Start-up vs. established company

I just completed the most extensive job search of my career. I originally thought that I wanted to work for a start-up, but I ended up taking a position at an established company. Why?

I ultimately decided there is really only one reason to work at any start-up: you need to passionately believe in the vision of the start-up to the exclusion of every other opportunity out there. It needs to resonate with you at your core. You need to think that this is such an amazing opportunity that you can't imagine why anyone would work on anything else. You need to fully submit to the reality distortion field.

Because when it comes down to it, start-ups can't offer the guaranteed compensation that an established company can. You are betting on the dream — the one that nearly all start-ups have — the dream that they will become a runaway success with massive impact and profits to match. But we all know logically the odds of that happening. Which is why you need to be emotionally involved to have it work.

There's another twist, and that's your percentage of equity. Because even if a startup is successful, it's a bit irrelevant if you hold .01% of the company. That $100 million payout translates into $10k. Sure it's a nice bonus, but it's not life changing. And it's no different than a bonus you might recieve at an established company for a great yearly performance review. So even for those few companies I talked to that I could get passionate about, there still wasn't enough equity on the table to make up for the reduced compensation. Well, unless it went onto become the next Microsoft or Google.

So at this point, I think I'll need to be a founder of a start-up to make that jump. And I need to find that idea that I just can't help but tackle. I'm still looking for it...

Comments

[brian cantoni]

Dave, this is a great way to look at it. Good luck in your new gig!

[Jay Godse]

You're right Dave.

You have to believe in the vision of a startup or you are obviously going to flounder. For my first startup, I bought into the vision, but after a while, the products didn't line up with the vision (and the customers agreed much later with their lack of spending), and I floundered. For my second startup, I completely agreed with the vision of the product and the startup succeeded with an acquisition. With my third startup, I joined it because the initial vision seemed plausible and the founder had proven himself. In this case, I did quite well until I realized that the vision of the founder didn't agree with any of the potential customers.

You are also right in the part about the equity stake. It gets even worse. When a startup takes subsequent rounds of financing, your percentage is diluted. In subsequent financings, there is an option pool, but most of it goes to the executive team. Don't join a startup if you want to get rich (unless you are on the executive team).

Having said that, startups are fantastic for learning a lot about a business very quickly. When you are on a small startup team (like I was on my second and third startups), you may spend a morning talking to a customer about new features, spend half the afternoon coding, and the other half of the afternoon negotiating with service providers. Large companies have well-defined roles and jobs that shield you from knowing the end-to-end aspects of a business. With a startup, you are much more likely to be on the project from concept through deployment and support. This is very unlikely at a large company. You also become very familiar with revenue models and cost models of your product at a small company, because you need to be very conscious of them if your business is to survive.

All the things you learn at a small startup can be very useful to you if you want to start your own company, or if you want to rise in a larger company.

And if you plan on breeding, you will usually be better off in a secure job at a safe large company or government department. They usually have better parental benefits, rights, and policies than startups.

Good luck.