How frequently do you receive messages like this?

Source: author, inspired by emails actually received through LinkedIn

This is the tenth call you’ve received this week from a recruiter. They’re clearly back from the holidays and have some quota to fill. They’re smelling the blood and infesting your phone screen.

How do you cut through the noise and figure out the right company to join?

You know it’s time to make a move, but you don’t know where. Should you go to the groundbreaking AI startup, or start the interview process with Airbnb? They’re all telling you they’re awesome and it’s going to be a great adventure and you’ll make more money than you can spend on a two-bedroom in San Francisco.

How do you cut through the noise and figure out the right company to join? I’ve been there. In fact, I’ve been there so many times as an employee, an advisor, or an investor that I count my mistakes with piles of worthless paper — the stock that’s worth nothing. I’ve learned to pick tech companies the hard way.

The first one I joined after grad school was worth $500M and had 250 employees. Two years later, when I left, it was down to $5M and 50.

After that, I joined a company at a time when it was worth $3 per share, down from $15 at its peak. It hasn’t recovered since.

I took the lesson to the next pick. I joined a 20-person company that grew its headcount tenfold by the time I left four years later. In the meantime, its revenue soared 100 times over and we raised $100M in funding, going from Series C to Series E.

My current company, Course Hero, is a rocket unicorn in hypergrowth.

Between all those ups and downs, not to mention advising or investing in a few companies, or being pitched to hundreds of times by tech companies trying to lure me on board, I’ve learned something about picking that next tech company that you hardly ever hear about.

It’s a lesson I wish I had learned a decade ago. It would have saved me a lot of grief. I’m sharing it here so it might be useful to you.

The lesson is this: What matters most when picking a tech company is the stage of growth.

The Four Stages of Growth

Really, there are only four stages that matter. Each has pros and cons. But they can make all the difference in the world when it comes to your financial upside, learning opportunities, and personal fulfillment.

In brief, they are:

Founding stage: You found a company or join very early, owning a very sizable piece of the pie. Pre-product/market fit: You join before the company’s growth has exploded. Hypergrowth: You join after the company has exploded, and it’s now growing at breakneck speed. Established: You join after the enterprise has reached a huge size. It’s cozy, stable, and still growing, but it will never go back to the huge growth phase. Think of companies like Google, Amazon, Facebook and Uber.

How do you make the right choice? Make sure you know what you’re getting into. Here are some details to help, based on my decade of Silicon Valley experience.

Stage 1: Founding stage (big dreams that rarely come true)

Economics

As a founder, you own a huge share of the company, but the risk is extremely high. Let’s see this play out with some fictionalized numbers.

With a cofounder and some seed investing, you might own 40% of a company valued at $10M. On paper, that looks like you own $4M, which is pretty great! But that’s paper. It’s not real. What matters is cash in the bank.

When a startup is worth $10M, it’s young. Odds that it will become a unicorn are extremely low. Let’s say it has a 1% chance of ever being worth $1B, a 9% chance to have a reasonable exit, and a 90% chance of being worth very little. In 1% of the possibilities, you can retire with tens or hundreds of millions of dollars in the bank. But if you fall into the 90% of cases, you might get nothing for eight to ten years of work.

No wonder entrepreneurs always tell you how hard it is. It’s really hard to be an entrepreneur, and in most cases, it’s not even worth it.

Obviously, Venture Capitalists (VCs) don’t want you to know that: They need new entrepreneurs drinking the Kool-Aid, creating companies they can invest in. So they push a romantic narrative of the maverick entrepreneur. But the truth is much darker.

If you are an entrepreneur, you have all of my respect. It’s one of the hardest things to do.

Learning

Being a founder is a master class in running a business. You’ll learn about legal, product, engineering, design, marketing, operations, HR. Unfortunately, that’s because you’re doing everything yourself, from reaching out to candidates on LinkedIn to taking out the trash.

If you go on to found another company or manage a business, this experience might be very relevant. On the flip side, it might be difficult to join another company after this experience. Many become Product Managers (PMs) or work in operations or business development. But it’s not easy. After all, who wants to report to someone else after they’ve been their own boss for years?

Another thing to consider: You won’t get a chance to learn from others until you reach a scale and level of success that allows you to hire really great people — which, as we discussed, is very unlikely. You mostly learn by doing— the hard way.

