How do you assess company’s market position (especially startups)?

It's tricky as startups generally aren't very public with exact financial numbers (they are private after all). The main tactical calculation to make is the amount of funding they have divided by the number of employees. This will give you runway (assuming 0 revenue, which many hyper-growth startups effectively have).

So let's say a tech company has raised $15 million and have 20 full-time staff in the United States who are a mix of engineering/non-tech:

1. The average compensation will be ~$100,000/year
2. Add 50% to that due to taxes, benefits, equipment, etc. So that's $150,000 burn per person per year
3. 20 * 150,000 = $3,000,000 spend. 15 million/3 million is 5 years, which is a decent number.

This calculation doesn't need to be exact - It should be a rough vibe check. The failure mode for my $15 million raised example would be if the company had 200+ employees or something. That is financially unsustainable unless the startup has massive profits (which they rarely do). Remember to add that 50% on top of the pay as many people don't realize how expensive it is to hire a full-time human being.

In general, a good company should have 2+ years of runway from that calculation. YC is recommending 3-5 given the current market, which makes it much harder to raise.

For funding, you can generally find that information on Crunchbase, TechCrunch, LinkedIn, and online searches in general. LinkedIn in particular is good for finding a ballpark of total headcount.

Always apply, but when interviewing ask these questions

• How much funding do they have
• How many engineers do they plan to onboard?
• Burn rate/runway (after onboarding all engineers)
• Investors (YC is a great sign, look up popular investors)
• Talent density - If the founders and engineers all come from top companies then generally they are better funded

Also get a sense of their engineers who left the company. Did they do layoffs? Are they pivoting? pivots are generally not a good sign

1 misleading indicator of health - Are they hiring aggressively?

• A lot of companies want to run lean so fewer engineers is not always a bad thing
• Conversely a lot of engineers might be a bad sign (overhiring)
• Generally companies should be pretty lean until PMF which tends to be series A ish

Pivots - I remember a sam altman video where he said some founders realize this current thing is not working and theyre running out of money, we need to pivot and they force an idea that more often than not fails

Try to understand the markets of their business. Does it seem profitable/revenue generating? Generally B2B is better (easier to monetize). User count for a B2C can be very very misleading as a lot of companies struggle to convert from free to paid users

Another thing you should do is to simply investigate the product. Not only does this help you get information on how the company is doing, it helps you pass the interview as well:

• If the company has a mobile app, see how many downloads and star ratings it is
• If the company has a website, use a free plugin like Similarweb to figure out how much traffic it gets
• If the company is open-source based, check out how many stars their GitHub repo has

This is another sanity check. If the company is claiming some crazy number like $10M+ yearly revenue but their website only gets 1k clicks per month, I would be incredibly skeptical.

Investor quality is a great signal as well. As an individual engineer, you probably don't have the skills to evaluate if a startup has a financially sound business model or has the potential to be a market leader. Well, the good news is that you don't need to figure this all out on your own.

It's literally the job of top VC firms to do this research and determine if a tech startup has these positive characteristics. As an engineer interested in working for startups, you can take advantage of the thousands of hours of due diligence top VCs do across startups and simply work for the ones funded by these top VCs.

In terms of identifying the top VCs, here's a good article: https://dealroom.net/blog/top-venture-capital-firms

A lot of succeeding in tech is building on top of the work already done by people smarter than you. 😁

Lastly, look at the talent. If a startup has a bunch of engineers from top companies like FAANG or other hyper-growth startups (Notion, Brex, etc), then it has a very good chance of being legit. Even if the startup fails, you will still learn from the best engineers in the world, which is the true prize (compensation and level are a lagging indicator of your true skill). Again, it's hard to go wrong banking on the decisions of incredibly talented people.

Anyways, hope this all helps and here's a bunch of other resources to determine if a startup is good (+ help you get into them):

• "How to know if the founder is legit?"
• "How to evaluate a startup?"
• "How to find and connect with scrappy startups?"
• "How to prep for interviews at a startup?"