The Startup Game

by on August 31, 2016

In 1999 I started at my first legitimate start-up as a Software Engineer. I say legitimate since it was the only one with outside funding and not bootstrapped. With $250,000 in funding and an old insurance agent’s office, the game began.

Since then I have worked in many more and not much has changed. They all go through the same milestones, get worried at the same time, ebb and flow between fear and elation, and do things no HR department would allow.

First, there is the launch. This includes finding an office, buying furniture, decorating, hiring the key players, and waiting for things like phone and internet to get installed. During this phase, the seed money seems like it will last forever and there is beer, free snacks, video games, and lots of goofing off.

In past companies we had indoor basketball, X-Box sessions, suction cup archery, Nerf guns, and lots of untracked away time. The reason for all of this is the mandatory late night and weekend duty required to launch a product.

Second is the reality punch. Usually occurring within the first 3 months, the seed money is going quickly and the product is behind schedule. Often, there is some kind of animosity brewing between sales and engineering. Sales has sold the yet to be completed product and engineering has yet to deliver said product. Management holds more meetings and non critical hires are sent home.

During this phase, multiple hires were made based upon the perceived needs of the founders. However, once the money starts to run dry, the staff must reduced to only those critical positions required to keep things going. Part of the reason for this is to reduce the amount of outstanding stock options for the next phase.

Third is the product launch. During the last 5 to 6 months the initial product has been completed, often in some kind of reduced form. Sales is able to close all the waiting customers, many of whom have become uninterested and now management is discussing the need for marketing.

Often times, no one is experienced in marketing and debates the need for SEO hackers, traditional marketers, growth experts, etc. No one really can define what is required, just that a need for more eyeballs exist.

Usually someone is hired that is able to increase registrations or generate interest via multiple events. During this time, the company begins to host Meetup groups, after-hour events, and the like while trying to desperately gain a larger following for the upcoming Series A.

Fourth is the grow or die phase. Since the seed cash is almost depleted, management is busy making pitches for a Series A while sales is working to secure new customers and engineering is adding all of the features that were put on hold for the launch to occur. This is a critical time since failure to secure customers and raise a decent Series A will mean failure for all.

Management has a better understanding of what does not work. Engineering understands the code base is able to quickly make updates as customer expectations are realized. Sales is able to close more business but still is making unrealistic claims. Most getting ignored by Management due to their short time goal of more customers.

Fifth is the awkward teenage stage. This only occurs if the Series A was launched or a large customer secured. Here the company begins to make key management hires. Usually, engineering gets a VP of Product or an experienced CTO. Followed by a VP for sales, a VP for marketing, and at times a new CEO at the direction of the board members that resulted from the Series A.

Sixth is the move toward young adulthood. Here the engineering team deals with technical debt, sales is given stringent rules on what to say to customers, support roles appear, and all of the questionable office activity stops. The video games gather dust, the decorations are changed to something more professional, Nerf guns live in desk drawers, and no one works past 5:30.

Now the first round of stock options is exercised and a few give notice as the initial excitement has passed. New employees are hired from larger companies without equity given and the start-up culture is transformed to a more traditional business.

Seventh is the move toward exit. In the past this was an IPO and a few key people were assigned to the IPO team. This happened to me and I was relegated to spending months attending meetings with accounting firms, lawyers, and image consultants. Here the team is focused on getting a return.

This phase is most concerned with becoming acquired by a well know company such as Google or Microsoft. As meetings begin to take place a great excitement occurs and people start planning what to do with their new wealth. Once it occurs, life goes back to normal and a divide is made between those with equity and those without.

Afterwards, the original employees share war stories in meetings, give tales of their wonderful vacations, and purchase lots of new toys. Unless things go wrong and the sale is made at a loss or at zero. This occurs more often than not and that leaves everyone looking for new jobs to start the process over again in a never ending loop.

This is the startup game.