When it comes to startups, risk comes to mind for many. But not taking that leap poses a greater risk -- the risk of missing a great opportunity for compensation, personal growth and networking galore. Choosing to accept startup risk -- as a founder or early employee -- could fundamentally alter your life and career, and quite frankly, I think you should do it.
Building a startup isn’t as risky as it sounds, it just requires a trade off of some short-term pain for long-term gain. Here are some initial pains I went through when building my company, so you can be ready when starting yours or joining your first new venture:
Short-term pain #1: Little to no pay
When I first started The Bouqs Co., I took no pay for eight months. Zero dollars. And I’m no spring chicken. I had a 15-year career at Bain & Co and Disney, a new mortgage in Los Angeles and a 1-year-old boy at home.
This kind of sacrifice is common in the beginning stages of a startup. Founders often sacrifice their pay to fund what needs funded, betting they’ll get it back (and more) later. And due to necessity, most startups pay below market in salary in early stages, asking employees to focus on equity upside instead.
Short-term pain #2: More hours
Startup founders and early employees work more hours than almost anyone -- except maybe bankers. For example, at the launch of XYZ Co., two to three people will be the only ones running the entire operation. That’s a lot of work per employee. As funding and demand increase for XYZ Co., the team will expand to six then 10 then 20 and so on.
The trouble is, no matter the number of people on XYZ Co.’s team, the work is never less. Nothing about XYZ Co. existed in its early days, so it requires an incredible amount of time and energy to give it life and sustain it. This means many hours split among few people -- and it’s a grind.
Short-term pain #3: The fear it might not work out
The founding team works long hours for little or no pay, barely scraping by for months. Regardless of their Herculean effort, there’s no guarantee the company will succeed. There’s a constant fear in the back of everyone’s mind that they are sacrificing all they have for something that may ultimately fail.
That kind of stress paired with early mornings, late nights and lack of funds is usually what scares away would-be entrepreneurs. But it’s just fear. It’s not reality. While there’s no guarantee it will work, there’s also no guarantee it won’t.
And ultimately, it isn’t real risk. Regardless of the outcome, the gains will likely outweigh these pains. Here’s how you win, regardless of whether your startup results in an initial public offering or a closing of the business:
Long-term gain #1: Compensation growth and equity
While founders and early employees may start out making below-market salary for their skills, when the company gets big, they’ll be making more than they would have in their alternative reality non-startup company. At a startup, founders automatically step into senior management roles, skipping over the traditional rise up the ladder. As the company grows, early employees naturally move into higher management positions. Since they helped build the company from the ground up, they’ve earned the seniority needed to lead newer employees.
Additionally, the equity value in a successful startup can be more than enough to offset any short-term decreases in pay in the beginning. As a startup accrues value, equity value grows to exceed what early team members would make as employees at regular day jobs.
Long-term gain #2: Not much is actually lost -- even in failure
Even if the business fails, not much money is lost by an employee or founder in the grand scheme of things. Let's say Sara tries to build a startup. She makes nothing. Zero dollars. Zilch. Six months later, it fails. Take the lost wages (half of one year’s salary at the next best alternative job) and divide it by all the money she will make in her career. It's just a tiny portion.
The losses, while real, are mitigated by the short time frame in which startups make it or break it.
Long-term gain #3: Learning at a fast-forward pace
Running a startup forces founders and employees to learn more than they would at any traditional job, earlier in their career. Everyone is forced to do more, do it more quickly and are asked to execute beyond their pay grade and experience. This means rapid development of experience and skills that may take years to acquire in another environment. If the company doesn’t go big, at the least employees will walk away with knowledge and experience that makes them more valuable in the job market.
Long-term gain #4: Building a solid network
When building a startup, founders and employees meet and have the opportunity to develop relationships with key people who may influence the business or their career. They’ll attend industry events and meet business influencers, investors, founders and others who could get their ideas in front of the right eyes to help the startup take off. These connections may also support their individual careers down the road. Plus, it doesn’t hurt to be well-connected to a pool of successful investors when another great idea for a business manifests in the future.
While there can be downsides to founding or working at a startup in the beginning, there’s always a light at the end of the tunnel -- in the upside or downside. Ultimately, the experience gained, the connections made and lessons learned are likely to be more than enough value to cover any short-term losses.
And those who make it? They get to change the world in some way, experience a life-changing sense of accomplishment and validate that the risk was worth it all along.
What short-term sacrifices did you make when you started your own business? What did you gain long-term? Please comment below.