Ask HN: How to evaluate a startup risk as an engineer?
i basically want to answer whether or not the startup has a good chance at an exit and exit at a price where i can walk away with 7 figures.
1. Is the company founded and managed by people that are competent, experienced, and 100% devoted to the success of the business? Do they have domain knowledge?
2. Is the company solving a real problem that affects the lives of thousands of people who really want that problem solved?
3. Is the solution simple enough to develop, produce and maintain while still being unique and differentiated from the rest of the market? Is the solution definitively valuable to the market (customers)?
4. Is the business designed to be sustainable in the next couple of years? In other words, can this business get to market and start generating revenue? Investors will tire of paying the bills at some point, and that will impact the staff and their salaries.
Remember that even when all of the answers are favorable, the chance of success is still less than 50%.
what you can do is look at the quality of investors in a start-up, and infer the quality of the opportunity. if the start-up has big name investors (a16z, bessemer, sequioa), chances are that the very smart people at those funds deduced the risk worth taking, and you probably should too.
if the investors are funds and people that you've never heard of, its likely that the risk was too high or upside too low to be of interest to mainstream investors.