Sometimes it’s nice to hear from recruiters, isn’t it? Makes you feel all warm and fuzzy inside to feel wanted. Chased. Sought after. Peeking over the fence at that seemingly greener grass.

The glee one feels when that red button flashes on the upper right corner message icon of your LinkedIn app. Ding!

Hope you are well! We’ve never spoken but your name came across my radar while working on a new **Insert Important Sounding** role in the Bay Area that looks to be a strong fit based on your background. To give you an example my client is a SaaS company ($350M+ in funding) with an awesome culture! This role will manage a team focused on my client’s largest customers!

Placer of World Class Performers

First, they always hope you are well don’t they? Doing quite well, thank you. The company is mysterious too. That is a given in the game of contract recruiting. It does make for fun sleuthing to uncover the company’s true identity. Doesn’t it? Yes, yes it does.

This SaaS darling has revenue of $350M! Wow! Wait, no.. That’s $350M+ in funds raised. Oh.

Ok, what are we to assume about this opportunity?

• Plenty of cash in the bank to pay your salary
• Many interesting people and projects to spend that money on
• People and projects to help you grow in experience and in your career
• Company has demonstrated to outside investors it has the potential for a winning market strategy and an exit in the form of an IPO

Sounds pretty good. Validating. This company is in the left lane headed to the coast on a summer Friday. Except, that money ain’t free.

• There are return expectations from investors on those dollars
• There are priorities on who gets paid and in what order in a qualifying event like an acquisition or IPO

And therein lies what each prospective management candidate should understand in evaluating late stage roles unofficially dubbed here as The Valuation Paradox.

• Increase in company value via additional investment = net positive for existing shareholders
• Increase in expectations to realize that value = higher bar for new entrants: late stage hires

When the media celebrates a $100M fundraise at a $1B valuation, prospective candidates should really be hearing that the exit expectations for the company just got raised to $2B, minimum. Meaning your new hire equity could be almost worthless at $1B, $1.5B, or more. Crazy! Better deliver on those sales targets.

Should it also be mentioned at this stage of the company’s lifecycle employees almost always receive Restricted Stock Units (RSUs)? These equity instruments have no vesting tax advantages like options until they actually become “unrestricted” in the form of a qualifying event like an IPO when the 12 month short term > long term capital gains clock starts. Yeah, that too.

There are many reasons to join a late stage startup beyond equity, so don’t let this necessarily deter you. But understand the valuation paradox before assuming early retirement.

Now, if you DO join the category winner it should work out just fine. Look at those nice people over at Plaid this week. $300M in dollars invested to drive an acquisition of $5.3B checks out. But do you work at Plaid? Hopefully you’re at least friends with someone who works at Plaid. Have them buy the drinks this weekend as you mull over this new late stage startup opportunity.