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7 questions to ask before joining a startup

March 14, 2013: 12:38 PM ET

Going to work for a fledgling enterprise is inherently risky, but knowing what to look for can boost your chances of picking a winner.

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Dear Annie: My dad sent me your column about how to find a job after graduation, but I have one further question. I'll be graduating in June with a bachelor's in computer science, and so far I have two job offers. One is from a big, well-established company with a famous brand, and the other is from a small company that was started about five years ago to market an innovative software product.

I really want to work for the startup, because it seems much more exciting, while the other company would be less risky but also less interesting, I think. On the other hand, friends tell me that three out of five new businesses fail, and I'm wondering whether the big company would just be a safer bet. Can you advise me on how to tell whether the startup is likely to be around a couple of years from now? --Undecided

Dear Undecided: Interesting question. I put it to Asim Razzaq, head of engineering at Silicon Valley cloud computing firm Axcient, launched in 2006. Earlier in his career, Razzaq was director of engineering at eBay (EBAY) but, before that, he worked for three startups -- including one he joined right out of college even though, like you, he also had offers from big-name companies.

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"Beginning my career at a startup was the single best decision I've ever made," Razzaq says. "It gave me a chance to do a lot more things and learn more much faster than I would have at a bigger, more hierarchical company."

That's not to say your friends don't have a point. How can you tell whether a promising startup is the next Google (GOOG), or just a flash in the pan? Razzaq suggests you do enough digging to answer these seven questions:

1. What stage is the startup in now? "Joining a very early-stage startup, where it's just a few guys on a shoestring budget with no track record yet, is obviously a huge gamble," Razzaq notes. You'd be better off at a company that, while still small, has "a proven customer base and demonstrated revenues. Not only is it less risky, but you'll learn more."

2. Has the enterprise shown fast growth so far? "You want a company that is showing some momentum, because you'll have more opportunities there," says Razzaq. Research the company online, looking closely at lists of fast-growing companies, tech blogs, and IT trade publications. "In tech right now, some fields are hotter than others," he adds. "You need to know the industry well enough to see whether this startup is in a business that is likely to keep growing."

3. Who's in charge? "In any small company, it's all about the people," Razzaq says. "Check out the backgrounds of the management team. What were they doing before they started this? Have they shown success, or better yet multiple successes, in the past?" This is one of the main things investors look for before committing funds, which brings us to the next question …

4. Who's funding the company? "It's great if venture capitalists have invested, but in and of itself, that doesn't tell you much, because venture capital is fairly easy to get in tech right now," Razzaq says. "You need to look at the investors, who are probably also on the board, and research what they have invested in before this." A solid history of backing winners is a good indication that this firm has strong potential, too.

5. Will you have a mentor? "Particularly right out of school, it's essential to learn workplace skills like resolving conflicts and influencing people even though you have no authority yet," Razzaq observes. "A mentor can be a crucial part of this." Axcient, for example, has a "buddy system." All new employees are assigned a "buddy" they can ask for advice.

6. What will your role be? "As a new grad, will you be boxed in to a menial position, or will you have significant responsibility quickly?" Razzaq asks. Try to get an idea of what career progression you can expect, too. "If you see a lot you could be doing in six months or a year, that's a good sign," he says. "You should ask questions like, 'What would success in this job look like, and where would it lead? What will I need to demonstrate in order to get more responsibility?'"

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7. Do you have the right personality to shine in a startup? "Unlike in a big company, you usually define your own role to a large degree. Instead of telling you what to do and when to do it, people will expect you to figure a lot of things out for yourself," Razzaq says. "So it's important to consider, are you good at spotting opportunities and seizing the initiative to get things done?" Not everyone is comfortable with that, so be honest with yourself.

He adds that working for a startup "is more challenging and takes more energy, but if you're up to it, you will probably learn more at a startup in one year than you would at a big company in five." Partly for that reason, working for a firm that is still in its infancy is less risky than it might appear, because "you can always work for a big company later," Razzaq says. "Large corporations are looking for ways to be more innovative and nimble, so people who have worked in an entrepreneurial environment are in demand."

Good luck!

Talkback: If you've worked for a startup, or work for one now, do you agree that the learning experience offsets the risk? If you're a hiring manager, do you prefer candidates with an entrepreneurial background? Leave a comment below.

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