Seed Stage Startup vs. Growth Stage Employer

December 19, 2013 John Bullard

A lot has been written about the relative differences between working at ‘big tech’ versus a startup. But not all startups are the same and there is less on record about the relative experience of working for startups at different stages of maturity.

Over the last few months I’ve transitioned from being a co-founder of a seed stage startup (Flomio) to an early employee of a growth stage startup (Distil). This post explores some of the observations I’ve had during the transition. If you’re eager to get into the startup space hopefully this sheds some light on what to expect as a seed founder vs a growth employee.

But first some definitions:

Seed Stage Startup:

  • focused on solution validation, product market fit, survival
  • 1 – 5 employees
  • 0 – $1MM in funding raised or bootstrapped
  • $0 – $10k MRR

Growth Stage Startup:

  • focused on expanding product line, growing revenue, growing team
  • 5 – 15 employees
  • $2MM-$5MM in funding raised, thinking about Series A
  • > $1 Million Run Rate

Emotions other than euphoria and terror

As a seed stage founder your emotional state vacillates between two extremes: pure euphoria and primal terror. One investor meeting, client pitch, etc can make the difference between making payroll and having a very hard conversation with the team.

As an early employee you still experience emotional swings but they’re less dramatic. This is for a few reasons. First the company is more mature and has some degree of product market fit. It also has clearly defined revenue streams, semi-predictable source of new leads, and strong ties to the investor community.

Of course there are local swings like working through the technical details of a rollout with a large Fortune 500 company but the magnitude of these swings is muted compared to the life and death decisions faced by early stage founders.

Leverage

As a seed stage founder you’ll be forced to make heart crushing concessions in order to close deals. You’ve build some kick ass, novel technology… but you’re small and viewed as an execution risk in the eyes of bigger companies. “How do we know you’ll be alive in three years?” becomes a familiar chorus. As you rush down your runway towards insolvency you’re never in a position of power.

Things are different at a growth stage startup. Of course there are negotiations and concessions made but no single client will ever make or break the firm. This gives you the option of walking away from bad terms even if it’s with a big, marquee brand.

Hacking vs Building

At the seed stage resources are scarce. You’re extremely selective of what requests to take on and often times ‘features’ are sum of many hacks glued together in order to barely make some critical deadline. There’s lots of customer validation, UI mocks and experiments meant to validate some product assumptions. Flexibility is key.

You have more resources to work with at the growth stage. The product is mature and the direction is clear. The problem set is full of optimizations: how can we speed onboarding time, how can we generate more revenue per account, etc. Development is geared for the long term with talk of test suites and code hygiene. All of this would have been premature at the seed stage – the product could be entirely different tomorrow.

Diffusion of the ‘glorious burden’

As a seed stage founder everything falls on you – accounting, marketing, buying office supplies- everything. You’re juggling a number of balls at once and you kind of love it. But it’s tough wearing all those hats and it quickly consumes every facet of your life.

It’s different as a growth stage employee. You’re aware of most everything happening at the company but so is everyone else. People begin taking on non-overlapping areas of responsibility- they become specialized. You too carve out a role and while it’s generalist in nature it’s probably limited to a single domain (e.g. engineering or sales).

Lower financial risk

As a seed stage founder you’re lucky to earn 50% market salary and many founders take no salary at all. There are burn considerations after all. This is offset by large equity grant – but it’s completely illiquid and it could very well be worth nothing.

As a growth stage employee you’ll be earning close to market salary. Still no gold plated ‘big tech’ perks but medical and dental will suffice. Of course there is a risk-reward trade-off here. Later stage == lower equity.

The Adopted Product Vision

As a seed stage founder you’re the guardian and shepherd of the product vision. With that role, comes intellectual freedom, but also the heavy responsibility of guiding innovation.

Growth stage companies have a product – a good one in fact. A product that other people are paying money for. When you come onboard you’re adopting this product vision and making it your own. You make contributions based on your personal worldview, but they are made as a contributor not an owner.

In conclusion, there are major differences between founding a seed stage startup and jumping onboard an established growth stage startup. One path doesn’t trump the other but they’re quite unique experiences. One size doesn’t fit all.

About the Author

John Bullard

John Bullard, Distil Networks’ VP of Engineering, is a technical entrepreneur focused on enterprise software. At Distil, John helps scale the the core platform and DevOps teams.

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