Fulfillment

Founding a business generally means that your level of personal satisfaction is high because you get to bring your vision to life. It’s something you care about and can’t stop thinking about. The downside is that in nearly all cases your dream will just remain that: a dream. A dream that, as it escapes slowly over the years, becomes a tedious grind because you’re too emotionally invested to leave your startup even if you know it’s not going anywhere. Two thirds of startups become zombies.

Stage 2: Pre-product/market fit (more spinach than dessert)

Economics

Joining a company before product/market fit is tough, because you get all of the hard part and none of the upside. As a founder, you may get a shot at being really rich. No such luck if you join a company as one of the first few dozens of hires, where you’ll usually get no more than 1% — and frequently much, much less — but with all of the insecurity of the founder. The only positive is the fact that you can leave whenever you want. But why would you want to bail if the company is good? (I’ll provide some more specific numerical examples for this stage in the Stage 3 description.)

Learning

You still get a broad education, but not as much as the founder’s. Here, too, you get to experience many roles yourself, so there’s breadth — but little depth. It mostly amounts to lots of ownership and an inflated title. You may be in charge of some exciting areas, but you are also taking out the trash.

Fulfillment

With a boss who is usually obsessed with the product and how to do things (and a vision that is not your own), you lose a lot of agency and independence. You’re executing somebody else’s vision. You also don’t get the same feeling of “winning” as you would in a company that is more successful. The years of grind are tiresome.

You will probably get an inflated title, because that’s one of the few things a startup can use to lure people in, but while having a powerful job title may feel great, it isn’t easy to move to another organization and go from, say, Director of Product for the whole company to the PM of a small feature.

Stage 3: Hypergrowth (where it’s at)

Economics

Hypergrowth companies usually hit the sweet spot. They are still small, so their stock is not too diluted. They’re also desperate to hire fast, because they’re growing yet people are not applying en masse since the company is not well established. Because the stock is not diluted and they really need to lure people in, they are usually still generous with their stock — and that stock is rapidly appreciating and likely to be worth a lot in the future. This is where the discussion of money gets interesting. It might be a bit complex, but understanding these numbers can mean the difference between retiring at 40 vs. retiring at 80.

Imagine that you join a company pre-product/market fit that is worth $150M in the most recent raise, and you get 0.5% of the company. That’s $750K to vest over four years. However, the likelihood that the company is going to be successful is low — say, 15%. It’s like betting on a 15% chance that the company reaches $1B in valuation (15% of $1B being $150M).

If you go to that same company post-product/market fit, it might also be worth $150M in the most recent round. But instead of getting 0.5% of the company, you may get 0.3%. You may be thinking, “That’s $450K, which is less than the $750K in the previous example.” Yes, but in this case, because the company is post-product/market fit, the likelihood that it will reach the $1B valuation might be as high as 50%. This is a big deal. It means the company could truly be worth $500M in valuation — and 0.3% of that is $1.5M. So, in reality, your stake is worth twice as much as in the pre-product/market fit company — and it carries less risk.

Learning

Here, you’ll have loads to learn across the board because, when a company grows so much (and so fast), you face tons of new problems everywhere, all the time. And these problems change every few months. You’ll find new problems, brainstorm new solutions, and execute against them. You pack years of learning into days of work at this stage.

Fulfillment

You’re solving problems while growing a product and a team. That’s always exciting. In addition, your individual impact is substantial. And you’ll feel like you’re winning. This is easily one the most fulfilling professional experiences you can have.

Stage 4: Established (comfortable but boring)

Economics

Stable tech companies pay some of the most generous salaries in both cash and equity to attract talent.

As you can see, established tech companies pay the highest salaries of all public companies. Facebook’s median salary — including stock — is a whopping $240K!

If you become really good, you might even become the world expert… about nothing.

Learning

If you’re fresh out of school, you may learn a lot — and not the hard way. Plenty of people who know more than you can show you the ropes.

However, when it comes down to it, you will get to own a button. Or a bar. Or one tab in the advertiser dashboard. Compared to smaller companies, where you might learn a lot about many different areas, your area of focus will be so narrow that you’ll learn a lot — about a little. If you become really good, you might even become the world expert… about nothing.

