The money

• Equity -- If they offer you shares of the company, ask how many shares outstanding. That way you can calculate the percentage of company ownership. Most VP jobs offer 1-3% ownership post-money (after the financing round). And you’ll want preferred not common stock.


• Cash --How much money is left in the company’s bank? What is the burn rate (monthly net cash out flow)? If you divide the total cash by monthly burn, you’ll find out the “runway” or number of months till cash runs out. If they have only three months left, do you really want to take the risk of being back out in the market?


• Revenue – Presumably one of your main motivators is equity growth. Assess the growth potential and risks by examining the revenue stream. Is it “lumpy” in that annual revenue is made up of just a few big deals? Or is it “smooth” in that there are many customers and the revenue is a mix of recurring revenue and one-time receipts?


• Profit -- When is cash flow positive expected? When is net profit expected? What are key assumptions & risks? These questions will help you understand the risks of having to secure additional rounds of funding which will only dilute your equity share.


• Exit strategy –The company won’t tell you most probably but you should enquire anyway about the exit strategy. If it’s an initial public offering (IPO), you have the chance to make a lot of money. If it’s a buy-out by another company, your equity will be worth far less.


• Investors & board -- Who are they? Talk to a few investors and ask them why they invested. The company should want you to talk to one or two board members since they’re making a substantial investment in you too.

• Installed base – Talk to a few customers to get an idea of why they bought the product/service. I’ve seen executives sign-on based largely on extraordinary customer testimonials. Ask them for a frank assessment of the areas for improvement. And ask them what other options (competitors) did they consider and why they choose your company. Remember, competition is not a bad thing. Unless it’s a completely new category, you’re better off having competitors because that validates the market space and lowers your personal risk.


• Be a customer – if it makes sense, try or buy the product/service yourself to experience their sales and support process. You can learn a lot about the company’s way of doing business by how they handle new customers.


• Sales pipeline -- Ask the VP of sales to show you the forecast for the next two quarters. You should see a nice spread of deals in each phase of the deal process. If you don’t have enough deals expected to close in the next year, your cash flow assumptions may be way off. Naturally, they’re hiring you as VP of marketing to help them if there’s a pipeline problem here but it’s better to know exactly what you’re getting into before you jump in.

The people:

• CEO and exec team – Do some networking with former employees, customers, investors, analysts, etc to get the inside scoop on the CEO and exec team. Don’t take the job until you’ve spoken with at least three people who can speak credibly and frankly about the management team. Ask the CEO how he handles conflict in the executive team. Ask each executive what they really think of the CEO and team dynamics—the good and the bad. Pregnant pauses and body language may alert you to some dysfunctional behavior.
• Your role – Now ask the tougher questions about your position. What exactly is your expected budget? If they don’t know or won’t say that’s a red flag. What are your success metrics after 90 days, 6 months, and one year? What decisions can you make on your own versus the CEO? What other key exec hires are planned and how will that affect your role? Why hire a VP now?

Here's another one under "role", Sridhar - What will be your signature authority?

Posted by: Elise | July 2, 2006 11:08 AM