My plan is to join the startup in 4-5 months time frame and only then initiate my H1B transfer. Till then ill continue with my current employer. Any idea on what USCIS looks for in H1B transfers ?

How far did they go with the visa transfer, and what is the situation with the current employer? You shouldn't worry too much about the new company, but instead worry about keeping your current job (and, by consequence, your H1B visa).

Otherwise you may risk losing both, and have to return to your country of origin and start all over again.

Then it's a no brainer. Start with your new employer, then apply to your friend's startup whenever they're ready. So you don't miss an opportunity with the big company. You can transfer your H1B as many times as you want as long as you have at least 6 months remaining on it. They will use premium processing, you can be done in 15 days. Then if you're into your first 3 years on your H1B, they will be able to extend it for 3 more years during the transfer.

I thought USCIS stopped premium processing earlier this year due to backlog.

You are right. The suspension also includes h1b transfer too. I wasn't aware of that.

There is an option called "bridge petition". More risky, but doable.