Should I ask startups about the amount of funding they've received when interviewing?


2
Is it okay for me to ask founders the exact amount of funding they have received when I go for interviews? While I love startups, I feel the risk is significantly higher for startups without funding. And with a family to support, I would rather lower my risk slightly by choosing startups with enough money to last at least a year.

Funding Hiring Interviews Startups

asked Mar 9 '14 at 15:25
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Corey Head
25 points
Top agency to build award-winning mobile apps: Utility NYC
  • Job interviews? Or is this some other type of interview? – rbwhitaker 5 years ago
  • Job interviews. – Corey Head 5 years ago

1 Answer


2

Corey --

I think this is a fair question. However, it does hit on a more intimate question for some founders. Here's why:

  • Early stage companies have scary times. You might be asking this right before a precarious round and the reality is the company may only have a few weeks or months of runway. It's just the name of the game for some startups. Or, they could have 8 months of runway but if they don't make their sales targets they're sunk.
  • Since you're technically not hired yet, the founder may not want the knowledge of their situation out in the marketplace.
  • The question you are asking is a difficult one to answer sometimes. First, the company has ongoing sales which may or may not land which impact cash flow. They probably have a few elephant deals in flight that could significantly change the outcome of the company's financial situation. What this means is that inevitably what you may be asking is for a "best guess". If the entrepreneur is an optimistic guy or gal, it's going to sound great.

I think it is better to ask questions about the structure of the investor group rather than the amount. I would focus on asking these types of questions (I'm assuming angel investors rather than VC's because I think angel funding is easier for startups - VC's come later when you're ready to chew down $5M or more for growth):

  • How many "deep pocketed" investors are in the group?
  • How many rounds have there been and how many rounds are there to go?
  • How many customers are there and how many more are needed to reach break even?
  • What does the sales and marketing team look like? How have the last X months of sales looked?

It is extremely important to have more than one deep pocketed investor for any startup. Why? Because someone is always sideways in an investor group as the years go by. If the group only has one deep pocketed investor - and that investor goes sideways for whatever reason - the company can become seriously unstable, having to hunt around for last minute capital. This can put a company in a toilet bowl flush since the founder will be distracted hunting around for more investors instead of keeping eyes on sales and marketing.

The question on sales and marketing will really give you some insight. If the founder loves all things technical and is still early in their sales journey, you'll see a tiny sales team and a bloated product/development team. If there's a good balance of sales and marketing folks, that should give you more comfort.

In the end, any startup is filled with risk. Be comfortable with the founder's ability to continue to raise capital until break even and to sell (if he or she is raising capital then they can sell).

You can also try to get a feel for the dynamic between the founder and the investors. Does the founder complain about the investors or show respect? You can glean lots of insight if you just listen to the choice of words the founder uses when describing the investors and the kind of relationship they have together.

answered Mar 9 '14 at 18:13
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Chris
337 points

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