Startup in a Pandemic

In September 2020 I was asked to share my perspective on "Why a Startup is a Good Place to be in a Pandemic and Recession"

Sep 27, 2020

My Experience

First, a little about me and my perspective...

Coming out of school I worked at BigCo (investment firm with 3k+ employees)
I've been a founder & early employee at startups that have failed to find PMF (Shmob, Viddy)
I've worked at one startup that has not failed
- I joined Segment after they raised their Series A. I started on the growth & analytics team before transitioning over to become a Product Manager. During my time we've grown from a small startup to a now sizeable (500 employees) post-Series D company.
I've coached and invested in a handful startups, of varying degrees of failed & not failed

What's a Startup?

I subscribe to YC Partner Kevin Hale's definition:A startup is company that is designed to grow very quickly.

Startups are distinct from small businesses, large corporations, or side-hustles. One is not better than the other, they just have different goals and pursue different strategies to achieve those goals.

Why does a startup need to grow? There is typically a hypothesis (or set of hypotheses) that the team is looking to validate. To prove or disprove that hypothesis, you need customers to use the product and share their feedback. The best way to know you have built something that people want is that they are ripping your product out of your hands, and using it again and again. That shows up as growth: new subscribers, growing revenue graph, things that look like a hockey stick.

A good example is a new startup I've been using lately to feed my dog, Abby. The Farmer's Dog is a direct-to-consumer dog food company that provides fresh, human-food, vitamin-fortified dog food.

How big is the market for this product? You can run a market analysis, but there's not really a way to know if anyone wants this — and how much they're willing to pay — until you start selling the product. You grow the number of subscribers, and make sure they're not cancelling. Before I got a picky-eater puppy, I would have never believed people would pay a premium for clean dogfood. But now I have week's worth of human-grade dogfood in my freezer.

This definition of startups can (and has) be taken to the extreme of "growth at all costs" — a willingness to throw out ethics and humanness in the name of faster growth. That hasn't been my experience, nor do I think the predominant narrative with startups. But something to watch out for.

Why Work at a Startup?

I'd say the best reason to work at a startup is that, in it's purest form, you get to build a product & company, together.

build = creating something new (potentially something that has never been down)
product = something tangible that will hopefully help and delight people
company = a durable group of people with a shared mission and set of values
together = you're all on the same lifeboat trying to survive

The last piece — building something together — was something I couldn't fully appreciate before I experienced it. There is an amazing bond that you create with your teammates when the odds are stacked against you and you're working together day-after-day. This was distinctly different from my experiences working at a Big Company, in which there is more zero-sum decision-making (e.g. setting the department budget for the next year) and internally-focused metrics of success (e.g. does your boss think you're doing a good job?).

Why Work at a Startup during a pandemic?

So what's great about startups amid a pandemic?

Ability to have outsized impact - When you work at a startup, you're generally going to get more responsibility, get more exposure to the inner-workings of a company, learn how to be scrappy and make shit happen. This is especially true in tighter fundraising environments, when you have to do more with less.
Asymmetric career upside - The beauty of startups on your career is that, from my POV, there is asymmetric upside. That means that the potential for upside outweighs the potential for downside. This doesn't necessarily mean financial upside. But the people you'll meet, the work experiences you'll have, the shot at joining a company that does survive - far outweigh the downside of failure. No one is going to look back at a startup that didn't survive this period and judge you on that failure.
Depending on your life situation, what motivates you, etc. now can be a good time to focus on "work" - Some great advice I received early on in my career: think about your time as a pie chart. You can spend that time with friends, family, work, hobbies, travel and many other things. The pandemic has changed that pie chart for many people. The time you can spend with friends, family, traveling have compressed. New work opportunity at a smaller company you believe in could be a good way to spend some extra cycles.

Finally, the competitive advantage of most startups is that they can adapt quickly to a changing environment. COVID and the shifting market dynamics means that many businesses have to adapt, and startups can do so relative ease.

What are the downsides to working at a startup during a pandemic?

Most startups are boring and will fail

Most startups are boring. The work at startups is boring. You need to pull a list of prospects to email. You need to answer the same support questions again and again from customers. You need to review contracts, issue refunds, set up your laptop.

On top of that, there's an ever-present risk that all your work will end in failure. A pandemic or recession increases the likelihood that you will run out of money. Companies and consumers are tightening budgets amid uncertainty. After COVID, the fundraising environment has tightened, increasing the risk that your startup will run out of money.

Startups have less resources invest in adapting to remote work

Just like you need to design your office for people to do their best work, you need to design your remote culture for people to be effective. Startups will typically have less resources to throw at this problem, especially if the startup is shifting from office environment to remote.

How should people adjust their schedules based on the new work-from-home environment? How do you build culture in a remote context? How do you build relationships, trust, and open communication when everyone's on a zoom? There's a lot of effort going into answer these questions. Startups are likely to be the fastest to implement changes, but also have the fewest resources to ensure these changes are working well for all teammates.

Life circumstances, priorities, etc. don't always align with the needs of a startup

Life is not all about work. It's ok to feel sad, confused, anxious — to feel overwhelmed by the political unrest of 2020, the global pandemic, continued racial injustice in America. It's fine to feel like building something new is not the right move.

There are plenty other ways to spend your time and energy. It's easy to buy into the startup-FOMO founder-worshipping buzzy-techcrunch/Forbes BS. You'll be more than ok if you prioritize your personal needs over your career.

How to avoid the downsides of startups?

Startups are inherently risky. But there are a few ways I've found that can reliably mitigate the career risk of working at a startup.

Trust your gut when it comes to the people

You need to be able to trust the people that you work with. If you get a bad feeling someone, catch an offhand comment that makes you think twice, or hear some bad references, there's no idea or business that's worth your time to surround yourself with shitty people.

My experience choosing Segment was all about the people. I had very little understand of the product, the market, etc. But meeting the early team gave me confidence that whatever they were up to was exciting and was a team I wanted to be a part of.

Do you diligence and get other perspectives on the team and company. Twitter, HackerNews, and investors are all great sources to tap into to get independent perspectives on a startup.

Look for a large "margin of safety"

This is a Ben Graham investment principle that's pretty intuitive. Your margin of safety is the difference between the intrinsic value of something and the price you have to pay for it. You can think of this as a built in cushion, or tailwinds. If things don't go exactly as planned, how much does that matter for you or the companies outcome?

Look for startups in which the margin of safety is high. A growing market, stable early customers, new regulations that increase the need for the product.

Opendoor has been marketing their margin of safety as they look to go public. Low interest rates, COVID accelerating the pace of home purchases, shifting needs due to working from home — all of these provide a tailwind for the business that help de-risk your career decision to join.

Try to simulate the day-to-day before you decide to join

If you're considering joining a startup, one amazing feature of startups is that they generally have more work than people. As an outsider and prospective teammate, this presents an amazing opportunity to offer to help before you decide to join. Offer to take on a project, do some independent customer research, join an all-hands meetings.

This will allow you to to understand if you like the work and people before you make any career decisions. And you might be able to help the company out while you learn!

Invisible Forces