Thinking of Joining a Start-up? Here are a Few Considerations

By Rachel Lord (‘13), Strategy and Operations at Clearbit in San Francisco, CA

Ninety percent of start-ups fail. With venture backed start-ups, the investor’s business model is to distribute funding in anticipation that a few will produce outsized returns on a relatively short timeline. While this fact could seem daunting, there is so much growth and impact a start-up experience can offer. 

Many have asked me how one knows when a start-up has potential. While there are so many considerations to weigh, the following focuses on information to gather to assess the likelihood of the business succeeding.

When considering a start-up opportunity, I spend a bit of time thinking like an investor. If you are considering joining a start-up, then you are an investor as well. You’re about to invest time and energy into building a business, along with potential equity aligning your work to its success. 

Here are a few topics and questions to understand and assess the viability of the overall business: 

Market and Product:

• What market is this start-up entering, and is this a growing space? 
• What is the status quo of the market?
• To what extent is this start-up disrupting the status quo? 
• Does the company’s value proposition meet a need in the market?
• Does the product functionality deliver impact and value?
• Is this solution a nice to have or a need to have? 

Metrics:

• What is the runway? 
• What is the burn rate? 
• Has the company raised funding and if so, how much?
• How many customers does the start-up have?
• What is the average contract value?
• What are the growth and retention rates? (Retention is especially applicable in a subscription business.)

Team, Culture, and Diversity:

• What is the founding story and who is leading the company? 
• In describing the company as a person, how would it be characterized? 
• How is the company measuring diversity and inclusion metrics? (Aside from indicating the ethos of the start-up, diversity boosts performance and innovation)

Customers:

• What is the return on investment for customers?  
• Are there customer testimonials? What do they highlight?
• What feedback have customers provided? 

Some of these questions are worth asking, and some are for interpretation after a bit of research. Hopefully all of them are helpful as you navigate options in the world of start-ups!