Five questions to ask before you join a startup

So, you decided to join a startup?! Congratulations - you are officially insane. Before you embark on a red-bull-soaked-counterstrike-entrenched-mind-blowing-code-twisting rush, challenge your decision with these five simple questions. If even one of the answers is making you feel uneasy - go find another startup or make your own!

Chances are, you will dismiss my remarks below and think that I am old-school or just senile. You are 100% correct, I am old-school and senile and I guarantee that you will recall these questions about a year from now as you seep a cold beer with your friends and explain what-went-wrong.

Here are the questions to ask the team, and yourself:

1) WHO will be using the product?
Can you spot your target users? What is the exact profile (age, socio-economic, geographical location, technical skills etc.) of the average user?
As a founder/ early member of the team you need to intimately know the target user or be that targeted user. Startups that have no focused view of their users, end up creating generic products that are equally offensive and completely useless to all users. In 5 minutes, find 20 people you know who will be using the product.

2) WHY should the end user use the product?
Now that you know WHO the user is, explain WHY should the user use the product. Look through the eyes of the user, forget about the technology and the cool factor. Ask what actual benefit will this user get? For example, if the user is a sales person, how many more deals in a month will that user close? From #1 above, talk to the 20 people you know and ask them if they agree with the value proposition. Do they think they will close X more deals per month if they use the product?

3) HOW MUCH is the end user expected to pay? Every company must make money and be profitable in order to survive. Now that you know who your users are, and what are they getting from using the product, as how much will they be willing to pay for it.
This painful, yet simple, sanity check is the best antidote you can take against startup delusion syndrome.
Talk to those users from #1 and #2 above, if they agree with the delivered value, ask them if they would pay the asking price.

Now that you know the benefit/ value (#2 above), the asking price (#3 above) and the market size (#1 above) you can estimate how much money the company is worth. This is very simple: (number of expected users in the first year X $ collected per user per year X 10) – $2 Million = what the company is worth. This is a very rough estimate but try it and you will see that it works.

4) WHAT is the chance of the company to sell out or to make profit?Your shares/ stock options are only worth something if the company is sold. This is often referred to as the exit strategy. Can you be sure that the company will be sold? If so WHY would it be sold and WHO will buy it? Please don’t say Google will buy us… it makes me sick. Just tell me why should Google buy you and not just compete with you…
In many ways, if your company is not worth much (see #3 above), no one will buy it.

5) In the long term, WHERE do I fit in?This last question is never asked, and often is the biggest cause of dissatisfaction. You have to know if you are joining the startup for you current skills, or if you are a part of the long term plan. Come to think of it – what is the long term plan? Will you be hiring your boss or will you be interviewing for your position within 6 months.


One last thing – he who dares, wins! Good luck!

Shuki