Working for a startup can be a rewarding career experience, but you have to get on board with a sound company. Here are eight questions to help you decide if a startup is right for you.
Going to work for a startup is like rolling the dice -- you can hit it big, you can lose everything, or you might find something in the middle.
On one hand you could get in early, take a little equity and bank a major payout when the company goes public. On the other hand, the company could flounder before it even launches publicly.
Many people are attracted to working for startups for the seemingly casual atmosphere and the creative environment. While a startup may possess both of the qualities, it will also require a tremendous amount of effort and dedication from its employees.
If you have your mind set on working for a startup, you should hedge your bets to make sure it will be a positive career experience. Here are eight questions you should pose to a potential startup employer.
1. How will I respond to failure?
One of the chilling truths of the startup world is that, historically, there is a 90% chance your startup will fail. Failure is generally accepted in most startup circles, and even lauded in some, but that flies in the face of the way the rest of the corporate world works. Determine whether you're ok with failing, and then find a startup that will provide a learning experience, even if it all goes out the window.
2. Do I want stability?
If you want a 9-to-5 job then a startup isn't right for you.
Ellie Mirman is currently the VP of marketing for Toast, but she has worked for a few other startups as well. She said that people eyeing a gig at a startup need to make sure they are 100% committed.
"It's often the fun beer-and-ping-pong-in-the-office stories that are told about startups, but there are very real difficult times too," Mirman said. "Long nights, projects that go awry, financing challenges -- you need to be in for both the high points and low points of startup life before committing."
3. Do I actually like these people?
One of the first things investors look at when they are fielding a startup pitch is the team. Chetan Puttagunta, a partner at VC firm NEA, said that startups can end up going through many pivots, but the team usually remains. You have to be sure that it's a team you can thrive with.
Start with the founders -- do they seem like the kind of people who will do whatever it takes to see this company succeed? The founders should seem like they eat, sleep, and breath this company.
After considering the founders, learn what you can about the rest of the team. According to Puttagunta, an early stage startup run can last 5-10 years. With that in mind, he said potential employees need to ask themselves two questions:
- Can I grow personally and professionally with these people for that amount of time?
- Will I advance my career and acquire new skills here?
"You're going to want to make sure that these are the kind of people you want to spend a lot of time with, and that you can collaborate with, that you can be constructive with, that you can be productive with," Puttagunta said.
While they may seem difficult to measure, these are essential qualities for a startup team.
4. Does the company understand its users?
One indicator of startup success is whether the company can communicate who would use the product or service and how, said Ryan O'Donnell, director of marketing for Avalara TrustFile.
O'Donnell, who has also worked for Seattle startups Big Fish Games and Redfin, said "If members of the startup are unable to articulate who they are targeting and what their needs, frustrations, [and] joys are, then they aren't building a customer driven product."
Make sure the startup you are targeting startup is engaging with customers early on and has a defined way of reaching them with the product.
5. Does the business plan make sense?
When you look at a startup you want to work for, make sure the company's mission is something that you can stand behind. If you're going to take the risk, it has to be something you believe in.
Once you figure out all the existential crap, you need to get a handle on whether or not the business plan is viable. You have to calculate if this "world-changing" business actually has a chance at changing the world.
Startup founders tend to be guarded when it comes to the inner workings of their company, so there is only so much they're going to divulge. Still, the founders should be able to share the company goals and processes they will use to scale the company.
"Having a business plan and model mapped out in full detail is only going to make implementing each step or phase of growth that much easier," said Paul Marino, account coordinator at Teknicks.
If the company has no discernible plan, there's only one thing you need to do -- run.
If the startup seems like it is solving a problem that actually exists, and they do indeed have a plan, you'll still want to vet it. Aydin Acar, the CEO and co-founder of Influenster recommends following up with these questions:
- Is the business model scalable?
- Is there a healthy revenue opportunity?
To determine if the model is scalable, you need to understand the addressable market size, Acar said. You should also ask about adjacent markets and what the timeline is for market entry into those adjacent markets. The key here is to do your own market research. The founder, or whoever you speak with at the company, will give you these numbers, but you should vet those numbers. Make sure the numbers from adjacent or secondary markets aren't being included in what the company considers its initial market entry point.
As far as revenue goes, founders should be able to tell you how they'll make money and when they project that they'll be profitable.
6. What is the company's financial situation?
No one likes talking about money, but for startups it's a common conversation. As you consider a new job with a startup, you need to be crystal clear on both the money coming in and the money going out.
Matt Mickiewicz, co-founder and CEO of Hired, said that job seekers should ask what the company's policy is on transparency and if they will regularly share financials with prospective or current employees.
To start, try to get a read on all the capital available to the company and what, if any, revenue is coming in. Most companies you interview with will have raised capital or be actively seeking it. However, sometimes you find a company that hasn't taken any outside money but is still breaking even, or even profitable. That's a great situation to be in.
"That shows you that they've hit something in the market that allows them to generate revenue, reinvest in the business, and be cash neutral," Puttagunta said. "There are very few startups that are of that characteristic."
After you get a picture of the money coming in you have to understand how quickly the money is going out the door. This will help you see how long of a "runway" a company has before it runs out of money. The rate by which a company is spending money is referred to as "burn rate."
According to Mickiewicz, the company's burn rate should leave it enough cash on hand for 12 months of operatings costs, or a one year runway. If it leaves less than six months, he said, that's a huge red flag.
7. What is the culture of the startup?
There are two aspects of company culture that need to be considered. First is the external action and activities you will experience in the office. This is where you get the stories of tech startup employees wearing pajamas to work and having Nerf gun battles.
While those types of things may seem silly, they can be important. If you are going to spend a large amount of time and effort on this team, it's important to know that you will be a part of a culture that values what you value. Whether that's work/life balance with a good vacation policy, or casual dress, or fun with Nerf guns.
"Sometimes it's the smallest things that matter the most," Marino said.
Even more importantly, though, are the aspects of the company culture that inform how the business operates. Mickiewicz calls these the core values of the company.
"Core values tell you a lot about what behaviours the company values in its team members, how hard decisions get made," Mickiewicz said.
8. How will I be compensated?
Beyond your salary there are a few other aspects of startup compensation you should be aware of.
Startup job titles can carry a lot less weight than their corporate counterparts, which means that it's essential to know what your employee development will look like. Mickiewicz said potential employees should ask about the startup's system for promotions and raises with questions such as:
"Is it ad hoc or well-defined with benchmarks I'd have to hit and clear timetables and paths for me to follow? What would be my two or three next career moves in the company?" Mickiewicz said.
After talking about salary, and other traditional benefits like insurance, you should ask the founders about the possibility of equity compensation. If you will receive equity, be sure to ask about the vesting schedule and whether you're dealing with stock options or restricted stock.
Joining a startup is largely a gut-driven decision, it has to be something you feel. Hopefully this checklist can help you guide that gut feeling and make a better decision about what kind of startup to work for.
- Why startups need to focus on resources other than money
- How to fund your startup without venture capital
- What to expect on your first day working for a startup
- How to build a socially responsible startup from day one