What are the roles inside a tech company? What non-tech positions are available and what do they do.
How to find startups to work for
How to get recognized by a tech company.
Networking effectively with “nerds”
Communicating effectively with “nerds”
The basics of Venture Capital (VC) and key terms
Startup Acronyms Explained
Email Etiquette
Conversion Optimization
Miscellaneous ideas that you just need to know about in order to be “fluent” in startup-ese that didn’t fit in elsewhere
Agile
Corporate Jargon
The Cloud
Information About Engineers
The Technology Lifecycle Adoption Curve
User Testing
Startup Compensation and Stock Options
So you have an idea for a startup and want to hire a developer to build it for you?

Find A Job In Tech Startups

Introduction

This guide is written for people who are either in the tech industry or want to get into it. This book’s purpose is mostly to give a survey of some of the key concepts that you need to grasp in order to be perceived as an industry insider, but it will not give you a complete explanation of everything you need to know. In fact, it may best be understood as “helping you learn what you don’t know”... but giving you enough information so that you can speak credibly in front of anyone in the industry, without having to bluff or make a fool of yourself.



Why Tech Companies?

Maybe you’ve seen movies like The Social Network. Maybe you’ve seen TV shows like Silicon Valley, that intend to parody the world of tech but instead inadvertently glamorize it. Either way, you’ve caught the “tech bug”. Truth be told, salaries in tech are higher than in other industries. Perhaps in the 1980s the hot industry was Finance, with movies like Wall Street glamorizing that, but currently, the hot thing is technology, or “tech” for short.

All the time, magazine articles are published about how child prodigies are making millions if not billions in the tech industry. And that provides a certain appeal: hey, if a punk kid can make millions with nothing other than the power of an idea, then maybe I can get rich too – and if not rich, then certainly I can make a comfortable living.


Allow me now to dispel some myths.


  1. Magazine articles (and blog articles) are often the result of highly paid PR firms leveraging relationships with the media. Don’t believe everything you read.

  2. Just because someone is worth millions of dollars on paper doesn’t mean that they’re actually rich. The valley is filled with “millionaires” who own shares in companies worth many millions of dollars, but at the same time, can’t buy a home. Something is only worth what someone will pay you for it. We’ll explore stock options and some implications therein in later chapters.

  3. The vast majority of young super-rich are piggybacking off of their parents’ relationships. If someone makes the 30 under 30 list, you can pretty much guarantee that they either have a super wealthy or influential parent. Mark Zuckerberg, for example, was privately tutored in programming, lessons paid for by his dentist father. There was recently an article about a secondary school student who sold an app to Yahoo! For millions – his father is a wealthy investment banker who called in a favor.

  4. In the tech world, ideas are worth “nothing”. The only reason that the Winklevoss twins were able to successfully sue Zuckerberg is because they paid him to work on their idea and then he went and made Facebook. Other than that, idea creators get zilch, and rightfully so. In the tech world, being an “idea person” without any hard skills or ability to either (a) finance implementation or (b) roll up one’s sleeves and do some hard work to bring progress… is the tech industry’s equivalent of a “deadbeat dad”.

  5. The vast majority of startup employees will wind up with no money from their stock options, for various reasons that we will explore later. Moreover, because people often move to high cost of living areas in order to “get to the job”, the increase in salary is substantially offset by the high cost of living.

  6. Although “changing the world” and sincerely aiming for “making the world a better place” are traits that (according to data from Noah Wasserman, writer of The Founder’s Dilemma) actually lead to entrepreneurs being more successful, the truth is these traits are really only fundamental at the very top of the hierarchy, and that’s only because in order to make a billion dollars, you really do need to build something that affects everybody. Everyone else is probably just “drinking the kool-ade”, and in life just as in Jonestown, everyone dies in the end.


Now that we’ve dismantled some of the delusions, now that we’ve shared some hard truths, we can share some good things about tech.


  1. Working in tech is very rewarding. You get a chance to build things that people use every day. It’s fun getting to see the results of your hard work “in the real world”. I love hearing “Oh, I have that app on my phone” or “My friend uses that app!”.

  2. Tech companies take care of their employees. Yes, this is a double edged sword: they care for you, therefore they are “infantilizing you”; it’s like a government “nanny state”, making all your decisions for you so you don’t have to make them for yourself. And all those lovely perks: catered meals, laundry handled for you? They’re just a trap to get you to stay late at the office.

    But the truth of the matter is the vast majority of corporations are run in an “evil way”; they want to exploit employees as much as possible, and we can’t really blame them for that. “Don’t hate the player; hate the game”. So if you’re going to be run ragged by an employer anyway, wouldn’t you prefer an employer who treats you nice?

  3. If you have the discipline to realistically value your stock options at zero, if you live frugally and commute from outside of San Francisco or New York.. or if you work remotely for a company in those high-cost of living areas, then you can really do well. But once you start making a six figure salary, you start to spend at six figure levels and suddenly you are attached to your job with “golden handcuffs”.

  4. Working in tech is intellectually rewarding. The problems you get to solve are both fun and nearly always applicable to the real world. If you like being an adult and making an impact on the world, you can do so in tech.

  5. Tech as an industry is growing. If you get into the industry now, you can grow as the industry grows with you. There are no dead ends, but the flip side of this is that you must be constantly improving your skills. As a desirable industry, it can be cutthroat and competitive. It’s normal for people to have to thoughtfully apply for over a hundred jobs before they match with a good fit.



