It’s critical, of course, to choose the right startup to join. You need to be able to distinguish the future stars from the lemons so you will hopefully avoid the lemons.

Before You Decide to Join a Startup…

Here are the top three things you must know before you make the decision to either join a startup or walk away.

1. What stage are things?

Lots of businesses call themselves startups.

Many are nothing more than someone who has come up with an idea and convinced themselves it’s going to be huge. And that’s it. They have no prototype, no capital, no premises, and no staff. Nothing.

It’s just them and their (possibly) “brilliant” idea.

At the other extreme, there are businesses that are trading, which have investors, customers, staff, premises and a service or product.

But because they are still in the early stage of their anticipated growth, they still consider themselves startups. They may well be at a point where they need to secure more funding for the next stage of their growth.

Position on the Startup Continuum

So when you hear a business is considered a startup, the first thing is you must be able to do is to establish where they are on this continuum.

• Generally speaking, businesses at the beginning of this continuum have no ability to pay you from their business revenues. Because there are none. Sometimes a startup founder may be independently wealthy or have access to other capital through personal connections and this can remove this obstacle. But these are the exception not the rule.So, unless you are completely convinced by the brilliance of the idea and its prospects of success, AND you can afford to work possibly for no pay for an unknown period of time, walk away, or negotiate a deal where you will be paid upfront or in the form of future equity (more on this later).
• The further a startup gets along the continuum however, the less risky it is and the more ability the business has to pay you. This doesn’t automatically mean that you’ll have a secure job there for the next 10 years, but it does mean you’ll get paid for as long as the business is able to.

[Read Understanding Startups to see the six key stages of a startup.]

Cashflow Position

Note the key words, “able to” (above.) Startups can have very wobbly cashflows. For example if the business has been over-optimistic in its recruitment of people or its investment in premises and consequently is carrying large overhead, any unexpected delay, costs, or blips in its revenue stream can result in there being no money to pay staff.

So, try to find out what the business’s cashflow position is. It’s a reasonable question to ask. You don’t need to audit the accounts to do this. You just need to know what the monthly incomes and costs are. If the incomes can cover the costs, then you can take some comfort that the business is probably not going to collapse in the short term.

2. Who is involved, and what’s their track-record?

Step two is look at who is involved. The track record of the key people in the business is vital to know. If the founders have a track record of success in the same or a similar business, not only are the success prospects much better, but you also can have more confidence they will be succeed. They will be doing something they know well. This makes a huge difference in their probability of success and consequently your job prospects.

The more breadth of talent that is already present the better. A visionary genius alone won’t get far without a team of others who know how to build what’s needed. If there’s a crack team of people who have all done this sort of thing before, that’s a really good sign. Not only are the success prospects much better, you can take a lot of confidence from the fact that these people would not be there if they didn’t believe in the business and its future.

It’s time to sleuth things. Check out the founders and other team members online. Ask others who know them about their history. It’s very risky to rely on what anyone tells you about themselves. You want independent verifications, not people’s own spin about themselves.

3. Has the business had any outside investment or scrutiny?

This is the third key aspect to know. If the business has been able to secure some funding already that’s a good sign. But take note who and where that funding has come from:

• Savvy investors If the source is external such as wealthy private investors, venture capital firms, or bank loans, you can take reassurance from the fact that none of these types of investment are usually made without rigorous independent scrutiny of the business and its prospects.
• Family and friends On the other hand, if it’s family or friend’s money, that doesn’t black list the business, but it does mean that the scrutiny will not have been as rigorous as with external investments.
• Crowd funding Crowd funding is a new source of funds for businesses. There’s a lot of hype about it. The most successful have raised tens of millions of dollars in this way.I recently examined the top 100 biggest crowd funded success stories. What is important to know is that only four categories of businesses were in the top 100 most successful at raising funds this way. They were video games, niche movies, software/tech gadgets, and charitable/heritage activities. This is because the crowdfunding investment community is heavily skewed to those who are heavy digital users. So they are the young, intense users of social media, very interested in technology.In essence, they choose to invest not so much because of the business merits of a startup but because they like the idea, product, or service it delivers. Success reflects their wants much more than the business’s prospects of success. So a crowdfunded business in one of these sectors that has secured heavy investment this way is a good bet.If the business is outside these sectors, has no record of success with crowdfunding, and states that this will be the source of its future capital, you should be much more wary.

Botton Line

By applying these three simple measures, you can easily sort out the promising startups from the seriously risky ones. Joining a startup which satisfies these three criteria is a sound decision. They may not be able to pay you top dollar. They may not be around in a year or even six months, but, and this is important, the time you spend there will deliver know-how, experience, and contacts which will make you an infinitely more valuable and sought after person in future.

In the next post, we’ll look at how to get hired by a start-up.

More Information About Startups

• Guide to Startup Jobs
• Understanding Startups
• How to Research an Early-Stage Startup
• Researching Private Companies

The post Evaluating a Startup as a Potential Employer appeared first on Job-Hunt.

