From Runway to Career Capital: A Framework for Evaluating Startup Jobs

Since I wrote my last piece making the case for working at a startup, I saw a tweet (that I’m now unable to find) that urged potential employees to think like VCs while identifying which startups to work for. The author then backs this up with his personal “got rich by picking the right startup” story. This seems off to me.

Even the smartest VCs rarely pick consistent winners. Their strategy revolves around spreading bets across multiple companies, hoping for one or two big successes to offset the inevitable failures. As an employee, you don't have this luxury. You're investing your time and career in one company at a time. Therefore, instead of trying to pick winners like a VC, it’s better to consider the expected impact of the move on your career and manage the downside risks by doing due diligence on the startup and your future colleagues. The younger the organization, the more due diligence I’d recommend.

Before talking about risks, it’s worth understanding what the upsides are - both generally working for a startup and with this specific one. These can include significant autonomy and responsibility at a young age, accelerated learning in an environment that is in touch with the commercial logic of business and markets, broader exposure to different business aspects, building valuable social capital etc. On the other hand, the main risks come from the longevity of the organization and the fact that you’re likely working for an organization that most people don’t instinctively recognize and respect.

I’ll list four categories of due diligence:

Assessing Runway and Short-Term Goals

Every reasonable person that has ever worked for a startup recognizes this as a risk. Startups run on funding cycles that can often be as short as 6-18 months, especially early on. Fight through the awkwardness that’s taking over your body and ask them about runway and fundraising. You can clearly state that you understand the risks that come with working for a startup but that you want to make sure it’s within your risk tolerance. This is a completely normal and even healthy thing to bring up when they ask you if you have any questions.

You could also get a sense of what their short to medium term goals are and how they intend to ascertain their success in the short run. A good storyteller can sell you on a captivating long-term vision. But you want to find out if that’s supplemented by a good dose of pragmatism.

Commercial Thesis/Theory of Change

The founders should be able to explain to you why they think the business or non-profit will succeed, in fairly simple terms. Watch out for people who obfuscate logic and reason with needless buzzwords and jargon. If it’s a non profit, you should have a good model of the organization’s theory of change.

In later stages of the process, it might be a good idea to run this by someone external who knows the space/industry well to understand what the key challenges are. Then present those challenges as questions in one of your interactions with the interviewer in the following tone - “I’ve read a bit about similar projects running into [xyz] technical challenges. I’m sure you know a lot more about this so I’m curious to know what you think”

Most founders have to accept significant uncertainties so it’s okay if they don’t have a perfectly satisfactory answer to everything. But generally speaking, it should be clear from their answer that they’ve thought a lot about the central concerns and criticisms.  We also recommend looking out for their willingness to explicitly state their uncertainties and of course.

People, Reputations, Track Records

In general, it’s a good idea to have conversations with as many people as possible. If you’re joining a 4 or 5 person startup, it’s not only feasible but also essential to have conversations with everyone.

The founders' experience and track record can be a strong indicator of the organization's potential. However, a young or relatively inexperienced founder shouldn't be an immediate red flag. In these cases, it’s a good idea to conduct a reference check.

If you don't know someone who has worked with them before, it’s not a terrible idea to ask the founders themselves. Try clarifying that you've enjoyed the conversations so far, but since it's a substantial decision, you'd like to talk to someone who has worked with them previously. You may even want to pro-actively offer them the opportunity to do the same with you (if they haven’t already asked for a reference). I recommend doing this only after building sufficient rapport with them, perhaps towards the end of the process.

The crux here is to look for signals of both competence and integrity. Perhaps even more importantly, the absence of feedback that might point to questionable ethics or integrity.

Assessing Career Capital/Future Prospects

When assessing a startup position, consider what you can learn and how it might advance your long-term career goals. Some roles, like those in business development or project management, often involve measurable outcomes such as reaching specific sales targets or successfully implementing projects. Especially if clearly attributable to you, these concrete accomplishments can be powerful resume boosters.

Perhaps even more importantly, roles that require interaction with external stakeholders can significantly expand your professional network. The social capital you build in a startup environment can be particularly valuable relative to the amount of exposure a junior employee is likely to get in a large corporation. When I worked at an early-stage startup as its Chief Financial Officer (something that would only be possible for a 25 year old in an early stage startup), I regularly interacted with investors, board members, and vendors. In fact, I found that particular job by interacting with a founder I met in the previous job.

The central assessment here should in the following form: Is there enough here that makes up for the fact that people won’t immediately know the place I worked for. That’s going to be a function of your role and the social capital that the founders of this startup already possess. If you think the founders/employees are super competent and match your working style, a lot of the downside risk re career capital can be ameliorated.

Conclusion

While exploring opportunities in early-stage impact organizations may seem daunting due to the inherent uncertainties, don't let the perceived awkwardness preclude you from asking these vital questions. Organizations value thorough, proactive individuals with a healthy, calculated approach to risk.