Originally delivered as a live discussion for fellows in the On Deck First 50 Fellowship
Deciding that you want to work at a startup is only the first step in an informed job search. The harder part is often what comes next: deciding what kind of startup you want to work at.
The right answer to this question varies a lot depending on who you are, especially when it comes to your risk tolerance and career priorities.
This guide covers the considerations that go into choosing your next startup, including the importance of aligning your risk tolerance with the level of risk of a startup at a particular stage and figuring out whether you are most motivated by personal growth, financial stability, or financial gain.
How comfortable are you with risk?
When evaluating what kind of startup you want to work for, ask yourself whether you want to be employee number two, number two hundred, or whether you want to found something yourself? The answer, most likely, will have a lot to do with your risk tolerance.
The riskiest startup to join is one that you start yourself. As a founder, you often have to put in your own funds, and may not be able to receive a paycheck for a number of years. You have to take on both an intense workload and the responsibility of your employee’s wellbeing and investors’ returns. If you’re looking for a low-risk career investment, this may not be the path for you.
On the other hand, starting your own venture can be incredibly rewarding on a personal, career, and financial level; the financial upside if your own company has a successful exit can often be life-changing. And at the end of the day, if you have an idea that you desperately want to build, this may be the only true path forward for you.
After starting your own business, the next riskiest thing to do is joining an early-stage company. Early-stage startups may not yet have found product-market fit, may not be able to pay their employees high salaries, and have uncertain futures.
That said, early-stage startups can be great places to learn and network, and often offer generous equity packages to their employees.
If you’re looking for the option with the least risk, focus on startups at or past the series B stage. These companies have usually found product-market fit and have reached the growth stage of their life cycle. While there might still be unforeseen issues and changes in company strategy or product down the line, at the series B stage or beyond you should be able to get a good understanding of a company’s roadmap and plans for growth, and estimate how your career fits into that trajectory.
But not all startups are alike, even at the same stage. You have to do your due diligence and assess the specific risk levels of the opportunities in front of you.
For example, a seed-stage company founded by a serial entrepreneur with a record of success may actually be less risky than a series C startup led by a first-time founder without a sound go-to-market strategy.
Assessing the risk level of a startup is a complicated, often intimidating process. It involves both understanding your own skills and thinking like an investor would about a company’s product and strategy.
That said, there is research you can do and questions you can ask during your job search to make sure you have all the information you need to navigate this process.
Here are a few such questions:
1. Skill set : How in-demand are your skills?
If you are an engineer, product manager, data scientist, or have another technical skill, the overall risk to your career is lower if a venture doesn’t pan out. People with a technical background can often afford to join riskier ventures with higher potential upside because, given talent market demands, they will likely be able to find another job with relative ease compared to those with less technical skill sets.
2. Company: What is the company’s revenue? Growth? How many shares does it have outstanding?
You can and should ask these questions about the business during your interviews. As long as you come from a genuine place of curiosity, and you don’t ask them too early in the interview process, they should be well received.
If a founder is dodgy about answering your questions, this is a bad sign, and may signal that their financials are in bad shape, or that there is a lack of transparency throughout the company.
3. Founders: Who are the startup’s founders? Do they have a track record of starting successful companies? Do you agree with their values, and believe in their mission?
This question is especially critical if you’re going to be reporting directly to a founder, as is often the case when you join an early-stage startup. But even if you are not, a founder’s attitudes and mindset trickle down to the rest of the company, and you should make sure you are aligned with their priorities before getting on board.
4. Employees: How smart is the team? Do you get along with them, and think they would be good teammates? How do they speak about the company and its direction?
You will have to collaborate closely with your future teammates, and spend dozens of hours a week communicating with them. They should be people you respect, and who you believe are intelligent and add value to the company in their own right.
5. Investors: Who are the investors, if any? Do you trust their investment portfolio? Are they individual angel investors or a massive fund?
A company’s investors are important - backing from a large VC like General Catalyst or Atomico with a track record of success can act as a vote of confidence in a company - but you should not join a venture just because it has big-name investors behind it. You need to make this bet yourself, and have your own reasons for doing so.
6. Product: What is the product? Who are its competitors? Does it have a technological advantage?
Get to know the product well in order to decide if it’s one that you want to get behind and dedicate your time to improving.
7. Market: What is the market this business is operating within? What are the biggest ecosystem risks?
Understanding the product’s market is as important as understanding the product itself. For example, joining a startup operating in a growing market - like virtual fitness or electric vehicles - is a much safer bet than a startup in a shrinking market. You should also try to discern the startup’s regulatory and competitive risks in the market, as well as its position: is it a leader, or joining the party late?