What are the roles inside a tech company? What non-tech positions are available and what do they do.


The “org chart” inside a tech company varies as the tech company changes in size. However, by the time a company gets to about 30 people it usually has members from at least one of each of the following tribes.


If you are non-technical, you should check out “Marketing”, “Operations”, and “Human Resources”. If you are artistic, check out “Design”; if you have a financial background, “Finance”. If you have great people skills, then “Sales” or “Bizdev and Partnerships”.


If you have a technical or engineering background, look into “Engineering” and “Product Management”.


Marketing

This team’s job is to communicate with the customer. They have to figure out who the customer is and what the customer’s needs are. These people tend to be very visually oriented, and you will often (but not always) find a lot of attractive people in marketing.


Social media management falls under marketing. So does trade shows. Mailings. Managing growth and advertising. Blog posts and content marketing. Email communication. The website.


All of this is “marketing” territory.


Lots of marketing people have read books by Seth Godin.


Design

These people’s job is to make the product and the marketing communications look prettier and on point with the company’s brand. These people tend to be very artistically talented, and at a startup, they also tend to be skillful in terms of software. Some programmers a designer might be asked to know are Adobe Photoshop, Illustrator, InDesign, Sketch, Skitch (different from Sketch, Skitch is a tool for annotations), and Balsamiq Mockups.


Sometimes, but not always, they can also be involved in the implementation of their designs – with HTML and CSS.


Operations

These people’s job is the back office of whatever is being built. For example, at an insurance startup, the operations team is involved in the actual underwriting of the insurance and handling the customer’s paperwork. At a food delivery startup, the operations team is involved in the delivery of the food.


For Operations roles, you don’t need technical knowledge. Attention to detail and organizational skills are far more important than technical aptitude. The exception is when the startup is serving a niche that requires specific expertise (such as insurance); however, most of this information can be learned within three months, on the job.

Bizdev and Partnerships

This department’s role is a combination of sales and marketing. It involves building partnerships to distribute the company’s offerings and enhance the company’s brand. Technical knowledge is not needed here, but people skills (especially sales skills), creativity, and business acumen are absolutely essential.


Finance

This department deals with funding the business and managing the day to day financial operations of the company. Usually, some sort of accounting credential is required to succeed here: undergraduate major, CPA, CFA, etc. No technical knowledge is required.


Human Resources


This is the department that manages hiring and firing of employees, the recruiting process, employee benefits, and coordinating employee development strategies. Managing the “human” “resources”. Schools of thought such as the Harvard Business Review are generally proponents of using cutting edge psychological strategies to manipulate and extract the most possible value from employees. As a startup employee, you are naturally in an adversarial relationship with HR: don’t ever forget it, but be a good diplomat. The key is politeness.


Product Management


These people are responsible for the actual product. They keep KPIs or Key Performance Indicators on the product, and they prioritize how the product is developed in each sprint cycle. Having a math or technical background helps a lot for this role, and some programming experience is ideal, but ultimately not required. If you are interested in learning more visit www.ProductManagerHQ.com for training. Also, read the book Inspired by Silicon Valley legend, Marty Cagan.


Sales


These people’s role is to sell the product to customers. They tend to be configured up into different roles: Business Development Representatives field incoming calls and qualify the customer, making sure the customer is a good fit for the company’s product/service. Account Executives then close the deal (truly: “begin the relationship”) with the customer. They tend to be managed by Sales Managers, who ultimately report to a VP Sales.


Engineering

The main roles are:

Engineering Manager – Usually a former engineer,

QA, Front End, Full Stack, Backend Engineer, Mobile Engineer – explained below. One of them is usually designated “Team Lead”, but that’s not necessarily a Manager title.

Program Manager – simply involved to facilitate communications between the teams.

“VP Engineering”, “Director of Engineering”, “CTO” – these are typically the head honchos when it comes to the Engineering tree.



How to find startups to work for


Here are some resources you can check:



How to get recognized by a tech company.

Building work on spec

Once you find a company you like, try to think of a way you could improve their business somehow. Make them a mock website, or design them some new icons and some new logos. Write a blog post that they could publish. Design a new feature with full wireframes and mockups – explanations of how the tech works, step by step. Implement something using their tech.


Then, write a blog post about it, and post it on various startup news aggregators: reddit.com/r/startups; Hacker News; your local startup meetup mailing list, et cetera. Tweet the link to the company.


Normally, even if the company doesn’t hire you, this will garner you the attention of hiring managers, especially if the work is well-executed.


The Look


It all comes to down to remembering that at any company, there are real people who are hiring for the role. Usually, the hiring manager has a specific visual image for the person they want to hire, so it helps to look the part. If you’re going out for marketing, be well-dressed and fashionable (but conservative). For engineering, a hoodie and being unkempt can actually help. And so forth. Try to look through some pictures of successful people in the role you’re going for and emulate their “look”. Although there are widespread laws against appearance based discrimination, it happens every day and is extremely difficult to prove and enforce.


Company Website


If the company posted the job in the careers section of their website, definitely apply through that channel, but realize you should supplement your approach.


Social Media


Follow the company on social media. This means Facebook, Twitter, LinkedIn, Instagram. It also means that you need to make such accounts – and be sure to purge them of any office-inappropriate content. Startups are kind of double sided in that regard: they can project an image of youth and carelessness (“nerf guns!” “move fast and break things!” “failure is a stepping stone to success!”) but at the same time, they can be very cautious and conservative; after all, they are businesses.


