What You Need To Know Before Working At A Startup
No two startups are alike, which is why when choosing between two to work for it comes down to more than just salary.
Even in this job market, some people are faced with multiple job offers, particularly if they possess skills startups want. While the decision is easier when weighing two established companies, when it comes to startups, it’s a bit trickier. After all, who is to say the company will even be around in a year or if you’ll get to use the skills you were hired for even if the company is throwing stock options at your feet. That’s why startup experts say fit ranks higher than pay.
Sure, stock options and other perks can certainly sway a decision, but what you are doing at the startup will be what actually helps you grow. According to John Cerasani, an entrepreneur and president of insurance brokerage Northwest Comprehensive, ideally you should choose the startup that will enable you to learn as much as you can about the field you’re working in. If in one job you are doing one function only, and in another you’ll get exposure to various aspects of the industry, Cerasani says to go with the latter.
What’s more, he says, is to choose the company that’s doing something you feel passionate about. Chances are the startup is going to make a lot of mistakes and potentially flame out, but if it’s something you are interested in, what’s to prevent you from learning from the mistakes and doing it better, says Cerasani.
Gauge the Startup’s Survival
In addition to choosing a startup you care about, you’ll also need to judge the odds of the startup surviving, which can be tough to do. One way is to look at who the investors are. For instance, does the company have venture capital backing or angel investors and how much have they raised. Roberson says one red flag is if the startup hasn’t raised any capital, but has been around for a few years.
“Venture capital backing is a good indicator that there are smart people who have done their due diligence,” says Roberson. If a company has been around for three years and hasn’t taken any VC dollars, he says he would question its strategy, since the typical path is to raise money within a year.
Experts say it pays to find out where the startup is in the fundraising cycle and what their goals are during the courting phase. For instance, do they plan to follow in the footsteps of Craigslist, which chose not to get venture backing or try to grow into a huge behemoth like Facebook or Google.
“You should definitely look and see where the money is coming from,” adds Cerasani. “A lot of ideas don’t make great businesses. If the money isn’t there to implement the strategy, that company can disappear tomorrow.”
Mentors, Compensation Matter
Whether or not the company has VC backers, who the company’s mentors are also matters. Does the company have a knowledgeable board or set advisors? Are there experienced partners? “You want to know what their vision is, what’s the overall direction and buy into that,” says Roberson.
At the end of the day, how much you are going to be paid is going to weigh heavily on your decision when all things are equal. In the case of salary, Roberson says the ideal situation is when you are paid enough so that you don’t have to worry about covering your car payment or mortgage bill, enabling you to forget about your pay and enjoy your job.
Since startups typically work on tight budgets, most make-up for low salaries by offering stock options in the company. The value of those stock options, however, is more important than how many they offer you.
Let’s say a startup offers you 10,000 shares in the company. You may think you are getting a great offer, but if that company has hundreds of millions of shares outstanding, your stake is really miniscule. On the flip side if you are offered 10,000 shares and there are only 100,000 shares outstanding, then you are being offered a 10% stake in the company. “It’s hard to know the value without knowing the number of outstanding shares,” says Roberson. “If the company doesn’t want to disclose the full number for whatever reason…that’s a red flag in my mind.”