Fulfillment

At this point, your individual impact is nil. Whether you work there doesn’t matter to the company, to the user, to the results. You are helping rich people get richer, one ad click or A/B test at a time. If that’s what interests you, this is the path to nirvana. It also may be a perfect fit for people whose passion lies elsewhere, for people who look for fulfillment on the “balance” side of “work-life balance” — running marathons, playing in a garage band, or spending time with family. (If that’s what you’re interested in though, beware of company policies. For example, Google doesn’t encourage its employees to give speeches or write blog posts.)

So what does this mean for you?

If you are in this to make as much money as possible, hypergrowth and established companies are the best places to be — unless you want a slim chance to be fabulously rich. In that case, your only path is founder, where you will likely end up broke. Don’t even bother with pre-product/market fit.

If you are motivated by learning, a role at a hypergrowth probably provides the best learning opportunity. You see so many different things in such a short time! Founder is also great, given the breadth of the role. Pre-product/market fit, as mentioned earlier, offers a wide breadth of experience, but not as much depth. Avoid established companies unless you’re fresh out of school, want a brand on your resume, or don’t mind developing a narrow career.

Fulfillment overall comes with a hypergrowth company or from pursuing this burning thing you really want to build as a founder. In the other stages, either it’s unlikely that your work will matter, or it absolutely won’t matter at all.

Wait a second! I hear you saying, “But, Tomas, there are more than just four potential stages!”

You’re right. There are two more stages. I didn’t want to talk about them, But since you insist….

Two stages to (usually) avoid like the plague

Stage 5: Established companies that have lost their momentum

These companies may still be growing, but barely. It’s like watching the grass grow. Still hoping Kodak will make a comeback?

Economics

Plenty of cons, and only one potential “pro”: You can earn lots of cash if you’re in a secure position. It’s hard to keep people around, so if you’re worth it, the company just might be inclined to pay handsomely. The cons are everything else — especially if you’re not in a secure position, because you can be laid off at any time.

Still hoping Kodak will make a comeback?

Learning

Don’t plan on learning anything, because there’s no growth or opportunity. People stay in their positions forever unless they’re fleeing, in which case it might not be a good idea for you to stay, either. Also, you will keep facing the same problems over and over again — and nobody wants to hear your solutions. There are more politics to consider, more financial analysis, more cost cutting, more stress, more anger… the list goes on and on.

Fulfillment

Obviously, this is not fulfilling. It’s actually quite depressing. But not as soul-crushing as the next stage.

Stage 6: Companies that are going down

This is an interesting situation. Many people work at these companies in the hopes that they are going to turn things around.

This is a waste of time. It never happens.

Why? Because a company that is going down has lost its product/market fit. It’s working hard to get it back, but (as we’ve seen before), it’s really hard to reach product/market fit — and once you lose it, good luck in recapturing it. Think of companies that started going down, like HP, Kodak, Blockbuster, Sears, Zynga, RockYou (the last two being mine), Yahoo, etc. How many of them were able to turn it around?

Economics

Cash here is even worse than in a pre-product/market fit company, because when a company is going down, the stock becomes worthless. And because financials are not going well, the company gets more and more austere. That raise you’re looking for is not their top priority — to put it mildly.

Fulfillment

When a company is in nosedive mode, morale hits the floor. The company tries hundreds of things and fails at every one of them. People get beaten down. Nothing works. This can be heartbreaking.

Learning

Interestingly, these companies can provide unique learning opportunities for people early in their careers. The worse the company is doing, the more you may be asked to step in. Leadership may start leaving in droves, followed by middle management. That creates a vacuum where the remaining people get promoted much faster and higher than they would otherwise.

This is what happened to me in my first job after my MBA: I spent all of four months doing product management before getting promoted to executive producer of a video game. You can imagine my performance. Yet, as EP, I managed 25 people — which I was completely unqualified to do, except when you compared me with others available in the company. All the leaders had left, and it was hard to attract new people. I just happened to be the best person available. It was the best professional education I received, all financed by my company. I’m not going to complain about a free, intensive education!

This is all only feasible if you’re in a position that is not too exposed to layoffs. Otherwise, this is a terrible place to be, and you want to get away as quickly as possible.