Don't Be an Early Employee at a Startup
I was preening through Quora, (Q&A community), and I found an Anonymous answer I wanted to share. Don't end up with the short end of the stick.
1. It's just not worth it - You work as hard as the founders, and put your everything into it. You're underpaid, have none of the benefits because health insurance has not been put in place yet, let alone 401K or anything else for that matter. It takes ages to get returns for your expenses because no one got around to it yet.
All that the founders have "given" you is skipping the initial phase of working for free for a few months up to a year to develop the product and raise funding (ideas are a dime a dozen - it's all in the execution, right?). If you're going to be an early employee of a startup that's any good, then you're likely very good yourself. Start a company on your own. Or work for a corporate. Anything else is getting the worst of both worlds.
2. You won't get rich - The chances of the company making an exit or IPO are low. Take those already low odds and divide them by 1,000 and those are the odds of that exit / IPO being significant enough to impact your life in a meaningful way. If you get even 1% of the shares, in the best case you're left with 0.6% after dilution. This means on a 30M exit you get 180K. Divided by the 4 years of vesting and it's 45K per year. That's probably lower than the gap between your salary and what you would have made in a corporate (Maybe the tax on those 180K in stock is preferable to that of a salary, but still not enough to make a real difference in your life). You'll watch the founders get rich and wonder why the hell you've put your heart and soul into a business that wasn't yours. You'll feel horrible. Just horrible.
3. You're likely to suffer assholes - Lets face it. Lots of self-proclaimed CEO's are ego tripping assholes, seeing themselves as the next Steve Jobs just for having raised $1M. They feel so great about being able to pay themselves out of other people's money, they won't *really* care about building the company further. Instead, they bask in their own apparent success while you try to get actual work done (See #2 - they are the ones who'll get rich if you succeed).
There are very, very, very few real visionaries out there! Most CEOs are just greedy assholes. Period.
Quote from a CEO friend of mine (haven't worked for him): "I've raised the money and hired a team within a month, my work is done! I don't have to do anything anymore!" He was obviously tripping and half joking.
But, I've heard similar things from other CEO friends, and have experienced that attitude from the CEO I worked for, unfortunately. That was painful.
They are also self proclaimed managers who might never have had any managerial experience, management coaching or manager examples. If they altogether despise corporate and never worked in one, then they have learned from no one and are rookie managers, learning on the job. You will suffer all of the bullshit and I mean ALL of it. Micro management, unhealthy feedback, blame, mistrust - the lot.
In conclusion what I have learned:
Either start your own company, or work for one that has its shit together (round B, has an HR department, clear benefit plan etc). Anything else - there's lots to lose, little to gain.
Best option: have a full-time job and try and work part-time (10-20/week) for a startup. This only really works if you have a job that's under 55 hours/week and you can find a startup that'll take you on part-time.
Other than that, completely agree. Chances of your company going big are small, chances of you getting a mid-high 6 figures+ payout are small, chances of you getting recognition are small. Just not a good option.
Great post. I heard that from some friends who worked at startups. They always wanted to be out of there quick.
I'd disagree in blanketing this as I think it is very startup specific. Lets just throw it out there that people at startups that are not in finance will not earn investment banking salaries.
Two of my very close friends work at startups. One gets paid pretty well versus anybody not in finance and has great perks at work (mini-gym, lots of food/snacks, like college after college). Another one was at two different startups and he absolutely hated the first one (lack of mentorship, issues w/ boss, lack of growth, etc.) and the one he left it for has been great. Let me say that in all cases they were paid well versus any other career except for finance (so not breaking 100k in base + bonus pre-perks pre-equity etc.). But lets be honest here, making lets say 90k is NOT bad at all.
I think OP was referring to very early stage start-ups, pre-external investment. If an employee is making 90k, that's a more-established company at that point. I'd definitely have taken a job at a startup like Facebook in 2008. People were making solid money and getting a great name on their resume. Even something not that big/visible but shows promise would be alright, so long as you're making decent money
Makes sense. Most of the "startups" that I've heard about pay well, probably because my friends who have been looking avoid the above like the plague.
The blanketing is mainly targeted at developing startups. The startup you named with a mini-gym, food/snacks, etc. etc. sounds like a startup that's well developed, like the post said:
3 is actually the point that I have also heard the most about from friends who have gone down the start-up route. Pretty sad actually.
Having worked at a tech startup last year, I can agree that this post is 100% spot on. I would venture to add that even co-founders can get dicked out of equity so when it comes to regular employees you're talking about a really low chance of financial success here, not to mention the time commitment required to reach that level of success in the first place.
As someone who worked at a startup all I can say is if you're not a founder stay far, far away.
What's your opinion on startups coming out of incubator? Do you have experience with these?
Lets define start up for the basis of this article shall we?
Mom's basement or 1st office?
Tell that to the first Facebook employees, see what their opinion is...
All depends on your risk tolerance.
To the author's point, that's .01% of all start-ups. I think the biggest issue, and the author brought this up, is the dilution that occurs over several rounds of funding. 1-2% sounds great until you realize you're now at .2% and then get acquired for $10mm after 2-3 years of hard work while making half the salary you should've been.
One of the things I have a hard time with, is deciphering when to start your own business vs. keep getting experience in a structured corporate environment. When I start a company, I don't want to have 4 or 5 other co-founders, and knowing that early employees get screwed 99% of the time, I don't want it to be because I wasn't ready to run my own show yet.
Yep my experience here too. Negotiate your equity up front and never ever listen to any promises unless they are in writing. Co-founders often get dicked out of equity and make sure your contract is extremely tight on what is going on. Consult a lawyer. If you don't have equity up front just walk away.
Don't get into the startup scene simply because its "cool" or the latest fashion. You'll really regret it then because you never even really wanted to do it in the first place. It's quite a complex scene and its best to know your stuff about it before you take the risk.
Spot on. I have interned at a tech start-up while in undergrad and this pretty much sums it up.
Could not agree more. Worked in a startup, realized what mistake I was doing while I was in it. My life improved so much.
Tech start ups are hardly the only start ups their are. Working in a start up is highly valuable if you know you want to start your own company. Working in a start up is not for the faint of heart or those looking for a traditional job. However you will gain experiences you are unlikely to get anywhere else. Early employees earn a vast knowledge base unlikely to be gained at any other job.
I think these have been posted in other threads, but its worth knowing what you're getting into when you're looking for that "great experience". With shirt. Deception, and hiding potential actions detrimental to your standing at the company are likely. Chances are you won't "learn how a startup works". Your founder will keep you far away from the P&L and the company finances and internal actions.
Its probably in your founder's best interest to conserve capital on what he/she already has. You won't get any more compensation unless you fight for it. Get ready to negotiate virtually everything.
Startups generally fail (different industries have different rates). But most startups that last more than 5 years do exactly that. Last. Soon you're not working for a startup. Your working for a small company. And your subject to 4 and 5 above, plus bad benefits. Since most people on this site are like 21-24, by the time your 29 4,5 and benefits will be a big deal.
If your startup is successful in the eyes of your founder, odds are he or she will get rich. You will likely then be working for another company. 1% of 50 mil acquisition is 500K. Then taxes and what not. The result is your founder made 30 mil and doesn't need a job anymore. You made 300K, bought a house in the suburbs and now your working for a company in a PE fund's portfolio with active management. That's gonna sting.
You will work about as hard as your founder if you intend to get anything re: 7. You might work even harder with the hope of more 2 to no avail.
If your interested in starting a company, start a company. Working for one is very rarely a good idea.
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