"Should I join a startup that is three or more years away from IPO? It is selling its first products, growing quickly and wants me to help open a new market for the startup."
That's essentially the question I addressed yesterday with a business development specialist.
What we talked about can help you make a wise decision when you are faced with such a career decision:
- How large are the odds that this startup can emerge before IPO as the Gorilla of a new space? We dug into the market, competition, and what the company's unfair advantage was composed of. The Conclusion: This startup has what it takes to become First To Get It Right in a New Market Category.
- Is the core team ("top management) able to lead the startup through the next growth phase and get it IPO ready? We dug into the LinkedIn and other readily available material, Googling and reading about each person. The Conclusion: This core team has deep and successful prior experience with high technology product breakthroughs, building new businesses and startups.
- Are the investors of high quality? This was simple, the About web page touted the names of the VCs and Partners. I knew the firms and of their reputations. The Conclusion: The money comes from among the world's most respected venture firms.
- Is the cash in the bank sufficient for several years before requiring another VC round? Again this was easy to find on VentureBeat and other Googled sources. The B Round had been completed less than six months ago for a tens of millions of dollars financing. However we still needed to know the burn rate (use of cash per month) to know how long that huge financing would last (the company must build its own factory in order to produce its products with its new proprietary technology). The Conclusion: The cash in the bank is probably good for at least two years, but in the next interviews the candidate will inquire more about this issue. The reason for the sensitivity with this matter is because this candidate has been asked to start opening a new market for the products, one that has a very large order per customer and takes years to close on a deal (currently the startup is selling a lot of high volume, lower priced products to retail product producers).
- How supportive of your challenging assignment is your boss and his/her boss? We reviewed the reporting ladder, discussed responses about this issue (after his first round of interviews), and speculated on what each of the bosses would want/expect of the candidate. The Conclusion: The right people want very much to have the doors opened for the startup to enter this new market.
- Is the level of job risk for the candidate reasonable? The candidate explained his contemplation of this issue, what he would be leaving behind (compensation, stock, track record, employer relations, etc.). And his answers to my questions told me he had a reasonbly realistic grasp of the risk he would be taking by terminating a fine employer and moving on to a much more relatively higher risk startup. The Conclusion: The candidate had his head out of the clouds and had removed his rosy glasses, leaving him with a clear understanding of what he was seriously about to do with his career.
- Are your dreams of freedom and creativity and joy-filled-living realistic? In this discussion this issue was premature. But it is very important to test before making your decision. Too often escaping from a job and joining a startup is like jumping out of the frying pan and into the fire. Be realistic: startups are a lot of chaos and hard work. And not all founding CEOs are angelic, or what you need to thrive in the new job. The startup's culture may be right for some but hell for you.
There are a lot more questions we discussed, including compenation (cash and stock options), but the above are more important to be sure about.
BOTTOM LINE: Be deliberate about your decision to join a startup. Then you have a chance to make the Big Leap with your eyes open. And remember that the startup you are going to join will look to you to add something important to help the new enterprise build its unfair advantage.
I wish you The Best on your Adventure!