So you are thinking of joining a startup. May be you are fresh from school or have great experience working in a big enterprise and want to take a larger role in a startup. Here are a few questions you want to find answers for, from the founders and/or by yourself. As I wrote last time, entrepreneurs by definition have unbridled optimism and may tend to assign a lower probability to certain risks. It is up to you to build a better model.
These may seem like a lot of questions to answer for a job, but think of yourself as a VC, except you are investing with your time (part of it compensated) and opportunity cost.
- Which market is the company's product and services addressing?
- At what stage is the market in? Is it growing? mature?
- Are these the only players developing such products?
- How big is the market? What percentage does the company say they can capture? Is that realistic? What are the probabilities of different scenarios?
- How is the company's market share growing since inception?
- Who are the competitors? What is their market share? How is their market share been growing?
- What is the product/service? Can YOU explain than in plain English?
- Is the company's products ahead of its time? Is there a network effect?
- What is unique about the product/service? If they can do it why not many other people can do the same?
- How is the company differentiating their product/service from the competition's? How do the product/services compare to competitor offerings?
- Who are the customers?
- What segments is the company addressing? Is the segment growing? If the startup is offering products for a shrinking segment, you can make a prediction about their growth limit.
- How do these segments make purchasing decisions? What drives their decisions? features? quality? price?
- Is there a customer? Can you find out from them what they think about the products? Startups usually have early adapters, can you find out from your network?
- How is the company making or plan to make money?
- Do you think this is sustainable and scalable?
- What is marketing and brand strategy?
- Who is selling the product? What are their qualifications?
- How is it currently funded?
- How will it be funded in the future? What are the sources and what is the probability of getting funding from these?
- What is its current cost structure? i.e what are the expenses? Is that sustainable?
- Is the company leveraged heavily?
- Can they generate capital to make big investments?
- Are they cash flow positive? Is more cash coming in than that goes out?
After all this is your career decision. When no other information about a privately held startup is available, you have to do the legwork.