What to Ask Before Joining a Private Company
+ 5 Keys to Stay Sane as a PM
Thinking of accepting an offer at a private, VC-backed company?
There’s a metric you need to ask them. What is their burn multiple?
There’s blood in the streets. Noom, Loom, Bolt, and other highly valued unicorns are slashing staff. Others are rescinding offers. Even if the company you are considering doesn’t rescind your offer, they may lay you off early in your tenure.
You can minimize the chance of this by understanding the company’s burn multiple.
Burn Multiple = Burn / Added Annual Revenue
It’s the best metric for how efficiently the company you are considering growing.
Consider an example quarterly report for two companies.
Company A: $60M burn for $30M additional annual revenue
Burn multiple = 2x
Company B: $100 burn for $200M additional annual revenue
Burn multiple = 1/2x
Although company B is burning more, it is growing more efficiently. Company B is the company you want to work for. So if you have two offers that are relatively equal, you should prefer the one with lower burn multiple. The lower burn multiple is going to have a much easier time raising funds, so it doesn’t have to lay you off.
Let’s take a real example - Bolt. The Information reported it burned $60M to generate $14M in annual revenue in q1. That’s a >4x burn multiple. That’s really bad. If you had asked Bolt about the burn multiple, you would have known it had a likelihood of layoffs.
The Burn Multiple should improve as the company ages. So when a company is raising at a $11B valuation, you are looking for <1. Earlier stages like series A and seed will naturally have higher burn multiples. 4 is bad at almost any level, and was a huge red flag for Bolt.
Many candidates are nervous to ask for these numbers. And when they are told no, they just move on. But, do you want to be left without a job? Will you be able to pay your rent?
Ask the tough questions so you aren’t left without an income.
5 keys to stay sane as a PM:
1. Don’t put the weight of all flaws in the product development process on your shoulders
2. Block spaces in your calendar for meeting-free focus time
3. Empower your design and engineering partners
4. Forgive yourself
5. Smile often