How can I find more information about a startup?

Question

I just came out of an interview with a startup founder. They have no product yet and no team (they are still assembling the team, hence the interview). They just have an idea of the business they are targeting and the technology they intend to use – which is pretty exciting, by the way. They also assured me that they are backed up by rich investors. So, in theory, money is no problem for them, which means that the company has enough of it to burn while trying to establish on the market. I know of at least another company founded by the same person.

It looks like a great opportunity to learn and, if everything goes well, be part of a successful company from its earliest days. But I'm also aware that it's a very risky step to start working for them. Basically, everything can go wrong overnight.

So, how can I get more information about a startup like that? What resources do I need to make a more informed decision?

Answer 1

Start-ups are inherently risky. For this reason,I would not consider one unless I had at least 3 months of income saved and preferably 6 months to a year. I've known too many people through the years that were having a great time at a wonderful start-up that stopped paying their paychecks very abruptly with no clue that the company was about to be out of money.

To reduce the risk (and start-ups can be a great place to expand your skills and lots of fun to work at so you may want to work there even with the risk) - I would consider some of the following:

How much of their idea are they willing to tell you. From what they told you does it sound like something that would have a viable income stream? If it is a consumer type product, would someone non-technical be interested in purchasing? Is is going to depend on ad sales or customer payment. Do they have an actual business plan that they will share with you after you sign a non-disclosure agreement. Start-ups without things like formal business plans are much more risky. This tends to mean that the money source is not professional (or really non-existant, most places that lend money to start-ups insist on a business plan) which is usually a bad sign.

What track record does the current top guy have? It's alot less risky to work on a start-up run by someone with a track record of running another successful business. If the start-up has no one with business-running experience at all - run like the wind. Are they hiring marketing people as well as developers? A great product that no one knows how to market will still likely fail.

Are they spending their intial funding on nice-to-haves or must-haves? Those with the fancy offices with the fireplace and the entertainment room, etc. are the ones most likely to fail. Nice-to-haves come after the income starts coming in, not before.

If you are not willing to move, are there other places locally that you will be able to get a job in on short notice if they fail. If the area has plenty of development jobs, you can probably afford to take the risk becasue you won't be out of work long if the company fails.

Are they going to expect you to work 80-120 hours a week for almost no pay for the hope that you will strike it rich in the end with your stock options? Assume that the stock options will be worthless when deciding if the salary and work conditions are acceptable. Don't bet on an outcome that is not likely.

Answer 2

Try to see where they are in the following area:

• Industry

  • Sector. What type of industry is it. Startups can often reflect their business. A 'consumer electronics sales' startup is working in a low margin, quickly changing environment, whereas an established autombile dealership that wants a product to help demo car features may be a higher margin more stable environment. These are no examples and not absolute. In certain circumstances those could actually be reversed.
  • Age. A brand new company, that wasn't even an idea 6 months ago can be quite different from a company that has been gathering steam and slowly growing for the past 5 years from 1 to 12 employees but still considers itself a startup. Thus the actual definition of startup varies and you will need to interpret this 'startup' on its own merits.
  • Growth A startup in a high growth industry has the potential for parallel growth in your carreer and income whereas one in an older, more established industry ismore likely to have lower growth. Again, as with all my answers this is not an absolute and it's possible to find the reverse for any given company or companies, however I give my answer as the generally more likely one. If nothing else, it's an area to explore more and come to your own conclusions.
  • Competition A company that has a lot of competition behaves differently from one that has found a new niche where they are basically the only serious player on the scene. Though the latter can be great it can aqlso have the downside that all plans and estimates (including financial and thus including salary) have to be completely redone, totally changing the setup.

• People.

  • Qualifications. Try to find out what you can about the people and their qualifications. Use linkedIn extensively and research their Stack Overflow (technical) and Facebook (both for technical and non-technical people) accounts.
  • Experience. Try to learn where they have worked, google those companies and see what happened to them and to their employees.
  • Personality. Spend quite a bit of time with the people you'll be working with. An hour or two doesn't tell you what you need to know. Plan on spending several days with them including several social and drinking events. You don't really know how well you'll get on with with people until someone lets their guard down, or you have a big disagreement. Try to find some low-key area where you disagree and try 'pushing' a bit to see how that goes. That's when you find out if you can really work together.

• Location

  • Physical. Where are they located? Is this the kind of geographical area that suits you? What will it mean for your commute? Would/is the company considering moving in the next two years. If it did, would it be to a location that would still work well for you?

  • Virtual. Do they integrate new technology so that you can work remotely?

• Finances.

  • Funding. How are they funded. Venture Capital vs. Angel Capital vs. Personal Wealth of management vs. actual revenue. Who 'really' owns the company and how will they direct it?

Answer 3

I would try to check the executives. Who are they? Where did they work before? What experience do they have? Do they understand the market they are in? Do they understand the technologies they (are planning to) use?

It is nice if they have money in their hands (do they really or are the just claiming to? ;-)) but if the product is managed in a bad way and isn't used it probably won't be satisfying.

Answer 4

Test the assertions.

The only one you mention is investment, which would generally be traced by looking at the company shares, i.e. investor will have a stake. Shares in non-public companies are generally a matter of public record.

Answer 5

Team

Team is the most important thing, even the current business model doesn't work. It can be changed and become success if we get the good team. Try to find out about how good the people in the team is.

Answer 6

I think this is an excellent question with no easy answers. However it sounds like the maximum downside for you would be that you work for them for a while and don't get paid. If you can't afford that risk, you probably shouldn't be looking at startups anyway.