Unorthodox Methods of Choosing the Right Startup17 Feb 2019
If you have known me for a while you probably know that I get uncontrollably passionate when it comes to the topic of startups. There is just something intrinsic that is fascinating to me about a group of ambitious people working tirelessly to create a reality closer to their imagination. However, the truth is most startups fail. And this is the exact reason why most people are turned away and choose a steady career instead. If working at Google/Facebook has a higher expected value than joining a startup, why risk working longer hours with lower compensation at a place with so much uncertainty?
There are many reasons why people choose to join a startup: equity, impact, culture, location - you name it. Whatever the incentive is, I believe one’s goal of joining a startup is to find the right fast track to reaching your career objectives compared to taking the alternative paths. It is an opportunity to work on things levels beyond your current credentials. Working at a startup is locally optimal if you are given responsibilities above your market value, but you are mentally eager and intellectually curious to overcome the inevitable hurdles. Therefore, when defining what a “right” startup is for you, it boils down to to one question: can joining this company catapult you towards the success you are looking for?
The startups in consideration need to be able to offer you massive opportunities for personal growth. This growth can come in many forms: building a scalable and reliable video streaming system, leading client negotiation to get a contract signed, launching new products in a niche market with a team of three, and so on. At a company where human resources are limited, you are more likely to get assigned to tasks that you are unqualified for, and it is up to you to rise up to the challenge and deliver value.
An index I often consider for evaluating personal growth is individual I/O (input/output) - input as the amount of information you are learning and output being the value that you are producing. You want to put yourself in an environment with high throughput of this type of I/O.
There are tons of startups out there. You will have to make the call on which one looks promising and can help you get closer to your goal. The younger a company is, the more analysis you will have to do. Here are some thoughts to help you evaluate a startup before signing that offer.
- Commit to a mission you truly care about. A young startup is like clay waiting to be molded; no one has a definite answer as to what it will look like eventually. Oftentimes business directions are unclear and management could be messy. You want to believe in the work that your organization is producing, otherwise you are likely to be affected by doubts from time to time.
With that being said, you should pick a mission that you’re passionate about - one that you’ll find yourself thinking about in the shower. Since the structure of a startup is usually flat, your voice would naturally carry more weight, so that your ideas are more valuable to the mission.
- People are the most important asset of a company. They are the key ingredient that make or break all other parts of the business. Therefore, you want to identify the people you want to work with, with the goal of becoming a core part of that community.
There are numerous channels to learn about the people affiliated with a company. LinkedIn and Crunchbase are good gateways for collecting information about the founders, team, and investors. Ask yourself whether you see yourself working with these people.
At a Series C or earlier stage startup, you usually have the chance to build a personal connection with the founders and executives. Schedule a phone call or one-on-one with them to get a glimpse of their thoughts about the company’s future.
- Work on projects that have a high impact on the business. Your value is correlated to the return on investment of the project that you contribute to. Always talk to your hiring manager beforehand about team assignments and product timelines, and aim to reach agreement in your expectations for one another.
If the startup has a blog, read about their recent work so you have a better sense of what the company is actually working on.
- Find a startup with crazy upward trajectory in multiple areas: revenue, headcount, users, new products, market share, etc. You want to be at a startup where things are going to, if not already, grow exponentially. You can usually inquire about these stats from the company once granted an offer.
If the startup has not yet reached the growth stage, but you believe it has great potential, there are many more questions you have to ask before making a logical decision. Has the company already figured out the product market fit? How do they plan to scale given the current state of operation? What can I bring to the table that will help the company accelerate growth?
There are two things you shouldn’t overemphasize on: profitability and funding. Word on the street is telling us blitzscaling trumps everything. Over 80% of 2018 IPOs are unprofitable is the market trend we are observing, so you should have the confidence to join a place with high growth and high burn rate. And speaking of funding, if a company has recently raised a large round of financing, it only tells that the company has a longer runway before having to raise again or reach self-sustainability. Actual growth stats should be weighted more in your analysis than the amount the company has in the bank account. So remember that these numbers do not tell the whole story.
- You get rich by owning things. Calculate what percentage of the company you are going to own. Negotiate for higher equity and lower base salary if you can. Even if the stocks could be worthless, equity is always a better motive for personal growth than cash is. (a16z has a great intro explaining how stock options works if you are new to this subject - link)
- Last but not least, join a startup where you would enjoy working. If you are going to spend most of your time on weekdays, and possibly weekends, at a fledgling startup, you want to make sure that you can sense the joy of being there, otherwise burnout is hard to avoid. What kind of culture did you feel during onsite? If you are going to disrupt an industry, you might as well have some fun doing it.
The described method is purely derived from my personal philosophy and experience, as the word “right” varies per individual. I do hope that this essay can at least serve as a guideline to help you make a decision, or get you start thinking about joining a company you would not have considered before. If you are looking for a place to start, below is a list of accredited resources on high potential startups:
- Breakout List
- These 50 Start-Ups May Be the Next ‘Unicorns’ (by NYT and CB Insights)
- Top Companies List (by Y Combinator)
- The Forbes Fintech 50
Thanks to Aleksander Bello, Rohan Varma, Rinko Shen, and Austin Poore for reading the draft and giving feedback on my writing.