The hosts discuss the current state of unicorns and the likelihood of their success. They highlight the potential risks for employees in late-stage unicorns and the impact on their equity if the company underperforms.

Assessing the State of Unicorns

The hosts emphasize the importance of evaluating revenue, product-market fit, and user engagement to gauge the success of a unicorn. They caution against relying solely on investor funding as a measure of company performance.

Evaluating Company Performance

The hosts suggest that employees at late-stage unicorns may want to consider joining earlier stage companies to avoid overvalued equity and gain more responsibility. They also mention the option of starting a company.

Considering Market Timing

The hosts advise employees to make their own analysis of company performance, considering factors such as engaged management, competent founders, and the productivity of colleagues. They caution against job hopping and stress the importance of critical thinking in assessing company prospects.

Making Informed Decisions

A startup with a valuation of $1 billion or more

A startup that focuses on creating mythical creatures

A startup that is failing and likely to shut down

A startup that has been acquired by a big tech company

Having to re-interview for your job in case of acquisition

Having a high strike price on your options

The revenue and revenue growth of the company

The number of fundraising rounds the company has completed

To make sure the company's metrics are excellent

To determine if the founders and senior management are competent

To find out if the company is a late-stage unicorn

- The video discusses reasons why employees should consider leaving failing unicorn startups.
- There are currently 1,400 unicorns, but not all of them will be successful.
- Employees at these companies often suffer when things don't work out, as their equity becomes worthless.
- If the company is acquired, employees may have to re-interview for their jobs or end up at a big tech company.
- Employees should consider revenue, user retention, and product-market fit as indicators of a company's success.
- The information needed to assess a company's performance is often available to employees.
- Fundraising rounds may not be a reliable indicator of a company's success.
- Employees at late-stage companies may consider moving to earlier-stage companies with better equity opportunities.
- Job hopping is not recommended as it hinders career growth and expertise building.
- Ultimately, employees should analyze the data and make informed decisions about their careers.

- When working at a company with good metrics, focused founders, and smart colleagues, it is advisable to stay for a long time.
- Look for signs of disengagement from senior management and founders, as this could indicate the company is not doing well.
- Consider if the message from management aligns with the facts you see and if it seems credible.
- Assess the productivity and competence of your colleagues, as a lack of important work and high turnover could be indicators of a struggling company.
- The unicorn label does not guarantee financial success, so it is important to think critically and not rely solely on authority figures' opinions.
- Each YC unicorn is not guaranteed to succeed, so it is important to make your own judgments and do the math yourself.

If you’re an employee of a late stage company right now, how would you know when it’s time to move on vs. time to double down?

The fact is there isn't an easy answer — it can really vary from person to person and situation to situation. In this video, YC Group Partners, Michael Seibel and Dalton Caldwell share some suggestions on what sort of things an employee of a late stage startup should be looking for  — the good signs and the bad — to best make this decision.

Apply to Y Combinator: https://yc.link/DandM-apply
Work at a Startup: https://yc.link/DandM-jobs

Chapters (Powered by https://bit.ly/chapterme-yc) - 
00:00 - Intro
00:53 - 1400 Unicorns
02:16 - Stock Options
04:00 - When To Stay
04:53 - Product Analytics
06:21 - Bad Signals
07:04 - Market Timing
08:44 - Two Directions
09:34 - Job Hopping
10:24 - Other Signs
12:26 - Summary
13:17 - Outro

as you can tell, the metrics are excellent.

Your colleagues are very smart and you were very impressed continuing to work with them.

You should probably stay a really long time.

of what Google looked like and what Facebook looked like.

Today, we'd like to do a follow-up on a video that we recorded a year ago.

That video was why you should leave your fang job.

We all know these people that wanna just tell you their darkest secret, which is they wake up every day and

Like they have fantasies of quitting every day.

Those are people that probably should quit.

This video is why maybe you should leave your failing unicorn startup.

But there might be some hints, there might be some signs you wanna be looking for that it might be time to reach greener pastures.

