Dullroar

Every now and again, someone asks me how to evaluate a startup they're considering joining. They've had a couple interviews, they like the technology, environment, and the job description, but a big question remains: Will this company succeed?

The short answer is that it's impossible to know (who can tell whether the CEO is going to develop a coke habit in the next year, and whether that coke habit will hurt or help his performance?) But if I had to name just one single thing that predicts success well, it would have to be customers. When you're evaluating a company, the one thing you've got to know is whether there is demand for the company's products. What better indication is there than customers? Sure, seeing the company's full audited financials might be better, but most companies won't reveal that stuff to a guy applying for an engineering job. However, most companies do seem willing to tell an applicant some basic info about their customers.

So what do you ask? Find out how many customers the company has, how long it took to get them, and how fast they're adding new customers. How many potential customers are out there, anyway? If you haven't been kicked out of the interview by now (remember, when asking these questions, politeness counts, and do try to sound impressed with the answers!), you might also ask how much a typical customer pays, and how many customers it takes to get to break-even (that's where the company isn't losing money anymore). After you get all this info, you should be able to do a little math to see if the company is on track to capture a sizable share of the market within a few years, and get to break-even in the near future. The two things you want to see are a healthy growth rate (say, on track to capture 20% of the market within 3 years) and happy customers.

I have two more issues to cover. First, what if the company has no customers yet? It's very hard to evaluate companies at this stage, so try to find out anything you can about customer trials or surveys. Any data at all helps, but mostly, it's best to know something about the market the company plans to sell to before you dive in. And by the way, if you join a company before it has customers, you should get a lot of stock options.

Finally, we come to the ugliest issue of them all: what if the company isn't completely truthful? I tend to think that most people are mostly honest, so I don't expect outright lies (especially when it comes to dealing with someone who might become a coworker). But some amount of exaggeration of good news and minimization of bad news is common, so take all this info with a grain of salt.

I admit this is just my opinion, it's not at all sure-fire, and it's probably obvious as well. But in everything I've read about interviewing, I don't recall seeing any mention of trying to assess the company's chances. And of the people I've interviewed for engineering positions, very few have bothered to ask about customers. Beyond the details, the message is this: don't just look at the technology when considering a company to join.