Things to consider before joining a early stage startup

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Are you looking to join an early-stage startup?

If you have not worked in a startup before, then choosing one cannot be more confusing. There are so many startups out there with interesting ideas, hype, different valuations, etc. So how do you determine if a startup is right for you? This is even harder for early-stage startups.

I faced this conundrum a few months back. After I left my job last year, I received a few opportunities to join early-stage startups. I did a lot of research for every opportunity and defined a few criteria to make this easier. But before I share, I want to lay out a fundamental guiding me through this -

All startups have risks. But you want to pick a startup with asymmetric risk i.e. downside is limited but upside is unlimited.

The below criteria are just trying to judge the asymmetry of the opportunity is -

1. Founders and the team

65% of startups fail because of founder conflicts. So research about the founder's credibility in the domain and their history. The early team is also equally important. Spend time talking with your future teammates.

2. Backers

Find out who are the top investors - angel/VC. The angel investors should ideally be the renowned personalities in the domain. The company should have enough funding for the next 1-2 years for a reasonably renowned firm.

3. Domain

Ignoring all the hype, you should really think about how much you are interested in the domain. The idea is often secondary as it can evolve. If you are not familiar with the domain, talk with your friends working in the same domain or comb through research reports.

4. Your Role

What you learn during work, stays with you even if the startup fails. So, think about what you will learn from the offered role.

5. Equity

Don't expect too much cash compensation from startups. Look at the equity and speculate its dilution/value after each funding round.

Many of the answers are difficult to find out. So talk with the founding team a lot before you make a decision.

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