There is no foolproof mechanism to identify a promising startup and one that might fail a year down the line. Taking a cue from the heavy layoffs across some companies this year, top institutes have come up with subjective ways of collating, collecting and analysing information about companies that are approaching them for final placements this year.
As a member of the IIM Rohtak placement committee puts it, “Startup businesses generally offer high packages to attract good talent. That is the premium they pay to compete with the bigger brands.”
What, however, is the best way to evaluate the health of any startup company? At IIM Calcutta, for instance, Professor Rajiv Kumar, chairperson, career development and placement office, informs that placement officials have a checklist for startups willing to recruit from campus. “The job title might say head of strategy or AVP strategy for instance, but the content of the role and job description is important. Also, we check the expected number of positions the company is willing to offer to IIM Calcutta graduates. If a company, for instance, wants to offer four or five roles instead of two or three we get to know how robust the company’s growth is. We also look at the profile of people who are working in the startup. For instance, we’re confident about companies that have people who have exited big firms to join them. We look at the compensation a firm is offering and within that we look at the fixed component vis-à-vis variable or stock options.”
At IIT Madras, Dr Babu Viswanathan, training and placement advisor says, “During the general body meeting with students before the placement season begins, I do tell them about the risks of joining startups and incidents we have had in the past.”
Babu also informs that placement committee faculty members from all IITs meet once before the placement season to make sure that companies don’t divide and conquer. The committee also blacklists companies that they feel are not suitable for recruiting graduates from all IITs.
Padmaja Ruparel, co-founder and president, Indian Angel Network, advises students to assess the source of funding and financial health of the company before joining a startup. “If the company is hiring, they need to be able to pay salaries. Joining well funded companies reduces early job risks.One must also do a quick check whether the companies have raised any funding,” she says. Talking to existing employees and peers to get an insight into the company provides more colour to one’s research, she adds.
Indian companies need to list on the government’s Registrar of Companies (ROC) and file their financial statements. Ruparel asks graduates to register at the ROC website to assess the company’s growth potential.