So make sure that your social media profiles are on point with your personal brand: the images of you are professional and they reflect the “look” of the job you’re gunning for. You post professional content, and if you post personal content, it is wholesome and family-friendly.


Use Their Product

If the company has a live demo of their product, try to use it if at all possible. Make an account – don’t use any bad words, use your real name, because often times there is someone monitoring all this information. You’d be surprised how many times I create an account, upload a file that says “testing…” and the CEO writes to me asking me what I am testing. So, be careful in your communication here, and know that every time you interact with their product, you may be monitored – the flip side is that it’s a chance to make a great impression.


The Resume

If you are going for a role in Product or Engineering, you need hard technical skills and proof thereof. No ifs, ands or buts. If you are going for a Design role, you need a portfolio and you need skills with the appropriate design software. If you are going for a role in Marketing, you need hard skills related to what you’re doing (social media, design, email software, ad platforms, etc.). Notice a theme? You want to call out the hard skills that are most relevant to the role. At a startup, there is almost no room for someone without strong hard skills.


Your resume should be at most one page long and impeccably proofread (containing no typos or mistakes whatsoever). Because startups are often founded by people with an Ivy League pedigree (or similar), and Ivy League schools are attended by people with perfect scores on their SAT tests, they tend to have a culture – that starts from the top – of perfect grammar. So pay someone to proofread your resume if grammar, spelling and punctuation aren’t your strong suit. They really do need to be on point.


Your resume needs to be visually attractive. If you are shooting for a job over six figures, it is worth finding a top designer on Craigslist and paying them $150 to improve your resume. In general, startups are terrible at hiring and generally optimize for a combination of aesthetics and substance (you need both).


If you need a starting point, use https://resumegenius.com/


The Cover Letter


Using some detective work, you can usually figure out who the hiring manager is for a position. How, you say?

  1. Check LinkedIn by searching under the Company name.

  2. Check Crunchbase

  3. Call the company and ask

  4. Email someone at the company and ask

  5. Check the job posting for clues


Definitely don’t be a stalker, but write your cover letter in a tone that alludes to being ‘clued in’.


If the company is small (fewer than 15 employees), you should emphasize how your skills will benefit multiple departments – other than that, even if you do have cross-functional skills, try to put as much emphasis as possible on your one strong suit area (engineering, operations, sales, marketing, HR, design).


LinkedIn

Make sure your LinkedIn profile is fully setup (check the section titled, “Networking effectively with ‘nerds’” for tips on this). Follow the company on LinkedIn. If your headline involves that you’re looking for work, make sure the headline is tailored for the role you’re gunning for!


Angel.co

Make sure you have an Angel.co profile. If the startup has listed their job on Angel.co, apply through that channel as well.


Recruiters

Startup companies use both in-house recruiters and external recruiters. External recruiters are generally a large waste of time and are hated. Internal recruiters are company employees designed to help shepard and communicate with candidates through the recruitment process.


Sometimes, companies will throw parties. If a startup has an event with an open bar (for example, at SXSW, or after a major tech conference) then it is secretly a recruiting event in disguise. Show up to these looking professional; build relationships, and when people ask “if you want to get lunch sometime”, realize that’s code for “I want to hire you and exploit your skills for economic gain”. So, shoot them your resume and it’s off to the races!


The Hiring Process


A company’s hiring process can involve multiple phone screens or phone interviews, followed by multiple in person interviews, followed by an in person presentation. All of that is designed to remove candidates at each stage, and then, sometimes companies will hire you on for a “one week trial”, or simply as a contractor, in order to further vet your skills and reduce the risk of a bad hire. All of this is normal, but if a company asks you to do real work with them, make sure it’s paid labor.




Networking effectively with “nerds”

Business Cards



Online Presence


LinkedIn



Email and website


Meetups



Communicating effectively with “nerds”


Power vs. Rationality

There are basically two main ways that humans communicate. One way is through Power, and conversations about Power. Another way is through Rationality.


Always be aware of what mode of communication you are engaging in, and why. If you are dealing with an engineer, you are best suited to use Rationality. If you are dealing with someone else, you are best suited to use Power talk.


Nerds thrive on rationality, so avoid any status signaling and status display as much as possible, and use a logical argument devoid of logical fallacies.


Be Egalitarian


Also, be egalitarian. Don’t flex your muscles or power trip on them or it will backfire, “revenge of the nerds” style. Nerds really don’t mind taking you down in a lose-lose battle – they’re already at the bottom of the social hierarchy, what have they got to lose? – and sometimes, they win.


Don’t dismiss them as “just tech”, or “back office nerds”. It can mean a lot to a nerd to be treated as an equal by someone in sales or marketing. You will be surprised at how hard they go out of their way to deliver you technical features and functionality that would otherwise take half a year to wend its way through product management, if you are simply including and respectful.


Be Clinical

Try to give feedback once something is 30% done rather than when it is at 80% done


Let them obsess about the technology – Educate them on the business


Nerds love to focus on the tech and geek out. That’s fine. Do NOT try to overrule them or demonstrate any kind of authority here. It will be perceived as you being out of your element and they will lose respect for you. Instead, educate them on the business, and explain how their work affects the business. This helps avoid “getting caught in the forest for the trees”, where nerds obsess over what can be perceived as irrelevant technical ideas.


Don’t fear them


Like dogs, tech people can smell fear in nontechnical people and will use and abuse it as they are able to expand their fiefdoms within a company.


