It’s a bit of a risky business joining a startup while everyone's scared of an economic downturn.
A more cautious funding environment could mean that even the sturdiest-looking startup runs into trouble if VCs tighten the purse strings — and you could find yourself back on the job market in just a few months.
So how can you avoid such a fate? Knowing the interview questions to ask before you join is a good place to start.
To find out what they are, Sifted spoke to a founder, a veteran HR worker and a CFO who changed jobs during the downturn.
The best interview questions to ask a startup before joining in a downturn
Question: How have the startup's plans changed this year?
“A good answer will show the company is adapting to the changing environment,” founder and CEO of jobs platform Otta, Sam Franklin, tells Sifted. “There are very few businesses that haven't had to adapt to the new market conditions, and if the company hasn’t updated its plans, it could signal poor management and overconfidence.”
Watch out for vague answers here, says fintech Bound’s CFO Marita Cavalcanti — who started the role earlier this year during the downturn.
“If a company is well prepared they should be able to answer your questions with decent levels of depth and precision,” she adds. “Any waffling around tends to indicate lack of understanding or preparedness.”
Question: What’s the company’s runway?
If a business has less than 12 months’ cash in the bank, Franklin says, you’ve got to be confident that it could reach profitability or fundraise within that time frame.
Either way, candidates should be cautious if the runway is shorter than nine months, says Cavalcanti, or “they could find themselves looking for another job while the downturn is still in full swing”.
Question: Has anyone on the team been through an economic crunch before?
Startup founders tend to be a youthful bunch (though not always) and this could be the first time they’ve had to navigate a downturn or recession as an employer.
That’s not necessarily a bad sign though. “Look at if they have experience around them,” says Michelle Coventry, head of talent at Creandum. “Either in the management team, their board members or seasoned investors.”
It’s reasonable to assume interviews are a two-way discovery, she adds, and it’s a big red flag if the company challenges or dismisses questions like these.
Question: Have you laid off staff?
There’s no right or wrong answer here, says Franklin, and the question is designed to get companies talking about a tricky topic. But keep your ears open for certain things, he adds.
“If the company has done layoffs and talks about people like numbers, objects or cash savings, then this could be a risk they aren't building a people-first workplace.”
Question: What growth are you expecting in the near future?
Cavalcanti says this question should focus on revenue growth and hiring plans over the next six to twelve months.
“Make sure the company has realistic expectations and a solid plan on how to grow which can be adjusted depending on results achieved,” she adds.
Product plans are also an important indicator, says Franklin, and “good businesses will be humble about the fact the market has changed, but retain a level of aspiration and clarity on how they'll continue to grow”.
Question: How has your thinking around your employee option scheme evolved since the fall in tech valuations?
“This question is best asked to people leaders or executives, and good answers will mention how much the company was worth at the last valuation and whether that’s now a fair reflection of their current value,” says Franklin. “Given the big fall in tech valuations, it's only fair that businesses are forward-thinking about what it means for the value of options they offer to employees.”
Question: Do you adjust salaries with inflation?
Rising inflation across Europe — which is expected to continue to stay high for the next couple of years — means you’ll start to feel the pinch if your salary stays the same for the next year or two.
“If your salary does not get adjusted at all and inflation stays at around 10% per annum, you would effectively get a pay cut of 10% per annum in real terms,” says Cavalcanti.
Question: What is the impact of higher interest rates on the company?
This is a bit of a left-field question, but “it will give you an idea of how prepared the company is for different economic scenarios”, Cavalcanti tells Sifted.
“We have seen a very long period of historically low interest rates,” she adds. “With central banks all around the world increasing interest rates again, there will be a huge impact on funding costs and other opportunities.”
