Questions to ask before joining a startup
Karan Chawla / September 11, 2018
9 min read
At the beginning of 2018, I got my first full-time tech job at a San Francisco based startup that was building an urban aerial mobility solution by automating helicopters to be used for an aerial shuttle service. It was clear to me that I didn't want to continue in academia because I was eager to solve real-world problems and was looking for something more fast-paced. I also made the decision of joining a startup because I wanted to grow as much as I could in the early years of my career and I believe working at a startup or starting up are the two best ways to do that. My engineering background prepared me for engineering tasks and helped me write a resume, but it didn't prepare me well for how to evaluate different startups. While this might be obvious to some, this is what I wish I knew before starting an engineering position at a tech startup.
Before accepting an offer at a tech startup, you need to be clear about what you want out of a new job. If you want to work in tech and make the most money possible, startups may not be the best option for you. If it is, you should consider working for tech giants like Amazon, Microsoft, Facebook, Google etc. However, for many people working at a startup will always be preferable than working at a big corporation. Some people prefer the risk to reward ratio, the variety of roles in which you could contribute, getting to own larger chunks of tech stack and so on. Making sure you've got what you need to lead a comfortable life and pay your bills on time is critical. Don't take a job which doesn't cover your cost of living or does not provide health insurance. Before accepting a job offer, you need to do some research about the average living expenses of the city you're moving to. A good rule of thumb is 25% of take-home pay should go towards housing and up to 40% in the Bay Area. 40% can be done if you minimize costs like going out or have a second income.
If the job requires relocation, it is common for companies to cover your relocation expenses. This usually varies from $3000 - $10,000.
- What's your base compensation package?
- What health insurance package does the company offer?
- Does this insurance cover my dependents and/or my significant other?
- Does the company also offer vision and dental insurance?
- Does the company offer relocation (if needed)?
- Does the company offer a signing bonus?
Startup equity is a complicated topic that is worthy of a separate blog post, but for the sake of brevity, I'll keep this simple. You need to know that equity in this startup actually has a chance of producing a nice windfall for you. Also, while other questions in this article can be asked conversationally during the interview, these questions should be asked after you've received an offer. Ask these three questions to establish whether or not equity is valuable at this startup —
- What percent of the company do these shares represent? Your percentage of ownership means more than your number of shares.
- What is your total preference stack? The more owed in liquidation preference, the less your equity is likely worth.
- What's the minimum price you would exit for? This gives you a reference point for valuing your potential payout. If the startup is offering you a good percentage of the company, isn't carrying an insane preference overhang, and would like to exit at a realistically high price (or IPO), your equity is in good shape. However, more often than not your equity is not going to help you with an early retirement unless you are getting hired as the first engineer and the company exits >1Bn. So, given an option between higher equity and a higher base compensation always choose higher base compensation.
If you plan to join a startup, you've every right to know how the startup is doing financially. Let's start with the fundamentals. You should ask about the total funding the company has received till date. Next, you should ask about what their monthly burn rate is and how much cash they have in the bank at the moment. You also need to ask questions about when the company is planning on fundraising next. If the CEO/founders don't reveal this information, it's a huge red flag. Mostly because it's a reflection of the company culture, more on this later in the post. With this information, you can get a picture of the scale of the company as well as how quickly they are spending cash.
After learning about the basic financials, you need to find out about the investors in the company. The investors can have a profound impact on the company culture and the direction of the company. Tools like AngelList and Crunchbase provide information about previous investments, and the individual investors can usually be found on LinkedIn.
- What is the total amount of funding raised?
- How much cash is on hand?
- What is the burn rate?
- What round of funding has the company raised?
- Who has invested in the company?
- When is the company planning on fundraising next?
Growth and Responsibilities
One of the major perks of working at startups is that the projects are high impact and you get to own large portions of projects. There's not much room to waste time or work on things that are unimportant to the business. Working at a startup is one of the most rewarding things you can do for your career because of all the things you'll be forced to learn on the fly. Even if you're an expert, daily learning will be critical to getting things done. Make sure the prospective projects are interesting and will take your career in the desired direction. If you're not sure what direction to take your career, choose a role that will expose you to lots of different ideas you might be interested in. It is not uncommon for someone to find something they love doing and become the person who owns a set of problems or services related to that thing.
To get a feel for how often things change, ask questions about the product market fit. If the startup hasn't reached product market fit yet, they'll be iterating quickly on a variety of ideas and a project you might be interested in might get canceled even before you join because it didn't meet the customer needs. However, if the company has reached product market fit then the engineering team is going to be solving whatever problems it needs to in order to build the product.
After gaining insight into the company's engineering direction, it's important to ask about who you'll be working with. Hopefully, you would have already met a few of your potential teammates during the interview process. If the company doesn't do this you can usually ask to meet with them, especially if they extend you an offer. Consider it a red flag if they won't let you speak to a potential co-worker. You'll be spending hours every day with these people under super stressful situations, make sure these are people you get along with. If you get a bad feeling about someone, trust your gut here, there are lots of other startups!
- What projects do you picture I'd work on?
- Has the company found product market fit?
- How does the company collect feedback from customers?
- Who would I be working with to complete the projects?
- Ask each new potential teammate:
- What do you work on?
- What about your role are you enjoying?
- What could the company improve on?
- How flexible is the company in terms of switching between teams?
- What's the workload like?
- What kind of engineering processes do they use?
- What's the accomplishment they are most proud of since they joined the company?
- What does the career trajectory look like?
Working at a startup where the culture fits with your lifestyle can be highly rewarding. Therefore, evaluating a company's culture and to understand whether you'd fit in or not is very important. A startup with a strong culture will have values which go deeper than buzzwords. So, it's important to know what the core values of the startup are. It's one thing to have a great values document and an entirely different thing to implement it in a day to day processes. Try to get a sense of how these values are reflected in day to day processes and decision making. Finally, ask about how many people recently left the company and for what reasons.
- What are the values of the company?
- How are these values reflected in daily processes and decision making?
- In the past 3 months how many people left or were fired and for what reason?
- What are the company's social events like?
- Bonus, look up past employees on LinkedIn and ask them about their time at the company?
Joining an early stage start should be a commitment of years, often in the prime of your career. You must, therefore, decide with utmost care; it's very different than taking a job at a large company with a high salary and a nice benefits program. The work will be long, hard, and hopefully the most rewarding of your career. The questions highlighted in this post shouldn't take more than 15 minutes to cover. You owe it to yourself to go through the diligence before committing some of the best years of your life to a startup. Finally, trust your gut. If something feels off during the interview, it probably is. Just because they raised a huge round and got a TechCrunch article doesn't mean they have their shit together. There are thousands of startups to choose from and like all things in life, going that extra mile to find the right one is worth the effort.
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