Once you’ve answered these questions and identified both your own risk tolerance and the riskiness of a particular venture, you’ll be better positioned to make an informed decision. But risk tolerance, as mentioned above, is only the first part of choosing the right startup to join. Before making your decision, take some time to consider your career priorities as well.
What are your career priorities?
What is valuable to you at a given point in your career will depend on a lot of factors, including your financial situation, age, time constraints, and ambitions.
Because these factors are ever-shifting, it’s important to spend time during each job search exploring them again in order to make sure the startup you end up at aligns with what you value most.
Look at your values and decide what’s most important to you and where you can be flexible: Would you be willing to take a paycut for an opportunity to be a founding member at an exciting startup? Or accept a less senior position to get your foot in the door at an established venture?
The outcomes people look to achieve by working at startups generally align with growth, financial stability, and financial gain.
If you’re early on in your career, with high ambitions and low monetary constraints, you may prioritize learning and growth. If this is the case, an early-stage startup is best for you.
Early-stage companies are often more willing to take chances on employees. They can’t afford to hire a suite of presidents and directors from other companies, so they look for diamonds in the rough: highly talented people who are early in their career and show potential for growth.
There is more risk involved in joining one of these ventures, but also more learning. At seed or series A startups, people are often required to grow faster than the business itself, and this involves an intense rate of learning.
If you’re considering joining an early-stage company, know that they have higher workloads than later-stage startups, but they also have higher potential financial upsides if you are able to accumulate equity at a venture that goes on to be sold or go public.
Early-stage startups are also great places to network and meet others who are early in their journey, and who may go on to do exciting things as their careers develop.
These companies value experimentation and innovation, and while later-stage startups also value these things, they often place higher emphasis on unwinding bad practices and replacing duct tape with sustainable processes. These changes are invaluable when a company is pursuing growth, but also mean that the rate of learning may be lower as stability is established.
If you are later in your career with tighter time constraints, and want something that will offer you more financial stability, you should look at startups at the series B level and beyond.
These companies often have established processes in place that allow you to maintain a more consistent work schedule from week to week.
Unlike earlier stage companies, they can also offer more generous compensation in addition to equity. Early-stage companies often offer more equity, but equity is not a sure thing; its value is ever-shifting, and it may not become actionable for years, if at all.
A caveat to this is that, depending on how high the capital investment is for a seed or series A company, they may in effect be paying as well as a series B or series C company. This is one example of why doing your research on a company’s financials is integral.
It is also important to note that startups may want people with a proven track record of success that can help them scale. For example, a series B company may be looking for a manager with experience at a series C company, and so on. In these cases, you will have to leverage your career history and skills to get the job you want.
The smaller the startup, the higher the potential financial gain, but the lower the financial stability.
If your priority is financial gain instead of financial stability, you may want to consider founding your own company or joining a seed-stage startup. These options are high risk, but it also has the greatest potential for reward. Once a startup reaches the series B or series C stage, it is standard for founders to take money off the table and increase their salaries substantially. In addition, they also have very high equity stakes.
Depending on your stage in your career, you may be able to achieve the best of both worlds for both financial gain and financial stability by joining a series B company at an executive level. These positions often come with both high equity and high pay and financial stability.
If you’re early in your career and your risk tolerance is low, you should target a later-stage company that can pay a more generous compensation package. If you join an early-stage company at an entry level, your equity package may not be substantial.
Joining an early-stage company at a senior or mid-level point in your career, however, can get you a large equity package that will build over time and compound in a substantial way towards high potential financial gain.
Your particular role will also affect your equity package. Technical jobs are the most in demand at early-stage startups, and tend to get more equity as a result.
But this doesn’t mean that there isn’t room for generalists. More than the particulars of a role, founders at early-stage startups want passionate people on their team who share their vision.
If you want to get your foot in the door at a given startup, reach out and present your value. For example, if you are a marketing designer, you can send an email expressing your interest and attach a sample of free work you’ve done for their website. If you’re in sales, talk about a potential lead you’ve generated that you’d love to pass along. Companies don’t post all of their job openings online, and startups may be open to creating roles around talent they want on their team.
There are no right answers
Joining any startup is a bet. Even if you’ve done your due diligence and asked all the right questions both of yourself and your potential employer, there are no guaranteed outcomes.
What’s more, it is often the case that a startup’s success or failure reflects on its employees. For example, being one of the first people at Uber or Spotify means more in a future job search than being one of the first people at a startup that folded.
You have to be your own career’s manager and know when it’s time to stay, when it’s time to leave, and when it’s time to take a break and evaluate your next steps if you find that your priorities, or the company itself, have shifted.
At the end of the day, there’s no right answer to choosing what type of startup you want to work at. Establish your priorities, do your research, and make the most informed decision you can with the information at hand.