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Questions to Ask Before You Join a Startup


Before making an investment, most professional investors complete something called “due diligence”. During this process, the investor investigates and verifies information about an investment opportunity. Effective due diligence helps you avoid bad decisions, and investors will often spend weeks on dilligence about one specific investment before deciding to hand over money.

Why don’t most job-seekers do the same?

Choosing which company to work at is arguably a more consequential decision than a venture capitalist choosing which company they should invest in. VCs have millions of dollars and invest in hundreds, or thousands, of companies (after which most VCs spend ~zero time doing anything for those companies). By contrast, joining a company is one decision you make that may take up a huge amount of your time for the next few years or decades of your life.

It’s at least a bit weird that most people ask very few questions of their potential employer. There are a bunch of reasons for this (e.g. it can feel scary, and the company holds some of the power). But the reality is that making a major life decision with scarce information makes things unnecessarily challenging.

Getting sufficient information is not that much additional work. We’re talking <1 hour. The upside to doing that additional work is potentially life-changing. You could save years of your life by avoiding joining a bad company.

Some of the below questions might seem too simple or obvious. That’s because the right quetions to ask are rather straightforward—there is no one super-secret question that will save you. And even though the questions below are basic, most people don’t ask them. Figure them out before making a decision and you will have more confidence and less regret about your final choice.

We are not suggesting you ask all of these directly, but that you find a way to answer them somehow (which may sometimes be by asking directly).

About the product


  • What does the product actually do? How has the product changed in the past month? Year? What’s the plan for the future? Can you use the product?
  • Who is the customer today? Why does the customer buy the product? What problem does it solve?
    • Can you talk to any of their customers to understand their experience first-hand?
  • Who is your competition? What makes you different? What is your edge today? Will that change in the future?


About the performance

 
  • What does success look like?
  • What is the revenue? What’s the nature of the revenue (transactional versus subscription)? How is the revenue growing? How has it changed over the past month? 6 months? Years?
  • How does the company expect the next 6 months to look? 12 months? 2 years?
  • How does the company think about profitability? How important is having runway? When will the company run out of money?
  • Who are the investors in the company? Why did they invest? Can you read their investment memos? Can you talk to them? 


About the team


  • Who is the CEO of the company? What are they good at? What is their vision for the company?  
  • Who is on the leadership team? What are they responsible for? What are they good at? Are they friends? Do they fight? What about?
  • Who would you be working with directly? What makes them great? Do they do real, impactful work?
  • Has anyone quit? Why? Has anyone been fired? Why? Has there been a layoff? Why?


About compensation 


  • How is compensation determined? How often has this changed? How often will it change? How is the org structure determined? How are levels determined?
  • What is the type of equity? Stock options or grants?
    • If options, how much will it cost you to exercise them all today if they allow you to early exercise? Does QSBS play a role? What is the post-termination exercise window?
  • What are the benefits? Is there 401(k) matching? 

About you


These are questions to answer for yourself, ideally in writing.

  • What is important to you as you think through this decision? What is less important?
  • Why do you want to join? [0]
  • What are your expectations for the role? Why?
  • What are your expectations for the company? Why?
  • What do you think of the people at the company? Why do you think those things?
  • Do your answers to these last three questions align with the reason you want to join?

It’s naive to expect an early-stage startup to have mature and permanent answers to every question. However, by asking these questions and others like them, you will be able to understand what parts of the business seem to be obviously de-risked and which parts still have a big question mark standing over them. The question marks are not red flags, but they are risks you should incorporate into your personal underwriting model.

There are no right answers from the company—only data you can use to better inform your decision.

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[0] This essay is not about giving advice. But if your primary motivation for joining a startup is to become very wealthy, just know two things. Thing one is that the odds your equity ever turns into meaningful money are very low, both because most startups never exit and because even when they do, you are not guaranteed millions. Most people who joined Instacart after Series B saw a worse return than if they’d just been paid in all cash and invested in the market. This is not uncommon. Thing two is that there are much clearer paths to becoming at least moderately wealthy (investment banking, Big Tech, consulting, real estate, literally 1000s of other jobs).


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