The basics of Venture Capital (VC) and key terms


New companies in tech go through a series of stages and evolutions as they are financed. Now, different companies grow in different ways, and financing varies from company to company– tech companies may choose to finance through means other than as described here, and I also want to say that the “fintech” ecosystem is evolving. Crowdfunding is just one new and relevant idea that we must wrap our minds around, but nonetheless, the essential framework is this:


Stages of VC Financing


The beginning. Company is nothing more than an idea, proof of concept, and some light traction (such as a few product orders or letters of intent to purchase). The company is financed by angel investors. Angel investors are high net worth individuals, who usually made their money in business, and then invest it into nascent startups to help them get off the ground.

If an entrepreneur is looking to find an angel investor for her business, then:

  1. Work your network and relationships. This is how I got my first angel financing.

  2. Make a profile on Gust.com

  3. Make a profile on Angel.co


Often times, angel investors will give you a chunk of money in exchange for a “convertible note”. What this means is that once your business gets to the next stage of funding, you can either repay them the amount they loaned you (with interest), or they can convert your debt to them into equity, but priced at a discount, usually 15% to 20%. For example, if they loaned you $10k and then your startup gets a $100k valuation, they would get approximately 10k / 80k = 12.5% of your company.

These terms vary from deal to deal. By no means is this book an authoritative guide to angel deals; really, we just want to teach you enough to teach yourself. Your next steps here is reading the book What Every Angel Investor Wants You To Know.


If a company can’t get money from angel investors, it may also look for an SBA or local government loan.


Then you get to pre-seed. At this point, incubators tend to play a relevant role. The most famous incubators in the community are probably TechStars and YCombinator, but there are new entrants all the time, such as AngelPad. If you google for “list of tech incubators”, you’ll find lots of resources.


Then you get to seed. At this point, seed stage venture capital firms are in play. They will want to see monthly revenues of at least $50,000 – that means your starting is actually grossing $50k in revenue directly, not just processing $50k worth of orders – and a path to 10x that.


Then you get to the “Series” financing. Series A, series B, series C, series D, and so forth.


Finally, you get to an “initial public offering” or IPO. This is when the investors become the public rather than venture capital firms.


If you are interested in learning more about this, the next book on your journey is the definitive guide, Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. It does a supreme job of explaining key terminology, everything from “participation” to “drag along rights” to “liquidation preference”.


Misc VC Facts


Venture Capitalists have to bet on a lot of companies so that one great success gives enough financial return on investment to make up for all their losses. Therefore, they expect that most of the companies they back will fail. Therefore, economically, the startups you work for are probably going to fail.


Startup Acronyms Explained


Online Advertising


CPC: Cost Per Click. How much you pay to get someone to click on one of your ads.


CPA: Cost Per Activity or Cost Per Action. How much does it cost you to get a prospect to take a specific action, be it signing up, creating an account, participating in some meaningful way… this metric is defined in context of a specific behavior, and the cumulative cost associated with driving one marginal (additional) occurrence of said behavior. For example, at mobile app companies, CPA designates cost per installation.


LTV: Lifetime Value. How much revenue you generate from a user or customer over the lifetime of its relationship with your company.


CPM: Cost Per Thousand Impressions. The “M” in CPM comes from the Roman numeral for one thousand.


CPV: Cost Per View. How much it costs to get someone to view your page.


Marketing


SEO: Search Engine Optimization. This is the art of getting your webpage to rank high in Google. There are a few technical things you can do to the HTML on your webpage to improve the SEO (outside the scope of this book, especially since it’s ever-changing) but the number one thing you want to do is: (a) write great content for humans, not robots and (b) get lots of authoritative people to link to your site. Getting lots of “spammy” links, such as by leaving random, irrelevant comments on websites with comments sections, is a bad way to do SEO.


SEO can also be considered a verb. “SEO my page.” A good way to SEO is get The New York Times to write an article about your business and have them link to your site. Because The New York Times has years of credibility, a link from them is worth a lot more in search engine rankings than a link from a local paper.


ASO: App Store Optimization. This is the art of getting your app to rank high when people search a relevant keyword in the app store.

PPC: Pay Per Click. In the Advertising section above, we explain CPC. The Cost Per Click. Pay Per Click is the generic term used for advertising services that charge you in a CPC manner. PPC generally refers to Google’s AdWords, Facebook Ads, Bing Ads, and self-serve PPC platforms such as Reddit. You advertise on a PPC platform, but then you get charged in CPC.


CAC: Cost to Acquire a Customer. Sometimes this is CCA, “Cost of Customer Acquisition”. Either way, it means the same thing: how much do we need to spend in order to acquire a new customer? In general, venture backed tech companies like to see a ratio of at least 3:1 between Lifetime Value (LTV) and Cost of Customer Acquisition– in other words, you need to make at least 3 times from a customer, over the lifetime of a relationship, what it costs you to acquire them.




Email Etiquette


Don’t abuse email threads. If you’re replying to an email that’s many threads deep, rewrite the subject line so that it reflects the current topic of conversation, and only quote as much information as is necessary.



Conversion Optimization


Conversion Rate

A conversion rate is the percent of users who take a specific action. For example, if the specific action is clicking the “signup” button on the homepage, and out of every 100 visitors, 3 people click the button, then your signup conversion rate on the homepage is 3%.


Your startup can be viewed through the lens of a series of conversion rates: conversion rate on homepage, conversion rate on user to paying user, conversion rate on paying user to referring customer, et cetera.


