Considering Your Technology Career. Part 3 of 4: The Take-off Company

In Part 1 of “Considering Your Technology Career,” I described a model for assessing satisfaction with your current employment situation, and I urged the reader to consider what is truly satisfying in their career. Remember that the four dimensions that I chose (Interest, Compensation, Bureaucracy, Prospects) were of special meaning to me. There may be other dimensions that you wish consider that have special meaning to you. In this article, I will describe a prototypical take-off company and provide some anecdotes based upon my experience. I will then apply the satisfaction model to the take-off company. Along the way, I will discuss some more subjective elements of a take-off that you may want to factor in when considering if joining a take-off company is right for you.

Let’s go.

take_off

The take-off stage is probably the most interesting and potentially rewarding growth phase of a company. Having usually begun life as a start-up company, the take-off survives the perilous early days and has built a great product suite with a demonstrated clientele and sales pipeline. A start-up becomes a take-off usually because the founders have reached the limits of their ability to grow the company further given the financial, manpower, and technical resources at their disposal and are looking to take the company to the next level. Most commonly, that next level positions the company to go public by creating an initial public offering (IPO) or to be purchased by a larger company. In either case, the founders are seeking a dramatic leap in company growth and financial returns on their sweat equity.

So how does the prototypical take-off company take off? It’s simple; they seek investors to infuse cash and know-how to enable growth. Investors come in two main forms: Venture Capital firms and Private Equity firms. The aims of each type of investor is the same, to inject capital into a fledgling company and help it grow to a point where the investors can cash out and get a tidy return. The details of the distinction between the two investor types are beyond the scope of this article but here is an article that describes the differences between venture capital and private equity firms.

Remembering that the end game of the take-off company is to go public or get acquired, it’s important to understand how investors measure the value of the company and know that it’s grown to the point of sale or IPO. That valuation fairly simple in concept too. The purchase value of take-off company is usually measured in multiples of the annual sales revenue or multiples of the sales pipeline. So the goal of the take-off company is to grow sales and gain clients usually to the exclusion of all else and in any way possible as quickly as possible.

Why is it important for you to understand the goals of the take-off company? For two reasons. First, if and when the take-off company gets acquired or goes public, the real value of the firm lies in the equity of the company, i.e., the stock. Being granted equity in the form of stock as terms of your employment is critical if you want to get a better return for your efforts. Future compensation is the main reason that many technologists join take-off companies. In my case, I joined a take-off company shortly after they received a round of venture capital funding and they were hiring to position themselves for growth. I received a modest amount of equity. Three years later, the company was acquired, and the stock became valuable after an additional three-year vesting period. The vesting period took place during the height of the “.COM” boom and we were fortunate enough to see the stock price of acquiring company double in those three years. I got lucky by being in the right place at the right time. By the way, three years between venture capital and private equity investment and selling the company or going public is a typical expectation placed upon the take-off company by the investors.

Second, the take-off company may have to do things that are ordinarily unsavory to a technologist to make sales and grow revenue. For example, the take-off firm I joined decided that it needed to win a large key deal quickly. There were features the prospective customer needed in the product, and they couldn’t wait for the features to be delivered as part of the next major software release. Executive management made a decision to create a separate software version to expedite the development of the needed features without having to wait for the next release of the core product. The chief product architects knew that having two versions of the code would create a maintenance headache down the road and lobbied to overturn the decision. In the end, the decision was upheld, the version was created, the features were added, the deal was won, and it created the expected maintenance headache downstream. Since the goal was to generate revenue to increase the value of the company to lead to an acquisition or IPO, branching the code was the right business decision in spite of adding risk later when the code would have to be merged back into the core.

One cautionary note worth mentioning is about “IP Trolls” also known as “Patent Trolls.” IP Trolls are companies that acquire technology companies for the intellectual property usually in the form of patents. IP Trolls care only about the IP and will quickly shed the employees of the companies they acquire. If you find yourself working for a take-off company that is acquired by an IP Troll, get your resume and social media profiles updated because you will probably find yourself without a job shortly after the acquisition takes place. A quick search on Glassdoor can help you identify if the acquiring company is an IP Troll.

