You've been in a start-up if...

When building a team to take on the trials of a start-up gig, it's important to find folks who "know" the start-up experience, the ups and downs and highs and lows of riding the start-up roller coaster.

Over time, I've heard people tell me that they DO have this experience. I've looked at their resume and thought I saw they had it.  But upon reflection - I see I made some mistakes here and after giving it more thought came up with a model to help me think out the question "has this person really been part of a start-up?"

So with that - you've been in a start up if...

Revenue phases.  I think all start-ups have phases of revenue (refer to chart 1 below).  Phase 1 is little to no revenue and company activities are mostly focused on product creation and market selection and getting to the point of making the company its first dollar of revenue.  I call this "phase 1" and depending on the company and the business model this phase can last a short period of time or take a couple years.  In the two start-ups that I have personally done - phase 1 lasted about 5 months.  In my opinion, phase 1 lasting longer than 1 year is a bad thing but realize that some company models don't necessarily offer revenue opportunities that fast.  In a way - this is a bias of the kind of business models I am attracted to and those that I am not.  I'm not an entrepreneur that is comfortable with a "fuzzy revenue model" or "fuzzy time to revenue".  Some Internet 2.0 companies have exactly this foundation (we'll figure our revenue out once we figure it out). 

I digress.  Phase 2 of a company is meaningful (not yet material) revenue traction where a company is maturing its relationship with its market and customers.  Revenue growth month over month is meaningful but not yet viral growth.  Customers are coming at your business - but not at a pace where you feel overwhelmed.  A sign you're exiting phase 2 is selling a large deal, and then selling another one.   Phase 3 revenue growth - plotted monthly or quarterly looks like the slope of line in chart  1 depicted below.

You've been in a start-up if you joined prior to the business entering phase 3.  If you entered the business in phase 3 - you HAVE NOT had a start-up experience.  You do not know the stress and ambiguity and pressure and resource-constrained decision making pattern you experience during phase 1 and phase 2.  I dropped the yellow line with the arrow to nail down this time in the life of the start-up. 

Chart 1 --- Revenue Phases

I think though that there are other circumstances to consider.  You've been in a start-up if you were part of the employee base to join the company before its first substantial financing, depicted below in chart 2 and indicated by the yellow line just prior to a Series B financing.  Some companies get to this milestone fast in life and others take a while.  If you joined a start-up after the "substantial round" you entered the business after the time of pressure and ambiguity and resource constrained thinking and don't share this pressure experience the employees that arrived before you have under their belt.

Chart 2 --- Financing Phases

Finally, you've been in a start-up if your employee number is less than some number - lets say 30.  If you were employee number 44 - I'm not sure you qualify to say you've been in start-up.  The reason is that employee count is an indication of resource availability and usually tied to the milestone events described in the two charts above.  You're employee number 52 because the company has closed a substantial round (or about to) and the company is entering phase 3 of its revenue generation life.  The company has to scale in headcount to execute and you're being hired because the trials and pressures of being in phase 1 and only having a series A financing completed are behind the company.

In a company with 15 employees - the C level executives roll-up their sleeves and help out with some of the tactics of the business.  In a company with 50 employees - the admin function of the business wants a mail-box system to distribute mail to the employees instead of walking it around to peoples desks.  The point I'm making is with employee count - comes scale and ability to execute the business function of the business.  This is a material release of the pressure that comes with a start-up where you have fewer employees than the company leadership would like.  If you show up at the company - and there's a mail-box distribution system near the front door - chances are you are an employee hired after that point in time where you can say that you have been in a start-up (depicted below by that yellow line again)

Chart 3 --- Employee Count

Look - this is not a science, this is just my opinion.  If I just wrote a rant that took your start-up experience and told you that it doesn't qualify as real start-up experience... my answer is I'm certain that is a percentage of you out there whose experience does really qualify but yet it defies my sorting above.  If that's the case - my hat is off to you - you're 2 to 3 sigmas to the right of the mean!