And if you're an employee of 1 of these companies, you probably have the best perspective, a better perspective than investors, maybe sometimes even better perspective than founders On what's really going on.

So maybe we should start this by saying there are 1,400 unicorns now.

Well, I'll ask you, I don't know what you think.

Do you think all 1,400 will go public successfully?

I think the odds are pretty slim that they're all doing amazing.

And so if you kind of divide this out, even if you're really optimistic, like what do you think an optimistic count, what percentage of the 1,400 were being super optimistic, they do an IPO and everyone's really happy?

Great, so in that case, 2 thirds of that 1,400, it's not gonna work out.

And I think what's unfortunate is that when things don't work out, employees usually don't.

They're usually in the category of people that take 1 for the team.

What this means is your equity, Most likely if you joined a unicorn that is late stage Yep, the strike price of your options is going to be tied to the valuation that the company raised at

and so if the company is Sold for less or if it's perhaps overvalued your options are likely underwater.

Yeah, right This is just a simple fact of life.

And often the people running these companies don't love this line of questioning.

And so we're just sort of telling you the truth, which is, the later you joined a company, the higher your strike price will be on options.

And so the folks that are most likely, most of the people weren't hired at the end of the, when they became unicorns, a lot of people came in.

Well, and the second thing is, if they do end in acquisition, and many will end in acquisition, oftentimes you have to re-interview for your job.

Like oftentimes they don't want to bring everyone over in the acquisition, and so that's tricky.

And also you might end up at the big tech company you're running away from.

So I think I'd love to put in a kind of a little bit of a note here.

I think that those 30% that will do well will probably do counterintuitively well.

Yeah, even going to work at those companies now is probably a good idea.

And so I think that's what's so tricky about this is you have to be smart.

You can't really be like following the bullshit press or stuff.

Yeah, or like the memes on Twitter about what's doing well and not doing well.

So Michael, what would you do if you were an employee, say you were a software engineer at a unicorn.

What would be the signals you'd be looking for to know if this was like a smart move to stay?

I think the first thing I'd be thinking about is revenue.

I would say that at the end of the day, when a company goes public or when a company is acquired for a lot of money, the market is looking at how much revenue that company is making and is that revenue growing?

And I would say that, for example, if I'm at a company right now that's making 50 to 100 million in revenue or more, that's a unicorn.

If they have 100 million plus in revenue, okay.

I think that if I'm working to come in as like 50 million or less in revenue and as a unicorn, now I'm starting to ask myself the question, do users like the product?

Again, not likely to be a popular question in management, if you ask management this, but worth considering.

And I think a lot of these questions can really be answered by looking at what are the customers doing, right?

I think what's so funny is that if you're an employee inside of a company, most likely the information you need to tell whether the company is doing well or not is like literally available to you.

Yeah, well, and I can imagine there actually maybe some folks out there that work at companies where the information is not available to them, is that okay?

Is that normal to not be told these numbers?

What's interesting is that maybe there are certain financials or certain cash on hand or something that it's important for the company or a founder might decide to keep private.

But I would say in most companies, product analytics in some way or another is available.

And so you can tell whether the users who are paying for your product are actually engaging with it.

And man, I think that's like hilariously the simple leading indicator of whether you have a good product is you sold somebody the product, they've successfully onboarded, and they're actively using it.

do it on the business model of the company.

Hey, they keep using it and they keep paying for it forever.

What we also need to attack is this idea that because smart investor invested, my company is doing well.

Like I just don't, I think that, you know, when you're the press or when you're on the outside having to judge, you have to use these kind of weird secondary,

Your only signal as an outsider is fundraising rounds.

And there can be companies that are still struggling that aren't gonna make it.

1 trick, by the way, friends out there, that's very common, is a fundraising round may have happened a year ago,

And it looks like they just raised, and that is not true.

So watch out for using the announcements of fundraising as a very reliable signal.

So Michael, in terms of market timing, 1 thing that might be interesting to think about if you're currently working at a unicorn, a very late stage company, is now might be a good time to consider going to an earlier stage company as an employee.

Because it's less likely their equity is super overvalued and there's lots of room for advancement.

