3 Signs That Startup Is a Burning House

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Picture this: You’re interviewing at a hot new startup, and the interviewer keeps bringing up how all the senior executives are relatively new to their positions—including the CEO, who recently replaced the founder. As he talks about the high turnover, you begin to feel a little nervous about the company’s prospects. Should you still take the job if they offer one?

Everybody has a different tolerance for risk, and tech isn’t exactly the most stable industry when it comes to company survival. For every corporation growing into the next Google or Apple, a thousand startups crash and burn. But there’s a big difference between taking a job with reasonable risk, and signing on for the corporate equivalent of a suicide mission. Here are a few tips for telling if the company you’re considering is in trouble:

Money Issues

Publicly traded companies must reveal a truckload of financial information every quarter, making it easy to judge their health. With startups and privately held firms, that evaluation can prove a little more difficult, but the signs are nonetheless there. If there are significant layoffs, a downsizing of offices, or sustained industry gossip about budget woes, chances are good that something is up. Plan and negotiate accordingly.

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Executive Changeover

If the company’s executive suite resembles your average episode of Game of Thrones, with people dispatched left and right, it’s not exactly a positive sign of the company’s stability. Sure, turnover is one thing—but if the company begins to look like late-era Twitter, with lots of handwringing over who will lead the firm into the blessed land of decent financial results, it could be a sign of management chaos to come.

Big Pivot

Not all pivots are made because a company is in trouble. Look at Facebook, for instance: Soon after it went public, the social network made a full-on charge toward mobile, recognizing that its future revenue would derive from advertising on smartphones and tablets. Just as often, however, companies pivot because their Plan A isn’t working at all: As just one example, take Color, which raised $41 million in funding, launched an app that failed to gain any sort of traction, attempted a muddled pivot into an image-sharing-thingie, and finally imploded.

Joining a company at the moment of pivot could prove beneficial for your career—if the pivot succeeds, and the company grows. But if the pivot is clearly an act of desperation, you might want to consider carefully whether you want to work there.

Image Credit: Todd Klassy/Shutterstock.com

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