• Early
  • Posts
  • These 12 Questions Worth $200B Will Help You Join The Next Unicorn

These 12 Questions Worth $200B Will Help You Join The Next Unicorn

How a hyper successful VC asses early-stage startup investments & how to apply that method to your job hunt

Author

Kyle Thomas
April 01, 2023

Welcome to April Everyone! 🌧 🐣🌼

I’m writing this email in my office in the attic while it pours rain outside.

I don’t know how you spend your Saturday mornings, but mine are spent adding final edits to this email, praying my kids don’t wake up when I’m mid-caffeine-induced flow.

That’s the life of a 34-year-old father of 3.

I didn’t choose the #dadlife, the #dadlife chose me.

Anyway, I’m going to try my hardest to type my softest so no one knows I’m up here.

Let’s see if it works!

HEADS UP: I added a new section to the end of the newsletter this week, so make sure you scroll to the bottom and let me know what you think.

It’s designed to give you insight into who has raised money recently and who’s hiring.

Based on your feedback, I’ll keep it ✅, expand it📈, or kill it ☠️.

The Midas Touch

Have you heard of companies like Instacart, Coinbase, or Rippling?

My guess is you have heard of at least one of them.

These companies are now valued at over ten billion dollars:

  • Instacart (People shop for you) = $10 Billion

  • Coinbase (Trade your cryptocurrency) = $15 Billion

  • Rippling (HR software that doesn’t suck) = $11 Billion

But these companies have something in common other than sky-high valuations.

They all started with an early-stage investment from Initialized Capital.

Initialized Capital is a venture capital firm that invests in Seed stage companies founded by Garry Tan (now President & CEO of Y-Combinator) and Alexis Ohanian (Co-Founder of Reddit).

If you’re not familiar with the world of venture capital, here is a simplified high-level understanding of how the funding rounds work.

  • Bootstrap / Friends & Family: A founder has an idea, and they either bootstrap the idea (bootstrap = use their own money) or they raise money from friends and family (this is called a “friends and family round”) to get it off the ground.

  • Seed: Once the founder is ready to raise money from an investment group, they will seek Seed funding. This is the first organized round of funding, typically a couple hundred thousand to a million dollars. Investors invest in an idea and a team that hasn’t been proven. There might be an early version of the product, a few users, and some demonstration of traction (growth), but it’s far from proven. There’s a high level of risk in the investment but a tremendous upside if the investors pick the right company. For a couple hundred thousand dollars, the investors will get a significant percentage of company ownership (10%-20%). If you Invest in a company like Instacart at that stage, you can turn $300k into $680 million (a more than 2000x return!) like Initialized did. Bigger risk, bigger reward.

  • Series A, B, C, D+: Each additional round of funding typically increases the amount raised and the company's valuation. The later the letter, the more the company has developed its idea, the more product market fit they have, and the more the focus is on scaling the business vs testing out its initial idea. The firm investing $3.5B in Uber’s Series G in 2016 bet on a much more “sure thing” than those investing $200k in the Seed round in 2009.

Despite the fact that Seed investments are “risky,” the team at Initialized has returned more than $200 BILLION DOLLARS on their investments in the 7 years since they were created.

In today’s newsletter I’m going to share

  • The 12 key questions Initialized Capital used to identify 28 unicorns and earn billions in returns

  • How you can use the same questions to choose the right startup to join and possibly earn millions of dollars in equity as a result

Let’s go!

Twelve Questions Worth $200B

Initialized invests in companies in the VERY early days.

Sometimes it’s just a person and an idea.

No product, no customers, just a twinkle in their eye.

So how do they know this company could be a unicorn with such little information?

They ask good questions based on data of what has indicated past winners, that’s how.

Their questions focus on three main areas.

  • Product

  • Market

  • Team

Each of these areas has 4 questions to help determine if the company a winner…

or not.

As a job hunter (especially a startup job hunter) you should ask these same questions about any company you’re looking to join.

It will help to “de-risk” your decision.

Picking Winners

I love early-stage startups.

They provide autonomy, the ability to build the future, accelerated career growth, close proximity to leadership, and passionate optimists.

But… because they’re tackling problems that haven’t yet been solved, there is a risk the idea won’t work, or they won’t execute properly and run out of money.

This is why every day I hear someone say, “Startups aren’t for me. They’re too risky.”

Buuuuuut… at the same time, it’s also true that in a startup, you can earn a salary you’re excited about AND have equity grants that could be worth life-changing amounts of money.

I know because I have done it and seen many others do it too.

To make that a reality, you’ll need to choose the right company which is easier said than done.

Otherwise, all that equity will be worth nothing.

Been there

That’s where these questions come in.

Use these same 12 questions to assess if the startup you’re considering joining will become the next unicorn or die on the vine.

Product

1. Is this 10x better, faster, and/or cheaper?

Look at the alternatives. Are 10 competitors doing roughly the same thing, or is the company in a league of its own?

When Uber launched, the next best thing was calling a Taxi company and hoping they showed up in a reasonable amount of time in a car that wouldn’t ruin your clothes.

