Questions to ask 2 yr startup before joining as CTO?

April 22nd, 2014

In this process, I have found the Questions to Ask Potential Cofounders helpful but it seems the questions are more geared towards a new team before the startup forms. Any questions that I should ask a 2 person team of 2 years? For instance, they already have given up equity to 2 different incubators/accelerators and have made numerous actions without me. I don't want to act as if I am questioning their decisions but I want to know what I am getting into. Any suggestions?

Tim Kilroy Analytics - LTV - Boosting Profits - Digital Marketing

April 22nd, 2014

You should ask ANY question that you want. If they get offended by you asking about the decisions that they made, then they aren't going to be teammates. Focus on asking the things that you want to know. This is a long-term relationship, not a date.

Ask the questions that you want, and listen to how they think about their decisions rather than the decisions that they made. They've been through 2 accelerators - what did they learn, would they do it again (why/not?) - was the equity investment worthwhile?

You can't fault prior bad decisions - the idea is that they are open to discussion and you are sure that you have a voice. You will have a C in your title. You MUST have a seat at the table in terms of decisions....

John Wallace President at Apps Incorporated

April 22nd, 2014

I think it's fine to question their decisions. It gives you an idea about how they think, and how they interact. Do they acknowledge decisions that were bad? Did they learn from their bad decisions? If they could do it over again, what would they do differently? We all make mistakes. Some people are terrific at learning from them. Others aren't.

In addition to how they think, I'd want to make sure they are a viable business.

• Do they have a working product?

• Do they have customers?

• Do they have the people and finical resources needed to succeed?

• Are there any competitors that they need to defeat? How will they do that?

• Do they have any benefactors (investors, angels, inside connections) that will give them an edge?

It's hard to create a viable business. I sense you aren't comfortable asking uncomfortable questions. But before jumping in bed with them, make sure that they have the ability to make it happen. Poke holes. Be skeptical. See if they consider those questions carefully (a good sign), or if they try to quickly dismiss them or cover them up (the harbinger of disaster).

Tim Scott

April 22nd, 2014

You need a good understanding of their traction so that you, as an investor (which is what you are if you are taking mostly equity for compensation), can properly negotiate your deal. Two years and two accelerators have no inherent value beyond what traction they have gained to date. Okay, existing product, relationships and to some degree learnings have some value. But as an investor, you should look for predictors of success. Traction is #1. Team is #2, so you need to asses them an skilled/proven entrepreneurs. As Tim Kilroy said, any whiff that they are closed to deeply challenging questions would be a big red flag.

BTW, by "traction" I mean quantitative proof that they have found product-market fit or at least product-solution fit.

Steve Owens

April 22nd, 2014

Celili - joining a start-up this early is just like getting married - it is all about how well you fit with the team. Focus on how well you compliment the team. Can you make collaborative decision with these guys? Will they listen to you? Will you listen to them?

Assume that things will get really rough - because they will, and likely more than once. When this happens, will we all pull together as a team and work through the issue, or ??? If it is the "or ???", then run away and find someone more compatible.

Hope that helps,

Steve Owens

Finish Line PDS

A Better Way for Small Companies to Develop Products

Michael Barnathan

April 22nd, 2014

As CTO, you'll also be maintaining their technology stack, and want to get a handle not only on the company's traction, but also the rest of the team's understanding of technical project management (else you'll get very frustrated managing the rest of the team's expectations), and any tech debt that they're about to saddle you with.

Carlie Urell Director of Client Relations at Zen Windows

April 22nd, 2014

Cecili,

Accelerators are meant to put a time frame around an incubation period, I would question the fact they are still in incubation

Grant Hosford Co-Founder & CEO at codeSpark, Inc

April 22nd, 2014

Without knowing what the business is or what the two founders have accomplished, here's what I would ask.What key assumptions about the business have been proven?What is still unknown about key assumptions?What customer validation tests have been run and what are the results?What are the top three things that need to be done next? Why?If they have revenue - What is being done to grow revenue?If they don't have revenue - What is the business model? How much of it has been tested? When will you start charging?Who is your next hire after me? You care about the answer to all of these especially in that they should be able to rattle off answers that make sense immediately. If they aren't thinking about these things its a big red flag.

Rob G

April 28th, 2014

Cecili, lots of good advice here already. At the risk of stating the obvious, it is a similar set of questions, but different expectations (from both sides) if you are joining the team for equity only VS being paid a market-rate salary. The expectations can/should also be tempered if the two founders have substantially greater relevant business experience. If part or most of your compensation will be equity then your primary objective needs to be to vet the viability of the business as well as the track record of the founders to execute - no different than any other investor:

1. what is the size of the addressable market?

2. do they have 'traction'? if so how did they get it? if not what is their DETAILED plan to get it?

3. What is the target market - SMB, enterprise, consumers?

4. What is the ideal prospect: i.e. "VP of marketing for retail grocery chains with 10-30 locations" - don't just settle for "small to medium sized businesses" or "consumers".

5. what is the DETAILED plan to reach these prospects in terms of marketing, business development, sales, distribution..?

6. Does the business require external funding to survive? is yes, then how will we get it?

7. What is the relevant market experience that the founders bring to the table? I see that you are a recent college grad so if the other members have significant relevant market experience, how do you compensate for your lack of experience? If all 3 of you are relatively inexperienced then what is the plan to obtain market knowledge? i.e. advisors, investors, ???

8. Is there any defensible IP?

9. what does competition look like? how do we compete? and what have you done to collect intelligence on the competition?

10. I would ask to spend some time as a team reviewing their detailed operating budget - hopefully they have a detailed spreadsheet that shows who the prospects are, what the budgeted line-items are to reach the prospects, what those marketing/business development/sales costs are, support costs, personnel plan, tech budget, etc. If these guys have been at this for 2 years and they've been through 2 incubators then you should expect some very detailed plans - if they don't yet have a product then they had better have some really solid plans. The founders should be able to walk through the plans with you and connect all the dots and it should make sense to you. There should be no "and here a miracle happens" spots in the plan. To go into this level of detail it would be reasonable for them to request that you sing an NDA. If they don't ask then it would be reasonable for you to raise a small yellow flag of caution.

Alexey Sapozhnikov

May 4th, 2014

My opinion- you should ask anything you want, regarding their experience, company vision, current stage etc.
If they get offended by any of your questions- this is a huge red flag, they are wantapreneurs for sure, just leave.

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