Startup Metrics For Pirates

In the late 2000s, startup impresario Dave McClure gave a presentation that made the rounds called Startup Metrics For Pirates. Dave was an early employee at PayPal and started his own Venture Capital firm (incubator) called 500startups. In his talk, he breaks down the “conversion” funnel as this: AARRR.


Attention

Activation

Retention

Revenue

Referral


Attention: Getting people to your product, whether it’s a website or app.

Activation: Getting people to sign up for your website or install and setup your app.

Retention: Once they use it, getting them to keep using it.

Revenue: Once they use it regularly, get them to pay you for premium services

Referral: Getting them to refer their friends



If you think about it, the vast majority of tech startups are running a “business engine” that depends on getting users through this funnel in some way, shape or form. Let’s use Uber as an example.


Attention: Get people to the Uber website. Spread the word about the Uber app: tv commercials, subway ads, ads on busses, etc.

Activation: If you download the app and don’t start using it, you start getting email reminders.

Retention: If you haven’t opened the app in a while, you get notifications about “discounts” and special deals.

Revenue: Your first ride is free if a friend sent you the app, but thenceforth, you have to pay for ongoing Uber rides.

Referral: Get a $5 Uber credit if you get a friend to download the app. Here’s your personalized link!


A/B Testing

When a product has enough users, it makes sense for startups to test two different versions of the product experience against each other. These are called “A/B”, “multivariate”, and “split” tests.

If one version registers a “statistically significant” increase in desired actions, then that version becomes the control and new iterations can be tested.


Nearly any step of any conversion funnel can be improved with testing.


What follows are some tactics for improving your startup’s offering at any stage of the funnel. While this list is by no means comprehensive, its purpose is to provide illustrative, real-world examples to get your creative juices flowing.


Tactics for Attention


Tactics for Activation



Tactics for Retention



Tactics for Revenue


Tactics for Referral



Miscellaneous ideas that you just need to know about, in order to be “fluent” in startup-ese, that didn’t fit in elsewhere


Retargeting


You know when sometimes, you visit a website and then ads for that website or brand or products start following you around everywhere on the Internet? That is a result of something called “retargeting”. Retargeting, also known as remarketing, involves a relationship between the website and the advertiser that is tracked by cookies.


Cookies


“Cookies” are a must-known technical concept, but essentially, a cookie is simply a digital receipt. Cookies are a piece of information that websites are allowed to store on your computer. When you visit a website with retargeting enabled, you receive a cookie linking your visit to that website to an advertiser. The advertiser, or your computer, then shares this information with publishers on the Internet, so they know which ad to show you.


To recap:


Social Media


Social Media: Social Media is any media website where users contribute the majority of the content rather than a staff of writing teams. For example, Twitter: users tweet. Facebook: users share links and updates. YouTube: mostly, users record videos rather than a content production team. Reddit: users submit links and comments. Hacker News: users submit links and comments. Etc.


When you participate in social media on behalf of your company, it is known as Social Media Marketing.


Content Marketing


If you write articles that you expect users to like and to discuss on social media, that is known as Content Marketing.


Some Social Media companies also have their own PPC (Pay Per Click) platforms.


AdWords


AdWords (intent): When users search something on Google, you can show them ads, using Google’s PPC platform. Often times, users search on Google because they are ready to buy. There is a decisionmaking process that shoppers have, as defined by YOTPO:


Need recognition (Awareness): The first and most important stage of the buying process, because every sale begins when a customer becomes aware that they have a need for a product or service.


Search for information (Research): During this stage, customers want to find out their options.


Evaluation of alternatives (Consideration): This is the stage when a customer is comparing options to make the best choice.


Purchasing decision (Conversion): During this stage, buying behavior turns into action – it’s time for the consumer to buy!


Post-purchase evaluation (Re-purchase): After making a purchase, consumers consider whether it was worth it, whether they will recommend the product/service/brand to others, and what feedback they would give.


Because buyers will use Google every step of the way to inform them on this process, you can target them effectively, and this is why Google makes so much money. You first have to figure out what language the prototypical buyers use to describe their thoughts and emotions and questions during each stage of the process, then you can write content containing those keywords (SEO, Content Marketing) as well as bid on searches containing those keywords (AdWords: Google’s PPC platform) to get buyers’ attention.


Net Promoter Score


Net Promoter Score: This is a way to measure how likely your product is going to grow virally (through referrals). Any growing company needs to have positive NPS. Here is how NPS is measured:


  1. Survey your customers and ask them how likely are they to recommend your product/service/brand to a friend, 1 through 10. (I personally like to use Delighted.com to deliver the survey automatically).

  2. “Promoters” are the 9s and 10s. “Passives” are the 7s and 8s. Detractors are the 1s through 6s.

  3. Calculate your NPS by taking % of promoters and subtracting % detractors. If it’s positive, you’re doing good.


Here is how NPS is dealt with: follow up with all your users or customers who answered 1 through 6 (the detractors). Write them individual emails and ask for more feedback and express your sincerity to bring them to a better experience. Figure out the underlying issues and address them.


While NPS is good, another way to measure your company’s referral rate is through viral coefficient. The entrepreneur Andrew Chen defines this as “For every user coming into your site, how many friends do they bring?”. Your analytics team can help you calculate this.


