Evaluating startup job opportunities
A close friend who works in venture capital always likes to say:
Diligence is never optional!
This holds true for not only a VC looking to invest in a startup, but also for product/engineering/sales/marketing folks who’re interested in joining as early employees at an early stage startup.
Say you’ve gone through a long interview process and finally landed a startup job offer. Here are some tips on doing diligence as a prospective employee on your future employer.
Industry
Try to understand the industry/sector in which a startup is operating: Software, Healthcare, Energy etc.
Is this sector known to generate outsized returns for investors and employees
Is this a sector that is currently experiencing high growth or is poised for growth in the next couple of years?
Are there big markets in this sector? How regulated are these markets?
How many competitors exist in this sector?
A recent twitter thread by Reid Hoffman emphasizes the importance of picking the right industry:
I’d like to propose a slight modification to Reid’s call to action: Pick an industry first, then a job.
Founding Team
The founders are the most important personnel at a startup. They’re responsible for:
Setting the company’s strategy
Hiring key early employees
Raising capital while the company is private
Setting the right culture
Early execution of the business strategy
As an early employee, you will be working closely with your founders and spending a lot of time following their vision. Some good questions to ask about founders:
Is this their first startup gig?
Are they good technologists?
Have they spent time in this space to fundamentally understand the market?
Are they good managers?
Can you do a reference check on the founder’s background?
Investors
Good investors can often be an extension of the founding leadership team. They can help with hiring, sourcing customers, providing operational expertise, mentorship and creating connections for the company by leveraging their extensive networks. It can be useful to ask:
Are these top tier investors? What is their reputation
What other companies are in their portfolio?
Are they sector focused or round focused?
How do the founders see them helping the company?
Product
It’s not always the case that you’ll have heard of product or space before joining a startup. As a prospective employee you can ask yourself:
Does the Product resonate with you? Would you use the it if you were a customer?
If the product has a free tier, try to signup as a free customer and spend a little time playing with the product. Are you able to get value from using it?
Is it a delightful experience for you as a user to use the product?
Customers
People who are using a product usually have a lot to tell about it. While doing diligence, VCs will often talk to customers and get their feedback on the quality of the product, the way the company manages customer experience and whether customers will recommend using the product to their friends/colleagues.
On the same lines, prospective employees can also reach out to customers. While getting time from busy customers might be tough, even here some useful questions to ask are:
Are the customers excited about the growth of the company?
Are they willing to be ambassadors for the company and help support it?
Wrapping up
At early stage startups, employees undertake a tremendous amount of risk. A good way of quantifying the opportunity cost is by comparing what the employee could have made in a role at a Big Tech company. It’s said that around 90% of startups go bust or have suboptimal exists where the common stockholders(employees) barely make enough to compensate for the risk that they take. It is helpful to de-risk your decision by doing as much diligence as possible. Good luck on your new job!