Dream job or risky nightmare: How to assess whether that startup leadership role is too much of a risk

| 4 minutes

When you’re a C-suite leader looking for your next challenge, there’s only a small pool of top roles to consider. It’s a shrinking pool too, with the number of CEO roles in the US alone declining by 19% over the past ten years. 

For those in the traditional finance sector, economic instability has led to even fewer options with the number of banking sector employees decreasing for the first time since 2020

With fewer opportunities at familiar names, many C-suite finance leaders are considering making the leap into Fintech and joining a startup. 

The idea of leading a company from rookie to household name is a big pull, but how can you assess whether a startup leadership role is a great opportunity or a huge risk? 

Startup survival odds 

Recent research has put startup failure rates as high as 90%

There’s a common misconception that most fail in the first year, but that only accounts for 1 in 10 failures. Most fledgling businesses fail between years two and five

When researching a potential startup employer, look at how long the business has been operating to get an idea of whether the risk level is at its peak. 

Money, money, money

Understanding how much funding a startup has is key to evaluating the risk. In the UK, 38% of startups fail simply because they run out of cash. 

Websites like Crunchbase and Pitchbook are great for getting an understanding of how much funding an organisation has secured and when. 

Estimate the runway

The amount of funding is only half the story. What may seem like a great level of investment won’t offset the risk for a very cost-heavy business. 

In the startup world, firms often talk about their “runway”: their burn rate minus revenue. 

You won’t be able to calculate this precisely as an outsider, but when you’re researching the company, think about whether it’s a cost-heavy business model and the size of the team. 

Though Fintech startups often have low-cost setup costs, team costs can spiral. Payroll is one of the biggest startup expenses; as a rough guide, payroll costs average $300,500 per five employees in the US. 

Who’s got their back

As well as how much funding they have and how they’re spending it, look into who their investors are. 

More than one investor is reassuring as it reduces dependency and is a positive reflection on the business’s potential. 

Seeing major VCs listed as investors is also a good indication that the business is stable and going in the right direction. 

Meet the team 

In a small business, everyone’s actions influence the company’s success and direction – positively or negatively.

The most important piece of due diligence you can do is to look into the team currently running the business. 

Use LinkedIn to get a feel for whether current business leaders are operating in their area of expertise and whether they’ve had previous successful ventures. 

High team turnover can also be visible on LinkedIn and is an important red flag to consider. 

Further down the recruitment process, be sure to spend time with the founder(s) to get a feel for how involved they are in the day-to-day running of the business and whether they’re someone you could work with. 

Taking the plunge 

Even a well-funded startup led by a great team can go bust, but in today’s uncertain markets, the risk of redundancy is unfortunately just as real in established financial institutions

Leadership roles at startups offer pace, stretch, and the ability to really see the impact of your decisions – your leadership – on the company’s success. 

If you’re interested in leadership roles with some of the most exciting new names in Fintech, get in touch to tell us a bit more about yourself and take the first step to finding that dream startup role.