Personas


Personas: This is the art and science of understanding who your users are. Although people in general are not an “average” of other people, in the startup world, when there’s 10, there’s more. If 10 people subscribe to your service, you can get 1000. If 10 people complain about an issue, 100 people are silently fuming and or moving on to a competitor. So personas are “archetypes” that help you guide your decision making in terms of product and marketing.

For example, “Franc is a 25 year old college graduate who has failed to find a high paying job in the new economy.” “Arina is a 44 year old fashion designer who wants to transition industries. She drives a VW Passat and travels to Europe three times a year”

These could be prototypical Personas for us, and it could guide the tone in our writing and our marketing.


Minimum Viable Product


Minimum Viable Product: In the late 2000s, entrepreneur Eric Ries, the founder of IMVU, created a movement in the startup community called “Lean Startup”. Basically, it means that instead of asking your customers what they want and then building something for them, it means putting together the absolutely minimum solution that would solve their problem – and seeing if it works. If people pay money for that, then it’s a Minimum Viable Product. If you want to learn more about this, read Eric’s book The Lean Startup or Steve Blank’s book, Four Steps To The Epiphany which heavily inspired Eric.


Product Market Fit


Product Market Fit: In the late 2000s, Marc Andreesen, one of the early employees at Netscape and the brand behind the VC firm Andreesen Horowitz (abbreviated A16Z), wrote a seminal blog post about “Product Market Fit”. PMF is what happens when the product the startup creates aligns with the needs of the market. When this happen, the startup tends to grow extremely rapidly. This often results in billion dollar companies, and it’s when overnight success happens. This is also how “disruption” happens: the functionality of a product suddenly meets the requirements of the market, and is a better solution. A rule of thumb: companies are said to have achieved Product Market Fit when 40% of their users would be “very disappointed” without your product/service.


Disruption


Disruption: Clayton Christensen, who is known for being a Harvard Business School professor, has written many books on business that have great influence and are revered in tech. One such book is The Innovator’s Dilemma and it explains why big companies can’t innovate. The reason is this: big companies need to grow at 10% y/y to keep shareholders happy, so they need to go after bigger opportunities and have to ignore the small opportunities. Startups begin as solutions to small opportunities and then grow into solutions for larger opportunities. Big companies then buy startups once the market has grown and startups have taken all the risk off the table. Either that, or the startups IPO and become big companies in their own right.


Startups(products) are represented by the curve and markets are represented by the straight lines. Therefore, product market fit happens at an intersection.


Analytics


Analytics: Business legend Peter Drucker says, “What gets measured, gets managed”. Metrics, or KPIs, are super important to startups. Often times, startups will use Google Analytics or Mixpanel to measure these, and they will supplement with custom dashboard. Many people feel that the most important metric for a startup is growth: how fast is revenue (and if no revenue, users) growing, from week to week. Yes, startups move from week to week – big companies move from quarter to quarter.



Agile

There are basically two schools of software development. The old school was called “waterfall”.


A product team came up with a coherent vision for a product, with a complete, fixed specification for the entire product. Then, the team spent a year or so building it, and then shipped it by printing it onto a CD Rom and packaging it for distribution through distributors. As the years went on, the cycles became shorter, like the span of a few months. And instead of CDRom, software started being delivered over the Internet. But the bottom line is that it was slow, and startups decidedly don’t work this way.


The new school is called “agile”. Since companies can distribute their own software (through “software as a service”, or SaaS), either on their own infrastructure (server farms), through app stores (App Store, Google Play), or through shared server space (the cloud), they can deploy and make changes much faster. This has resulted in ethoses like “move fast and break things” (-Facebook) and the development of new engineering techniques for continuously updating one’s tech. These buzzwords are “continuous integration” and “continuous delivery”.


Whereas a “Waterfall” team might have a year-long development cycles, “agile” teams’ cycles are much shorter and tend to be two to four weeks long. This usually consists of a “sprint planning session” (where the team meets up to decide what tasks should be done), a work cycle, where team members indicate what work is in progress through the moving of “cards” in through a “kanban board”, and then ideally, a “retrospective” at the end to discuss what went right and what went wrong.


Unfortunately, very few teams actually adhere to best practices and “retrospectives” are rare in practice.

Kanban board from the TV show, Silicon Valley


Standups

A key feature of an agile team is a daily “standup” meeting, wherein one person talks about:

  1. What they did yesterday

  2. Where they are “blocked” – i.e., relying on support from another member of the team

  3. What they are working on today


Ideally, this is just a quick status report meeting. It’s “standing up” so we get through it quickly. In practice, few managers know how to effectively run a standup meeting, so time is wasted as people go in depth on topics during the group’s time. However, when standup works correctly, you can really keep your finger on the pulse of the group’s output and whether you are going to complete all the goals you set out to during your sprint planning.


Tools

Agile teams tend to use the following software programs: Trello and JIRA. The company that makes JIRA recently bought Trello.



Corporate Jargon

Circle back

“Let’s circle back to this (talk about this later)”

Offline conversation

“Don’t talk about this in a group meeting and waste everybody’s time.. Talk about it in an offline conversation (1-1, later).”


Ship it

“Release it to the public”


The Cloud


You have probably heard the term “the cloud” a lot and are wondering what it means. The answer is servers. Back in the day, companies would have to buy their own server to deploy their software services. This would be really expensive, an intensive capital cost, and created a barrier to entry: only funded startups could afford servers. Not only was there the cost of the hardware, but there was the cost of maintaining it (sysadmins, techs).