So how would you think about this if you were an employee of 1 of these companies?

Well, 1, I'd think that you've gathered a lot of experience, and so you might have an opportunity to have more responsibility to an early stage company, which would also probably get you more equity.

I would say too, you could use many of the hints that we gave you to judge that early stage company, and you can actually do a bit of a comparison to get a vibe for like, oh, this early stage company seems like it's doing better than my late stage company.

And the third thing is that what's funny is I think it's a little counterintuitive, right?

It's the moment where your friends are gonna be like, that's stupid.

Yeah, why would you go to a smaller company that's not a unicorn?

And it's so weird in my life how many times the dumb move at the moment was the smart move later and vice versa.

Yeah, and so the dream setup is you go to an earlier stage company that has the same revenue as the unicorn you are leaving, and 1 10th the valuation, thus your option strike price is much better.

And of course, you could always start a company as well, which is just the Uber version of the same trade.

So I think What I would say is this, is that this is tricky.

I think that when we made the video about Fang, fortunately or unfortunately, I think that Google's gonna look very similar 5 years from now as it looks now.

And I think that For those of you who are at unicorns, it can really go either way.

You could leave a unicorn and that company could do great.

You could look back 5 years from now and say, I made the exact wrong decision.

On the flip side, you could be the person, you know, shutting the lights off and 5 years from now being like, I'm not making the right decision.

So make sure that you're actually doing your own analysis here, I think is the point I want to make.

Like make sure you're doing first principles analysis, you're looking at data, you're not believing any hype.

I think another point to make is the concept of job hopping.

So sometimes you'll see people that swap.

They go to a new unicorn every 12 months or 18 months.

It is very hard to ever build a good career or to build expertise.

So again, I don't want folks to interpret what we're saying as, hey, you should be a job offer and

To the extent you are working at a place where as far as you can tell, the metrics are excellent, the founders are extremely focused, your colleagues are very smart, and you are very impressed continuing to work with them.

of what Google looked like, what Facebook looked like.

And so again, let me just go through things I would look at if I were someone in 1 of these companies trying to decide if my company was doing well.

All the stuff Michael said, but other signs I'd be looking for is, do the founders seem checked out?

But does it actually seem like senior management is like engaged and in reality, sometimes when a unicorn is doing poorly, management will just completely be on Mars.

Like the numbers will all be bad, but they'll be like, oh, we're doing better than ever, like that kind

And so you should actually be looking at senior management and the founders and make a judgment if you think they seem like they're competent.

Sometimes the press lionizes people that aren't super competent.

The press shouldn't be involved in this decision.

Yeah, it should be like, is the message in the all hands line up with the facts that you see?

I also would look at what the rest of the people that work at the company seem like.

And do you just feel like your colleagues are good?

Because 1 signal of a company that's not going well is that everyone good has kind of left.

And the people that are left are just doing make work to try to not get laid off.

Yeah, and often the founders of these companies won't want to do layoffs or whatever to keep the fiction going that the company's going well.

And so again, I think you can make judgment, hopefully you're correct, but of just how good do your colleagues seem and how much do they have really important work to do that's serving customers versus going through the motions making pitch decks or slide decks or whatever it is that people do at

And so I think these are really, you have the information if you're inside of the company.

And again, if this could all check out, and you're like, you know what?

This is going great, and I really like my colleagues, and I'm learning a lot, and I'm doing well.

So yeah, maybe that's the message that we want to leave is that, unfortunately, amongst these 1,400 that are not going to make it, unfortunately this unicorn label does not mean you're gonna get in the money.

Yeah, And a lot of life is you can be disappointed because other authority figures told you something is true.

The authority figure said, this company raised a lot of money.

But ultimately those authority figures aren't gonna be around if it doesn't work out.

If it's 30 figures are investors, they're hedged.


Speaker 0: As far

Speaker 1: as you can tell, the metrics are excellent. Yes. The founders are extremely focused. Yes. Your colleagues are very smart and you were very impressed continuing to work with them.

Yes. You should probably stay a really long time.

