The Pros and Cons of Working for a Startup
You got a job offer to work for a startup. While you love the company’s product and its mission, you aren’t sure if working for a startup is right for you. Yes, you don’t have to wear a suit and there’s a fridge full of your favorite beverages. But, the pay is lousy and there are no guarantees.
Weighing the pros and cons of working for a startup is more than comparing the long hours to the promise of a big payday. Working for a startup is risky, and sometimes the risks may not outweigh the benefits. But, that’s not always the case, of course.
What Is a Startup?
When people think of “startups,” they tend to think of cool tech companies that have ping-pong tournaments, a daily happy hour during work hours, and a location in a brick-exposed loft with bench-style seating (and no private offices).
However, a startup isn’t defined by where it works or even how it works. A startup is a company in a specific stage of its development. And, while some people assign lofty-sounding definitions to what a startup is (the journey of a concept to reality, for example), all a startup really is is a company that’s just “starting up.”
At its core, a startup is a new company that’s trying to capitalize on or create demand for a service or product. In most cases, startups aren’t profitable – yet – so they are funded by outside investors or bootstrapped by the founders (self-funded through their savings or even their credit cards).
To be clear, a startup is not the same as a small business. Having a “startup vibe,” or “remaining true to our startup roots,” is not the same as being a startup. While there is no hard and fast definition of when a company is no longer a startup, it’s safe to say that when a company has been in business for 15 years or is profitable, it is no longer a startup.
The Pros and Cons of Working for a Startup
Once you know what a startup is and isn’t, you need to decide if working for a startup is right for you. Like any job and any company, there are pros and cons. However, working for a startup company has specific pros and cons that you should consider before accepting that offer.
The Pros of Working for a Startup
While it may sound cool to say, “I work for a startup, and we’re disrupting the industry,” there are other, more tangible benefits of working for a startup.
You Learn a Lot
Working at a startup usually means wearing many different hats. Your job title might be “social media specialist,” but there’s a good chance you are the entire social media department. That means you’ll probably learn how to create infographics (because there’s no design team), and how to track engagement and conversions on your social media posts (because there’s no marketing or SEM department). You may even have to answer the phones once in a while (because there’s no support staff).
The skills and experiences you gain while working at a startup have multiple professional benefits for you. First, the skillset you amass during your employment makes you a very desirable applicant when you apply for a new job. You’ll have marketable and transferable skills that other job seekers won’t.
Second, thanks to your exposure to multiple aspects of the startup, you may discover that you love designing more than social media strategy and decide to pivot your career toward graphic design. And because you’re working at a startup, you’ll get a chance to practice and hone your graphic design skills without necessarily having to go back to school (and add to your portfolio).
Lastly, startups tend to lack middle management. In many cases, you’ll work directly with founders, CEOs, and even investors. You’ll learn about the industry from passionately engaged people who believe in what they are building. And, you’ll get a behind the scenes view of what it takes to run a company and learn things you wouldn’t get the opportunity to at a more established company.
Because there’s no middle management tier, startups are often described as “flat.” In a startup, you’re not only trusted to get your work done; you are expected to get your work done with little to no supervision or direction.
Creative, Innovative Risk-Takers Welcome
Startups tend to have a “do or die” mentality. They have to grow, and grow quickly; otherwise, they won’t survive. Thanks to this mentality, startups allow, and even encourage, risk-taking, allowing you to try out innovative and creative approaches to problem-solving. There is no “this is how we do it” mentality because no one has ever done it before. As long as you believe it’s the right choice, and it will help grow the business, you can test out a new approach or strategy no matter how unconventional it sounds.
Casual and Flexible
Beyond beer on tap and bringing your dog to the office, startups are casual and flexible. Suits and ties are usually discouraged in favor of a “come as you are” attitude. The only things that matter are that you get your job done and you help grow the company.
Startups also tend to be flexible about where you work, when you work, and how you work. In some startups, if your best work happens at two in the morning, feel free to log in and get it done. If you like to work for a block in the morning, stop for a few hours, then come back after dinner to do some more, that’s fine, too.
