Joining a startup is far less risky than most people seem to think. In fact, I don’t know if anyone has ever studied this systematically, but I would bet that people who join startups have greater job security than people who join large companies, and certainly have better risk-adjusted returns.
Here’s why:
- Big companies aren’t as stable as you think: I graduated business school 6 years ago. Very few people in my class created or joined startups, instead opting for “safe” companies like… Bear Stearns, Lehman Brothers, Ford, hedge funds that no longer exist, etc. Meanwhile, everyone I know who went the startup route has had job security and been successful – in some cases spectacularly so.
- Big companies aren’t loyal to employees: When there are cuts at big companies, they tend to just use a hacksaw and not consider how loyal you’ve been or how hard you worked. The people who survive are often the ones who happen to be in certain favored divisions or are good at playing politics.
On the flip side:
- Startups that have financing pay pretty well: If the startup you found or join is VC backed, you usually make market or near-market wages (in addition to the potential upside you get with equity). Even if things go south you will probably have broken even financially and learned valuable skills.
- Startups tend to be much more loyal to employees: For example, in the recent downturn I know of a number of startups where management took pay cuts (in some cases took their pay to zero) before laying anyone off. Experienced startup managers know how devastating layoffs can be to morale and to their own reputation and tend to avoid them at all costs. Moreover, even when there are layoffs they tend to be based on merit and loyalty.
- When you join a startup, you are also joining a network – You aren’t just joining a company – you are joining a network of employees and investors who – regardless of the fate of the startup you join – will inevitably go on to do interesting and successful ventures. If you impress them, they will bring you along. I know of many cases where startups failed but employees went on to flourish at the founders’ next startup or another company their VCs invested in.
In short, just because startups tend to fail more than big companies doesn’t mean joining a startup is riskier than joining a big company.
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10 comments ↓
I agree with you Chris, but majority of people have their brakes on because of the media, economic conditions, social status (need for less risky career). Smart and wise individuals end up in start ups and the “dinosaurs” (as I call traditional business individuals) will never move to newer companies.
Being on the other side of the wall, I understand what loyalty means to the janitor, not just a VP and how it will help a company.
I know companies that have received awards for Employer of the year or month…whatever…and trust me…it sucked working there…but there are many others without awards that are far better than those winning awards.
To me…being loyal to my employees is the #1 priority, since I cannot run the company on my own and the company hired them, not the other way around.
Imagine if XYZ (insert your favorite company) has all, I mean all employees quit…how well are they until they find replacements?
This is a great post. Completely agree, but I do think there is one risk of startups you don’t mention: If you are at a well-funded startup with purely technical founders the VCs will often bring in a big-company CEO, who in turn brings big-company policies. In this instance you have the worst of both worlds. This has happened to me twice, and both times the results were predictably disastrous.
I never worked at any big companies, because of the fact that the things that I’m interested at, and I’m good at, are not the things that are the interest of established companies around “where” I lived.
You’re correct about the situations in startup compared to the big companies. But, the risk with startups are always related to their financial conditions and how to find talented people or experts that would be able to deliver the best results.
In order to compete with big companies, good and engaging product is the number one determining factor.
Unfortunately, it’s very hard to find great talents in software, around my living area, to realize such startup idea.
[...] and act with integrity, people will notice. Contrary to popular wisdom, you will actually have more job stability than working at a big company. And hopefully you’ll go on to start your own company, gain [...]
Perhaps an issue of these times, but in my 4-years experience in 2 startups, the reality is that you are constantly in uncertainty mode. You can be out or the thing could be dead tomorrow. It’s a huge toll on your state of mind. The other impact is that when you’re interviewing, you loose a lot of points with ’solid’ organization opportunities, as you’re being seen as a loose cannon.
Again, perhaps just a sign of current times, when companies expect the 105% candidate fit.
Your message is a tad biased. The reality is over a 10 year span a vast majority of start-up employees will earn less money, work harder, yet have more fun, more autonomy. The corporate types will earn more more money, learn different skills, work less hard but have less fun and less of them will “win big”. During the same period that you state Ford, hedge funds etc. laid people off, the start-up community laid off people in their droves because so many failed to get funding or their next round. It’s a mix. I’ve worked in both worlds, and I prefer the start-up world. It’s a question of which environment you would prefer to work in and what you want (pace, risk/return profile, culture needs etc…). It’s not so black and white.
I agree in some ways and disagree in others. In a startup if you fail you go fast. There is not the same honor system for making sure employees are loved that is done so in a bigger entity. Additionally, there are few stories these days about getting rich quick in a startup and often times the ownership has sold their soul to the investors to assure a big payout for them but not for their teams. They are the ones with big golden parachutes and a high risk reward. I know as being the HR person at many a startup and having to shut the doors and disappoint people. I think you either are a startup personality or are not one. Those who like to be highly visible and do lots of things that may be outside of their usual realm should consider startups. Those who prefer a more regimented or process driven world should go larger…just my 2C.
[...] my way/solve my way to a solution.” Chris Dixon also has a couple nice posts on this topic: Joining a startup is less risky than you think. Every time an engineer joins google a startup dies. More specifically, work for my startup: [...]
[...] Joining a startup is less risky than you think. Every time an engineer joins google a startup dies. [...]
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