Sizing up startup rocket ships

It's been a rough go for the startup industry over the past 18 months — but now can also be a great time for workers to grab a seat on a rocket ship.

Driving the news: Prospect, a startup that's raised $1 million in funding from Construct Capital and angel investors, is building a data-based tool it says can help workers figure out where they're most likely to maximize their equity returns in venture-backed startups.

The big picture: Big public technology companies' stocks — long seen as a safe way to accumulate a very comfortable nest egg as an employee — took a huge hit in the turmoil of last year's rout in tech stocks.

• Meanwhile, certain private companies like Instacart have cut their internal valuations to attract employees (who would otherwise balk at astronomical option prices with nowhere to grow).

What they're saying: Choosing a startup job is "fundamentally an investment decision, but most employees don't have the tools for that," Prospect co-founder and CEO Billy Gallagher tells Axios.

• The company is partly inspired by Gallagher's own job search in 2018. After stints in tech journalism, venture capital, and writing a book, he decided to try his hand at a startup.
• Through online research and conversations with friends and investors in Silicon Valley, he made a list of about 20 companies and ultimately joined Rippling, then about a year old.

How it works: Prospect is building out a model whose main purpose is to show job seekers the potential upside of employee equity at various startups, for a typical four-year-vesting period. It also has a rudimentary calculator that can parse job offers a candidate uploads.

• It's using data from sources like Pitchbook, a company headcount provider, news articles, and even directly from some companies.
• Prospect's model uses factors like a company's investors, funding, pace of headcount growth, revenue, user and customer growth, among others to predict the value trajectory of employee equity.
• It plans to eventually charge employers for helping them recruit, and possibly job seekers as well.

Between the lines: Similarly to VCs, Prospect believes that making significant money via startup equity isn't as much of a crapshoot as some say.

• Past the seed stage, a company's success becomes more predictable, argues Gallagher.
• That's also why the idea of betting on the most promising startups as an employee isn't novel. For example, a Stanford University student in 2014 put out a list of "breakout" startups, which has been updated annually.
• And there's then-Google CEO Eric Schmidt's famous words to Sheryl Sandberg when she was considering leaving politics to join the company in 2001: "If you're offered a seat on a rocket ship, get on, don't ask what seat."

Yes, but: Whether an employee's stock options will turn into life-changing money someday still depends on variables like the size of the equity grants they get, whether they fully vest (and exercise) their stock, and so on.

• Even VCs don't always pick right.
• And Gallagher's list in 2018 had some misses — like Quibi, the mobile-only video subscription streaming service that raised $1.75 billion in funding and shut down just six months after its debut.

The bottom line: This could be a good time to "buy the dip" as a startup employee.

• "The people this resonates with are those who have worked at a successful startup before," says Gallagher.