A step-by-step guide for picking good companies one should work at
After 5 startups, I’ve come to realize there’s a fairly detailed process I follow to evaluate companies I want to work at or recommend. I rely on this framework when friends, family & mentees reach out for my opinion.
Since many have found this valuable, I thought I’d jot it down and share it for broader consumption. Please share it with those that might find this useful, and add your feedback on ways we can make this better.
There are two key parts to this question:
Part 1: How can I identify good companies?
Part 2: Which of these companies are good FOR ME?
I'll be covering both of them in this article. Let's begin with Part 1.
Part 1: How can I identify good companies
IMO, there are 3 key questions to answer
- Is the company solving an exciting problem statement & does the company have defensibility in what they are building?
- Does the company have the right mix of skill/founder/insights/investors etc that increases their probability of success?
- Does the company have a viable business model?
These are probably questions you’ve heard before. The real challenge is how should you go about finding answers to these questions. It requires some digging around and basic data analysis.
I’ve tried to simplify it by outlining the steps you can follow:
1- Start with the founder and the team you might end up working with
At startups, the background of the founder(s) & the core team has a large impact on the quality of the product, execution velocity, culture, hiring and the chances of becoming a rocketship we all desire to be on.
At mid & later stage companies, your experience will be influenced by your immediate team.
2- Understand the vision and the mission of the company
It's very important to understand the core problem statement that the company is trying to solve. The best place to understand that is via the company's About Us page or a podcast by the founder or press around the company.
It's a red flag if you are finding it difficult to find/relate to/feel convinced about the mission of the company.
3 - Write down the list of Moats this business has
The goal is to understand how defensible this company is. In other words, it’s important to know what is unique about the company that others can’t easily copy. Here’s a simple guide on how to identify moats.
4 - Dig into the Financial outlook of the company
This is a good benchmark on the company’s ability to attract the quality of capital for future rounds of financing as well as the quality of talent for the core team.
Post PMF [Series B + C + D], understand what is the path to monetization & its sustainability over long periods of time. For IPO companies, you can look at Market cap trendlines.
It's an easy number to understand how valuable the company is today and how fast it is growing.
5 - Understand the market conditions that impact the company today and tomorrow
You can go in many different directions, but I try to keep it really simple. I focus on 3 key aspects:
- What are the external factors that are existential risks to the company?
Ex: government regulation for TikTok.
- How many meaningful companies exist in this space?
Ex: 12 clones of TikTok in India. This could either indicate that the market is large enough or that it's already saturated.
- How does this company compare to the rest on factors of DAU/MAU, Revenue & money raised?
Ex: Tiktok is the market leader by a longshot.
Most of these 5 things could also be learned via proxies — social following, reviews, downloads, search trends, # of podcast appearances, etc. Proxies are not-so-accurate indicators but give you some information to improve your decision quality
Part 2: Which of these companies are good for me?
There are 3 key inputs you need to have before you know if the company is right for you
1- What are your strengths?
Not knowing what you are uniquely suited at is the biggest reason why folks short-sell themselves. There are many tools in the market that help assess your skills.
Understanding your strength gives you a lever for negotiating your job offer.
2 - What is your risk appetite?
Firstly, define what is risk for you. There are 4 variables I use: Salary, Role, Organisation Structure & Stability.
Typically, early-stage startups offer:
- Lower cash salaries but you own equity
- Broader roles & hence faster pace of learning
- Typically flat organizations
- Run the risk of shutting down in the near future.
Typically, mid Size/Stage companies offer:
- Above Market Salaries
- Defined roles and responsibilities & hence opportunities to become a subject matter expert
- Typically have growing pains within org structures
- Have more stability compared to early-stage startups.
Typically, late Stage companies offer:
- At market salaries, because you get the brand name on your resume
- You are one of many doing the same role
- Very detailed org structure
- Rarely go out of business, very high job stability.
3 - What are your 3 non-negotiables?
To keep it simple here’s a list I provide & ask them to pick
- Salary / Lifestyle
- Pace of learning
- Job Title
- Work-life Balance
- Team / Manager.
- Benefits: This is not the same as culture.
Once you have this, it's very simple to know what type of company is right for you.
I hope this helps you make a better, more informed career choice. Like your financial investments, remember these decisions have a compounding effect over your professional life in the next 10 years.
So be wise & dedicate the time it deserves.