Last week I wrote a post about Startup Options and how there are a lot of things startups don’t tell you about getting stock options. One of the things that stuck out for a few people who emailed me was the last paragraph:
“I’ve been thinking about startup hiring and how it is mostly selling the dream, but also moderately a very misleading situation. I can’t tell you how many times I have heard friends and colleagues say that they joined a company to find out things are not as they seem. Growth is not what the management was saying in the interview, a pivot is in the works, and much more.”
I have thought a bit more about due diligence when joining a company. I think there is an unspoken piece about joining venture-backed startups and that is that if they have raised money from top investors things must be going amazingly. This is hardly the truth. After being around the early-stage startup world for the past 6 years, I’ve found that just because a top-tier investment fund has invested in a company does not mean they are doing well in any capacity (this is not company-specific, but a generality).
Some of the best investors strike out big all the time. You have no idea what was pitched to the investors and how things have changed from the time of investment to the time you decide to come onboard. This is why you need to do your own due diligence when joining a company (and not rely on public signals that may be outdated). This means asking hard questions. If the question is too hard for a company to answer or if they won’t share certain information (when late in the stages of considering employment), you need to reconsider whether you should be joining the company.
The Due Diligence Farce is real and I think one of biggest reasons why there is employee turnover at startups.