What to Evaluate When Considering a Start-up
For many people, early stage companies offer an allure and excitement that well-established companies can’t match. But how do you know that the start-up you are considering is the right career move? Make an educated decision by researching the following:
Who the Founders are
There are risks and rewards to consider when looking at any early stage company and different criteria you can evaluate to help determine both. First and foremost, research the founders. Determine if they've had previous successes and learn more about their professional backgrounds. You don’t necessarily need to discount a past failure. Many successful entrepreneurs had failed attempts before success.
Check out the Funding
Funding is also a key indicator of a start-up's stability. What level of funding do they have and who are the investors? What type of investors – are they angel, VC or otherwise? Funding from a brand-name VC firm could be an indicator that they survived a serious vetting process and may point to a strong contender in the market.
Cost of Entry
Consider the product or service. Does it have a low cost of entry such as a software product or an app, or does it require a large capital investment? Ask about the existing customer base and revenue stream and learn about the competitive landscape- are there direct competitors, how crowded is the space, how strong is the market demand?
When you Start
Joining a start-up means different things at different times and the balance of risk and reward will shift. Get in early and you'll likely have more opportunity to make a significant impact along with the potential for greater equity. On the other hand, earlier is typically riskier. When joining at the later stages, after Series B financing for example, you may still have the reward but assume less risk.
Why You Want In
In the past, people would often join a start-up in hopes of a big payout. In recent years we have seen that candidates are more often attracted to start-ups because they will have a greater impact and will deal with less bureaucracy. No matter if the company succeeds or fails you are going to gain an invaluable amount of experience and connections that you can take with you to your next opportunity.
Love What they Do
When evaluating a start-up, you should also evaluate whether their product or service is one you can get excited about. Just because something is well-funded, doesn't mean it will resonate with you or that you believe and respect what it is or what it does.
In looking at the red flags, watch for turnover, especially with the management of the company. Find out if there has been any dramatic change in strategic direction, or change in the products or services. These could indicate areas you want to investigate further in evaluating the opportunity.
Start-ups may offer the right opportunity at the right time. The key is to do your research and make an educated decision so you can enjoy the experience while doing what’s best for your career.