Is a Startup Right for Your First Employer?
Startups are good examples of small organizations. However, you can also find large startups like Uber, Lyft, and Airbnb. These companies started small but because of their success or large amount of investment they’ve received, they’ve experienced hyper-growth. Regardless of their size, work at these startups often has the following benefits.
Stock options give you the potential for a big payday and are a common benefit awarded at startup companies. These options allow you to buy stock in the company at a certain price per share, usually a low price. As the value of the company grows, so does the value of its shares. And because you have the option to buy shares at a predetermined low price, this is where you can make some money.
For example, you join a startup and you get 10,000 stock options in the company. The exercise price, or strike price, of these options is $1 per share, meaning you have the option to buy shares at a dollar each. At some point in the future, let’s say the company gets bought or it goes on the stock market via an initial public offering (IPO). The price of the stock is then $10 per share. In this hypothetical scenario, you’ve made $9 per share, or $90,000, since you have options for 10,000 shares.
That’s a pretty nice payday. One thing to note is that stock options usually have vesting schedules. This means you can’t join a startup, get options, and then leave the following week with your options. Vesting schedules are usually four years in length and allow you to exercise a fourth of your stock options each year until fully vested. Options usually also carry what’s called a cliff, which means you need to stay with the company for at least six months to a year before you can exercise any of your options.
Although stock options can provide a great payday at some point, this is not usually the case. You hear about the great success stories like Apple, Google, and Facebook where some early employees became multi-millionaires because of their options. In reality, only a handful of startups hit it big. The vast majority of them either fail or achieve modest success. You rarely hear about these companies in the news.
Faster work pace
The work at a startup can be rewarding, because you’re usually disrupting a market or working on some cool innovative product. But this often means you’re working on rushed deadlines and at a faster pace than what you may see in a typical organization. Because startups are disrupting markets, speed is key in order to launch a product, grow market share, and stay ahead of the competition.
Startups often follow a make-or-break strategy, where they invest heavily on a strategy with the hope of success, but with the risk of failing. Such failure can take the form of the company running out of money and having to do layoffs or shutting down. Because startups usually have no revenue but need cash to pay employees to build products, many startups rely on investors to get off the ground and fuel growth. This investment usually comes in stages, or rounds, and the company raises these rounds by selling shares in the company as it reaches certain product, usage, or revenue milestones. As you can imagine, there is tremendous pressure to meet these milestones in order to get to the next round of funding. You’ll need to decide whether you’re someone who thrives under pressure or buckles when you get stressed.
Less work–life balance
The concept of having a balance between your work life and personal life is a fantasy in most startups. Because of the pace of the work, the deadlines and the stress involved, you’ll most likely be working odd and late hours. If you have a family and value spending time with them, you’ll see less of them. If you have hobbies that you enjoy, be prepared to spend less time on them. Your job at a startup will most likely demand a good chunk of your waking time. Not only that, but it may also take a toll mentally and emotionally.
Startups change the world. Just think about companies like Google, which is making information accessible to everyone, or Tesla, which is working to bring electric vehicles to everyone and reduce pollution. You’ll make an impact, do exciting work, and most likely learn a lot — regardless of whether the startup succeeds or fails.
Best of all, you’ll also have the potential to make a lot of money. But this comes at a cost, because it takes away time from loved ones and from the activities you enjoy doing. If you’re single and you have few commitments, working at a startup can be a great opportunity. Just make sure you evaluate the pros and cons.