Question: Which Is More Risky, A Startup Or A Big Company?
I get this question a lot. The answer is surprising since risk is relative. Relative to your age. Relative to your upbringing. Relative to your skills. In essence, risk is a personal thing. You can’t convince someone to do a startup if they can’t get past the scariness of not getting paid, the get the job done no matter what or the general unknown of it all. What does strike me as odd is the automatic assumption that a startup is more risky than a big company. That’s just not true.
Career Risk vs Getting Paid Risk
Let’s start off by looking at the real risks and rewards in going to a startup or a big company. For me, they fall into two major categories: Career Risk and Getting Paid Risk.
Big companies are heavy on career risk. This type of risk is the one where you get pigeon holed into some mundane existence. Usually, the cause is because the company has to make its next quarters numbers or your boss can’t take the chance on something new. Career risk is the one thing that is the hardest thing for people who are startup risk adverse. The reason being that it usually pops up late in ones career. By then, you are safe in your 3 bedroom, 2 bath house with the Hybrid SUV in the garage. You probably are married and have a couple of kids. Nice, safe and career deadly all rolled into one. Which is fine, if that is what you want.
Getting Paid Risk
Startups are heavy on getting paid risk. What this means is that you might not get paid as much or at all, during your tenure at a startup. Some folks really get bent on this. That is why most never leave a big company until asked (the polite way to say laid off). The getting paid risk is the major risk factor at a startup. No question about it. The upside is what you learn and do. Startups are the crucible for career acceleration since you have to do more, with less resources and still ship product.
Which Risk Is Worst: Career or Getting Paid?
It all depends on who you ask. If you ask the NCG (New College Grad), they will most likely say career since they really want to establish themselves while the mother of two with a mortgage and that shinny Hybrid will almost always say getting paid. It’s because what really matters to each one is vastly different. The mother of two has a comfortable lifestyle that she does not want to risk while the NCG knows no better. He is just out of college and can’t believe someone will PAY him to work long hours. It’s just natural for them.
Getting back to which risk is worst. Clearly, these two people have different lives and each wants different things. Again, it’s a personal thing that is hard to quantify. So, how do you evaluate this if you want to jump to that hot startup after spending time drinking bad corporate coffee?
Step 1: Get The Facts
Always do your research before you make any type of career decision. This includes asking questions such as:
- Is the company funded?
- What market is the company in?
- Who is the competition?
- How long has it been around?
- Who founded the company? Are they still around?
- How much stock will I get?
- What’s the company culture like?
- Who works there?
Step 2: Do The Math
Once you have the facts, then it’s time to do some math. This will be one of many criteria that you will used to decided if the gig is worth it. Calculations you should do include:
- How much do I need to live?
- Do I have enough savings to last 6 months?
- How much does my spouse make? Do they even work?
- What can I live without?
Step 3: Talk it out
You have the facts and you have done the math. Next, you have to talk it out with your stakeholders (e.g. spouse) to see if they buy into this. I cannot stress how important it is to get your significant others buy in. They will be living the startup life with you, so they need to be prepared for what’s in store. Also, talk it out with your potential employer. Figure out what they expect and how you fit in. You will be working a lot with them, so you need to gel with the entire team.
Step 4: It’s Not About The Money
Don’t jump to a startup if you want to strike it rich. That is the wrong way to evaluate it. Most startups fail, so you will end up not making any money. The real reason to go is the experience. You will learn more per unit time than at any other time in your career. Startups accelerate your career by providing a rich experience that no big company can touch. That’s why big companies get their butt kicked by small, nibble startups.
In The End, It’s A Gut Feel
You can’t talk anyone into doing a startup. For whatever reason, most people trust their gut and go for it. Getting the facts, doing the math and talking it out are part of the process. In the end, your gut will tell you if the risk is worth it or not.
This is a great post on What Startups Are Really Like. It’s a long article but well worth a read. I really like the Lots of Little Things (#7) section. Little things build into big things, so always watch out for the little things.
Awesome post. Very true that risk is personal. There have been countless times I’ve tried to convince friends to jump ship and start their own consultancies and they simply can’t get over the fear of not getting that bi-monthly paycheck. You also provide a nice road map for people to consider before jumping to conclusions.