90% of startups fail. Here's exactly how you should vet a company before deciding to join
Article published by Business Insider on 14th August 2019.
- Joining a startup could either mean being a part of a successful company’s growth (and benefiting financially and professionally) or a bad company’s legacy.
- We spoke with founders, human-resources experts, and startup hiring managers to gather the best questions you should be asking in a job interview to determine whether a startup is worth working for.
- They mentioned bringing up runway, core values, company culture, and benefits as a way to vet a company’s management, mission, and potential.
Joining a startup could be the best career move you ever make — or the worst. That’s because if you pick a winner and get in on the ground floor of what later becomes a successful company, you stand to reap substantial benefits, both financially and professionally. But if your radar is off and you sign on with a dud, the inverse is true — and it can take years to recover from the damages.
So how do you know when a company has potential? Is it all just luck whether you land at the next Facebook or become part of the often quoted statistic that says that around 90% of startups fail? Should you take the huge risk that’s inherent in being part of launching a new venture?
The answer can be found in the types of questions you ask the startup’s hiring team before making your decision. During the interview process, bring up the following questions to extract the information you need from the company’s founders, managers, and employees.
What does this company’s runway look like?
Understanding the concept of “runway” as it applies to startups should be one of your first orders of business when considering whether or not to join one. The blog Coding VC describes runway as “how long your company can survive if your income and expenses stay constant” and suggests that fledgling firms should have about 18 months of runway at the seed stage.
By asking about the startup’s runway, you’re in essence finding out how financially stable it is. If you learn that the company has only six months of runway, for example, that may indicate that layoffs could occur in less than a year if fundraising doesn’t go as planned or the burn rate increases faster than projected.
Ben Mercer. Courtesy of Ben Mercer
Ben Mercer, who has worked in startups and also hired people for them as the cofounder of Personify XP, believes that asking about runway is themost important topic that a prospective staff member can home in on. “You want job security, and knowing that you may only have a few months before the startup goes bust may not be a risk that you want to take,” Mercer said.
What are this company’s core values?
If you feel assured about the startup’s financial longevity, the next step is to probe into whether the organization seems like a good fit for you by asking about corporate values.
Pratibha Vuppuluri, who has more than a decade of experience in the financial-services industry and is the chief blogger at She Started It, emphasizes the importance of “asking questions that really matter to you” before joining a startup company to gain a clearer idea of whether or not you’ll enjoy working there.
Mark Pacitti. Courtesy of Mark Pacitti
“For instance, you can ask questions about the core values of the company, about its mission and vision, as well as where does the company hope to be in five to 10 years,” Vuppuluri said. “You may also ask questions like what are their career plans for their employees, what trainings do they offer, or what are their plans for you should you join them.”
What are this company culture like?
Once you’ve determined that the organization’s mission and values match your own, then it’s critical to get an idea of what it might feel like to actually work there day in and day out (or as in the case of many startups, night after night). While you may glean some sense of the corporate culture simply by participating in an interview at their offices, drilling down on some specifics can assist you in gaining a broader picture of how employees experience life at this particular startup.
One major issue to explore in relation to startup culture is what the policy is in terms of working longer hours, since high expectations in this regard can quickly throw off your work-life balance. Lizzie Benton, a culture consultant at Liberty Mind who works alongside small to midsize enterprises to improve their company culture, believes that it’s critical for candidates to ask the right questions so they truly understand the culture they’re considering joining. “In regards to a startup culture, candidates should understand what may be demanded of them in these early stages,” she said. “For example, ask questions such as: What support do you have in place to reduce burn out?”
What keeps you up at night?
By asking the founders, “What keeps you up at night?” you’re attempting to drill down on the risks that key players may perceive on the horizon, according to Mark Pacitti, the founder and managing director of Woozle Research.
“Most, if not all, startup founders will be keenly aware of the obstacles or challenges that exist that might hinder their success,” Pacitti said. “By asking this question, you can get an understanding of what the company believes their biggest risk is to success to help get a better understanding of how certain or uncertain the company’s future may be.”
Joey Price. Courtesy of Joey Price
Pacitti added that while the types of risks that might keep a startup founder up at night come in all shapes and sizes, knowing whether a company believes money, execution, competitors, employees, and/or regulations are considered particular roadblocks to success could give candidates invaluable insight into how the CEO thinks about the future.
What compensation plan/benefits do you offer?
Everything is looking solid, and you’re almost ready to accept the offer. Assuming that you know the salary band for the position, and it’s acceptable to you, now it’s time to get down to brass tacks and make sure that the total compensation package is one that you want — and negotiate if it isn’t. At some startups, the benefits package may not be as competitive as it can be at larger, more established organizations, which is why many offer stock options as an extra incentive to come aboard.
Joey Price, who is the CEO of Jumpstart:HR, a human-resources outsourcing and consulting company for US-based small businesses and startups, noted the importance of asking about stock options. “Giving stock options to an employee who joins in on the early phases of a company is key because it ensures that employees have a stake in the company’s performance,” Price said. “Their value increases as they make the company better.”
Baron Christopher Hanson. Courtesy of Baron Christopher Hanson
Along with discussing salary, benefits, and stock options, don’t forget to tie in scheduling issues, keeping in mind what you learned earlier about the company’s culture and support systems to reduce burnout. Baron Christopher Hanson, the lead consultant and owner of RedBaron Consulting LLC, suggests requesting, in writing, “an honest, straight-up answer about your ideal day and annual work schedule” that includes time off not only for vacation but also for family emergencies and rest. He also suggests requiring the employer to provide “crystal clear overtime, weekend, holiday, international time zone, and email/text response clauses” as part of your employment agreement. You can use the questioning stage of your interview both to ensure that you really want the job and to avoid selling yourself short.
“Startups are notorious for trying to hire superstars on the cheap,” Hanson said. “Typically people who have skills and passion, yet who are desperate for a job, don’t ask too many questions, and are foolishly willing to start work without any
written employment agreement.”