Questions to Ask Before Joining A Biotech Start-Up

Time to write a post for people considering working for a start-up. I did this once upon a time. It wasn't a great experience, but that's a story for another day. 

Unlike a bigger companies, there's often very little information on start-ups. The average applicant has little idea what to expect and - if they're new to the sector - what questions to ask. 

Knowing what to ask is critically important for a start-up employee. You will be working at a discounted rate (i.e., lower salary/benefits) in exchange for stock options. Generally (and I'm oversimplifying a bit) your options will be granted at the current valuation (see note). If the company goes public and/or is acquired, your options will be worth the difference between the strike price (the price the options were granted at) and the sales price or current value. For example, if you get 1,000 shares at an 11 dollar/share valuation and the company does an IPO where the shares settle at 25/share, you can sell your shares for a profit of $14,000. If the company goes out of business or the share price is lower/equal to the strike price, you get nothing. Essentially, you are gambling on the small chances of a big payoff against the certainty of lower compensation in the near-term.  

The only other advantage of start-ups is the fact that you will be, to some degree, an early employee. If a company rapidly expands, a literal pyramid of employment will likely be built below you. Thus, rapid advancement is possible, but only if you're in the right place at the right time. 

Side note: I'm not saying not to work at a start-up. Just understand the risks and rewards before jumping into the pool. To help with this, I wrote some questions and pointers I wish I'd had a decade ago. 

Who is funding you?

Ideally, you want a reputable venture capital firm (or more than one) along for the ride. For what it's worth, VC's are pros who have some skill at identifying what will work (or at least have a fighting chance). 

How many rounds of fundraising have you gone through? 

Companies raise money in multiple rounds. Ideally, the value of the company goes up each round. Employees shares are often diluted (lose value) with subsequent rounds). Also, a "down round" (where the company's value diminishes) is a serious warning sign that things are not rosy.

Am I a new hire or am I replacing someone who's left?

In effect: Is the company growing actively? I asked this one, but ignored the fact that I was replacing a guy who'd quit and fled to greener pastures. 

What are the metrics for successful stage-up?

In biotech, there will be milestones in place to demonstrate you are progressively marching towards a successful tech/product/whatever. This is a schedule that closely matches when a company runs out of money. If you learn what you need to do and when you need to do it by, your expertise should give you 

What are the long-term plans for the company?

You're asking if they are aiming for an IPO or planning to be acquired. Being acquired is, surprisingly, often the goal, especially for single-product companies. 

Other pointers:

Is the person interviewing you letting you interact freely with the other employees, or are they trying to keep you away from them? Any place that won't let you meet potential co-workers (especially those you interact directly with) is showing you a danger sign. 

Do you like the boss? At a small company, the boss is essentially the office god. He has ultimate power and there's nowhere to go to escape him. If you get a bad vibe, time to go. 

Look at the equipment and space. Is it decent (not luxury stuff, necessarily, but sufficient to do the job) or is it a mismash of other people's junk? The latter can suggest acute money problems. 

Are there experienced people working there who - in your opinion - could be making more somewhere else? Yes = good sign. Obviously, if it appears you're surrounded by the D-team, you might want to ask yourself why. 

Most of all: If there's even the slightest blank look or hesitation in answering any of the questions I listed, get the fuck out of there and never look back. ​

Note: How are companies valued? If the company raises $1 million from investors for 10% equity, the company's valuation is $10 million. Note that this is not necessarily what the company is worth.