It’s hard to know if a start-up will survive before joining. Many of them fail for different reasons. The big two are running out of money and shipping a product nobody wanted.
Since college, I’ve worked on a few start-ups and applied to a bunch more. Out of those applications, I got offers rescinded from two early stage start-ups. One in 2022, right after the end of the zero-interest rate company phenomenon. Another one in 2023, from a clean-tech company that ran out of money.
I asked a few questions before joining these companies. But I think I could’ve done a better job. These are some areas I missed.
Probing a start-up during interviews
You want to make sure: 1) the company has enough money; 2) your role is in a growing business; 3) your role is valuable; and 4) venture capital firms backing the start-up have a good track record.
1. How much money do they have?
- What’s your burn rate? What will it be in 6 months?
Ideally you want 1-2 years of runway
- When was the last time you raised money, how much did you raise, and at what valuation?
If they raised in 2022 during when money was cheap that’s probably a red flag
- When do you expect to become profitable?
They should have a plan for it, at least
2. Is the company growing?
- Have they signed big customers recently? Do they have contracts on the way?
Ideally they should have money coming in from big and smaller customers, and with more on the way
- How sticky is their product? Is it hard for customers to switch?
If they signed a multi-year contract with a large company it can be hard for the big co to get rid of them
- Have people left the company recently? What is the average tenure of people on your team
You don’t want a revolving door, but you also don’t want people who are just putting in their time
3. Is the role important to the team?
- What are you going to be doing? Is there an important vacuum you’re filling? Or are you part of “growing a team”
If your skillset is important for the company (e.g., the only engineer that knows Elastic Search), it would be harder for them to replace you. If you’re a full-stack dev that can be easily replaceable I have bad news for you
4. Is the company backed by reputable VC firms?
- Who have they backed before?
You don’t want celebrity investors who don’t know the market or the technology. Good VC firms would have interviewed the founding team, here’s a sample ranking
I’ve gotten my questions answered, now what
Even if the companies hire you, they might have no idea of what they need.
During an interview in 2022. I asked the CEO of the start-up if they had enough money to run the business. He said they did. Three days before joining the offer was rescinded. Turns out they had some money, but they still had to make cuts to survive.
Questions are important but it’s also hard to predict the future. And your interviewers might not actually know how the business is doing.
Sometimes you have to do your own research, these sites can give you more information on the company.
- Crunchbase: great information on latest funding rounds and founders
- LinkedIn Company Statistics: you can see turnover rates and people who left or joined the company recently
- Industry News: e.g., TechCrunch, VentureBeat, Business Insider, and Forbes
- Start-up ranking sites: this one seems promising
At each of these sources, your goal should be to get a feel of how much “heat” there is around the company. That can be a) increasing number of customers, b) recent fundraising rounds c), and c) highlights in industry blogs.
Assuming you get enough green flags from your conversations and the industry is looking promising. You still have a decision to make.
Making a decision
This is more of a personal question, where are you at your career, and how much risk are you willing to take.
In college I worked at a hardware seed-stage start-up. We didn’t have salaries, and it took us a while to ship a product, but we did it. I learned a lot and it was risky.
A few years after, I joined a Series B start-up (30-50 people, $50M~ raised). It had “experienced” leaders and money in the bank. It was still not structured, and I didn’t have mentorship, but you get a lot of autonomy.
I think it can be exciting to join an early-stage start-up. But I would ensure you know what you’re doing when you join. After spending a few years at early-stage companies I think getting mentorship is key if you’re just getting into software engineering.
Looking back, I would recommend anyone new to join a start-up between 50-100 people with 2-3 experienced engineers above you. I would also ensure the engineering leadership is technically competent. You don’t want to be in a engineering team with a CTO that hasn’t coded in 20 years.
An added perk if the start-up is using tools that can make you marketable in future roles.
Assuming the company meets all your needs, I would keep trying to learn outside of your job to stay sharp. The industry changes and what you like might change.
To avoid pigeon-holing yourself in a role, it’s good to keep challenging yourself in outside projects and talking with other engineers outside of your company.
Start-ups are risky. If you do join one, you will learn a lot and get autonomy. If the one you join manages to survive, it can be a rewarding journey.