What stage company is right for me?

Amongst the jargon thrown around in startup land is talking about what stage a business is in. "Stage" refers to what funding stage a company has progressed to. 

Commonly, you'll hear folks describe a business as "early-stage" (Pre-Seed, Seed, Series A, Series B, debatably Series C) or "late-stage" (Stage D or later). Understanding what the different stages entail, from funding, risk, and type of work, is essential when deciding where to land.

In this post, I'll explain assessing stage fit for job seekers and knowing where to focus your sights. 

On Funding Stage, Risk-Reward

An early-stage startup friend sent an excellent post from Billy Gallagher of Prospect titled, "What stage startup offers the best risk-reward tradeoff?" I recommend checking out his post (after you're done here). It's packed with data and tackles one of the biggest question marks folks generally have when choosing what startup to work at next— how much risk is worth the reward in terms of hedging your bets on equity. 

For those still with me, the TL;DR of his findings was this: 

-    Joining Series C may give you an ideal combination of risk and reward. Series C startups had the highest weighted growth in our analysis, followed by Series B and A.

- At Series D and beyond, you may be taking a serious amount of risk for little upside. Many people who join startups at this stage would be better off joining a publicly-traded company and either getting paid in all-cash or in cash & public stock.

- Joining at the seed stage is high risk-high reward. Just 1 in 4,000 seed-stage startups in the analysis exited for more than $500M, and just 7 in 100 exited for more than they raised. You're taking a lot of risk at the seed stage—though you have the most upside here.

- If your startup is backed by a top VC firm, your odds go up significantly. Numbers jumped across the board when we looked at startups backed by 30 top VCs. 

Fascinating (and super helpful). But only a part of the puzzle of determining what stage company is the best fit for someone. 

The Formula of Good Stage Match

Billy's post left me thinking about the other crucial aspects of deciding what stage company one should join— primarily how much money one needs to live today and what I'll call "stage satisfaction." 

Stage satisfaction is understanding the sweet spot of where:  

1️⃣ One finds the most enjoyment/challenge/etc. 

2️⃣ One brings the most impact, given their skill set. 

The formula broken down looks like this: 

• Risk tolerance: How much stability do you need? If you joined a company that crashed in like six months, would you be okay for at least a little while? Hopefully, you've asked the right questions upfront to avoid this situation. The more risk tolerant, the more flexibility you may feel to go to an earlier-stage company.  

• How much is my time worth to me now? How much money do I need/want to live on today? We all have expenses and a standard of how we want to live. Understanding what that salary number is for yourself and how that slots into the market rate for different funding stages is critical. 

• Stage Satisfaction: What stage of work do you provide the most impact? Which do you enjoy the most? Is it building all the systems and processes from scratch? Adding onto existing playbooks? Working as a team of one or with a group of others? A great exercise to explore this idea is jotting down a list of all the times you found the most satisfaction during your career, what was it about those moments that made you feel great? How do those match up with different stages of company building?  

Using myself as an example to the questions above, I can piece together the following:

I enjoy being an earlyish-stage builder type. That typically looks like a company that already has product-market fit and understands how to sell its product but doesn't have much built out yet regarding processes. I like to be the first person to ever sit in a role. I thrive when I have at least a dozen other co-workers across different departments. Joining after a Series B doesn't excite me; there needs to be more of a possible reward. Joining earlier than I described is not a great fit for my skill set. 

If I were to join a new company today, I would likely look for a Series A company with at least a dozen employees, a few million dollars in ARR, and product market fit.

If that sounds incredibly narrow to you, it is. 

But it makes finding the right next thing easier, and that's what matters most.         

Understanding What You Need

Doing research before starting to reach out to companies is imperative. 

With the understanding of what you need to live on today, how much risk you're open to, and where you find the most stage satisfaction, you can prioritize what companies to engage with and which you'll likely be best suited for. 

Disclaimer: The content provided below should not be taken as financial advice. I am not a licensed financial or tax professional, and consulting with one when making investment decisions is advisable.