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The definitive startup checklist

You are the valuable person here. Take care of all of your needs and then you will have more freedom. Be able to demonstrate greater competence at your job, and have better relationships with the people you work with. What follows is a checklist to help you decide if you should take a job with a startup.

Layout credit: Anna Escher

1. Has the CEO built a business before?

This is not always reliable (Mark Zuckerberg or Larry Page hadn’t built businesses before) but there’s an interesting stat: 85 percent of startups fail. If the CEO has built and sold a startup before, then the odds go down to 25 percent. So you might as well have the statistics on your side.

2. Does the company have good funding?

Do they have enough money to last at least a year? (If the company has six months or fewer worth of funding then they are already out of business.)

“Good funding” means people (or funds) who will also write second checks. If all they have is one year’s worth of friends and family money, then you are taking the risk in a year they will run out of money. Why take risks when there are plenty of other good jobs out there?

3. Do you believe in the vision?

Is the CEO creative enough to develop a strong vision, and also a good enough communicator to convey that vision? Could you use this product? Could you see it helping a million or more people?

4. Do you believe in their latest round valuation?

Imagine you had, in cash, the amount of their full valuation. Would you be able to create a better product with more traction? Like, for $46 billion, would you be able to beat Uber? There are plenty of startups out there where if you gave me their full valuation in cash I can easily see how they can be replaced.

Don’t work for a company that is easily replaceable at a lower valuation.

Also, if you believe in the valuation, make sure your options are not at the venture capital price but at the “409A valuation” price. Google that.

5. What can you learn?

Make sure that even in the worst case scenario where you misjudged everything else, that you at least learn one thing fairly quickly after you take the job so that it adds to your skill set and you can move on to get a better job.

6. How do the partners get along?

The entire culture of a company comes from the top down. So if the partners who started the business don’t have their emotional act together, the company itself won’t be emotionally sound.

Also, think ecosystem again – try to see your boss’ relationships with other people in the company. All gossiping is bad. Hopefully they think highly of the people they work with. Else you shouldn’t work for them and you shouldn’t work for that company.

7. What are the current demographic trends?

Warren Buffett said, “If you have a strong demographic wind behind you then the company will do well even with poor management.”

The book Bold lists a lot of demographic trends that take advantage of Moore’s Law that are getting bigger. Robotics, Internet of Things, 3D printing, etc. That’s one start. Another start are companies disrupting healthcare since that is such a mess right now.

Another example: I’d rather work for Uber than a company that lends money against taxi medallions. I’d rather work for Airbnb than Marriott. I’d rather work for Tesla than GM.

8. When will they IPO?

You can’t ask in your interview, “when will you IPO?”

It’s unpredictable when a company will exit. A good company might wait 7-10 years before an exit. In fact, a good company should wait 7-10 years. Why? Because if they’re good then they are undoubtedly growing faster than the market. So they should stay private as long as possible to maximize benefits for shareholders and employees.

So try to figure out if management is ultimately interested in an exit. Some CEOs are not.

9. Do you see the path to profitability?

Some startups might be years away. But the good thing about working for a company that ultimately has huge margins (not just profits but margins) is that they have a lot of perks.

Just compare the chef at Google with the chef at Walmart. Hint: there IS NO chef at Walmart.

Previous
Next

The definitive startup checklist

You are the valuable person here. Take care of all of your needs and then you will have more freedom. Be able to demonstrate greater competence at your job, and have better relationships with the people you work with. What follows is a checklist to help you decide if you should take a job with a startup.

Layout credit: Anna Escher

1. Has the CEO built a business before?

This is not always reliable (Mark Zuckerberg or Larry Page hadn’t built businesses before) but there’s an interesting stat: 85 percent of startups fail. If the CEO has built and sold a startup before, then the odds go down to 25 percent. So you might as well have the statistics on your side.

2. Does the company have good funding?

Do they have enough money to last at least a year? (If the company has six months or fewer worth of funding then they are already out of business.)

“Good funding” means people (or funds) who will also write second checks. If all they have is one year’s worth of friends and family money, then you are taking the risk in a year they will run out of money. Why take risks when there are plenty of other good jobs out there?

3. Do you believe in the vision?

Is the CEO creative enough to develop a strong vision, and also a good enough communicator to convey that vision? Could you use this product? Could you see it helping a million or more people?

4. Do you believe in their latest round valuation?

Imagine you had, in cash, the amount of their full valuation. Would you be able to create a better product with more traction? Like, for $46 billion, would you be able to beat Uber? There are plenty of startups out there where if you gave me their full valuation in cash I can easily see how they can be replaced.

Don’t work for a company that is easily replaceable at a lower valuation.

Also, if you believe in the valuation, make sure your options are not at the venture capital price but at the “409A valuation” price. Google that.

5. What can you learn?

Make sure that even in the worst case scenario where you misjudged everything else, that you at least learn one thing fairly quickly after you take the job so that it adds to your skill set and you can move on to get a better job.

6. How do the partners get along?

The entire culture of a company comes from the top down. So if the partners who started the business don’t have their emotional act together, the company itself won’t be emotionally sound.

Also, think ecosystem again – try to see your boss’ relationships with other people in the company. All gossiping is bad. Hopefully they think highly of the people they work with. Else you shouldn’t work for them and you shouldn’t work for that company.

7. What are the current demographic trends?

Warren Buffett said, “If you have a strong demographic wind behind you then the company will do well even with poor management.”

The book Bold lists a lot of demographic trends that take advantage of Moore’s Law that are getting bigger. Robotics, Internet of Things, 3D printing, etc. That’s one start. Another start are companies disrupting healthcare since that is such a mess right now.

Another example: I’d rather work for Uber than a company that lends money against taxi medallions. I’d rather work for Airbnb than Marriott. I’d rather work for Tesla than GM.

8. When will they IPO?

You can’t ask in your interview, “when will you IPO?”

It’s unpredictable when a company will exit. A good company might wait 7-10 years before an exit. In fact, a good company should wait 7-10 years. Why? Because if they’re good then they are undoubtedly growing faster than the market. So they should stay private as long as possible to maximize benefits for shareholders and employees.

So try to figure out if management is ultimately interested in an exit. Some CEOs are not.

9. Do you see the path to profitability?

Some startups might be years away. But the good thing about working for a company that ultimately has huge margins (not just profits but margins) is that they have a lot of perks.

Just compare the chef at Google with the chef at Walmart. Hint: there IS NO chef at Walmart.

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