So, within months after Son No. 1 loses his job because the tech start-up he was working for went belly up, Son No. 2 gets a job offer from a start-up. They asked him questions about his long term goals and willingness to make a two-year commitment to the company . . . but I’m wondering if he should have been asking them the same questions!
A new hire is hardly in a position to be asking for a copy of their current financial statement — but he also doesn’t want to turn down other offers, move to a new city, and then find himself out of work in six months!
I don’t think it is out of the line to ask about their cash burn and who funds them and how much$$$. I worked in startups and the bosses were pretty open about that stuff. If the company is hush hush about financial position- run.
Yes, at your son’s age risk is the great wealth multiplier. Whether it’s investing or career choice, those decisions and risks taken in the 20s can mean the difference between retiring a multimillionaire and eating cat food in the golden years.
Definitely do the research - ask the questions about financial backing and cash burn, but go ahead and take risks early when there is still plenty of time to recover from any crash and burn.
What departments have you had the most jobs in lately ( listen for sales, programming and the words we cannot hire fast enough.
You want to determine that sales have increased for at least the last three years by at least 20% or more.
Look closely at the track record of management (success AND failures)
What other type of people are they hiring (what is their background)
You do not want an entire group of people under 30 ( you need some senior management as well as young people willing to take a risk) check and see where the senior management came from.
Ask questions of people in the same industry. Are they public? Why not? Remember many start ups can remain private for years. (esp if they have to pay back VC).
Most of @Happytimes2001’s questions are inapplicable to this very small company . . . but may be appropriate for future employers. But cash burn and funding are definitely relevant!
Is the place where the potential employer is located one where there are many other companies around where he could seek employment?
Perhaps another consideration is whether the employer wants him to sign an employee non-compete agreement that can limit his ability to seek a different job, even if dismissed without cause in a downsizing. In a few states, they are not allowed or unenforceable, at least for most ordinary employees (see http://www.beckreedriden.com/50-state-noncompete-chart-2/ ), but in other states, such an agreement can be like agreeing to remain unemployed for a specified period after termination of employment.
UCB - legitimate concern, applies to situations where employee wants to bail out for whatever reason, but if the employer goes under, who’s gonna enforce that non-compete?
Companies do not necessarily go out of business in one fell swoop. Sometimes, they go through multiple rounds of downsizing to cut costs as the money runs out; those dismissed early but under a non-compete may wait for a while before the company is completely out of business, making the non-compete irrelevant.
But also, a declining company may be acquired by another company, which can cause the scope of a non-compete agreement to be expanded if the combined company has more lines of business and hence more competing companies that the ex-employee has agreed not to work at.
I would focus,most on what he’d be doing, what exposure he’ll have to more experienced staff. – in other words, what the experience will yield beyond money and how transferable it will be.
I would ask what their model requires for them to do to be confident in their ability to pay him for the 2 years he’s being asked to commit to. – 10 fold increase in revenues? Another equity round? How likely?
And of course, I would ask what their policy is on giving employees equity participation. Annual option grants? Because all of the financial upside is nonexistent if you have no ownership stake.
UCB - if a company is on a downward spiral, slapping a former employee with a lawsuit is pretty low on the totem pole of their priorities. Speaking from some personal experiences. Unless the employee is a very big piece of cheese, of course.
It’s typical for an early stage tech startup to go 12-18 months between funding rounds. If he can’t accept the risk of being unemployed in a year, he should find work at a more established company. I would ask about equity either in the form of options or units/shares, and the vesting schedule.
So, how good is the offer? Is he going to be doing something that he wants to get experience at doing? Does he have other offers? And does he believe in the company?
I was not particularly impressed with the offer that my younger son got at a startup. However, he is gaining skills doing what he wants (front end web development) and really likes the job and the people he works with. They offered him the job though he had very little job experience in the field. So even though he ought to be getting a better salary, I personally think it’s worth it to enjoy your job and gain the skills you actually want. He could have gotten a better salary if he had stayed at his last job, I think, but he absolutely hated it and wasn’t getting the skills he wanted.
I always ask this question, and I love when I hear it coming from him. Is what I’m doing getting me in the direction that I want to go?
Run their name and their C-officers’ names throug Crunchbase. That would be a good start for the DD. Also, run the founders’ names and investors’ names plus “fraud” or “scam” in google. Sometimes it come be enlightening.
I have very little to offer here on this thread. Just want to agree that Crunchbase is an excellent resource.
Our 24-year-old son went to work for a startup located in S.F. It will be one year ago later this month. He was not necessarily looking to join a start up but, except for a year at Cooper Perkins as a temp and then doing some consulting work for a brief time, there were not a lot of opportunities for him in the S.F. Bay Area. This was the only part of the country he wanted to work.
The startup was founded by 2 individuals in 2013. It is a neuroscience company. Co-founder #1 is an MD who previously helped develop a device and get FDA approval and also helped raise a significant amount of money for this company. Co-founder #2 has a PhD in mechanical engineering. (My son also has a MechE degree from Cal, where this individual attended school, and they are the only 2 employees with MechE degrees.)
Company has total funding of $24M on 6 funding rounds, the last 2 rounds being Series-B. There are about 18 total employees. Not sure how much income was generated last year, maybe around $6M per and rising?
Bottom line:
My son really likes the work he does. His salary is good but not great, considering the high cost of living in S.F. where he lives, sharing a 3-bedroom flat with 2 others. He has good medical benefits and profit sharing (which is a bit of an unknown at this stage). Feels that he is making a contribution, and is being given opportunities that are relatively unique at his age. (He is traveling to China every 8 weeks with co-founder #2 who seems to be grooming him to work with suppliers and distributors.)
If the wheels came off the wagon tomorrow, he could always move home for a time while he found gainful employment elsewhere. In the meantime he is learning and being exposed to the ways of our world.
My relative’s BF worked for a startup. He quit when it went too many weeks then months without any actual pay (nothing to pay bills with). He now works for Dolby and they want him to go back to school for engineering degree that they will subsidize. The BF has no regrets about his time with start up as he learned some but is happy to have a more stable job now with established company.
Calculated risk is the key here. The current economy is a good time to do it.
Since a new hire is also a potential shareholder, assuming they gave him stock or options, it is not unreasonable for him to ask financial questions
how long is the current funding round and what milestones do they need to meet in order to get the next round.
What fraction of the company do the startup options represent, what is the current value of those shares. What you really want to know is if the company gets valued at a billion dollars are your shares worth $500,000 or $5,000. I’ve seen both.
I would add, that I loved working in startups, and even if it is unsuccessful, people often get 5 years of experience in 2 years because they have to do everything.