Nowadays, companies like Amazon, Microsoft and Google have gone ahead and bought tons and tons of servers and put them in their own data centers. In doing so, they have achieved Economies of Scale: they pay less per computer than we would. So, it makes sense to rent someone else’s servers rather than buy your own.


“Cloud” is just an idea of reducing costs by renting other people’s computers rather than your own. If you are “deploying in the cloud”, you are hosting your website on rented computers (probably from Amazon, Microsoft or Google). If you are “running analytics in the cloud”, you are borrowing computer time (probably from Amazon, Microsoft or Google) in order to do your computation – you don’t actually own the computers.


Cloud = other people’s hardware.



Information About Engineers


Java vs. JavaScript

These are two different languages. You will permanently lose credibility in a developer’s eyes if you refer to Java as JavaScript or vice versa. It’s petty, but we’re here to help you avoid the faux pas.


Clients & Servers


In computing there are two important concepts: the “client” and the “server”. The server is the computer that stores all the information and the database and does processing. The client is the computer that interacts with the user.


A web browser is a “client”. An iPhone app is a “client”. These “clients” talk to servers.


Front End Developers

A “front-end” developer is someone who writes code for web browsers, such as Chrome, Safari, Firefox, Internet Explorer, and the browsers (Safari or Chrome) on people’s mobile phones. Frontend developers will know JavaScript, CSS, and HTML. Sometimes they will also know frameworks such as SASS, haml, LESS, Backbone.js, Angular, React, Vue.


Back End Developers

A “back-end” developer is someone who writes code for servers. These languages include: JavaScript (yes, also can be used as a backend language), Java, C#, PHP, Python, C++, C, and Ruby.


Most often, back-end developers write code in a framework. For Ruby, the most popular framework is Ruby on Rails. For PHP, it’s WordPress, Laravel, Symfony and CodeIgniter. For JavaScript, it’s Node.js. For C#, it’s .NET. For python, it’s Django.


Frameworks

A framework is a set of tools that have already solved problems that constantly come up in development. It’s like baking a cake from a mix instead of from scratch. But this metaphor falls short because nobody ever looks down upon a developer who doesn’t “bake from scratch”; however, inventing a new framework is akin to “baking a cake from scratch”. But making a new framework catch on is much rarer than successfully making a tasty cake!

Database Developers

A “database” developer knows how to talk to databases. This person will speak both the languages SQL (using solutions such as MS SQL Server, PostgreSQL, MySQL) and “noSQL” (using solutions such as MongoDB). Many backend developers are also decent database developers.


Mobile Developers


A “mobile” developer is someone who writes code for people’s phones. Mobile developers usually write Java (Android), .NET, Objective-C or Swift. These days, it is also possible to use JavaScript to write mobile code, by leveraging frameworks such as Ionic and React Native.


QA

There are two types of QA, or Quality Assurance, developers. There are “testers”, who catch bugs by testing the website in a “Staging” environment (the version of the company’s tech that’s rolled out only to the company itself) before finding them in a “Production” environment (the version of the tech that everybody uses).


A good QA will thoroughly document bugs (deviations from expected behavior) with lots of screenshots and information about how the bug was encountered (steps needed to reproduce).

There is a second type of QA. These QAs will build software and write tests to catch bugs in an automated fashion. These are called “QA Engineers”. In many software teams, all engineers are expected to write their own automated tests as well.


QAs like to use the software “Selenium” for automated testing of the user’s experience.


DevOps

Devops is a developer who deploys your app, either to an App Store or onto the Cloud. In the hierarchy of developer skill, “DevOps” is generally perceived to be above “QA” but lower than “Front End”/”Backend”/”Full Stack” engineers. This does vary somewhat from company to company, as a Principal QA Engineer will generally be considered higher, in corporate ranking and in pay, than a junior front end developer.


Full Stack


Sometimes developers are both “front-end” and “back-end”. If they can do this, and they can also do basic deployment (“devops”), then they are considered a “full stack” developer because they can build applications soup to nuts.



The Technology Lifecycle Adoption Curve

The key book here is Crossing The Chasm by Geoffrey Moore, but here are the bullet points.



User Testing

User Testing


The best way to figure out whether your product (website, app, etc.) is usable is by doing “usability testing”. This is where you figure out the most important tasks for your website (for example: “Create an account”; “Find an item you look”; “Choose an item and go through the entire checkout experience”) and then hire random people to complete these tasks while you watch.


The idea is you give them a task (a cue card) and then step back and ask them to do a little narrative of what they’re thinking while you watch them do the task (over their shoulder, on a projection screen, via a screenshare in the other room, etc.). If the users has any questions, tell them you will answer them after you’ve paid them.


If you want a definitive manual, read the book Don’t Make Me Think by Steve Krug.


You can recruit users for this for $50 off of Craigslist. It won’t take more than an hour. And the best part is that since humans tend to be similar, getting data from three different people is enough – and, those people don’t need to be representative of your market (though ideally they are). Just make sure that you actually act on their feedback and fix the bottlenecks and frustrations! Incidentally, this can actually be a great way to get customers, but it’s a clear path to improving the usability (UX: user experience) of your product.



So you have an idea for a startup and want to hire a developer to build it for you?


Short answer: read Derek Sivers’s article, How to hire a programmer to implement your ideas. https://sivers.org/how2hire


Some info for the greenhorns:


“Build it and they will come” does not apply to tech.

Is “the tech” really the bottleneck in your business?


