How to evaluate a startup job? – Read this before accepting your job offer

evaluate a startup job

So you have finally got a job in a startup. Your parents are asking you to consider other opportunities in a more stable company. But some of your friends who are working at other early-stage companies are encouraging you. You are in two minds about signing the offer letter.

I know. Evaluating a startup job is hard. I have experienced this dilemma so many times.

In this article, I am going to help you bring structure to the chaos. I have tried to summarize my 8+ years of job hunting knowledge in one post. You don’t need to seek perfection in implementing all the tools mentioned below in your first job hunt. But make sure that you bookmark this article for future reference. So let’s get to it.

Finding the right startup is hard

Startups are unpredictable in every sense. But what a startup provides is a platform to learn fast. Yes, 9 out of 10 startups indeed fail. But the skills you acquire by working at a startup are going to give you an edge. 

At a startup, you could have many consecutive periods of growth, steadily scaling, be touted as the next big thing in publications including Tech Crunch, NY Times, and Forbes, raise millions of dollars in funding only to have it all fall apart as quickly as it began. It takes a lot of right things to succeed as a startup. But one loose nut here or there, and it could all come crumbling down. 

Joining a startup is always riskier than your average corporate job. Even though most startups try to project a merry work culture, the truth is that a startup is always understaffed. And the founders are looking for an extra hand to get the job done quickly. So you might find yourself putting in that extra hour or two of work from time to time. 

But if you find the right startup job, you will be able to reap incredible benefits. And if you can tread these waters with care, then not only will you make more money, but you will be exponentially more skilled than your peers. 

So how do you navigate these murky waters? 

Four words – think like an investor.

Essentially you are an investor in any company you join as an employee. The only difference is that you are investing time instead of money.

How do investors make money if 9 out of 10 startups fail? 

Investors are in the race to find that one uncut diamond from these murky waters that will reap 100X returns, which will not only cover their losses from the failed startup investments and make healthy profits from a business perspective. So it does not matter if the first nine startups that you work at fail. You need to improve your due diligence process over time to evaluate a startup, just like the investors.

In your journey, working at startups, you might start as an employee. There is only so much you can ask a company if you are joining at the executive level. But on the other hand, if you are evaluating a C-level position at a startup, you have more access to information. It is similar to the difference between a retail investor in the equity market who has access to limited information versus a hedge funder who can call up Tim Cook to find out the latest information about Apple. 

How to evaluate a startup as a potential employee?

There are many questions you can ask founders, investors, current employees, and customers. I have documented the list of questions you can ask various stakeholders here. I will keep updating this google sheet in the future based on your feedback. So bookmark the google sheet and this article as it will come in handy in your next job hunt.

So let’s get to it. What are the five most important areas to evaluate before joining a startup?

I have listed these in the order of priority.

Area 1: Finances – Will my job be secure for at least 18 months?

The financials of a company is the most critical area to evaluate. The main takeaway from this exercise is to assess whether you will be employed in a particular company for at least 18 months before joining. I wouldn’t recommend anybody joining a company that has less than 18 months of runway if they are not profitable. You don’t want to be laid off from any company. Finding answers to the questions listed under the Financials section will help you evaluate the company’s financial health.

Area 2: Product – Is the startup building something valuable?

If you intend to join a startup, you must know the meaning of Product-market fit. It is one of the most abused phrases in the startup world. PM-fit is half art and half science. Of course, you can measure PM-fit, but measuring it depends on various factors, including business model and industry. 

Andy Rachleff, CEO and Co-founder of Wealthfront, coined the term Product-Market Fit. However, Tren Griffin’s article on PM-fit will give you a good understanding of what it really means. 

The main goal of product evaluation is to identify the current stage of growth. I have included various stages as a drop-down in the row under the answer column in the Startup Job Evaluation google sheet.

Area 3: Leadership – Does the leadership have experience under their belt? Will I learn enough?

Evaluating leadership is as important as assessing the product. After all, the primary reason you are working at a startup is to learn fast on the job. Quality leadership is crucial for the startup’s success and how much you will enjoy and gain from experience. Look at the track record of leadership and employee reviews of previous companies they ran. Linkedin recommendations are also a great resource to help you evaluate your boss and founders. Moreover, it is also essential to understand whether the leadership team has clearly defined roles and responsibilities. Founder dispute is one of the leading causes of startup failures.

Area 4: Business Model – Will the startup make money?

If the startup is post the PM-fit stage, then definitely find answers to the following questions:

  1. What is the customer acquisition cost (CAC)? 
  2. What’s the lifetime value of a customer (LTV)? 
  3. How large is your addressable market? 

If your founders or manager do not know the answers to these three questions and claim to have product-market fit, that is a definite red flag. However, you can do very little evaluation about the business model if you are considering a pre-PM-fit company.

Area 5: Team Culture – Will I enjoy working with the team?

You might find it difficult to ask some of the questions listed under the Team Culture section in the google sheet. However, I highly recommend that you ask these questions. If you are hesitant, at least make sure that you check out Glassdoor ratings and reviews about the team culture. Also, skim through the Linkedin profiles of your teammates and then let your gut feeling take a call.

How to use the ‘Questions to evaluate a startup job’ Google sheet

Step 1: Make a copy of the Google sheet onto your Google Drive.

Step 2: Create a separate tab for each company that you are evaluating.

Step 3: Find out as much information as possible from online sources.

Step 4: After receiving the offer letter, schedule a call with the manager/founder and ask the remaining questions that are crucial

Step 5: Once you have all the information in one place, take a call according to your gut feeling.

Some Notes:

  • If you are evaluating an employee position, make sure you have answers to all the fields marked as required.
  • I recommend that you find answers to every question if you are evaluating a C-level or leadership role. 
  • I have included another tab called ‘Sources of Information’ that lists various websites where you can gather crucial data.
  • I will keep updating the Google sheet with more questions, sources of information, etc., as and when I come across new tools.

I hope you find this piece is valuable in your Startup career search. As always, please give feedback and let me know if I have missed out on any crucial questions, areas to evaluate, or sources of information that might help others in their job search.

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