The Efficient Frontier of Technology Career Choices
The graph above is a simple risk-reward spectrum. As you can see, roles at different stage companies all have their own ratio of risk to reward and there are a number of factors that determine which side of the Efficient Frontier line it is on.
On the bottom left are the low risk options that also have lower rewards - a job at a company that has been around for a long time, and is not growing rapidly. HP and IBM come to mind (however, it has been pointed out, HP and IBM may be a higher risk than you might think - what with layoffs and the dreaded repeated “re-orgs”). In our opinion, there are a few examples of opportunities in the current landscape where the potential rewards outweigh the risk:
1. FAANG and other industry giants - Before the last decade, it was hard to get wealthy working at large companies. However, the combination of the war for talent as well as the stock and cash compensation handed out by these companies, has made this very possible. Another added advantage of being in these companies is that you may well meet the potential co-founders of your future startup.
2. Companies that have recently gone public - It is reasonably hard for a company to go public in a traditional way - they need very good growth rates and predictable revenue. Stocks of these companies have “popped” after their IPO as well, so they are a good place to be a part of a growth story and be reasonably secure. Companies like Datadog, Snowflake and Twilio come to mind, along with many others.
3. However, the TRUE sweet spot in this area above the EF line is an existing startup that falls into one of two categories, a company at the Seed - Series B stage or a company at the Series B - Series D Stage. When looking for a startup, it can be beneficial to look for one that has raised in the last six months from a Top 20 investor (Sequoia, Accel, Benchmark, A16Z, Battery, Bessemer and so on). The amount for a Seed-Series B range from $5 million - $50 million, and for later stage companies, the rounds are typically $75 million and above. The signals from such a round for a late stage round are all quite positive:
- The company likely has a very high growth rate (100%+ which is the requirement for such rounds in this day and age)
- Software companies in this area will be using this money mainly to hire the best talent across the board
- Could be an IPO candidate in 2-4 years and may currently be a Unicorn
4. At every point in your career, you should also evaluate whether or not you want to either start your own company or join a very early stage startup. There are tremendous risks in doing that of course. But the rewards are many fold - not only financially, but in terms of career growth and impact. It should be noted that starting your own company is a major leap of faith in your ability to raise money, build a team, build a product, achieve product-market fit and scale. It is not for everyone. And it is not sexy for the first few years. But it is, and shall remain, the foundation for the American Dream.
No matter what opportunity you choose, the single most important rule when choosing is this - you must optimize for points ABOVE the line - i.e. larger rewards for the same risk!
Research and Evaluate Opportunities
Having made the decision to optimize one’s career situation, the next obvious question is - how does one find such opportunities? Apart from asking everyone you know, there are some online resources that are incredibly useful.
- Crunchbase - Crunchbase can be used to browse companies, filtering by location, investment stage, number of employees, and industry. This information can be helpful for ranking companies on your own personal risk/reward spectrum. It is free for seven days and then moves to $29/month, billed annually. I would argue that $348 is a small investment for your future.
- Pitchbook - Pitchbook is a good resource for finding information about companies and industry segments that interest you. However, it is expensive, with plans costing a few thousand dollars per month. So if you currently have access through an employer or educational institution, do take advantage.
- LinkedIn - Instead of simply using LinkedIn to browse job postings, use it to dive deep into companies that interest you. Learn what you can about the company culture and the people who might become your future co-workers.
- Glassdoor - Glassdoor can provide insight into what it is like to work at a given company with estimated salary ranges, information about benefits, and perhaps most importantly, employee reviews. Always use this data point to double-check once you’ve decided to pursue an opportunity.
Network, Network, Network
Once you’ve done your research and found a path that interests you, whether it is taking a role at an established company or taking the plunge into the world of entrepreneurship, networking is crucial for propelling you down that chosen path.
Now that vaccinations are allowing people to return to some semblance of pre-pandemic life, face-to-face networking will be back on the table. While we might still be waiting a while for large group networking events, there is still an opportunity for one-on-one or small group meetups, if all parties are comfortable.
If you would rather stick to virtual networking, take a look through your LinkedIn connections and reach out to anyone that you feel could be helpful in your quest to find your risk/reward career sweet spot.
This is truly a time of renaissance for technology. It is possible that these times (1990-present) will be as momentous in history as the Renaissance was. You owe it to yourself to be an active participant in these unprecedented times.