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Over the years I’ve had many friends ask “Should I join this early stage startup?” They’ll get around to describing the Founder/CEO and say something like “They’ve had three exits.”

Then I explain that many “exits” actually don’t produce much if any substantial money for the founder, and even more rarely substantial money for the employees. Many “exits” are “acqui-hires" where the product gets thrown out and the team gets hired with a signing bonus.[1] Some founders may say it’s an “exit” if they sold just a tiny piece of the product like the domain name.

There are also many cases where startups grew and created tremendous value for users, but they were bad businesses, and the team decided to simply shut it down . Maybe the team decided it wasn’t worth sacrificing a year of their life to join an acquirer they didn’t want to work for just to say they got an “exit".

All “exits” are not equal. In fact, exit doesn’t equal win.

A smarter way to evaluate a past startup or a founder is to look a layer deeper.

In this article I’ll outline how to evaluate an early stage startup in terms of optimizing for your own best outcome. The earlier stage the startup, the more relevant this advice is.

Evaluating startup based on impact and value

Fundamentally, a startup is supposed to do two things:

  1. make the the world a better place