You got an offer from a startup. Congratulations! Now, you're doing your due diligence... [if you aren't, you should!]
When people evaluate startup offers, they mostly research about salary and equity. It's likely that by the time they get an offer, they're already sold on the team and the mission. Let me tell you that's not enough.
Founders are very good at selling a vision (which is why they are founders). Everyone wants to disrupt something. Everything looks sexy initially. But as the ground realities kick in and bank account starts to shrink, things start to look bleak and excitement starts to fade away. A wonderful TechCrunch start ends with a thoughtful post martem on Medium.
So, take some time and think very hard. Salary and equity aside, is this company really worth working your ass off for the next few years?
In my mind, that depends on three factors:
Do They Have An Unfair Advantage?
Vision is okay. Passion is okay. But does this team (and particularly the founders) have an unfair advantage to make a dent in this market?
CEO is the most important. Read as much as you can about the CEO - her LinkedIn, Twitter, Facebook, blogs, articles, anything and everything you can find. How does she think? What does she value? Is she a short term thinker or a long term thinker? How did you feel when you talked to her?
Apply Warren Buffet's hiring principle: does she possess a lot of intelligence, energy, and integrity?
Focus a lot on how she thinks about money. Most startups die because they run out of money. A lot of them run out of money because they spend money on unnecessary things. Look at the office. Look at her lifestyle. Look at where she's spending money on.
I once met a startup that just raised a seed round. Immediately after closing the round, they rented a big office (anticipating rapid growth), bought a bunch of premium furniture, and a big screen TV for conferencing. I know right then they're not going to make it. Fifteen months later, they ran out of money and shutdown.
Some founders have a strong bootstrapping mindset. They'll do anything to sell and keep the lights on. They don't care about investors. For them, building a business is about survival - they can't imagine working for others.
Some are opportunists. They'll raise money because they can. They'll experiment as long as they can, and give up if things don't work out. Their opportunity cost is high - they're in it to see if there's a market and if they can build a business.
If things don't work out, they don't lose much. Their investors don't lose much. But you will. You will lose more than them.
See if they have an unfair market advantage. If its a consumer startup, pre-traction, does the CEO have a blog with millions of visitors that are potential users or customers? If its an enterprise startup, does the CEO have unfair access to customers or deep unique knowledge about the problem that others don't have?
Most startups manage to build great products. But they die because they can't get distribution before money runs out. Figure out what unique existing advantage they have for getting distribution.
Is the team worth it?
In the initial stages, no matter what the idea is, investors are backing teams. One way to look at this is if the startup runs out of money but has a great team, it can be acqhired. So a good team increases optionality.
Ask yourself: assuming the startup dies in a couple of years, what will I get out of this experience?
Learning of course is part of it. You will become better at what you do for sure. What else? Will you build valuable relationships that can open other opportunities down the lane or significantly add value to your network? Will you get to build customer relationships that can help you down the lane? Will you build relationships with strong engineers that can work for you if you start a company?
So, research a lot about who you will work with closely, who you will get to interact with, and who you can build relationships with. Based on the size of the company, the size of the network you'll build there will vary. For example, if its an early stage startup, you could build a relationship with the CEO. But if its a late stage startup, the CEO might not be accessible.
Are they moving fast?
Regardless of the idea or market, speed is the most important weapon for startups. How fast they move in the interview process is a reasonable indicator of how fast they move in general.
If it's an early stage startup and they're slow, that's a red flag. Early stage startups cannot afford to move slowly. Good ones are irrationally biased towards action. If they take weeks to respond and think for days, that's a bad sign.
Mid stage and late stage startups have a fair amount of process in place. But still if they take too long to make decisions, that could be a warning sign. Great companies are careful about where to slow down and where not to, and recruiting (especially communication) is one area they don't slow down.
Another important indicator is how much progress they have made to date and how much they value progress in general. Most companies, especially early stage, spend too much time talking about vision and pedigree. They're trying you sell you on a big vision and their connections or investors. That's a warning sign. Good startups focus on progress and traction. And that's what matters.
How fast they respond to your emails is also an indicator. Good hiring managers, especially startup founders, are always checking emails and make it a habit to respond quickly. If you don't get fast responses to your emails, that could be a warning sign.
Bottom Line
Startups are awesome. They're more exciting than big companies any which way you look at it (I'm biased). There's a certain thrill in taking products to market and building a business around them. But if you're helping a startup, be very very clear what you're getting into and why you're doing it.
Learning is a given. Money is purely a bonus (and a matter of luck). If you're serious about it, you have to give it a few years. Think hard.