Key Questions for Candidates Joining Startups: Understanding Investors, Strategies, and Growth Prospects
Maryna Khomich
Founder @ Recrucial | Expert Recruitment Strategist | Growth Expert for start-ups I Organizational Consultant
Two weeks ago, we discussed the questions candidates should ask when considering a job at a startup. Since startups are a unique type of company, it’s essential to understand how their specific characteristics will impact your employment, work, and financial well-being.
In our previous article, we explored the concept of stock options:
We also covered how startups are valued, the stages at which this happens, and how this affects the value of stock options.
Additionally, we touched on what employees can expect if they leave a startup before it exits: the price at which they can buy their stock options and what they can do with them. Understanding these aspects from the start is crucial because your compensation as a startup employee will largely depend on these flexible elements, namely the stock options.
Startups often offer a compensation package with a fixed base salary and stock options. Therefore, when considering a job at a startup, it’s essential to understand what you can expect regarding compensation.
Investors and their Impact
Beyond the financial aspects, several related questions can influence your choice of a startup employer.
For example, knowing who has already invested in the startup is important. Since investors not only provide capital but sometimes also participate in the company's management, it’s vital for employees to know who the investors are before joining the startup.
First, it’s crucial to assess the prestige of the investors: research their history and see which companies they have supported in the past and the outcome of those investments. Have they had successful exits in the same industry as the startup you are considering?
Next, pay attention to the investors’ reputation within the industry and the level of trust other entrepreneurs have in them. Reputable investors often participate in successful projects and have positive reviews from startups. This could indicate a higher likelihood of future success for the startup.
There are notable personalities and funds in the investment world whose actions significantly impact startups and businesses in general. Here are some examples of successful and controversial investors from the US and Europe:
USA
1. Andreessen Horowitz
One of the most respected venture capital firms in Silicon Valley, founded by Marc Andreessen and Ben Horowitz. They have invested in successful companies like Facebook, Airbnb, and Lyft. The firm is known not only for providing capital but also for offering active support and advice.
2. Peter Thiel
Co-founder of PayPal and Palantir, known as one of the first investors in Facebook. Thiel is also a controversial figure due to his political views and support for various conservative initiatives, which creates debate within the tech community.
Europe
1. Index Ventures
A European venture capital firm with offices in London and San Francisco, known for investments in Revolut, Deliveroo, and Adyen. The firm is notable for its active involvement in developing Europe’s tech sector.
2. Daniel Ek
Founder of Spotify, who actively invests in European startups through his venture fund. He significantly contributes to the development of the music industry and digital technologies.
Controversial Figures
Although Elizabeth Holmes wasn’t an investor, her company attracted significant investments from influential figures. The scandal around Theranos, where the company’s promises of revolutionary medical technology were revealed to be false, highlighted the risks associated with venture investments.
2. Masayoshi Son and SoftBank Vision Fund
Despite being based in Japan, his fund’s influence is felt in the US and Europe. The fund is known for massive investments in tech startups like WeWork, whose financial management and business model later faced severe criticism.
These investors and funds have varying impacts on the industry, and their actions can serve as lessons for startups and entrepreneurs on the importance of choosing the right partners and investors.
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Influence of investors on culture and strategy
How can investors influence a company’s culture and strategy??This?can happen in several ways.
Investors can set priorities and directions for the company’s development. They often contribute to strategic planning and prioritization. Investors may push for a quick market launch of products, accelerated growth, or new technology development to maximize returns. Investors aim for their investments to pay off and generate profit. Therefore, these strategic decisions directly impact the work atmosphere and culture, such as the pace of work, stress levels, and focus on innovation or quick results.
Investors can also influence corporate culture. Those with a solid corporate philosophy may promote similar values within the startup. For instance, if an investor is committed to sustainable development, they might require the company to adhere to these principles, affecting the entire corporate culture, including attitudes toward ecology, social responsibility, and work processes.
Sometimes, investors participate in hiring top management, influencing team building and leadership within the startup. They might recommend candidates for critical positions, affecting management style, team interaction, and the overall atmosphere in the company.
It’s important to understand that investors provide?not only capital but also?access to their network of contacts. This?can include partner companies, potential clients, and mentors. These resources can significantly influence the company’s opportunities and steer its development in a specific direction,?which also affects?the company culture, such as openness to innovation and experimentation.