You can string together almost anything using www.Zapier.com these days. Think outside the box. Do you really need to hire a developer?


Have you validated your idea with paying customers and will they sign a letter of intent?

Do you have a scalable strategy for marketing and selling? Prove it.

What do the economics look like?


If you want to get money to hire the developer, read the section titled “Stages of VC Financing” – we provide info on Angel investors .


If you want more info – stay tuned! We’re going to be releasing an entire book dedicated to this soon.


Startup Compensation and Stock Options

Startup Compensation and Stock Options


Assume That Your Options Are Going To $0

If you assume that your stock options are going to be worthless, you’re going to be a lot happier. Realistically, the vast majority of startup option packages tend to be worthless.

Strike price

The “Strike Price” of your options means how much you pay for each share of stock. The value of each share of stock is typically set during a financing round (e.g. a “Series A”).

Exercise window

Once you leave the company, you usually get a fixed amount of time to exercise your options. If the options are illiquid (i.e., you aren’t allowed to sell them – the company can enforce that – and or nobody wants to buy them), then you often have a hard choice to make. Do you really want to gamble and bet that much money on the company you’re leaving?


Ways you get screwed

Just a few ways…



The Open Guide to Equity Compensation

Table of Contents

Introduction

If you’ve ever worked or considered working for a startup or fast-growing tech company, you probably have experienced or tried to learn about stock options, RSUs, and other types of equity compensation.

It is a confusing topic that is often not discussed clearly. This is unfortunate because it makes it harder to make good decisions. Many people learn the basic ideas through experience or reading, but equity compensation is a complicated and difficult area usually only thoroughly understood by professionals. Sadly, costly and avoidable mistakes are routine, and this hurts both companies and employees.

This guide aims to improve that situation. It does not presume you have a law degree or MBA. The material is dense, but we have tried to present it in a way that both lawyers and non-lawyers can understand.

Think of the guide as a small book, not a blog. We suggest you star and refer to it in the future. An hour or two reading the material here and the linked resources could ultimately be among the most financially valuable ways you could spend that time.

This document and the discussion around it are not legal or tax advice. Talk to a professional if you need advice about your particular situation. See the full disclaimer below.

Should You Read This?

If you’re thinking of working for a company that is offering you equity, it is critical to understand both the basics and some very technical details about the exact type of compensation you are being offered, including the tax consequences. Equity compensation and tax might seem like different topics, but they are so intertwined it is hard to explain one without the other. An understanding of the underlying rules is necessary for negotiating fair offers — on both sides.

Of course, this guide can’t replace professional advice. But following the advice of a company lawyer, your lawyer, or your tax advisor can be easier if you understand these topics better. Unfortunately, there’s just no way you can “just trust,” sign lots of papers, and expect it will work out. Ask almost anyone who’s worked at startups, and they’ll have stories of how they or their friends or colleagues made costly mistakes because they did not understand the details.

About This Guide

What is covered?

Format

Basic Equity Concepts

This section covers the fundamental concepts and terminology around stock, stock options, and equity compensation.

Compensation

Stock

What is your stock worth?

Kinds of stock

Stock options

RSUs

Other Equity Concepts

These are a few different types of equity awards and topics that are less common, but we mention for completeness.

Equity Compensation Details

Now for the details around using stock and options for compensation.

Tax Basics

Equity compensation awards can give rise to federal and state income taxes as well as employment taxes and Medicare surtax charges. We’ll first back up and discuss fundamentals of how different kinds of taxes are calculated.

Taxes on Stock and Options

Now we’ve covered the basic concepts of equity and taxes, here are some messy details of how they interact.

As already discussed, employees can get restricted stock, stock options, or RSUs. The tax consequences for each of these is dramatically different.

83(b) elections

409A valuations

Stock awards vs ISOs vs NSOs

Taxes on RSUs

Stages of a Startup

This section is a quick refresher on how companies raise funding and grow, as this is critical to understanding the value of a company and what equity in a company is worth.

Evaluating Equity Compensation

It takes quite a bit of know-how to be able discuss, understand, and evaluate equity compensation offers. If you don’t yet have an offer, see the sections below on evaluating a company and negotiation, as well.

Negotiations and Offers

If you don’t yet have an offer, it’s important to negotiate firmly and fairly to get a good one. A guide like this can’t give you personal advice on what a reasonable offer is, as it depends greatly on your skills, the marketplace of candidates, what other offers you have, what the company can pay, what other candidates the company has found, and the company’s needs and situation. However, this section covers some basics of what to expect with offers, and tips on negotiating an offer.

Offers

Typical employee equity levels

Negotiation tips

Common Scenarios

Documents and Agreements

This section covers a few kinds of documents you’re likely to see. It’s not exhaustive, as titles and details vary.

Compensation Gotchas

These are scenarios that can be very costly for you if you aren’t aware of them.

Tax Gotchas

Here are some costly, common errors to watch out for on the taxation side.

Further Reading

Stock Option Guide Credits

Many thanks to all Open Stock Option Guide contributors.
Thanks also to those who have given detailed feedback, including
Julia Evans,
George Grellas,
Chris McCann,
Leo Polovets,
Srinath Sridhar,
and
David Weekly
and to many commentators on Hacker News.
The original authors are Joshua Levy and Joe Wallin.

Disclaimer

This guide and all associated comments and discussion do not constitute legal or tax advice in any respect.
No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.
The author(s) expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this guide or associated content.

License

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

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