So let’s apply the satisfaction model to the prototypical take-off company.

take_off_interest

As I said above, many technologists join take-off companies due to the promise of making money from equity. It’s worthwhile to remember that most take-offs were recently start-ups, so the founders are still around, the products are relatively new, and the excitement level is usually high. In many cases, the investor cash places the product on the fast track for both feature and technical innovation. My experience with take-offs is that they are often fun and interesting places to work. The race to acquisition or IPO makes them fast-paced, so be ready to trade off some of your personal life for the prospect of a return on your efforts. Since take-offs are more likely to be better staffed than start-ups, you’re more likely to become part of a great technical team. I met many talented technologists from my days in a take-off firm, many of whom remain in my network of revered colleagues.

My “Interest” rating above reflects the technical, feature, and team opportunities understanding that there will be variability. The founders are still around, they’ve hired new talent (maybe even you), and the product and ideas remain fresh. I will offer a word of caution. As I said above, at times take-off companies will make business decisions to drive growth that will result in unsavory technical choices. If you’re lucky enough to stay through an acquisition or IPO, you may find yourself cleaning up after the take-off decisions. In the example above, I lived through the acquisition and was part of the team that had to figure out how to merge the various code branches back into the core. It was not a fun time but was necessary. Go into take-off companies with your eyes wide open and don’t be discouraged if the chickens come home to roost after the company is acquired or goes public!

take_off_compensation

In my opinion, compensation is the primary allure of take-offs. If you remember my discussion of total compensation in the first article, take-offs add the possibility of credible equity returns in addition to a base salary. Sometimes the salaries can be on the lower end but the take-off company is all about increasing the value of the company to sell the company or to take it public. It important that you join in the equity stake as terms of your employment. As before, the discussion of negotiating your equity stake is beyond the scope of the article. However, take-offs and startups share similar models for granting equity, so a link to an article on the topic might be helpful.

My “Compensation” rating above reflects the possibility of good returns on your effort. After all, a Venture Capital or Private Equity firm have invested in the company, and they are motivated to see the company succeed so they will get a return on their investment. They’ve done your homework for you, so you get to join them on the journey to possible returns. There are never any sure things, but the take-off company is further along the way to success.

take_off_bureaucracy

Remember that take-off companies were probably start-ups in their recent past so they will focus on efficiently removing roadblocks to success. Further, they are highly motivated by their investors to grow the business. You can expect a relatively low amount of political intrigue and bureaucracy since the employees have a unified mission. However, since the company is growing, they will insist on more organizational orthodoxy in key area so that employees stay focused on their primary mission without being distracted by other tasks. In short, human resources, IT, governance, and other “institutions”  form, so others don’t have to split their time performing those jobs. Plus, the company will need to mitigate the risks inherent in company growth by institutionalizing core services like human resources and IT. In short, you can expect to wear fewer hats in a take-off than you might normally wear in a start-up and there will be somewhat more bureaucracy to deal with in exchange.

My “Bureaucracy” rating reflects this increase in formal process and governance in exchange for your ability to keep your head down doing what is need to support business growth.

take_off_prospects

Just as with working for a start-up the experience working for a take-off can boost your career by exposing you to aspects of a business that you might not otherwise see with a lower downside risk of the company failing out from under you. While you might not get to wear as many hats and your exposure to new parts of the business might be less than those available with a start-up, the possibility of better compensation and a better team experience could very well outweigh the exposure opportunities. I found that working for a take-off provided me with learning experiences from exposure to talented people. Whereas the start-up had me doing things I might not otherwise do, working for a take-off helped propel my career forward due the learning experiences I gained working with people in disciplines different from my world of software development. It was there that I gained knowledge and experience with infrastructure and sales disciplines. Both were key to my future as a CTO.

My “Prospects” rating reflects the both the opportunities to grow in your career as well as the opportunity to gain compensation for your efforts.

What’s Next?

If a take-off company meets it growth potential and get acquired or goes public, it usual enters the “Maturity” phase where stable and predictable growth is usually the goal. In part 4 of “Considering Your Technology Career”, we will examine the “Mature” company and use the model for assessing satisfaction to explore possible sources of satisfaction and dissatisfaction.

Stay tuned!

Best,

Charlie