Evaluating a Startup to join

the “headwinds/tailwinds” framework

This is the final post in a 3 part series. To get more context I’d recommend to start your reading at post 1 and continue through post 2.

Now that you’ve asked some form of the “22 Questions to Ask Founders Before You Join Their Startup” and you feel like you’ve got a good handle on the founder’s responses, you need to figure out how to evaluate them. To do that, you want to improve your understanding of the top opportunities and risks that exist for the startup. And the best way to do this is to create context for discussion about the startup with a savvy group of peers.

Here I’ll share this simple “headwinds/tailwinds” framework. You can use it when you’re first learning about a startup and you can keep improving upon it as you gather more information, interview with the company, and consider a job offer.

Start by listing the top three most promising aspects of the startup. Call those the tailwinds. Then list the top three risks to the startup. Call those the headwinds. Make your list of 3 headwinds and 3 tailwinds. Write them down. Now whatever you wrote is probably reasonable, but I bet we collectively could help improve it. You may have identified some pretty risky aspects of the startup, but there might be even bigger risks that you’re not yet weighing appropriately. The purpose of this exercise is to instigate discussions. You want to develop a list that accurately reflects the risks and opportunities ahead for the startup.

Having these kinds of discussions is roughly the same way VC partnerships make investment decisions.

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Template

Company Name

Headwinds

1. Risk 1

2. Risk 2

3. Risk 3

Tailwinds

1. Opportunity 1

2. Opportunity 2

3. Opportunity 3

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The specific headwinds/tailwinds factors you list could come from any number of factors. e.g. existing/new product opportunities, competitive advantages of team, novel business model, existing traction, founder characteristics, org decision making process, engines of growth, investors, team members assembled, changes in the market/world.

Example “headwinds/tailwinds”

X/Twitter

Headwinds

1. Chaotic execution (“ready, fire, aim”) - Many decisions appear to be made with little consideration for the second-order impact. - e.g. selling blue checks to anyone who pays drastically changes the meaning of a blue check and wipes away a lot of previously accrued value.

2. Outside CEO was installed from the ad world. But the innovation in the business going forward may be in direct pay and creator monetization. Can the org/leadership adapt?

3. Alternative offerings are gaining some early traction with different use-cases and architectures - Threads, Nostr, Bluesky, and others show early promising alternatives for organizing publishing networks on the Internet.

Tailwinds

1. Elon Musk - great track record as an entrepreneur

2. Execution pace - more shots on goal means quicker learning cycles

3. Video - rising importance as a category and increased support and investment in products (in short-form and long-form video) and content (e.g. Tucker Carlson)

You may agree or disagree that these are the most important “headwinds/tailwinds”. Tell me what you think is more important to weigh!

You need to refine your list by sharing what you think are the “headwinds/tailwinds” with other smart startup-oriented people to improve upon your list. This framework generates context for debate/discussion. Is your savvy peer group concerned about things you’re not listing as risks? You might consider adding/reprioritizing some factors.

It’s important how you select the people to debate these points with. You want people who are optimistic and open to future possibilities and may have some experience investing-in, founding, or joining startups — but you want to make sure they bring rigor to the process. Remember, any time you meet a founder during an information gathering process they are likely in “sales mode”. The founder is telling you about a really promising future which may be possible, but the founder may also be glossing over some important risks for the purpose of selling you on the opportunity. You want to share in the optimism, while grounding yourself in which aspects are the biggest challenges. This will help you realistically assess the opportunity. So who you select to discuss this stuff with really matters.

If you’re a talented engineer who’s considering joining a company you have a lot of leverage. You should use this leverage to get the best information currently known about a company. Every startup comes with risks and no one has perfect visibility into how the future will unfold. But if you’re considering working at a startup to earn an ownership stake (equity!) you should be on level ground with what is currently known by other investors. And then use that to assess the forward looking risks and opportunities that no one can know yet.

So gather information, write it down in this simple framework, and then solicit feedback/improvements from people who are at least arms-length from selling you on the opportunity. We do a lot of this kind of feedback with the Founders You Should Know community (you can DM me your “headwinds/tailswinds” draft on Twitter and I can give you my feedback on a particular startup opportunity). If you’re thinking about a career move and want to meet startups worth betting your career on apply to attend one of our upcoming Founders You Should Know startup showcases in San Francisco.