How Should Job Seekers Choose Companies Based on Funding Stage?
If you were to ask a recent graduate entering the job market what kind of company they want to work for, their answer would likely include factors like "high name recognition, large company size, multiple funding stages, or a publicly listed company" – all under the umbrella of "big companies."
However, in this era of innovation, we've witnessed the emergence of countless entrepreneurial success stories, witnessing the birth of one "Unicorn" or even "Decacorn" company after another. Who can say that joining a large company guarantees a better future compared to working for small to medium-sized companies?
Let's rewind to 2012. Few could have foreseen that a startup like ByteDance, which secured only a $1 million USD Series A funding stage, would grow into a multi-billion-dollar Internet giant seven years later. Similarly, hardly anyone would have predicted that Didi, which only completed its angel round of funding in July of the same year, would rapidly become an industry leader with the support of capital. Many employees who joined these companies in their early stages have already reached the "peak of their careers."
Take a step back and calmly weigh the pros and cons. You might want to consider the many factors influencing your choice. Startups vary greatly in quality, so how do you make the right choice?
What do the A, B, C, and D funding stage mean for a company, and how does joining a company at different funding stages affect your career development?
Why do companies seek funding?
Funding is the act of companies relinquishing a portion of their future interests (usually equity or debt) to raise capital for their operations. In common industry terms, funding stages for companies, from early to later stages of development, are divided into seed rounds, angel rounds, ABC rounds, C+ (often referred to as D, E, F, etc.) rounds, with larger amounts as you progress.
So, why do companies need funding? The typical answer is: they lack money.
In the fast-paced world of the internet, the emergence of a "trend" attracts hundreds or thousands of startups, and having a great idea without the financial ability to execute it is undoubtedly disheartening. Having sufficient cash means being able to expand more quickly and gain a competitive edge in the market. Therefore, most companies seek funding to supplement their cash flow.
However, there is a portion of startup companies that have achieved self-sufficiency or even profitability at a very early stage, and they appear to be doing well. Why would these companies, which are not short of funds, still seek funding?
Being Prepared
First, it's about being prepared. Jack Ma once said: "You should raise money when you don't need it. You should repair the roof when it's sunny, not when it's raining." This is easy to understand; when a company is highly profitable, it becomes an attractive target for capital investment. Funding is easier to secure, and the company maintains control. However, if a company faces operational issues and urgently needs "life support," investment firms will be more cautious in assessing the company's future value and turnaround potential. In such cases, the company is in a very passive position.
Networking and Industry Resources
Second, it's about networking and industry resources. Startups with well-connected investors can access a network of valuable industry resources, becoming a secret weapon for their development. Investors, to ensure the success of their investments, will use their resources to support these companies and even encourage mutual support among their invested companies, creating a strong alliance.
Improving Management and Operations
Third, it's about improving management and operations. Some startup companies may have chaotic internal management mechanisms, and bringing in experienced post-investment management from investment firms can help improve the level of management and establish a healthy competitive development mechanism.
Trust and Endorsement
Fourth, it's about trust and endorsement. If a startup company secures funding from well-known investors and receives recognition from external commercial entities, it indicates that the company's founding team has a strong background and capability, gaining more attention and approval from the public.
What are companies in the A, B, C, D, and E funding stages like, and how do different funding stages affect career development?
Let's briefly understand the characteristics of companies at different funding stages and the impact on career development:
Characteristics of Companies at Different funding stages
1. Seed Round
Companies in the seed round usually have little more than an idea, with better ones having a demo. Funding primarily comes from what is humorously referred to as the "3Fs": Family, Friends, and Fools. When you think of companies in the seed round, you might imagine "boys working in a garage" creating something like the birth of Apple.
At this stage, companies are extremely small, typically consisting of just a few founding partners.
2. Angel Round
By the time a company reaches the angel round, it usually has a demo and has started running a basic business model. Funding comes from investment firms. However, as the market becomes more rational, achieving angel funding now requires some level of growth data for the existing product.
3. Series A Round
Series A is a stage where many startups are at risk of failing. However, it's also a phase of high potential for companies, typically between stages 1 and 10 in their development. Having gone through the earlier chaotic and exploratory phases, the product is more developed, and business is growing rapidly.
For talent, joining a Series A company means accumulating real business achievements and gaining a sense of real "battle" because Series A companies need to establish themselves firmly in the industry. This phase involves accumulating a lot of business insights, continuous progress, validation, and is a valuable learning experience.
If you're a core member, you'll have the opportunity, in the early stages of your career, to build influence and lead a team. At the same time, companies are more likely to experience a talent gap, where they've secured funding, but the initial employees' capabilities haven't kept pace, leading to internal conflicts.
Regarding benefits, some companies will enhance their incentive structures such as options and talent organization between Series A and Series B. So, talents who join at this stage can generally expect better economic rewards. If you're considering such a company, remember to ask during the interview if they have established talent incentive programs.
4. Series B Round
At this point, the company's business model is relatively mature and validated. Through the previous funding stage, the company has experienced rapid growth, refined its business model, and even turned a profit.
For team dynamics, Series B stage companies have already gone through some shocks and integrations. From a core team, they are expanding to a larger team of hundreds, moving towards more standardized, corporate practices. This stage marks the disappearance of some flat organizational characteristics as the company introduces more departments, groups, and hierarchical structures.
