In Part 1 of the series “Should I work for a Startup?“ we examined all the potential benefits and advantages of working for a Startup.
In this post, we will discuss some of the downside, risks, or disadvantages of working for a startup.
1. Extremely Long Work Hours
If you are an employee at an early-stage startup – there is a high probability that you will be working for very long hours. Most employees in this situation find themselves wearing multiple hats & juggling multiple responsibilities.
There will be more grunt work expected from you compared to a large corporation. If work-life balance is one of your priorities, then you have to think twice before working for a startup. Often you will be working evenings & weekends, attending events, endless traveling, etc. Most Founders may not be completely upfront with you as to how much time you would have to spend at work.
2. Success Rates of Startups are Low
Yes, we have all heard about Facebook, Google, Tesla, and the uber-successful companies that were once startups. We have also heard about Instagram, WhatsApp, Oculus Rift that were acquired within large corporations. Perhaps these stories are what lure many candidates to work for startups.
A word of caution – every founder you will interview will tell you that his/her company will be the next Google or Facebook. I have heard that pitch a few times.
75% of venture-backed startups fail. In most cases, they receive over $1 million in funding yet they fail. And that is the reality most startup founders know. But their employees don’t necessarily know this.
If Career stability is important to you- then keep this in mind – and you should strongly reconsider working for a startup. Most established corporations have weathered the storms, have gone through multiple stress tests, and have established themselves in the marketplace. Corporations would provide more career stability & job security than most startups.
3. Low Income and Benefits
It is a known fact that most startups (not all) provide their early employees with stock ownership. However, in most cases, the salaries and benefits are lower than the average market.
The complexities of salaries, stocks, benefits vary based on which stage of funding a particular startup is in. Most startups are cash-strapped and will be very frugal with their available cash and funding. Most of their initial funding would go towards product development, marketing, customer acquisition, etc.
Angel List has put together an amazing graph that provides you the data on what to expect as salary & equity for a startup. It is interesting to note that the average equity is less than 1%.
4. Career Stability
As mentioned before, 3 out of 4 venture-backed startups fail. In the case of non-funded startups, the failure rate is even higher. This could negatively affect your resume and career (temporarily). If you worked for a startup that no one has heard about, it could be difficult to secure your next job (although not impossible).
Let me share my example. For a while, I worked for Canon selling copiers. The sales-reps who have worked for Canon /Xerox have a strong reputation in the marketplace. As I transitioned away from Canon – I found it easier to get interviews at other companies; in many cases, recruiters were flooding me with interview opportunities. It was not difficult to get another job.
Once I also worked for a small IT services company in the Toronto area. When the time came for me to look elsewhere – I found it difficult to get interviews. Most hiring managers did not know the company I worked for and interviews were an uphill battle. It was relatively difficult to secure an interview or a job. Although I did secure a job and career that I currently enjoy- the process was relatively difficult.
If you worked for Google or Goldman Sachs, and you decided to look for a job elsewhere – how difficult do you think it will be for you to get an interview? You will receive far more options and opportunities. The reputation of the company you worked for does affect you while job hunting.
In Part 1 we looked at the potential advantages of working for a startup. In Part 2 we reviewed the potential disadvantages of working for a startup.
Should I work for a Startup? You ask…
It depends on you, your risk level, your entrepreneurial spirit, your financial situation, your family situation, your income goals.
Working for a Startup is not for everyone!!
Also, not everyone is fit to work at a startup!!
Here are some additional resources for you to help you make the decision.
- Joining a Startup? Top 6 Questions You Should Ask
- 11 Things to Consider Before going to work for a Startup
- 5 Things You Should know before working for a Startup
I hope you have got enough information to make an informed decision.
Feel free to share if you found the series/posts resourceful!!