How to Pick Your Next Tech Company
What to look for in your next employer
One of the common mistakes I see students or new grads making when evaluating tech companies as employers is the fallacy that all tech companies are equal.
What I mean by that is, for example, they perceive bootstrapped early-stage startups with no revenue to be on the same ‘level’ as a venture-backed Series A company that has product-market fit.
When I say ‘level’, I’m referring to a combination of: stability, upside, growth opportunities, financial prospects, etc.
Now, to be clear, what’s “right” for you all depends on what your goals are.
Are you trying to optimize for learning via being a scrappy, jack-of-all-trades? Then the early-stage startup is probably a better fit.
But if you’re seeking stability, mentorship, and a higher salary, then the Series A company is likely better for you. In a startup, the growth trajectory is limitless. Whereas with a big company, the upside is relatively capped (stability).
Based on where you’re at in life and what you value, you should pick accordingly.
But regardless of stage, how can you evaluate tech companies for their overall outlook & potential?
Over time, I’ve developed a set of heuristics that I use when evaluating tech companies as potential employers. In this post, I’m going to share the 6 criteria I use when deciding whether I’d want to join a particular company.
Funding
Yes, venture funding is the first one. Now, I want to be clear — funding is not a sufficient, nor necessary, condition for a tech company to be successful.
But I strongly believe that having venture funding greatly increases the likelihood of a company being successful.
Why? Well, first it shows that people who’ve “been there, done that” in the startup world have a high degree of confidence that this company can do the same.
Funding allows companies to pay top dollar for talent, spend aggressively to acquire customers, and above all, provides financial stability — especially if the company is pre-revenue (or has minimal revenue).
In addition, being venture-backed also provides non-financial benefits, such as access to valuable networks, strategic partnerships, and unique sales / distribution channels, through relationships developed with your angels or VC firms.
What to look for:
- Funding rounds. Funding is given in sequential stages, beginning with a “Seed” round. After that, the rounds map to the letters of the alphabet, starting with Series A, then Series B, etc. The more rounds a company has raised, generally speaking, the higher the likelihood of it succeeding. Investors won’t continue to invest in a company if it’s not doing well!
- Rule of thumb: the more rounds a company has raised, the better.
Total funding. Similarly, the amount of money a company has raised is another strong signal. Now, I’d argue this is actually less important than which round they’re at — because rounds are indicative of progress, while size of funding is not. Funding rounds have increased in size over the past few years, so they can be misleading.
Example: Would you rather join a company that’s raised a $500k seed + a $2M Series A? Or an early-stage company that’s raised a $3M seed?
The latter has raised more money, but the former has made more progress; at least in terms of milestones.
- Investors will often make follow-on investments with companies who successfully reach ‘milestones’ that were goals from their previous funding round.
- Rule of thumb: funding rounds matter more than funding size.
Investors
Similar to my opening sentiment, not all investors are created equal. All dollars are generally equal (for our purposes here), but this is all about the non-financial benefits that VC funding provides.
The best VCs can make a transformative impact on a company through any combination of access to: talent, networks, strategic partnerships, influencers, etc.
But VC is very much an 80/20 game; 20% of VC firms hold 80% of all VCs’ collective value (and likely, the historical returns — if not more).
How can you gauge a VC firm’s ‘reputation’? Check out their website for a list of their portfolio companies. Recognize any of the names? You’re likely in good hands. Never heard of any of the companies? Research them to be sure, but if none of the companies ever “made it” (reached scale, got acquired, or went public), that could be cause for concern.
Rule of thumb: if the company’s investors don’t have any recognizable names in their portfolio, they likely don’t have a good track record of picking ‘winners’.
Founding team
Startups are all about people. When I look at a tech company, I always go on LinkedIn and look up the founders’ profiles. Are they serial founders, or is this their first rodeo? Do they have domain expertise in a particular vertical? Or have they had complementary roles at other tech companies?
While brand names like Ivy League degrees and Y Combinator are easy to be attracted to, do your best to ignore these. They’re simply credentials, and have very little correlation, if any, with what the founders are like.
It’s also helpful to Google their names and see if you can come across any interesting pieces of news or tidbits about their careers. Or blog posts they’ve written!
Follow them on Twitter too; it’s often a hint as to what the company culture is like.
What to look for:
- Founders who have prior startup success, deep domain expertise, or some other ‘unfair advantage’.
- Rule of thumb: if the founders are proven entrepreneurs, it’s likely a great company to work for.
People
Well, wouldn’t you want to know the people you might be working with?! Similar to the founders, always look up the profiles of the co-workers who’d be your teammates, direct reports, and/or your manager. Specifically, see what previous work experience they have, and how seasoned they are. See if you can get a gauge on their personalities, working styles, etc.
Also, check if you have any mutual connections with them! This is a great chance to reach out to your contacts and ask about those people.
Rule of thumb: leverage your network to get familiar with the people you’d be working with.
Product
This is often the most surprising one that people overlook. The product is literally what the company’s customers pay them money for. Not only should you be familiar with the product, but you should have lots of opinions or feedback about it!
If it’s a free product, sign up with some test accounts and play around with it. If it’s a paid product, sign up for the free trial.
If you notice a level of rigour and thoughtfulness in the product, that’s usually a great sign that there’s strong Product sense and leadership at the company.
If the product is bloated, confusing, and full of random features, it might be a sign that the company doesn’t have a strong Product culture (if that’s important to you).
If you’re applying for a Product role, a very common interview question is: “What would you change about our product and why?” Well… you can only answer that if you’re familiar with the product.
Sign up for the product, take some notes on the onboarding experience, and try to accomplish some of the core user actions / task flows. Then, document your ideas on how you could improve some of them.
Rule of thumb: the more intuitive a product is, the more likely the company has a strong Product culture.
Customers
If a company’s customers rave about the company and its product, that’s a great sign. Do some digging; look up mentions of the company on Twitter or Reddit, find online communities where customers discuss the product, and read reviews from users.
The sign of a great company is one that can turn its customers into evangelists, and the more evidence you can find of this, the better the company likely is.
Rule of thumb: companies loved by their customers are typically great companies to work for.
To summarize, here are the 6 criteria I suggest using when evaluating your next tech company:
- Funding
- Investors
- Founding team
- People
- Product
- Customers
Thanks for reading! If you enjoyed this post, feel free to follow me here + on Twitter @samir_javer.
