Entrepreneurship for Engineers: a Post-Layoff Startup?

Let’s face it: the past year has been a rough time for a lot of people who work in tech. For some entrepreneurs, a layoff is exactly the kick in the pants they need to start their own company.

What are some pieces of advice for recently laid off folks who think entrepreneurship might be the next step?

Check Your Bank Balance.

If you’re considering building a product company — either one that ends up being bootstrapped or one that gets outside venture funding — you’ll likely need some savings or a generous severance package. If you don’t have that, chances are you’re better off starting out by selling services of some kind first.

You can start selling services immediately and get cash coming in the door quickly; it’s fairly unlikely you’ll be able to do that with a product company.

Even if your ultimate goal is to build a product company, you can start with a consulting or freelance business and work on the product on the side. But in fact, the need for consistent cashflow is one reason that immediately after a layoff, when you might have a severance package and at the very least could collect unemployment, can be a good time to start a company.

Mark Feldman, CEO and co-founder of RevenueBase, a corporate database company, doesn’t think he’d have had the nerve to start his own company if it hadn’t been for a layoff and severance package that gave him the luxury of building something he thought was useful without a huge amount of pressure.

Take Your Time.

On the other hand, the psychological aftermath of a layoff is simply not the same as quitting your job because you’re ready to take the leap to entrepreneurship.

“I took some time to think about what I wanted to do for the next step,” said Sesheeka Selvaratnam, founder of AI Query. Psychologically, he cautioned, you’ll need to do a bit of a reset before diving into something new, to avoid making rash decisions — and just to figure out what you would be interested in building.

Start with an MVP.

Both Feldman and Selvaratnam launched a product that was very much a “minimum viable product,” or MVP. 

Don’t wait until your product is perfected to introduce it to potential customers, Selvaratnam urged.

“Get it out there,” he said. “My first product was more duct tape and string. It was really crappy. And when I saw folks paying for it, that’s when I went into 2.0.”

Even if you have a severance package or savings to fall back on, if your entrepreneurial journey has been forced on you, you probably are short on time; you want to be able to prove as quickly as possible that you have something that people will pay for.

This is just as valid if you’re planning on getting venture funding. Investors are more likely to bite if they see real traction, and some revenue, from a minimum viable product.

When Feldman showed an MVP of the bespoke business databases he planned to create through his startup, investors were impressed by the demand for a product that was incredibly basic and saw huge potential for the idea if it was actually packaged as software.

“I was getting feedback from investors, like, ‘you don’t even have a software product, you’re just selling Microsoft Excel files for $50,000,” he said. But the spreadsheets were enough to prove there was demand in the market for the type of data RevenueBase was selling.

Stick with It, but Be Prepared to Pivot.

A big part of entrepreneurship is mindset, and if your entrepreneurial journey started by accident, because of a layoff, rather than by design, keeping yourself in the right mindset can be challenging.

“Sometimes you’re beating yourself up and saying, ‘What are we doing here?’” Selvaratnam said. “You’re just trying to stay with it.”

One of Feldman’s biggest regrets was not believing in himself, particularly at the beginning. “It’s easy to talk yourself out of starting the business,” he said.

Even though he’d read about founders raising money and building big companies all the time, he never thought that he was the kind of person who’d be able to do that.

At the same time, sometimes an idea just isn’t good. “You have to realize when to pack it up as well,” he said. “Don’t keep putting massive amounts of energy over and over again. If you’re not seeing something, it’s the universe telling you you have to pivot.”

Move into a Leadership Mindset.

At a certain point, the backstory behind the company becomes irrelevant — no one cares that this company wouldn’t have happened if not for a layoff once you’ve raised a funding round and started hiring people.

The only difference is subtle: the type of person who’s pushed into entrepreneurship by a layoff may be slightly different in mindset from someone who laid out a plan to start a company and then left their job when the time was right.

According to Feldman, one of the challenges with building a company has been not just acquiring the skills needed to be a CEO, but rather figuring out what those skills are.

“Over time, as the company evolves, you have to learn to see around corners. You have to learn how to navigate a board of directors and investors,” he said. “And you have to really learn to know yourself and your values and how you want to lead the company.”