Startups tend to be very popular especially amongst young adults fresh out of college. However, it often happens that some get disillusioned after actually working for one, because it turned out to be different than expected. Time for a reality check.
Expectation: fast money
The appeal of fast money is huge. Many students fresh out of college look to startups, because they have a chance of getting equity. If the company does well, your equity is worth a lot all of a sudden. Facebook’s IPO created hundreds of millionaires, so did Twitter’s. The thought of becoming a millionaire within three years out of college is extremely compelling.
Reality: is not so great
- Scenario 1 – Bootstrapped Startups
Salary is indeed not very high in early stage bootstrapping startups. That is the nature of a startup – it’s a young company that just started out, revenues are not high, and profitability is still far away. Bootstrapped startups simply cannot afford to pay high wages to their employees.
- Scenario 2 – Funded Startups
Things look a bit brighter at funded startups – they actually have money that they can spend. Wages are still lower than at corporations, but they are significantly higher than at bootstrapped startups. Apart from that, you get nice perks! If you think free breakfast, drinks and fruit are nothing special, think again. Some startups even offers unlimited vacation to its employees- funnily enough one of them had to add a minimum amount of vacation days employees have to take after no one took vacation at all, but that is another story.
Equity is a genuinely nice thing. By owning a part of the company you are working for, you are incentivised to work harder. This is good for your boss, but also for you – you have higher motivation now. However, equity comes in multiple forms. Be sure to check up on the details if you are offered some. Especially important are the conditions for payout.
Quite often, you will find a bad leaver clause. This means that you have left the company on unfriendly terms, and in the most extreme case, you will walk away with nothing at all. Also keep in mind your vesting period. You do not receive the whole equity package at once, you have more of an incentive to stay at the company if you receive small pieces of your equity package over time (because if you leave early, you would miss out on the equity you have not yet received).
That’s why vesting was introduced – you get a certain amount of shares every month, for a predefined period. At the end of the vesting period, you will finally have the full equity that you were promised. A second mechanism keeping you at the company is the so-called “cliff” – although your equity is vesting over time, you may also have a period of time where, if you decide to leave the company, you will not receive any equity at all (normally one year after signing your equity agreement).
Sharewave has a nice example diagram showing this:
The first 12 months you theoretically get nothing if you leave in that timeframe, but after those 12 months you get a large batch of shares.
Expectation: flat hierarchies
Who doesn’t like the prospect of merit-based promotion? If you work hard and do your job well, you get promoted. If you like competition, you will like this type of style. A stereotype of millennials is that they don’t want to work hard for a senior position, and expect to receive a top position at a company directly out of college. That is not realistic, but at a startup you can climb the ranks much faster than you could at an established corporation.
Reality: at early stage startups, this is definitely true
It also makes sense logically – if you are competing for a promotion with five others, you have a higher chance of being promoted than when competing with 50. But even more than that – most startups genuinely value results more than experience. If you do well, you are given more responsibility and rise up in the ranks very fast.
Note that this is true for the flip side as well, if you do not perform, you can be let go very fast as well.
Expectation: great company culture
When you think of a tech company, you generally tend to think of Google, Facebook, Twitter and the likes – the huge companies from Silicon Valley. And all of these companies pride themselves in having great company culture, great offices, a great atmosphere and in general take care of their employees very well.
Reality: true (with some limitations)
Those large companies you’re thinking about? They do tend to provide an amazing work environment, want you to develop personally and have great offices that inspire creativity. At large companies, there are some exceptions within certain departments – recently this blog post of an Ex-Yelp employee gained a lot of attention, but in general the work atmosphere is great.
Non-funded, young startups do not have those great offices, healthcare, perks and foosball tables. However their company culture can also be great. Imagine you are building a product together with a couple of your friends – working together every day, pushing each other to do their best, sharing the good moments and the bad. Also a great environment and company culture.
Expectation: having autonomy and responsibility
If you decide on working at a startup, you tend to want to notice the impact you give on the company. You want to contribute to a great product and want to make a difference. At the same time, you are looking for independent work with responsibility. You want to feel important and you want to see your work have an effect on the development of the company.
Reality: depends on the stage of the startup
If you start at Uber in an entry-level position, you will obviously not have as much impact on the company as you will starting at an early stage startup that only has three employees. If you are looking for autonomy and responsibility, you must know what you are getting into. If you start working at a company that only has three employees, your work can make or break the company. That’s the reason founders find it extremely hard employing their first employee. If they choose the wrong person, they might have signed the death warrant of their company.
By taking on the responsibility for a project, you commit yourself. That means if there are unexpected issues that need to be dealt with, you are the one who has to deal with them. Solving those issues might take more time than you anticipated, so do not be surprised if you are working long into the night.
Expectation: Making the world a better place
Startups stand for innovation and progress. Who does not want to work for a company that is genuinely improving the lives of a significant portion of the world population?
Reality: In rare cases you will (depending on your definition of a “better place”)
These days, everyone is starting a startup. You are interested in paranormal activity and want to know if there is a ghost in your house? There’s an app for that. You enjoy candles and gambling? Why not try out Prize Candle.
If you are working for a company like Tesla, you are indeed making the world a better place. But most startups are not Tesla. Most startup owners are not Elon Musk. So chances are, you are not working for the company that has a revolutionary idea and is changing the world for the better. Of course it depends on what you consider “a better place” – if you are creating something like an app which helps you locate your nearest coffee shop, you may indeed be helping out people who were looking for just that.