Your Checklist for Evaluating a Startup Opportunity
What guidelines should be followed while evaluating a job opportunity?
With the economic uncertainty, many people wonder how warm their seat is, or how to evaluate their next opportunity. While there are no universal laws; these are just some guidelines to keep you safe.
Trust your gut
If you think your seat is warm, it probably is. Don't ignore that little voice.
Evaluate the background and expertise of your boss and your boss' boss.
If you are in the C-Suite, that would include the lead investor.
Can you learn from these individuals?
Do they read the market the same way you do?
How much capital has been raised relative to the business's revenue?
Consider it a warning sign if capital raised is more than 2x revenue. Consider it a flashing red light if the company has raised more than 5-10x revenue.
For a VC opportunity to pay off, venture capitalists need to 10x their outcome. If a company raises $100M, you need to believe this company is worth a billion dollars. If your revenue is $5M, good luck with that bet.
Does the company publish a quarterly cash balance to its employees?
Zero cash in the bank is your startup's only existential risk. Don't trust any term like EBITDA and especially not Adjusted EBITDA or "operationally profitable."
It doesn't take an accountant to understand if your cash balance is declining each quarter, and how fast.
If you calculate your startup has less than 12 months of cash, and your company is not actively talking about raising money, then your job is in trouble.
Not every startup does this, but you should know going in if yours is part of that group or not.
Do you clearly understand what bets the company is making?
What would have to be true for your company to succeed?
Do you see fancy sports cars in the parking lot of the executive team of a pre-revenue or pre-profitable startup?
I get we are all remote now. If so, run away.
Do you fully understand who the ideal customer profile (ICP) of your company is? Does the company?
Is it a specific description with metrics? Does this ICP sound like a company that is a flash in the pan created due to a pandemic bubble, or does that ideal customer profile sound like any of many healthy businesses that might have been around for the last 10+ years?
What is your downside risk?
Do you have 3 kids and a huge new mortgage? Maybe not the best time to join that startup.
Have a great network and would regret not taking a flyer on a great team with few answers but hard-working core team?
Go right ahead! That's what startups are about.
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