Another resource to check out is an article I wrote a few weeks ago titled: Thinking of Joining a Startup, Then Think Like a Venture Capitalist. Once you have internalized the decision makes sense for you, this is a guide to making sure you are asking the right questions.

http://darthcapitalist.com/2009/07/thinking-of-joining-a-startup-then-think-like-a-venture-capitalist/

BTW, The link in the end is faulty, please correct it.

Secondly, point # 3 is highly misguided and misguiding. The very purpose of equity is to incent employees to take the startup to a stage of massive cash infusion from outside (IPO or acquisition). Before that stage, startups are NOT in a position to BUY back vested options. Ironically, the author says “Cash is king” but forgets to apply the same principle to the startup itself!!.

I disagree with that piece of advise around the domain, and that being the first thing you look at. Twitter is in the social networking space & happened not a long time back. There are a bunch of smaller companies which have done well thanks to platformization of soc. networks like Rockyou, slide, zynga, – they are all in the soc. networking space & are doing well. weRead[1] & chakpak are 2 others from India which are doing well too.
In general, I feel, the domain is a much smaller factor than say the people who are building the startup. It can serve as a guide, but innovation happens in well-established domains too – gmail & ipod are classics and in some ways Zoho falls in that category too.

[1] – I help build weread.

“For e.g, a new startup for social networking is not what you want to get into right now. On the other hand, a startup in the Business modelling and optimization domain is definitely a hot one right now (partly because of the optimization needs during recession, and mostly because there are not many players in this domain right now).”