I have an offer in hand that includes stock options. It’s a startup that has recently gone through their series B. How do I analyze the chances of the company making it to IPO and how long it would take them to get there? I know this is not exact science but I would like to at least have some guidelines on how to perform basic analysis. Current TC: 340k
The simplest way to guess if it’ll succeed is if the founders have created past successful companies with nice exits. After that, there are some vague indicators. look at the total addressable market, if it’s over 10B that’s good. Are customers obsessed with the business? Is the revenue model recurring or transactional? Recurring is better as it’s more reliable. That’s just top of mind.
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1. Ask for their revenu and projected revenu. 2. Are they able to attract other talents from big companies? If they can’t even sell the dreams to top candidates, they likely can’t go too far. 3. Do they have experience leaders from successful companies to lead the teams. 4. What are their investors? VC with successful track records?
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Ask how long they’ve gone between funding rounds or look it up yourself on TechCrunch. If their last funding round was several years ago and not for a huge amount of money, I would consider that a red flag, especially if they’ve been around for a while. Additionally, any company that is 8+ years old that still calls itself a start up is something to avoid.
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Ask for their revenue, growth trajectory, valuation of the last round. Based on public companies in similar industry, evaluate the revenue multiple of their valuation.
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All of the above things - but also, find out if they have a true competitive advantage or if the moat is shallow. If it can easily be built or bought by a larger competitor in the space that would be a red flag to me. Also - since they just raised series B, ask how they plan to invest it for future growth. That will tell you everything you need to know about the competency of the leadership team.
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What’s the offer? Seen a lot of people get screwed over around Series B with high valuation, strike price, low equity %
They offered a number of stock options, they did not mention equity % equivalence. Can I figure that out myself? Should their total raised capital be my “company value” reference?
Ya you can back into equity % but you need company valuation. Not total capital raised. DM if you have questions
Ask your interviewers if they have exercised their options . My manager said he hadn’t although he’s been with the company for 5 years . So I asked for more cash.
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check if leadership has past experience with successful startup exits. Mine clearly didn't.
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Not an indicator. I wouldn’t rely on the past performance.