• I’ve been recruited to work with (or for) a number of startups over the years. Most offers I’ve declined, but I’ve also take a few and unfortunately none have hit it big!

    I have tried to learn to not get caught up in the excitement of the founder’s dream too quickly: most of the companies started won’t be around in five years and most of the ones I have been recruited to are no longer around. Startups are a high risk and unless you’re in a position to take a risk, make sure there is both adequate reward and potential for success. There are some questions you should ask before agreeing to work for a startup firm:

    1. Will I get along with the team? A startup is typically a very close knit group who spend a lot of hours together. It’s important to understand whether or not you will get along with your coworkers and managers.
    2. What is the history of the firm? Some companies go through several different ideas until they find one they want to stick with. What ideas did they pitch along the way? The thinking could help you understand their critical thinking skills and strategy.
    3. What is your current burn rate? The burn rate is the amount of money the startup is spending per month. This is important for two reasons: the company may be burning through its available cash and if the company isn’t spending much money, that raises questions.
    4. How much money do you have in the bank? How much cash is left to burn through?
    5. Can I meet the founder, CEO, and management team? Make sure you are comfortable with the team before putting your eggs in this basket.
    6. If you are receiving stock options, what is the number of fully diluted shares? Employee stock options are frequently a part of your benefits package to keep your salary low. If you understand the total number of shares, you will understand what percentage of the company you will own through your options.
    7. Have you ever had a down round, flat round, or significant management change? In the venture capital world, a down or flat round of financing would indicate the company had some bumps in the road.
    8. What is the exit plan and timeframe? You might be receiving thousands of options, but if the company does not have a plan to sell or go public, those options may not be worth much to you.
    9. Who are your competitors? What do you do better than them? What do they do better than the company? The answer to this question will help you understand many different aspects of the company’s strategy, positioning, and how they see the marketplace.
    10. What’s your biggest worry right now? Get a feel for where the problems lie.

    Lessons Learned

    Not every startup is going to succeed. However, startup firms teach a lot of lessons for those that can stomach it! Learn the valuable lesson of asking the right questions before you join the team.

    This entry was posted on Friday, November 27th, 2009 at 8:13 am and is filed under Entrepreneurship, Small Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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