Evaluating a Startup

What Sales Professionals Should Look For in a Tech Startup

We’re currently living in the golden age of startups. San Francisco, New York, Boston, Seattle, and many other American cities are home to many innovative startups. This presents a wealth of opportunities for sales professionals.

Working at a startup can offer many opportunities to learn new skills and assume significant responsibilities. But before accepting a job offer at a startup, you should thoroughly vet the company so that you can better determine whether it’s a fit for your professional aspirations. Keep in mind that you will be responsible for selling a product or service. You want to make sure that the company is poised for success before staking your future on it.

When evaluating a startup, consider the following factors:

1. Investment from reputable VC firms and angel investors

Putting money behind a company is the strongest possible endorsement. Research how much money the startup has raised, and which investors have provided support. This information is freely available on Crunchbase and AngelList.

Evaluate the investors’ qualifications. Does this investor (or venture capital fund) have a track record of backing successful companies? Is the investor an expert in the industry? While investor quality isn’t always predictive of the company’s ability to succeed, well-qualified investors do signal that the company has undergone outside vetting.

Investors can also play a major role in helping to shape the startup’s strategy. If the investors have a history of helping companies reach a successful exit, that’s a great sign in the startup’s favor.

2. Founder qualifications and leadership abilities

Founders probably play more of a role in a company’s success or failure than any other factor. They also play a key role in shaping the day-to-day work experience.

Examine the qualifications of the founders. This includes education, professional connections, previous work experience, and any other companies that the founder might have founded. Ask yourself this question: Does this founder (or founding team) have the skills to lead the startup towards success?

If you’ve met the founder, or have talked to employees, consider how well their approach and personality meshes with yours. Most founders tend to cultivate a workplace culture that reflects their own values.

3. Value proposition of the product

You should also conduct your own evaluation of the company. Think critically about the product’s value proposition. Is it convincing? Do you think this value proposition can stand out in the market, or is it just echoing other products’ value propositions? Can you explain it succinctly to potential customers?

If you have experience in the industry, you can draw on it in making your determination. If not, consult with a potential customer. They can tell you if the basic pitch makes sense.

While you will undoubtedly learn more about the product during onboarding, you should be able to get a sense of the overarching value proposition at this stage. If it isn’t well-defined, it’s highly unlikely that you’ll be able to effectively communicate the product’s value to prospective customers.

4. Clearly defined market 

Successful startups know their target market and how best to reach it. Trying to sell within too many verticals too soon can oftentimes be a cause for startup failure.

Ask, is the company targeting a clearly defined market? If it is going after multiple market segments, is there a reasonable strategy in place for how to accomplish this? Does the team currently in place have the expertise to reach the target market? Has the company already acquired (and retained) customers within this market?

If a company still seems to be struggling to define its market, that may be a sign that it’s not yet ready for a large salesforce. You have to decide whether you’re okay being part of the discovery process.

5. Competitors and market saturation

You should also think about the overall market, including how many competitors have already staked claim to it. Is this a fractured market, or is there already a clear winner? If one or two companies dominate the market, it might still be possible for the startup to succeed—but it becomes more important for the product to be a standout. 

Some startups are trying to establish a new category. This can be invigorating for many sales professionals, but if this is the case you should be prepared to do a little more legwork with customers. You will need to explain to the prospect why they need a product they might not have previously considered or allotted space for in the budget. For startups that are in new categories, it’s critical to evaluate whether the product is really adding value.

6. Sales leadership team’s qualifications

Many founders are tech people, not salespeople. That’s fine if they’ve brought in strong sales leadership. Assess sales leaders’ qualifications: Do they have experience in building out sales teams? How successful have they been in previous management positions? Do you believe their management style will enable you to succeed?

If the startup hasn’t yet brought on highly qualified sales leaders, that may be a sign that they aren’t properly valuing the sales team. Ask about their hiring plans.

7. Stage of the startup in terms of size, customer base, and investments

Look at the company’s core data: revenue, profits, investments, and number of employees. Companies with more money in the bank and an established customer base tend to be less risky. Think about how much risk you’re willing to tolerate. If you’re going to take a chance on a newer company, everything else becomes even more important. 

8. Plans for scaling

All startups want to grow, but there can be significant differences in terms of pace. Find out the company’s plans for growth and evaluate how realistic the plan is. If the company plans to grow quickly, are they committed to ensuring that employees continue to have a great work experience?

Working at a startup is an excellent opportunity for sales professionals but taking such a role isn’t without risks. By considering how well the startup is positioned, you can give yourself the best chance for success. 

9. Compensation plan

Carefully evaluate the compensation plan. Important factors to consider include how competitive the plan is in comparison to other companies in your region, what the ramping up period looks like, and how many sales you’ll have to make to meet target earnings.

Early-stage startups will have less real data about sales representative performance and compensation. In the absence of data, you’ll have to rely on your judgment to estimate a range of how much you might reasonably make. Think about the lower end of that range. Can you live with that?

10. Opportunities for career growth

One of the most exciting parts of working for a startup is the potential for rapid advancement. But not every startup truly invests in helping employees grow in their careers. If your prospective supervisor talked about opportunities for growth, that’s a great sign. People in higher-level roles who started out at a more junior role within the company is another positive indicator.

Working at a startup is an excellent opportunity for sales professionals, but taking such a role isn’t without risks. By considering how well the startup is positioned, you can give yourself the best chance for success.

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James Meincke

Director of Marketing @ CloserIQ. Previously Recruiter @ ManpowerGroup & Freelance Social Media Strategist. University of Wisconsin Journalism & Strategic Communication Grad.