Speaker 0: Yeah. I mean, that's kind

Speaker 2: of what Google looked like and what Facebook looked like. Yeah. Yeah.

Speaker 0: Welcome to Dalton and Michael. Today, we'd like to do a follow-up on a video that we recorded a year ago. That video was why you should leave your fang job. We all know these people that wanna just tell you their darkest secret, which is they wake up every day and

Speaker 1: they like dream of quitting.

Speaker 0: Like they have fantasies of quitting every day.

Speaker 1: Those are people that probably should quit.

Speaker 0: This video is why maybe you should leave your failing unicorn startup. Oof, tricky topic.

Speaker 1: And let's say signals, we don't know. We don't have all the information. But there might be some hints, there might be some signs you wanna be looking for that it might be time to reach greener pastures.

Speaker 0: And if you're an employee of 1 of these companies, you probably have the best perspective, a better perspective than investors, maybe sometimes even better perspective than founders On what's really going on. So maybe we should start this by saying there are 1,400 unicorns now.

Speaker 1: Is that right? Yeah. Wow.

Speaker 0: Well, I'll ask you, I don't know what you think. Do you think all 1,400 will go public successfully?

Speaker 1: I think the odds are pretty slim that they're all doing amazing. Yeah. I think that's a fair statement.

Speaker 0: I think that's a fair statement. And so if you kind of divide this out, even if you're really optimistic, like what do you think an optimistic count, what percentage of the 1,400 were being super optimistic, they do an IPO and everyone's really happy?

Speaker 1: Third, I'm just making this up,

Speaker 0: a third? Yeah. Great, so in that case, 2 thirds of that 1,400, it's not gonna work out. And I think what's unfortunate is that when things don't work out, employees usually don't.

Speaker 1: Who takes 1 for the team? They're usually in the category of people that take 1 for the team. Right? And again, brass tacks here. What this means is your equity, Most likely if you joined a unicorn that is late stage Yep, the strike price of your options is going to be tied to the valuation that the company raised at

Speaker 0: yep,

Speaker 1: and so if the company is Sold for less or if it's perhaps overvalued your options are likely underwater. Yeah, right This is just a simple fact of life. And often the people running these companies don't love this line of questioning. And so we're just sort of telling you the truth, which is, the later you joined a company, the higher your strike price will be on options. And so the folks that are most likely, most of the people weren't hired at the end of the, when they became unicorns, a lot of people came in.

So the strike prices are very high. And so man, you need to be smart.

Speaker 2: Yes.

Speaker 0: Well, and the second thing is, if they do end in acquisition, and many will end in acquisition, oftentimes you have to re-interview for your job. Like oftentimes they don't want to bring everyone over in the acquisition, and so that's tricky. And also you might end up at the big tech company you're running away from. That's right. When you're joining a startup.

So I think I'd love to put in a kind of a little bit of a note here. I think that those 30% that will do well will probably do counterintuitively well. Like really well.

Speaker 2: Yeah, like very well. Extremely well.

Speaker 0: Yeah, even going to work at those companies now is probably a good idea. Absolutely. Yeah. And so I think that's what's so tricky about this is you have to be smart. You can't really be like following the bullshit press or stuff.

Speaker 1: Yeah, or like the memes on Twitter about what's doing well and not doing well.

Speaker 0: You got to attack this.

Speaker 1: Let's be specific. So Michael, what would you do if you were an employee, say you were a software engineer at a unicorn. What would be the signals you'd be looking for to know if this was like a smart move to stay?

Speaker 0: I think the first thing I'd be thinking about is revenue. I would say that at the end of the day, when a company goes public or when a company is acquired for a lot of money, the market is looking at how much revenue that company is making and is that revenue growing? And I would say that, for example, if I'm at a company right now that's making 50 to 100 million in revenue or more, that's a unicorn. Like,

Speaker 1: that's pretty good. Yeah, that's, that's. It's reasonable that it's a unicorn.

Speaker 0: Yeah, yeah.

Speaker 1: If they have 100 million plus in revenue, okay. Yeah. That's, that pencil's out, right?

