I had a good conversation the other day with a former colleague who’s considering making a move to very early-stage startup. I shared with him the list of questions I ask myself before I make a commitment to working with a startup and thought I’d share them here as well.
A quick disclaimer: startups are inherently risky and these five questions aren’t designed to help you avoid a high level of risk. That’s not the point. These questions are designed to help ensure that you understand the risk and make you a bit more comfortable that you’re making a good decision.
Here they are:
- Do you have confidence in the people, particularly the leadership team? There’s a great quote from Peter Drucker that I can’t seem to find where he points out that, when a company finally succeeds, more often than not, it will find that it will end up selling a different product at a different price to a totally different set of customers than it initially had planned. The point is that the startup doesn’t have to have the perfect idea or the perfect product to be successful. What they have now probably isn’t right. And that’s ok. What’s important is that you’re working with an ultra-talented team that can iterate and execute like crazy. I’ve written before that the most critical traits for people working in startups are grit, humility, curiosity and adaptability. If you find that the team you’re working with has these traits you’re off to a good start.
- Has the founder(s) earned the right to know a secret? If what this startup is doing is so valuable, why isn’t someone else doing it? More often than not the reason is that the founder knows something that other people don’t. Or at least knows how to execute in a way that others don’t. It’s important to be able to understand the secret that the startup knows and to understand why they know it and others don't.
- Can the investors/board articulate how the business could be massive and why it’s defensible? Prior to making a jump, when possible, it’s important to talk with some of the investors and board members. This is a good way to test their engagement and confidence in the company and alignment with leadership. Really push them on why they invested. Ask them what they think the core of the business will be and what they think will come after the core. If they can’t confidently articulate this in a way that makes sense it’s a clear red flag.
- Can you see yourself being truly passionate about the work you'll be doing? Startups are tough. You’re fighting an uphill battle most of the time and there are lots of highs and even more lows (at least at the beginning). If it's easy then it's not valuable. I’ve found that dealing with the pain of working at a startup is a lot easier when I truly believe and care about the mission of the company. If you don't care about the impact you'll have beyond your own personal benefit then you'll find that the tough days are a lot tougher.
- What are 3 reasons it could fail? Again, most startups are long shots. And it’s important to be humble enough to know that you can fail. If you can’t articulate 3 reasons that it could fail, then you either don’t understand the business well enough or you aren’t taking the risk very seriously. Do your diligence such that you understand as many risks as possible and the reasons it might not work out. If after truly understanding the risks and potential pitfalls ahead you really feel like you still want to make the move then you've probably found a good fit.