Negative assumptions are made:

• Startups are risky.
• They are disorganized.
• They are for young people.
• They often fail.

These are just a few of the knee-jerk reactions that most people have about working for a startup. In this post, I’ll explain why none of this matters.

Actually, once you know what’s what, working for a startup can be a really smart career choice. Startups are a better career choice than you thought because…

Why Joining a Startup May Be a Smart Career Move

Consider the four common prejudices listed above simply in terms of your resume and experience.

Regardless of whether a startup you join succeeds or fails, regardless of whether you stay or leave, the experience of just being there will show that:

• You are not afraid to take calculated risks.
• You are capable of working flexibly and in a fast changing environment.
• You can execute at speed and like being around energetic “can do” people.
• You are not afraid of failure.

You don’t even need to state these things on your resume. Actions speak louder than words, and being in a start-up proves beyond question that even if you are not a founder or an entrepreneur, you have these qualities which are so sought after in today’s job market.

Making this choice is as much about your next job(s) as this one. Joining a start-up positions you for more options in the future than by taking on a “secure” job which probably isn’t really secure at all; as you’ll know if you pay any attention to the business news. Every day there are down-sizings, closures, off-shoring, consolidations — big organizations are laying off thousands of people every month.

Startup Job – Smart Investment?

Working for a start-up is quite possibly the best career investment anyone can make today

Most posts about start-ups focus on the founders’ personal stories and their advice for other entrepreneurs. These posts aren’t about that. These posts are about working for start-ups as an employee and why everyone should think about it differently.

According to data from analysts Mattermark, start-ups are attracting more investment than any time since 2000:

There’s much to be said for the old adage, “follow the money”…

1.We have entered an age where disruptive digital businesses are the ones driving change.

In the old days, having IBM, GM, or J&J on your resume was considered to confer some of that brand prestige upon you. Not so much anymore. Big global corporations are no longer the ones that are changing the world.

Instead, it’s the thousands of digital disrupters who are at the forefront of change and competition. Google and Amazon didn’t exist 20 years ago. Neither did eBay, Trip Advisor or PayPal. Airbnb was founded in 2008. Uber is just 7 years old…

Every one of these businesses has transformed their industry. If just one of these firms were to appear on your resume, you are a hot property.

“Ah,” you say, “but these firms are the survivors from hundreds of failed start-ups.” This is irrelevant — employers don’t hire people based on the financial results of their employers. They hire them because of their ideas, attitudes, skills, and experience.

2.Start-ups nearly always involve digital in some way.

If there is one word which is invaluable for just about any resume today in just about any sector, it’s ‘digital’.

The digital revolution lies at the heart of a transformation in jobs, greater than any change in the history of jobs. The digital revolution has democratized business in the same way that the telephone democratized communication and electricity democratized energy.

If you join a start-up, chances are that it will involve digital aspects from the very start, because it is the digital world which has made such things possible. Old businesses are struggling to migrate their analog business to the online world. New businesses build in digital capability right from the get-go.

So, you have a choice. Do you want to join the ranks of the disrupters, or the disrupted?

3.You’ll gain more experience in one year working in a start-up than three years in an established organization.

Start-ups don’t have lots of employees. Or departmental silos and communication barriers.

Everyone has to turn their hand to multiple tasks. It’s a fast moving environment. You are unlikely to be criticized if your work is less than perfect, because perfection isn’t the goal. Progress, deadlines and milestones are.

No-one ever gets bored in a start-up. And you’ll rack up valuable experiences that most likely you’d never have the chance to realize in an established business. Your resume will inflate with value faster than anywhere else.

4.You’ll be working with energized innovators not clones.

The startup environment attracts people who think and act differently to people in more established organizations. They must solve new problems daily, act fast, and keep within tight budgets.

This environment isn’t to everyone’s liking, but for those who can embrace it, it’s like the difference between being a regular trooper and a member of an elite special force. Resourcefulness, initiative and independent thinking are more valuable than routine and rules. Joe Cohen, founder of Seatwave says: “I want people who take the ball, run with it, and get sh*t done.”

5.Getting hired by a start-up is often easier than joining a more established employer.

For the reasons described at the beginning of this post, many people are extremely wary of joining a start-up. Which in turn means the competition for these jobs is less intense, and the hiring processes are less rigorous — start-ups do not have large and bureaucratic HR departments.

Bottom Line

None of the above means that you should jump at the next chance you get to join a start-up. All start-ups are not the same. And in the following posts, we’ll take a look at how to decide which start-ups are potential stars and which ones are lemons.

More Information About Startups

• Understanding Startups
• How to Research an Early-Stage Startup
• Researching Private Companies

The post Guide to Startup Jobs appeared first on Job-Hunt.

What Is a Startup?

In everyday parlance, a startup can be any business in the early days of its existence. But this definition obscures understanding which startups are a good choice to join and which are not.

