How to Evaluate a Job at a Startup

How to Evaluate a Job at a Startup

Is a startup like a big employer, only smaller? Not at all. Very young, very small companies are very different. Their employees tend to wear many hats instead of specializing; they punch no clock, often working endless hours to realize someone else's dream; and they make a deep personal commitment to an untested product and to founders who don't always prove to be brilliant executives.

So candidates for startup jobs need to take their due diligence seriously, doing a thorough investigation of the business and carefully considering whether the career opportunity, compensation and chance that the business will fail are compatible with their life circumstances and risk tolerance. 

Startups Are a Different Kind of Place to Work

Begin at the beginning: Before you examine a startup's business financing and prospects, think about whether you're temperamentally suited to the challenges in store.

First, acknowledge that a job posting for a business startup is much more of a moving target than a carefully vetted job description at a large employer. "You have to accept risk at a startup, and that your job may change a lot," says Healy Jones, head of marketing at Cambridge, Massachusetts-based OfficeDrop, a document scanning service founded in 2007.

And unlike a Fortune 500 company, startups tend to operate loosely, rewarding employees who adopt a "do whatever it takes" attitude and work ethic. "There are no rules, which is very difficult if you come out of a very structured company," says Roberta Matuson, president of consulting firm Human Resource Solutions in Northampton, Massachusetts.

Of course, the career upside at a new venture can be almost limitless. "You may be able to grow up more quickly in a startup, since the company is likely to promote from within if things are going well," Jones says.

One practical way to assess the organizational effectiveness of a startup is to observe how the firm treats you throughout your candidacy, whether it has HR staff or not. Are all contacts with you made in a professional manner? Do all interviewers ask good, hard questions that don't fall on the wrong side of labor and discrimination law? Does everyone seem to be on the same page about how the hiring decision will be made? "If there is no process, which is really typical in a startup, that's an indicator there won't be a lot of systems in place" at the company, Matuson says.

Get Serious About Due Diligence

Even if you don't balance your own checkbook, you must assess the financial strength of any young, small company where you apply for a job.

Don't allow the company's executives to rest on the laurels of last year's venture capital financing. "Find out when was the last funding round," Jones advises. "If the same companies are backing the founders again, that's a very good sign."

For companies that are a little further along, press for details on recent, current and near-term revenues. "When I was interviewing for this job, I asked, 'Do you have customers and are you making sales?'" says Joshua Steinfeld, director of public relations and corporate communications at CodeBaby, a Colorado Springs customer-service technology firm started in 2001. "They have to be willing to open their books up, and you've got to find out what's in the pipeline. There was enough in development at CodeBaby to put to rest any question about whether this business was something they'd worked on but was falling apart."

Ask all the questions you would of a good friend if she were working for the company. "I grilled the CTO for over an hour," Steinfeld says. "He let me ask every hard question, like how the CEO operates."

Will You Accept a Lower Salary for the Chance of a Big Payoff?

As you're assessing the company's fiscal health and prospects, you'll likely find yourself assessing your own financial priorities as well. "The hardest thing is [balancing] a lower salary against the potential of a big payoff," says Jeff Martin, business development and project manager at Syscom Advanced Materials in Columbus, Ohio, a conductive-fiber manufacturer founded in 2005. "When you have a family, the current revenue becomes much more important than the long-term home-run shot of a startup."

Some professionals insist that a company, however young, must be financially robust enough to offer a market salary. "Compensation still needs to match what a more established corporation pays," Steinfeld says. "Don't accept the line, 'Right now we can't pay you what we'd like to.'"

Remember, the success of the entire venture, not just your personal finances, rests on the ability of the startup to pay competitively. "The further along a company is, the more their success is linked to hiring people who know how to sell, which requires pay at market rates," says Will Indest, vice president of venture development at TechColumbus, an incubator firm in Columbus, Ohio.

However you view your potential for a big payday if the startup is sold or goes public, don't assume that you'll walk away from the company with anything more than the family photos on your desk. "You shouldn't bank on equity compensation for your retirement savings," Jones says. As much as you may believe in the company's people and products, you won't know whether those options or shares will be worth anything when you leave.