By Neil Patrick
If you have read the previous two posts (Startup Jobs and Understanding Startups), I hope you are now feeling more positive about the opportunities and benefits of joining and working for a startup. By exploring opportunities with startups you really have very little to lose and potentially a great deal to gain -- provided you know what’s what.
It’s critical, of course, to choose the right startup to join. You need to be able to distinguish the future stars from the lemons so you will hopefully avoid the lemons.
Here are the top three things you must know before you make the decision to either join a startup or walk away.
Lots of businesses call themselves startups.
Many are nothing more than someone who has come up with an idea and convinced themselves it’s going to be huge. And that’s it. They have no prototype, no capital, no premises, and no staff. Nothing.
It’s just them and their (possibly) "brilliant" idea.
At the other extreme, there are businesses that are trading, which have investors, customers, staff, premises and a service or product.
But because they are still in the early stage of their anticipated growth, they still consider themselves startups. They may well be at a point where they need to secure more funding for the next stage of their growth.
So when you hear a business is considered a startup, the first thing is you must be able to do is to establish where they are on this continuum.
[Read Understanding Startups to see the six key stages of a startup.]
Note the key words, "able to" (above.) Startups can have very wobbly cashflows. For example if the business has been over-optimistic in its recruitment of people or its investment in premises and consequently is carrying large overhead, any unexpected delay, costs, or blips in its revenue stream can result in there being no money to pay staff.
So, try to find out what the business’s cashflow position is. It’s a reasonable question to ask. You don’t need to audit the accounts to do this. You just need to know what the monthly incomes and costs are. If the incomes can cover the costs, then you can take some comfort that the business is probably not going to collapse in the short term.
Step two is look at who is involved. The track record of the key people in the business is vital to know. If the founders have a track record of success in the same or a similar business, not only are the success prospects much better, but you also can have more confidence they will be succeed. They will be doing something they know well. This makes a huge difference in their probability of success and consequently your job prospects.
The more breadth of talent that is already present the better. A visionary genius alone won’t get far without a team of others who know how to build what’s needed. If there’s a crack team of people who have all done this sort of thing before, that’s a really good sign. Not only are the success prospects much better, you can take a lot of confidence from the fact that these people would not be there if they didn’t believe in the business and its future.
It’s time to sleuth things. Check out the founders and other team members online. Ask others who know them about their history. It’s very risky to rely on what anyone tells you about themselves. You want independent verifications, not people’s own spin about themselves.
This is the third key aspect to know. If the business has been able to secure some funding already that’s a good sign. But take note who and where that funding has come from:
By applying these three simple measures, you can easily sort out the promising startups from the seriously risky ones. Joining a startup which satisfies these three criteria is a sound decision. They may not be able to pay you top dollar. They may not be around in a year or even six months, but, and this is important, the time you spend there will deliver know-how, experience, and contacts which will make you an infinitely more valuable and sought after person in future.
In the next post, we’ll look at how to get hired by a start-up.
Neil Patrick is a veteran of start-ups, having been a founding director of three start-ups to date including the largest venture capital backed start-up ever in the UK. He’s also a visiting lecturer on the MBA courses at Cardiff University Business School specialising in Entrepreneurship, Corporate Strategy and Marketing. He is a mentor for business start-ups at the Innovation Centre for Enterprise (ICE) in South Wales. He is also the Editor of a popular careers blog, 40pluscareerguru. You can follow him on LinkedIn at linkedin.com/in/neilrpatrick, on Twitter at @NewCareerGuru, and also on Google+.