The U.S. Small Business Administration describes a startup as a “business that is typically technology oriented and has high growth potential.”

Paul Graham states that “a startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of ‘exit.’ The only essential thing is growth. Everything else we associate with startups follows from growth.”

Graham adds that an entrepreneur starting a startup is committing to solve a harder type of problem than ordinary businesses do. “You’re committing to search for one of the rare ideas that generates rapid growth.”

Straight away, we can see that not every startup:

• is necessarily a tech business.
• requires venture capital funding.
• is being set-up with a view to an exit or sale to deliver wealth to its founders.

The common factor is growth potential.

Which means that if you cannot easily see this potential for the business, then not only is it unlikely to succeed, your involvement is unlikely to be sustained or well-rewarded.

Stages of a Startup

So if you are approached about working for a startup, the first critical thing to establish is exactly what stage of development the startup is at.

This graphic shows the six key stages:

The earlier the stage of the startup, the greater chance you have to negotiate some equity if you join. This reflects the risk you are taking.

The rewards can be great for early joiners, but only when the business achieves growth and profits and a successful exit. Many entrepreneurs aim for this to happen within about 5 years of launch.

But, unless you are already connected with entrepreneurial people, the chances are that you will not be approached to work at a startup in phases “Concepting” (the -1 phase, in the chart above) and “Ideating” (the -2 phase). The earliest stage for hiring is most likely to be the “Committing” stage (phase 0) when the business is taking on people to enable the realization of its vision and goals.

The risk of failure reduces as each milestone, above, is passed. So the security increases.

The essential thing to determine when considering joining a startup is which stage it is at. The earlier you join, the higher the potential rewards, but the higher the risk. And vice versa, the later you join.

Capitalization

Apart from developing their product or service, most startups are obliged to commit a significant amount of their efforts to the hunt for funding.

Again, understanding the level of capital to hand and likely to be obtained, must be a factor in your evaluation of the attractiveness of joining the business.

There are different stages of investment.

First: the seed round.

The first round is called the seed round. This is when the startup is still in the very early phase of development when the product or service is still in the prototype phase.

At this stage, founders and/or angel investors will be the ones participating. A startup with only seed funding secured cannot usually last for long without trading in some way. Nor can they commit to paying salaries because the revenue streams are not yet sufficient to bear this cost.

This is an awkward and tense stage for many startups. They need people to turn their product or service into cash flow. And they need it fast. If you can help make this happen, then you are in a strong negotiating position to secure not just a job, but also an equity share.

Second, the Series A round.

The next round is called Series A. At this point, the company is already trading and making revenues even though these may be small.

In Series A rounds, venture capital firms will be participating alongside angel investors. A business at this stage is in many ways the best balance between risk and reward for potential employees. The business will have secured enough confidence from investment professionals to warrant a higher degree of confidence from employees.

Following, Series B, C, and D.

The next rounds are Series B, C, and D. These three rounds are the ones leading towards the IPO (initial public offering or ‘flotation’). Venture capital firms and private equity firms will be participating. At this stage, there is relatively little risk in joining a startup. Certainly no-more than joining a large and well-established corporation.

Crowd-Funding

This is a new buzzword. It has grabbed headlines as there have been some very successful and high profile businesses which have secured millions of dollars of capital for business startups by using crowd-funding or peer to peer lending.

However, if a startup says it will raise its seed capital by crowd-funding, you should exercise great caution.

This means that the business cannot access any funds apart from the owner’s personal capital and lines of credit, until a successful crowd-funding campaign has been completed. And when it comes to crowd-funding, we find that success has little to do with business merit and potential, but everything to do with the nature of the business.

In essence, the simple fact this reveals is that crowd-funding is where what I’ll call cyber-geeks (and hardly anyone else) invest some of their money to help products and services they want become reality. This is another reason why it is often called “peer to peer” lending.

I recently examined the 100 most successful crowd-funding campaigns. And some very interesting patterns emerged from the analysis.

What this showed was that every single one of the top 100 were from just four business sectors:

1. Computer games
2. “Niche” movies (mostly it seems involving zombies)
3. Software and tech gadgets
4. Heritage organizations and charitable ventures.

So, if the startup you are considering joining is in one of these four sectors, then crowd-funding has a realistic prospect of raising capital. If it isn’t, then you should seek a lot of reassurances as to why crowd-funding is going to succeed for your potential startup employer.

Bottom Line on Startups

Ask questions and do research to understand what phase a startup is in before you decide to join it. Evaluate the risks and rewards in line with the stage and capitalization and your sense of how popular the product or service will be.

In the next post, we’ll take a look at how to evaluate a startup before you decide to join.

More Information About Startups

• Guide to Startup Jobs
• Evaluating a Startup as a Potential Employer
• How to Research an Early-Stage Startup
• Researching Private Companies

The post Understanding Startups appeared first on Job-Hunt.