I’ve had the good fortune to be involved in 3 successful startups, now in my fourth, including founding two.
You want to think like a VC (VCs are the companies that fund startups, not banks as mentioned above). Remember, just as a VC finds some place to park millions of their dollars, you’re finding some place to park years of your life. It’s a huge commitment for both of you, so don’t treat the decision lightly. Especially since the hours will be long.
What the VC wants to know (prioritized):
Team: Does the team have a track record of successfully building companies? Do they have a track record of building relevant technology? Do they have a track record of selling to relevant customers? Do they have a rolodex of relevant parters and potential acquirers?
Market Size: What is the potential market for the product you’ll make? Most tier one VCs won’t touch you if you aren’t aiming at a $1B market.
Competition and Differentiation: How many competitors are out there? What do you have to give you an unfair advantage? How much development lead-time do you have on the competition? How many patents do you have? What differentiates you from your competition? How will you maintain that differentiation?
Product: Do you have a strong product?
Note that the product is pretty far down the list, and is really secondary in the scope of things. It’s really about getting some sharp experienced people that are aiming at a big market. It’s a given that the market will change, so if you have sharp people, they’ll adjust. If instead you make a choice based on a great product, when the market changes (it will), the product will be useless, and the team won’t be able to adapt.
Also, if you’re new to this, here’s how the money works:
You’ll get some stock options, which are ownership of some percentage of the company. At some point (assuming the company doesn’t fold), you’ll “exit”, either by going public or being acquired by another company. At that point, your shares will be liquid, and you can (or maybe must depending) cash them out. There is a total number of shares outstanding. Ask what this is. There is a number of shares they’ll offer you (typically you’ll have to work 4 years to get them all; they’ll vest over that four years). The company will become liquid at some price some day. So, if you take your shares, multiply by the exit price of the company, then divide by the number of total shares, you’ll get what you should earn from your stock options over that vesting period (4 years typically).
Note that by the time the company becomes liquid, the total number of shares will increase, if they have to raise additional money which is likely. Count on the total shares doubling at least, and maybe quadrupling.