It’s not that there’s an “anything goes” attitude at startups. There are times when you will have to make a meeting every week at nine in the morning. But, startups tend to be more accommodating to employees who want flexibility.
The Promise of a Payday
And, of course, there is the promise of a huge payday if the company goes public. Of course, not every company grows like Amazon. However, even if the company doesn’t go public, if the company becomes profitable enough, getting in on the ground floor could still net you a large payday.
The Cons of Working at a Startup
But, working for a startup isn’t as rosy as it sounds. Starting something from the ground up and propelling its growth requires a lot of work at the beginning. And, to make the company successful, you may need to make a lot of sacrifices.
Low Pay and Long Hours
Working for a startup likely means flexibility in work hours and work location. However, thanks to the “do or die” mentality of many, you will work. A lot. And there’s a very good chance you’ll be an exempt employee, which means you won’t get paid overtime for those hours.
Because the startup is, well, starting up, you probably won’t get paid a lot for the long hours you put in. The fact is, startups aren’t profitable, which means there isn’t a lot of money for salary (and benefits). Instead of a market rate salary, you’ll probably get a low salary with stock options. The stock options act as IOUs to make up for the fact that you can’t get paid a lot now, but if you work really hard, it might pay off later. However, the stock options of tomorrow won’t help you pay the bills of today.
And, the “do or die” mentality tends to mean “do it right now!” You will work a lot of long hours to help the business succeed. That likely means a lot of long days and nights, weekends, and sacrificing your personal time in pursuit of profitability and growth.
Along with low pay comes a lack of benefits. Startups are usually small – under 50 people. And that means they aren’t required to provide certain benefits (i.e., health insurance). Even if the startup is larger, that doesn’t mean they have to give you vacation, a retirement plan, or anything else.
It Might Fail
Those stock options are, of course, a promise. If you work hard and if you help grow the company and if it is successful, you will be rewarded.
While there are, of course, startups with IPOs and valuations at stratospheric heights, one study found that nearly 75% of all venture-backed startups fail (with between 30% and 40% of the investors losing their entire investment). And while you may not have invested in the company, if the company fails, those promised stock options are worth nothing.
There are myriad reasons why startups fail. However, in the end, the reasons why they fail aren’t important. The fact is, working for a startup is a leap of faith with no guarantee of a safe landing.
Since nearly 75% of venture-backed startups fail, working at a startup means you may not have a job next month or even next week. You may quit a stable, “safe” job with benefits and a 401k, only to wake up one morning to discover that the company dissolved overnight.
There’s No Place to Hide
Startups, as we’ve mentioned, are flat. You have the chance to work directly with the entire company in a lot of cases. But, on the days you “aren’t feelin’ it,” there’s no way for you to coast.
In larger or more established companies, it’s easy to hide out in your cube and aimlessly scroll through social media all day. There’s a good chance no one will notice. But, in a startup, it’s work all day every day. And, more importantly, you have to show results all day every day. If you can’t show daily results, you’ll likely end up out of a job.
You Have to Be a People Pleaser
Unless the startup is entirely bootstrapped, there will be investors the company needs to please. Investors want to see their investment pay off quickly. While they know investing in any startup is a risk, they’ve invested in yours, and they want that to pay off.
This means working hard to meet their demands for growth and profitability. While that can mean long hours and crazy meetings, sometimes that can mean doing the thing the investors want (like pivot the product or change the logo), to help appease their desires.
It Might Not Pay Off
And, of course, with 75% of startups failing, there is always the chance that all of your hard work and all of your sacrifices result in nothing. If the company fails, all you’ll have is a pile of worthless stock options while you search for a new job.
Go Big or Go Home?
Working for a startup is risky, not to mention exhausting. But there is always the possibility that the startup you work for is a unicorn. And even if it does fail, you probably learned a lot of things that you can take to the next job.
The pros and cons of working for a startup should not be taken lightly. When you get that job offer, look past the beer and flexible hours to help you figure out what you’ll really get from working for a startup to make the right decision for your career.
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By Rachel Pelta | February 21, 2020 | Categories: Remote Management