Comparing startup job offers is confusing, even for seasoned professionals. There is limited information available about startups and the popular opinions are often subjective and based on the media hype. Result – many people either accept bad startup job offer or reject one from the next Google or WhatsApp..
To illustrate this dilemma, let’s say you have these two startup job offers:
- FashionNext, a hot new fashion startup that has not raised funding yet.
- TalkNow, VC backed SaaS startup with 25,000 app downloads
TalkNow looks like a better choice – after all it’s VC backed and also has some visible traction. But what if I told that the FashionNext is started by seasoned Uber employees and is soon to raise a seed round from a marquee set of investors such as Ratan Tata & Flipkart founders?
You might be reconsidering now. But here’s another fact – the team at TalkNow have an IIT/Stanford background and had sold their previous company for $25M.
Confused which one should you join? It basically depends on just two things – the risk and the rewards. In general, you want the one that offers less risk and more rewards.
But how to think about startup risks and rewards? Read on!
Identifying the risk
Every startup has risks. But some are much much more risky than others. To find risk, analyze the startup along these parameters:
The Stage of Startup
Is the startup at an idea stage or already has a product with paying users?
The earlier the stage, there are simply more things that can go wrong. The idea might not work or be difficult to execute, the team might break apart or the startup may not be able to raise enough funding.
Yes, the earlier the stage, the more will be the learning opportunities. But that’s about the rewards – we will see them later in this article.
Let me start with this:
Having IITians or ex-Google folks is not equal to having a strong team.
Don’t get me wrong. Having credentials and experience matters. But the strength of the team depends on the context of the startup. You need to figure out – what does the success of the startup most depend on? Is it the ability to build the complex piece of technology (like building Alexa or Siri)? Or it’s about putting together the entire value chain to solve the problem at scale (like Amazon)? Or it will come down to securing massive funding to beat out the competition (like Flipkart)? Ask the startup this question and discuss with other people in the ecosystem.
Once you know the main challenge, the core team at the startup should have the necessary skills/experience to overcome that. Brand names may not matter there – a team of IITians faced with the primary challenge of striking big partnerships may not look like a winning team anymore.
The Funding Risk
Beyond the initial funds put in by the founders, more money either comes from the revenues or external funding. You need to understand from the startup:
- What is their next financial milestone – securing (more) funding or become operationally profitable?
- What is the expected time frame to reach that milestone?
- How much cash they have “in bank”
You might feel a bit uncomfortable asking these questions. But asking them have two extra benefits. First, great startups actually love candidates who are serious about their careers and are not afraid to ask the right questions. And as a corollary, the startups that don’t handle these questions confidently are either not well prepared or not transparent enough and should be avoided.
99% of startups fail since they run out of money.
Knowing the rewards
A high risk startup is not necessarily bad for everyone. If your rewards are high enough to justify taking the risk, you might want to go for it. In fact, founders/entrepreneurs are an extreme example of such an employee!
Your rewards by joining a startup are:
Will this startup change your career trajectory?
The right reason to join a startup is just this – will you get to work on things you want? For a developer, this may mean working on complex problems every day. For a marketer, it may be about understanding the 4Ps from scratch and driving growth.
Give this a lot of thought. For instance, the earlier stage startups are risky, but they often offer the best learning experience. There is little hierarchy and you can rise up very fast.
Will you be happy working at this startup?
Not every successful startup is fun to work at. Team, the working environment and the culture is all that matters. In case of some startups, it’s actually about the vision. For instance, you may just want to work at SpaceX, if you are aligned with their vision of changing space travel. Or perhaps you’d love to work for Change.org due to it’s vision of empowering common people.
Is the money enough for the risk?
Money is important to everyone, but I deliberately put it last since it’s really a hygiene factor when it comes to choosing a startup job. If you’re in it just for money, you could be in for a rude shock.
What is important here is to ask if the startup job offer is paying you commensurate to your skills and the risk you’re taking. If you are taking a salary cut, you should ideally be getting some good equity/stock options. Will write a detailed post on stock options later.
Taking the decision – which startup job offer to accept?
It’s all about the risk vs rewards. Some people take more risks for higher rewards, while some prefer a different balance.
Determine rewards of each job and choose the job that offers more rewards at lesser risk.
Personally, as per my current risk ability, if a startup is offering me a great career trajectory and moderate risk – I’d accept the offer given my minimum cash needs are met. Remember – my risk ability will change overtime and your minimum cash needs might be different from mine.
If you want to read more, check out this article: think like an investor when evaluating a startup.
So are you comparing a startup job offer? Which one you accepted and why?