What are some key signs that you should walk away from a startup?
Answers
I am going to make the assumption that the company is not doing well.
Ask yourself three primary questions --
-Do you agree with the direction of the company? At times the founder will push in a direction that is just not marketable, because they are emotional.
-Do you feel the
-Are your opinions, recommendations respected, i.e. If you were to say good bye, would anyone care?
There are multiple examples of individuals that stay with a start-up with the hopes of turning it around, when the business is not viable.
May I suggest you set a deadline. If the direction is not where you believe it should be in six months, walk away.
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May I add, do you see "light at the end of the tunnel" such as:
- an exit strategy where you'll be compensated
- or a retirement fund of some kind
- a
At some point in your life, that brass ring pipe dream needs to mix with reality...
And then it doesn't :)
I could be wrong, but it seems to me one of the primary drivers for non-founders to join start-ups is the opportunity to, hopefully, have a great pay day resulting from stock options. If this is the case, then that should factor into the decision. How many shares are on the fully-diluted cap table? What's the liquidation preference of the preferred stock ahead of me (assuming the EE has options for common stock)? What are the exit multiples for a company like mine (revenue/EBITDA) and given the resulting valuation, and the answers to the questions above, is/will my stock be worth anything at the end of the day? And what is management's plan to exit?
If a primary driver is also the excitement of building something from scratch, then perhaps the financial questions above are not paramount. If this is the case, then I would ask myself--am I progressing along a
Just my thoughts. Good luck!
Start ups can mean different things to different people and represent different stages on a life cycle, but here are my ten signs to look for as a hint that its time to walk away!
10 Have there been departures among the founder management team, or are there currently disputes and potential defections?
9 Do the current founders have a track record of success for a similar business?
8 Has the Company struggled unsuccesfully to raise investment?
7 Has the Company experienced a continuing failure to meet its corporate objectives on a timely basis, or at all?
6 Do you believe the current business plan is acheivable?
5 Do you see increasing competitive presence in your space?
4 Is the Company missing out on sales opportunities?
3 Is management being open about business prospects and honest and ethical in incurring debt from its vendors, including employees and consultants?
2 Has scarce cash been used wisely?
1 Are you the last one still there?