With Uber you could see the car on the map, a short ETA, a clean black Lincoln Towncar, the driver dressed in a suit, you had cold water, and the price was the same or less (which later caused its own problems).

10x better, faster, and cheaper meant it was a far superior alternative.

2. Is there a demo or early version?

Have you used the company’s product?

If not, can you sign up for it and start using it?

If you can’t sign up for it, can you find someone who is a customer and ask them about it?

If you use it and want to shout from the rooftops about it, that’s a good sign.

I can tell you from first-hand experience that it’s far easier to build a product you use constantly than to build one you’re not a user of.

If you never use the product and don’t know why anyone would… Run!

3. Is this well-built?

If you’re a user, test how the experience checks out against other apps you use.

Is the user interface intuitive?

Does everything work?

Is there a level of attention to detail that shows the people who built it care about function and usability?

It doesn’t have to be perfect, but it should function and make sense.

4. What’s it solving?

When you’re using the product or service, does it do what they claim to be able to do?

Now ask yourself, is that a problem worth solving?

The company could be the world’s best at purifying water in bird baths to ensure your wild birds drink only the purest oxygenated spring water…

That’s one fancy ass bird

but… why?

It should solve a real problem that causes real pain in the world, not one that seems manufactured.

Market

5. Is this market large enough?

A great way to ask this question is, “Could this product affect 1 billion people?”

This is called “TAM” for Total Addressable Market in the startup world.

If the TAM is large, it has the potential to scale, and you could be strapped to a rocketship.

If the TAM is small and you’re banking on your equity being worth a lot, you may be in for a rude awakening.

Sometimes this can be hard to judge.

Initial investors looked at Uber’s TAM and said, “There’s not a large market for wealthy people looking for limousines.”

The people who saw that Uber’s TAM wasn’t limo riders but anyone looking to go from A to B won big.

6. Who’s it for?

Is it clear who the target customer is?

This is why it’s great to be a user of the product because the answer to this question becomes, “Me!”

If you’re not a user, can the company clearly articulate who the product is for?

In the early days, Uber served the mid to late 20 to early 30 year old male looking to go out to the bars in style.

If you ask people at the startup you’re looking to join, “Who are your customers?” and they don’t know, or each gives a different/generic answer, that’s not a great sign.

Trust me. I have been there.

Lack of customer clarity in a company creates confusion about priorities, difficulty in messaging, and challenges in attracting the ideal customers.

That means slow or no growth and a stressful work environment.

7. What’s the business model?

How is the company going to make money?

Does it make sense to you?

To believe your job will be safe and your equity worth anything, you’ll need to have confidence not only that the company can survive but that it’s sitting on a money-printing machine.

Things to look at here are the margins, customer acquisition cost (CAC), pricing strategy, customer retention, and operating expenses/efficiency.

But in its simplest form, does how they intend to make money make sense?

8. What does this compete with?

If you asked a person on the street who Uber’s competitors were in 2014, they would have said Taxi’s or maybe Lyft.

If you asked Travis Kalanick the CEO and Founder, he would have told you a different answer.

Car ownership.

Like I said earlier, if you join the 10th startup trying its hand at ridesharing, food delivery, or you name the industry, the competition is going to be fierce.

Not to say that company can’t ultimately win, but it’s easier to win if you’re going up against an antiquated incumbent or if you’re the first mover.

Know the competition and ask yourself, “Do I believe this founder, this team, and this product are going to beat them?“

Team

Are these founders builders?

It’s one thing to be a great leader or manager.

It’s something COMPLETELY different to be a great builder.

Startups are messy, chaotic, uncertain, everchanging, and just fucking hard.

I thrive in that environment and actively seek it out.

Not everyone does.

Look at the background of the founders.

Have they been on teams that built great products?

Have they started prior companies?

You want to follow a leader who knows how to go from zero to 1 and enjoys it.

It’s a great sign if the founder is getting in the trenches building the company with everyone else.

Mark Zuckerberg coded the initial versions of Facebook.

Tony Xu (founder of Doordash) got in his car and delivered orders.

It’s a bad sign if the founder thinks they can hire everyone else into the company to build it for them and doesn’t like getting their hands dirty.

Are they experts in the space?

Have you heard of “Product Market Fit”?

It’s the holy grail of startups.

It means you have proven there’s demand for what you’re selling, and people are willing to pay for it because it’s better than the alternatives.

Well, there’s a holy grail of startup founders that’s lesser known.

It’s called “Founder Market Fit”.

Is the founder/founding team uniquely qualified to solve this problem?

Let’s look at Uber as an example again.

Did Travis Kalanick have experience launching Taxi companies?

No.

But he did launch multiple peer-to-peer file-sharing companies that harnessed the power of the network effect and fought against the deeply entrenched old-school music and film industries.

Uber harnessed the power of a peer-to-peer driver base that fought against the deeply entrenched old-school Taxi industry.

See what I mean?

He was uniquely positioned to solve that problem.

This can take the form of unique expertise (a rocket scientist building a rocket company) or personal history (an immigrant knowing the struggles of small businesses).