Working at a Series B company can have a brand-like effect on your career, as it's a more stable phase. Although the business model has been validated, companies still need to support a larger team, innovate more, expand their market, and marketing.
5. Series C Round
At this stage, companies are already very mature, and both their business model and team capabilities have undergone significant refinement. Profitability at scale is the most critical goal for Series C companies, preparing for the leap to an IPO. They are typically ranked among the top three in their vertical. Resources are consolidated to solidify their position and eliminate competition.
From a team perspective, Series C companies have stable and mature teams. Since they have well-established profit models, the survival of most Series C companies is no longer a significant issue. After Series C, and before going public, many well-known companies that we are familiar with are in this stage. For example, ByteDance (pre-IPO), Weidian (Series C), Ant Financial (Series C).
Joining a Series C company means that the company will have higher expectations for talent, with rigorous assessments, promotions, and an emphasis on team training and management. If you want to continue receiving systematic growth opportunities, Series C and later-stage companies may be more suitable for you.
6. Series D and Beyond (C+ Rounds)
Series D and beyond, often referred to as C+ rounds, are usually companies that require significant funding to seize market opportunities. Examples include the O2O battles and the dockless bike-sharing wars.
Joining a company in this "wartime" state can be demanding as they have high expectations for talent. If you are fortunate enough to participate in such a battle and make significant contributions, it can have a profound impact on your career. These companies are widely discussed due to their notoriety, which can enhance your professional reputation.
However, working in such companies can involve an intense pace, fierce competition, and a sense of being carried along by capital. You may have less autonomy and decision-making power in your role.
Note: Please remember that the startup landscape is dynamic, and individual company experiences may vary. It's essential to conduct thorough research and consider your personal career goals when choosing the stage of a company to join.
Funding Stages and Job Prospects
Believe that through the detailed analysis in the previous paragraph, you can already understand that having more financing rounds does not necessarily mean a company is better. What's important is to consider what you want to gain from your job.
In general, companies before the B-round are relatively unstable. They are still in the exploration phase, and their business logic is gradually maturing. At this stage, there might be a lack of systematic training, well-defined organizational structure, or promotion systems, and the job roles might not be well-established.
However, joining such companies can also provide more opportunities, allow you to take on a broader range of tasks, and offer better prospects for growth and advancement. Joining these companies requires a strong work ethic, a willingness to explore, and the potential for stronger career development.
On the contrary, the company after the B round is more stable. The business logic of the enterprise is perfect, the development is stable, and a perfect talent training system has been built, which is suitable for students who want to learn and grow systematically. At the same time, the strong brand effect will make your job-hopping smoother in the future.
However, for companies above round B, due to the gradual modeling of enterprise development, the business that individuals have been exposed to is relatively single, and there are fewer opportunities. And it's not that enterprises with too much financing will not "die". The popular Ofo bicycles mentioned at the beginning of the article is the best example.
Other Characteristics to Note
How to choose when two companies are at the same financing stage? What else can you see from the comparison of many start-up companies? You can pay attention to these dimensions of the company:
Team Background and Leadership:
As mentioned earlier in the discussion of financing rounds for startup companies, the capability of the founding team is crucial. Entrepreneurship is often a challenging journey, and a team with a successful track record and strong professional backgrounds is more likely to attract the attention of investors. Success in entrepreneurship depends on the team's ability to dream big and execute effectively. Whether in the early or later stages, the founding team remains the cornerstone of a company's potential.
Industry Track:
Just as you should choose your career based on your interests, the same applies to startups. You should consider whether the industry and business align with your interests and whether it's in a growing sector. Pay attention to broader industry trends, government policies, and investor interests in that field. Understanding the competitive landscape, the company's current advantages in the industry, and its positioning is essential to making an informed choice.
Fundraising Capabilities:
The fundraising ability of the founding team and the company's stage and valuation are also critical factors. Many startups fail in their early rounds due to financial difficulties, and mismanaging the fundraising process can be detrimental. A startup's ability to secure funding is crucial to its survival and growth in the early stages.
Product:
Your feelings about the company's product, even if it's just a demo, are essential. Does it excite you, and do you believe it can bring value to users? Additionally, consider how the team views and treats users. As someone on the front lines in a startup, your interactions with customers can shape your experience and work environment. Before an interview, try using the product from a user's perspective to assess its quality.
Job Responsibilities:
Your daily work will mainly involve your job responsibilities. Assess whether they align with your career goals. Evaluate whether your immediate supervisor and the company's leadership can provide you with the necessary guidance and flexibility. Consider whether the role offers timely feedback, a chance to make direct contributions to the core business, and a sense of responsibility for the company's growth.
Economic Returns:
Lastly, there's the practical aspect of compensation. While entrepreneurship can be challenging, you should establish your compensation baseline. Don't compromise on your bottom line, and be cautious about accepting low initial salaries based on unverifiable promises, such as stock options, in the early stages.
Final Thoughts
All in all, as a fresh graduate, Aniday understands that choosing your first job can be a daunting task. As a recruitment firm, do reach out to us and submit your CVs to increase your chances of getting hired once you graduate through our plethora of job options. Last but not least, do let both your heart and mind lead you and good luck choosing the best possible workplace for you to start work at!