Having external investors often requires regular reporting and transparency in the company’s activities.?This?can foster a culture of responsibility and discipline, where every employee understands their role in achieving common goals and the importance of their work for the?overall success of the project.?Choosing an investor can even determine how detailed and comprehensive the company’s processes will be.
How can you study the influence of investors on a company’s culture and strategy? What aspects of working at the company concern you??For example,?finding out if the company has overtime work is essential.?What is the attitude towards it? Is it encouraged or not? Is it paid or not?
Additionally, find out the attitude toward proposing new ideas. What is the process for suggesting new ideas? It’s important to evaluate the professional networks and events where investors participate. How involved are they in professional events such as conferences and meetings??This gives you the opportunity?to observe their behavior and?possibly?ask them questions directly if you meet them at the same event.?It also allows you to gather opinions and feedback from other ecosystem participants.
Another way to evaluate the influence of investors on the startup is to look for information about them in news and analytical resources. These sources can provide valuable insights into investors’ activities, approaches, and reputations in the business community.
Startup development plans
After learning who has already invested in the startup and evaluating the potential influence of investors on the company’s operations, it’s also important to ask the employer about their future development plans. We’ve already discussed what constitutes a successful exit for a startup, such as successful scenarios of the company’s transition to a new phase. However, there are also intermediate growth options for the company.
When you ask this question to your potential employer, their response may reveal several directions or points. The first direction is strategic. The founder should have an understanding of how they plan to develop their company. This helps you evaluate how your skills and career ambitions align with this direction. For instance, if the startup plans to expand into new markets, this could offer you opportunities to work in an international environment or even relocate to a new country.
The founder’s response should also include references to the startup’s financial situation, such as plans to secure new funding rounds or achieve self-sustainability. All of this can indicate financial stability and potential investments in employee development.
What other development plans can a startup have? What other aspects should you consider when choosing a startup as a workplace?
Firstly, product line expansion. Startups may plan to expand their portfolio of products or services. This could involve developing new products, adding features to existing products, or even creating new technologies. For you as a candidate, this means opportunities to participate in innovative projects and develop new skills.
Secondly, geographical expansion. The startup might plan to enter new markets or expand its presence in existing locations. This could provide you with opportunities to work in an international setting, take business trips, or even move to another country.
Thirdly, partnerships or collaborations with other companies. This could include partnerships with major industries, participation in accelerator programs, or collaborations with universities for research projects. Such partnerships can significantly impact the startup’s growth and success.
It’s important to understand the investment strategies and financial prospects of the startup, which we discussed in our previous article. Additionally, you should consider the technological strategy. For tech startups, it’s crucial to understand their approach to choosing and using technologies, including decisions between open source and proprietary solutions, strategies for ensuring data security and confidentiality, and plans for supporting and developing technical infrastructure.
All of this will help you assess the startup’s prospects and connect them with your personal and career goals.
Understanding the exit target
Another important question to ask your potential startup employer is: who do you see as a potential buyer of your company? In other words, who is your potential exit target? This question can significantly impact your career and life if you’re considering working at a startup.
Understanding the company’s exit target will help you better understand its strategy and direction. By asking this question, you’ll learn about the company’s long-term goals and strategic vision. Companies with clear exit plans, such as selling to a large tech company or going public (IPO), are usually more organized and focused on achieving specific results. This can affect the startup’s stability and provide clearer prospects for growth and development. Knowing the exit target of a startup indicates the seriousness of its intentions and its movement toward a specific goal.
Understanding the exit target also affects risk and reward. It helps you evaluate the risks and potential rewards associated with working at the startup. Startups aiming to sell to major players can offer significant financial advantages in the event of a successful exit. However, it’s also important to be aware of the potential risks, including instability and possible changes in management after the ownership change. These changes will definitely occur. It’s crucial to understand the timing of the potential exit and whether you can stay with the company until it goes public or is acquired by a larger company.
The choice of exit target also affects your career prospects and personal development. If the startup is aiming to sell to a specific type of buyer, this could open doors for future opportunities in those organizations. It also influences the types of skills and experiences you’ll gain while working at the startup. Therefore, besides the financial outcomes, the choice of a potential exit target can also impact your long-term career.
In conclusion, it’s important to remember that working at a startup can offer many opportunities but also comes with certain risks. It’s essential to thoroughly research the company, its investors, development strategy, and growth potential before making a decision to join. Ask the right questions, analyze the answers you receive, and align them with your career goals and priorities. This will help you make an informed choice and find a job that meets your expectations and supports your professional development.