Would we want to work for them?

The product may be an absolute game-changer, the team is world-class, the market ripe for disruption.

But if the founding team is full of insufferable assholes, it will suck to work there.

You’ll join, work there for a bit, and be looking for your next gig well before your stock has fully vested.

Ask yourself…

Do these people inspire me?

Do I want to learn from them?

Would I want to follow them through good times and bad?

Do they create a vision for the world that I want to work towards?

An inspiring leader won’t guarantee success.

But a founder people don’t want to follow will guarantee failure.

Would we want to work with them for 10+ years?

Job hopping is all the rage.

Don’t get me wrong, I see the value in getting a new job to increase your salary.

But maybe I’m a purist and loyal to a fault in believing that I want to see the vision become reality when I commit to joining a cause and a team.

I worked at Uber for 7 years and watched it go from 250 people to over 20,000.

I told myself I would leave if I stopped solving interesting problems, I didn’t enjoy the people I worked with, or if a company’s mission gripped me more.

It took 7 years before I started looking elsewhere.

So as you’re looking at the company you’re joining, ask yourself, “Can I see myself working for/with this founder and this team on this mission for the next decade?”

Alright, there you go.

12 questions to give you a better shot at choosing which startups to target for your next career-accelerating, possibly even life-changing role.

These questions won’t guarantee success (the majority of Initialized’s investments don’t become unicorns), but they will give you a far higher likelihood of success.

And that’s all you can ask for.

Here they are again so you can screenshot them and keep them in your back pocket:

Product

  • Is this 10x better, faster, and/or cheaper?

  • Is there a demo or early version?

  • Is this well-built?

  • What’s it solving?

Market

  • Is this market large enough?

  • Who’s it for?

  • What’s the business model?

  • What does this compete with?

Team

  • Are these founders builders?

  • Are they experts in the space?

  • Would we want to work for them?

  • Would we want to work with them for 10+ years?

(NEW SECTION) Who’s Hiring?

With Spring comes new life and even though there seems to be a lot of doom and gloom about layoffs, 150 companies with headquarters in the US raised over 4 billion dollars this month.

There are going to be some major winners that come out of these crazy times.

Here are 4 companies that received funding this month and are hiring for non-technical roles.

  • Industry: Enterprise Software, Intelligent Systems, Life Science, Manufacturing, Pharmaceutical, Software

  • What they do: Help pharmaceutical producers bring medicine to patients faster using a platform that incorporates AI, augmented reality, wearable/desktop devices, and robot manufacturing. ALL THE BUZZWORDS!

  • Company Stage: Series C

  • Employees: 155

  • Recent Funding: Raised $65M Series C this month

  • Total Funding: $152M

  • Open Ops Roles: Senior Director, FP&A

  • Links: Careers Page, LinkedIn

  • Industry: AI, Info Tech, Software

  • What they do: Provide open-ended conversational applications that let users create characters and converse with them. Think ChatGPT, but the output is Elon Musk speaking.

  • Company Stage: Series A

  • Employees: 21

  • Recent Funding: Raised $150M Series A this month

  • Total Funding: $150M

  • Open Ops Roles: Operations Manager

  • Links: Careers Page, LinkedIn

  • Industry: Advertising, Analytics, Digital Marketing, SaaS, Info Tech, Enterprise Software

  • What they do: Enable brands to better recognize their customers online, providing 1-1 marketing at scale

  • Company Stage: Series C

  • Employees: 796

  • Recent Funding: Raised their $76M Series C this month

  • Total Funding: $152M

  • Open Ops Roles: Director of Business Development, Publishers, UK

  • Links: Careers Page, LinkedIn

Do you like this section?

Want to see more startups profiled?

Login or Subscribe to participate in polls.

That’s all for today.

The kids have woken up and are screaming downstairs because the boy took the giraffe from the girl.

Off to break up a fight.

Let’s become career champions together 🏆

Kyle

P.S. Whenever you’re ready, there are 3 ways I can help you:

#1: Free Job Hunt Strategy Call: Request a free job hunt strategy call with Kyle to get closer to landing your dream role tomorrow. On our call, we will walk through your vision and how to make it a reality, cover the obstacles standing in your way, and help determine the best next step for you to take based on your short-term and long-term goals. Schedule a call today!

#2: Want the proven playbook to get more dream job offers in less time with less stress? Discover how to build a proven system to land your dream job in a matter of days.

#3: Follow me on LinkedIn for more job hunt systems, productivity tools, and networking templates.

Share UpEmployment

The job hunt isn’t something you need to do alone.

In fact, if you surround yourself with other career champions, you’ll land your dream job quicker.

So share this newsletter with anyone you know that is currently looking for that next career-accelerating opportunity so you can win together!

Forward them this email or just copy and paste this link: https://upemployment.beehiiv.com/subscribe

Did you like the newsletter this week? Do you have any questions I can answer?

Want to see more or less of something?

Reply to this email and let me know! I’ll build what you want to see.

See you again next week!

Reply

or to participate.