommend.

  1. Consider looking for companies tackling major problems in underserved or “unsexy” markets. When I left the martech space to join a company in trucking / logistics, many of my former peers found the move curious. Five years later, that market has grown massively. Most of us are deeply attentive to the importance of efficiency in logistics and the global supply chain, but many founders understood the challenges and needs earlier. Think like the best investors here and look for companies doing things being missed by others. For example, I have a couple Series A clients in data privacy and compliance operations space doing exceptional work to help companies maintain constituent trust, operational efficiency, and brand / business viability. Talk about important value props! Are you looking in these areas for opportunity? If not, why not?
  2. Pay attention to funding, but don’t over index on the size of the round. Larger amounts raised, particularly in plush times, often generate a lot of excitement from investors and employees, but these can create more risk in environments like today’s. Companies that raise money based on excessive valuations could face greater pressures from their investors to pump the brakes harder on spending and hiring. Why? If these companies need to raise another round, they may be forced to take a “down round” investment at a lower valuation – bad for investors, and employees watching their ISOs vest. Not everyone can simply pivot from “growth at all costs” to “responsible growth” IF prior rounds were raised on the former grounds. By contrast, companies that raised money at more reasonable valuations may be better equipped to raise additional money or consider debt options. If you can find a company like this that’s also growing at an impressive YoY/MoM rate, you may have a winner on your hands.
  3. Look at the leadership team. Have they survived prior downturns? What’s their overall management experience? How closely do their values comport with yours? What’s the diversity of the team? (Here I mean more than traditional DEI; if everyone comes from the same Ivy League college, ask yourself: is this a company that’s prioritizing cozy cronyism over diversity of thought to drive excellence?)
  4. How confident are you in their product market fit (PMF) and current customer base? Do they have a track record retaining and growing clients? Is there an additional larger market to pursue? Can you get your head around it? The latter question is relevant too. It’s okay to acknowledge it may not pique your interest.
  5. What’s the hiring process? Is it clear and documented? Can the company walk you through the steps to offer? Also, do they have a plan they can share for future hiring planned throughout the year? What are the dependencies? Transparency is always great – now is the time to push for this harder than ever. (Another side note: I would spend MORE time asking about the plan, less asking for historical ‘performance data’. Asking a startup revenue leader “how many reps hit quota last year” gives you a lot less insight into their preparedness for future execution.
  6. How well does the role align to your skills & behaviors? Your growth goals? Is there a chance for you to build on existing skills and be fulfilled in the meantime? If the company doesn’t prove viable, what’s your confidence that the work you do will help succeed in your next role?
  7. Be sure start-up work is right for you. In bullish and bearish times, work in early-stage companies is always a little different. If you are not comfortable with some level of ambiguity, it may not make sense. Or perhaps you want to deepen functionally specific skills as a priority. In this case, finding a more mature organization with a reputation for excellence in your lane could be the better move.

In 2008, some incredible companies were founded during the downturn . What’s great for an investor is not necessarily great for you from a career perspective. That said, if you can find great opportunities in a market with role opportunities that get you excited, now could prove to be an incredible time to go early company in your career.

Is there safety in early-stage today? Difficult to say whether the relative risks here outweigh those in other verticals or more mature companies. But if startups get you excited, I wouldn’t take it off the table.