Many job seekers tell me they are concerned about joining a startup, as it's hard to spot a good startup as an outsider. They are a bit of a black box in comparison to somewhere like Goldman Sachs, that has established a reputation over 150 years.
The aim of this article is to provide some quick tips to help you spot the best startups.
This article doesn't help answer some questions
There are some questions before joining a company that this article doesn't answer. For example:
- Is the mission worth me dedicating my time to?
- Will I enjoy working with these people?
- Does this company pay fairly?
These are all great questions you should look to answer.
I focus more on whether the startup is likely to be successful. A successful startup will grow, provide a number of development opportunities and is unlikely to run out of money in the short term.
A good signal: the company has received investment
When a company receives investment, the investors are taking a bet on the company being more valuable in the future. To make a judgement, they ask questions such as:
- Do we believe the founders can execute?
- Are they able to hire, attract and develop great talent?
- Is there a big gap for this business in the market?
- Is this market growing?
- Is the product better than the competitors?
- Is now the right time to build this business?
- Are they going to use our money wisely?
To answer these questions, investors research the market, speak to experts, meet the founders and wider team, try out the product, speak to competitors and analyse the company's operational data.
Receiving investment from a fund (e.g. Index Ventures) means they have become comfortable that the company has positive prospects. In essence, they have asked a lot of the hard questions for you, and felt comfortable with the answers.
A stronger signal: the company has received investment from good investors
Good investors attract the best startups. Investors only make a certain number of investments per year, and so need to choose the ones they think will be most successful. Naturally they choose the companies that have high quality intrinsics (e.g. business model, product, team, growth, etc).
How to spot good investors?
Good investors tend to have portfolios that include many leading or successful businesses. For example, the following funds are known to be some of the best:
Accel invested in: Facebook, Dropbox, Spotify, Slack, Deliveroo and more
Index invested in: Facebook, Etsy, Intercom, Revolut, Sonos and more
Sequoia invested in: Apple, Google, Airbnb, WhatsApp, YouTube and more
So one quick tip is to look at successful businesses and check their investors. You can do this with tools like Crunchbase.
I’ve listed the top VC firms on the Otta platform at the bottom of this post (although with a strong lean towards European investors, as our platform is currently focused on London).
A few caveats
This advice isn't a perfect way to spot great startups, and so keep in mind three caveats:
- Not all successful companies have investors! (E.g. Checkout.com operated from 2012-2019 without outside investment, because it was profitable. In 2019 it raised $230m, which is huge for a first investment)
- Not all successful companies have good investors
- Good investors do invest in poor/unsuccessful companies
Searching for jobs based on investors
Once you've identified good investors, most of them have a portfolio page where they list their companies. From there you can go to the company website, find their careers page and look for jobs.
At Otta, we only have jobs from the world's most innovative companies. Our focus is on companies with great investors, and so you can use our platform to find jobs easily.
What else can you do?
It’s worth doing your own research and detective work, in addition to checking the investors. Here are a few quick tips:
- Are you excited about the mission? Startups are mission-driven companies and challenge the status quo. If you aren’t excited about the problem they’re solving, it’s probably not worth pursuing
- Use the product or read reviews. This is a good opportunity to see if the product delivers on its promise and adds value. It may be helpful to get in the mindset of customers and understand the problems they have
- Speak to current employees and ask lots of questions. How will [company] beat competitors? How much growth are you targeting this year? What’s the opportunity for development here?
- Read industry commentary. Is there a lot of press about the market? Are there articles explaining how well the company is doing?
These investors have the most companies on Otta (number of companies in brackets). This doesn't necessarily mean they're the best investors, but they have a high quantity of great companies in London.
You can also see companies based on the investors here.
- Index Ventures (29)
- Octopus Ventures (27)
- Balderton Capital (27)
- LocalGlobe (21)
- Accel (17)
- Seedcamp (14)
- Atomico (13)
- Sequoia Capital (12)
- Passion Capital (11)
- Forward Partners (10)
- JamJar Investments (10)
- Draper Esprit (10)
- DST Global (9)
- Bessemer Venture Partners (9)
- Dawn Capital (9)
- Notion (9)
- GV (9)
- Augmentum Fintech (8)
- Entrepreneur First (8)
- Y Combinator (7)