Speaker 0: Yeah, that's pretty good. I think that if I'm working to come in as like 50 million or less in revenue and as a unicorn, now I'm starting to ask myself the question, do users like the product? What's retention look like? Are we charging as much as we could? Could we charge more?

Speaker 1: Do we actually have product market fit?

Speaker 0: Do we actually have product market fit?

Speaker 1: Again, not likely to be a popular question in management, if you ask management this, but worth considering.

Speaker 0: And I think a lot of these questions can really be answered by looking at what are the customers doing, right? I think what's so funny is that if you're an employee inside of a company, most likely the information you need to tell whether the company is doing well or not is like literally available to you.

Speaker 1: Yeah, well, and I can imagine there actually maybe some folks out there that work at companies where the information is not available to them, is that okay? Like, what do you think? Is that normal to not be told these numbers?

Speaker 0: What's interesting is that maybe there are certain financials or certain cash on hand or something that it's important for the company or a founder might decide to keep private. But I would say in most companies, product analytics in some way or another is available. Yep, it's like widely available. And so you can tell whether the users who are paying for your product are actually engaging with it. And man, I think that's like hilariously the simple leading indicator of whether you have a good product is you sold somebody the product, they've successfully onboarded, and they're actively using it.

Speaker 1: And then they renew.

Speaker 0: And they do renew. And they

Speaker 1: do it on the business model of the company. Hey, they keep using it and they keep paying for it forever.

Speaker 0: What we also need to attack is this idea that because smart investor invested, my company is doing well. Yep. Like I just don't, I think that, you know, when you're the press or when you're on the outside having to judge, you have to use these kind of weird secondary,

Speaker 1: non-primary sources. Yeah, it's not revenue focused. Your only signal as an outsider is fundraising rounds. Yeah. And there can be companies that are still struggling that aren't gonna make it.

They're still somehow raising money. 1 trick, by the way, friends out there, that's very common, is a fundraising round may have happened a year ago,

Speaker 0: but

Speaker 1: they're choosing to announce it now. And it looks like they just raised, and that is not true. So watch out for using the announcements of fundraising as a very reliable signal. So Michael, in terms of market timing, 1 thing that might be interesting to think about if you're currently working at a unicorn, a very late stage company, is now might be a good time to consider going to an earlier stage company as an employee. Because it's less likely their equity is super overvalued and there's lots of room for advancement.

So how would you think about this if you were an employee of 1 of these companies?

Speaker 0: Well, 1, I'd think that you've gathered a lot of experience, and so you might have an opportunity to have more responsibility to an early stage company, which would also probably get you more equity. I would say too, you could use many of the hints that we gave you to judge that early stage company, and you can actually do a bit of a comparison to get a vibe for like, oh, this early stage company seems like it's doing better than my late stage company. And the third thing is that what's funny is I think it's a little counterintuitive, right? It's the moment where your friends are gonna be like, that's stupid.

Speaker 1: Yeah, why would you go to a smaller company that's not a unicorn? Exactly.

Speaker 0: Right? And it's so weird in my life how many times the dumb move at the moment was the smart move later and vice versa. Like it is just over and

Speaker 2: over again.

Speaker 1: Yeah, and so the dream setup is you go to an earlier stage company that has the same revenue as the unicorn you are leaving, and 1 10th the valuation, thus your option strike price is much better.

Speaker 0: And you have more responsibility.

Speaker 1: You have more responsibility. That's a pretty good trade.

Speaker 0: That's not a bad trade at all. That's not a bad trade at all. And of course, you could always start a company as well, which is just the Uber version of the same trade. Exactly. So I think What I would say is this, is that this is tricky.

I think that when we made the video about Fang, fortunately or unfortunately, I think that Google's gonna look very similar 5 years from now as it looks now. And I think that For those of you who are at unicorns, it can really go either way. You have to be careful. You could leave a unicorn and that company could do great. You could look back 5 years from now and say, I made the exact wrong decision.

