The Right Sized Company

The Right Sized Company

My first (professional) job out of college was at a startup. I was employee number 40, or thereabouts. While there I got to be part of seeing that company grow the normal way – hiring, as well as by acquisition. That pattern of small company to large company has repeated for me throughout my career.

I find that a smaller company has advantages that come from its size. A small company is hungry. You need to move aggressively to get new business and to grow. There’s an energy that comes with that that can be very exciting. Also, a small company typically doesn’t get hung up on hierarchy. If something needs to be done and someone can or will do it, a small company doesn’t have time to get stuck on whether that’s your job, it’s more important that it gets done rather who does it.

Small companies and, specifically, startups also come with equity. Typically you’re trading some stability and taking on increased risk against the hope that the company will get acquired or go public and your deferred investment – usually in the form of stock options, will become worth something.

I’ve heard that some relatively small number of companies get out of startup mode. Something like one in 10. So, I count myself lucky that out of the three startups I’ve been a part of, two of them had some form of payoff. The first was acquired and our stock options were bought out. This netted me enough for the downpayment on my first house, so that worked out well. The second was also purchased and the payout was less impressive, but I was getting paid well, so I didn’t care too much. The third was the sad case of a very cool technology trying to break out in what became a very tough economy and we ran out of money. The doors were shut with little warning and the technology was sold off for parts. That was a very sad day.

On the other side of the equation are the larger companies I’ve worked for. Often numbered in the hundreds to thousands of folks. These, too, have benefits. Stability is chief: Typically the company is profitable, there may be stock and/or bonuses, there is structure, people know what they’re supposed to do and they’ve done it before so it doesn’t have to be made up on the fly. Also, often times the benefits are better for a larger company as the buying ability of a larger company typically translates in to better insurance rates and coverage. All of those things are good, especially the latter when you are raising a family.

I could not have been more thankful for being part of a large, stable company when my son went through having cancer at 13. There were many things we had to be thankful including being in this city where we have amazing hospitals like Doernbecher Children’s Hospital and the Shriner’s Hospital for children. The Doctors were amazing. The Doctor who did my son’s operation to remove the tumor (and his lower leg) also did the reconstructive surgery using a technique he’d devised which was considered revolutionary at the time and resulted in my son having a better prosthetic experience than many people with similar issues. And, to bring it back to point, because we had very, very good insurance through my employer, I watched over a million dollars of bills go by and our portion of that was tiny in comparison. I cannot imagine dealing with a catastrophic medical problem like that without insurance. There’s no question, you do what you have to for your kids, but the financial impact on a family without insurance would be insurmountable! So, for that, and many other things, there are many benefits to be found in a large company.

Even knowing that, I’ve left the (relative) comfort of a large and stable company no fewer than three times to go to a smaller and riskier startup.

The reasons was pretty consistent and it was made up of two parts. The first part was some boredom at a large company – large companies, in my experience, tend to like having folks in clear roles and the preference would be to stay there because that meets the needs of the company. The second part was the belief that at a smaller company I could have a larger impact. Obviously the impact you can have as 1 of 25 is significantly larger than when you’re one of 4000. I don’t believe in any case did I go because I thought there would be a large payoff at the end. In my experience, if you’re not in the first ten, odds are your upside potential is significantly smaller. My current boss has a friend who measure upside in terms of the following:

• Vacation-sized
• car-sized
• Down payment on a house-sized
• House-sized
• Retirement-sized

Those are reasonable groupings. Typically I’ve seen payoffs in the first three categories but any payoff is rare and those top two categories requires either being there very early or being very lucky in terms of the right company. And usually being at the company for a number of years will also help.

My current company is an interesting case that I’ve not experienced before. It was formed by carving off parts of two large (very large!) companies and forming a new company. It’s wholly owned, so privately held and not publicly available. I’m not spilling anything confidential since it was in the news, but GE invested in this new company and purchased a 10% share of the company for $100 million dollars. So this new company was evaluated at one billion (cue Dr. Evil: “One BILLION Dollars!) when it was formed, even before we sold a product. Now that’s some interesting potential. By some definitions, it’s a startup, but it’s a very well funded startup made up of over 1200 people. That size and still being a startup is a bit mind-boggling to me.

The upside of this is that we have some of the benefits of a large company: good benefits, good market pay. We also have some of the challenges of a startup: We start out burning through a fixed pot of money and we need to become both profitable and also grow our business aggressively in the next few years is we hope to become a stable and public company. It’s an interesting contrast and one I’m looking forward to experiencing. There is some upside potential and only time will tell which of the groups above that potential sits in. Till then, I’ll enjoy the challenge of a “small” company where I can have some influence in our success and see how far this ride goes!