After 8 years at a public company, I started evaluating startups as potential employers. I quickly realized: I had no idea how their financing actually works. Here's what I learned.
For most of my career, I worked at a public company. The financials were transparent. Quarterly reports, analyst calls, stock price. If I wanted to understand how the company was doing, I could look it up.
Then I started evaluating startups as potential employers. Series B companies. Series C. Names I'd heard, products I admired. And I realized something uncomfortable: I had no idea how to evaluate them financially.
What does "Series B" actually mean? Is €20M ARR good at that stage? What happens to my equity if there's a down round? These weren't hypothetical questions anymore. They were decision-critical.
So I did what engineers do: I learned the domain. This post is what I wish someone had explained to me when I started.
Let's start with the most important mental model: raising money is not an achievement. It's fuel. A startup that raises a lot of money isn't automatically healthy. It might just need a lot of capital to operate, or it's burning through cash faster than expected.
A €100M funding round sounds impressive until you learn they're spending €15M per month with no path to profitability.
When you see a headline like "Startup X raises €50M Series C," the right question isn't "wow, they must be doing great." It's: why do they need that money, and what will they do with it?
Different investors play at different stages. Understanding this helps you decode a company's trajectory.
Not every unicorn follows the VC playbook. Zscaler, for example, bootstrapped for years before taking outside capital in 2012 — a full decade after founding. They went public in 2018 at a $1.9B valuation and are now worth over $25B.
For candidates, these companies often have different DNA: more focus on capital efficiency, less "growth at all costs" pressure, and founders who've retained significant control. The culture tends to be more pragmatic. Whether that's a pro or con depends on what you're looking for.
As a candidate, pay attention to who invested. Tier-1 VCs (Sequoia, a16z/Andreessen Horowitz, Benchmark, Index) signal that serious due diligence was done. Unknown investors or only strategic investors can be yellow flags.
Here's what actually happens at each stage:
| Round | Typical Size | Expected ARR | Team Size |
|---|---|---|---|
| Pre-Seed | €100K-€1M | — | 1-5 |
| Seed | €500K-€5M | €0-500K | 5-20 |
| Series A | €5M-€20M | €1M-€3M | 20-50 |
| Series B | €15M-€60M | €5M-€20M | 50-150 |
| Series C | €50M-€150M | €20M-€100M | 150-500 |
| Series D+ | €100M+ | €50M+ | 500+ |
I've highlighted Series B because for many ICs, this is the sweet spot: enough validation that the company works, but still early enough for meaningful equity. The company has found product-market fit, has a real go-to-market engine, but isn't yet a mini-corporation.
Seed: You're joining a bet. Below-market salary (20-40% less), significant equity, high risk. Good if you want the founding team experience.
Series A: Still risky, but something's been validated. Salary closer to market (10-20% under), equity still meaningful. The company is figuring out how to scale.
Series B: The go-to-market engine is running. Real management layers form. Market-rate salaries become possible. This is where I'd tell most experienced ICs to look: enough proof that it works, enough upside that it matters.
Series C+: Lower risk, lower equity upside. Starting to feel like a real company. Good benefits, clear processes. The IPO conversation starts.
Here's a concept that confused me: pre-money vs. post-money valuation.
Example: A company has a €10M pre-money valuation. Investors put in €2.5M. Post-money is €12.5M. The investors now own €2.5M / €12.5M = 20%.
Higher valuation means less dilution for existing shareholders. But valuations that are too high create down-round risk later.
Why does this matter to you? Because your equity percentage is calculated against total shares. If the company keeps raising at higher valuations, you dilute less. If there's a down round, you dilute more, and your options might be underwater.
When evaluating a startup, these patterns should make you ask harder questions:
Startup funding isn't magic. It's a system with knowable rules. Once you understand how it works, you can make better decisions about where to work.
The goal isn't to become a finance expert. It's to ask the right questions and recognize when something doesn't add up. A company that's evasive about runway or valuation is telling you something. Listen.
In the next post, I'll cover how to evaluate the equity component of your offer specifically, including what your options might actually be worth.