Below are questions to ask before joining a startup as an employee. You may not need to ask all of them, but these should be directionally helpful.
Quality of the Team (& investors)
- Have any of the founders had a previous, successful exit?
- Who will you report to?
- I think it’s best to optimize for rapid learning and ability to gain responsibility, rather than title
- Who are the lead investors?
- Look for high quality VCs. Also knowing which VC is on the board is helpful
Company Runway & Health
- What’s the current runway (number of months) and plan for next fundraise?
- 18-24 months of runway (including your comp) is ideal. Under 12 is a worry.
- Assume capital raises in this (tough) environment will take 10 months
- Given the company’s current stage, where is it behind?
- Helps showcase what the biggest existential threats and ability to introspect
- What are the company’s 1-2 top priorities? (could also ask for their OKRs)
- What was the company’s valuation at the last round (409A) — and given the current economy, what’s it realistically today?
- Helps to know how tough fundraising will be (avoid companies extremely under water, or soon-to-be)
- IMO, it’s best to assume your equity won’t be worth anything, but later be surprised to the upside
- That said, understand what you own. Ask for your ownership percentage on a ‘fully diluted shares outstanding’ (fdso) basis. Equity grants are often presented on an absolute basis so you will need to know your relative ownership percentage (also see Compound’s calculator)
- Make sure you are on a ‘normal’ vesting schedule (i.e., 4 years or less)
- Ask how long the option exercise window is
- In modern times, 90 days is far too low - ask for several years
- If fully remote, drill into culture and how often the team get together? How do people stay connected?
- Personally I have found 100% remote companies to have less success and higher turnover
- Often startups don’t have a ton of experience with implementing employee feedback systems. Ask what 1:1’s will look like and how feedback is administered. If new to startups you may want to research OKRs.
- It’s also smart to take initiative on developing a 30/60/90 plan, setting yourself up for success.
Collection: Early Employee - Compound Manual
You've taken a leap of faith and gone all in on a startup you think has the potential to take off. As an early employee, you're building the plane as you fly it. It goes beyond "wearing different hats". Your job description seems to change by the week as you try to find product-market fit. That leaves little time to think through the nuances of equity optimization and how to manage your personal finances. Still, you know that these "unknown unknowns" will impact your later upside by orders of magnitude if what you build becomes something big. But you weren't hired for your in-depth knowledge of the tax code. Not to worry—we'll cover Startup Equity 101 so you can focus on creating the next iconic company.
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Thought exercise you could ask your hiring manager:
- Imagine 6 months from now and I'm really successful, what happened?
- Imagine 6 months from now and things didn't work out, what happened?