On the flip side, you could be the person, you know, shutting the lights off and 5 years from now being like, I'm not making the right decision. So make sure that you're actually doing your own analysis here, I think is the point I want to make. Like make sure you're doing first principles analysis, you're looking at data, you're not believing any hype.

Speaker 1: I think another point to make is the concept of job hopping. Job hopping is not good either. So sometimes you'll see people that swap. They go to a new unicorn every 12 months or 18 months. It is very hard to ever build a good career or to build expertise.

Or even

Speaker 0: make a lot of money. Or make

Speaker 1: a lot of money doing that kind of stuff. So again, I don't want folks to interpret what we're saying as, hey, you should be a job offer and

Speaker 0: just

Speaker 1: switch jobs. To the extent you are working at a place where as far as you can tell, the metrics are excellent, the founders are extremely focused, your colleagues are very smart, and you are very impressed continuing to work with them.

Speaker 0: You should

Speaker 1: probably stay a really long time.

Speaker 0: Yeah. I mean, that's kind

Speaker 2: of what Google looked like, what Facebook looked like.

Speaker 1: And so again, let me just go through things I would look at if I were someone in 1 of these companies trying to decide if my company was doing well. All the stuff Michael said, but other signs I'd be looking for is, do the founders seem checked out? Are they in the office? Maybe you don't have an office. Maybe a remote company.

But does it actually seem like senior management is like engaged and in reality, sometimes when a unicorn is doing poorly, management will just completely be on Mars. Yes. Like the numbers will all be bad, but they'll be like, oh, we're doing better than ever, like that kind

Speaker 0: of crap. A WeWork is a classic example of this.

Speaker 1: And so you should actually be looking at senior management and the founders and make a judgment if you think they seem like they're competent. Yeah. And again, this is different. Sometimes the press lionizes people that aren't super competent.

Speaker 0: The press shouldn't be involved in this decision. So you should make

Speaker 1: your own decision.

Speaker 0: Yeah, it should be like, is the message in the all hands line up with the facts that you see?

Speaker 1: Yeah, Does it seem credible? Yeah. I also would look at what the rest of the people that work at the company seem like. And do they all seem busy? And do they have enough to work to do?

Yes. And do you just feel like your colleagues are good?

Speaker 2: Yes.

Speaker 1: Because 1 signal of a company that's not going well is that everyone good has kind of left. And the people that are left are just doing make work to try to not get laid off. It's kind of a malaise. Yeah, and often the founders of these companies won't want to do layoffs or whatever to keep the fiction going that the company's going well. And so again, I think you can make judgment, hopefully you're correct, but of just how good do your colleagues seem and how much do they have really important work to do that's serving customers versus going through the motions making pitch decks or slide decks or whatever it is that people do at

Speaker 2: companies that are quite well. Right? Yes.

Speaker 1: And so I think these are really, you have the information if you're inside of the company.

Speaker 0: You have all the information.

Speaker 1: Way better than anyone else does. Yes. And again, if this could all check out, and you're like, you know what? This is going great, and I really like my colleagues, and I'm learning a lot, and I'm doing well. And I

Speaker 0: should double down.

Speaker 1: You should double what?

Speaker 0: I should work harder. I should try to get more equity. So yeah, maybe that's the message that we want to leave is that, unfortunately, amongst these 1,400 that are not going to make it, unfortunately this unicorn label does not mean you're gonna get in the money. Yep. And you've gotta think critically.

And like, that's, isn't that life?

Speaker 1: Yeah, And a lot of life is you can be disappointed because other authority figures told you something is true. The authority figure said, this company raised a lot of money. It's a very good bet. It's the next whatever. But ultimately those authority figures aren't gonna be around if it doesn't work out.

Speaker 0: And if it's all you. If it's 30 figures are investors, they're hedged. Yeah, they're hedged. So maybe do the

Speaker 1: math yourself. Every YC unicorn is going to make it. Everyone, every single 1.

Speaker 0: You heard it here. Every single 1. Dalton's personal guarantee. All right. Great chatting.

Thanks. You

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Should You Quit Your Job At A Unicorn?