Answer by Mira Zaslove:
Product is not scalable
- The first red-flag that you should walk away from a start-up job, is that you no longer believe in its ability to grow. Defining a “startup job” can be tricky. Profit, revenue, headcount, and culture vary between company, geography, and industry. However, the key success factor of any startup is its growth potential. As Y Combinator’s Paul Graham notes, “a startup is a company designed to scale very quickly.”
- Many small companies generate impressive profits. However awesome the cash flow; the pertinent question is: how scalable is the product? Often at small companies, there are a few amazing individuals, ideas, or products, who keep the entire company afloat. I’ve seen companies where the top sales guy brought in enough to pay all the bills. This is possible with a small team. Not so much when company grows 10x. Analogous issues can be found with industries — restaurants, photographers, designers, etc. — that rely heavily on one person’s vision.
- If the company is paying too much to retain customers, relying too much on manual processes, or is unable to train employees, these can be scalability red flags.
Leadership is not good
- Culture comes from the top. Start-ups live and die with leadership. If the leadership is bad, leave. Bad leadership means that the leader is unable to grow the company. Look for leaders who have a clear goal, and can execute.
- Start-up leaders tend to be risk takers, and they might be maniacal workaholics. Good ones are often unconventional and see the word differently. So don’t worry too much about that. The red flag appears when you no longer believe in their capacity to make the right decisions for the growth of the company.
Top talent is leaving
- When people in vital positions, you respect and know are good, leave, it’s a red flag. You want to see the incoming talent get better not worse. If the company starts hiring C players to replace A players in the important roles, that is a red flag.
- Also, if people who know more than you do in critical roles, CFO, Chief Counsel, Head of Product / Engineering / Sales, etc., unexpectedly leave, or are suddenly fired with no explanation, these can be red flags.
- A personal red flag of mine is when leadership repeatedly talks poorly about current and ex-employees. (See:)
You are learning bad habits
- For many people, not learning anything can be a red flag. However, at a promising start-up you believe in, I would say give it time. One minute you can be answering the phones, and then next day you can be leading sales meetings.
- Once you are on that rocket-ship, don’t get off. One advantage of working at start-ups vs established companies is that you get to wear a lot of hats, and learn a lot of different skill sets.
- A red-flag is when you are learning bad habits. This largely is a function of the first 3 items, but if you have a bad product, bad management, or the top people are leaving, you may start learning bad habits. Listen to your gut here, and if you find yourself doing questionable things, check yourself before it gets out of control.