There is a romantic vision of working for startup that goes like this: ‘All I have to do is find the right startup that will float on the Nasdaq or be acquired by Google/Facebook/Amazon and I’ll be obscenely wealthy.’ Throw in the idea of working for the next big thing, mingling with famous founders and ideally having ‘mission-driven culture’ and, well, the lure of working for a startup can be compelling.
We all dream about it. The siren call of meeting a charismatic founder who has a big plan, an even bigger vision and (possibly) a lot of venture capital, who offers you the role that will go to the moon.
I’ve done it: I left a 160-year-old brand and joined a five-year-old company that had grown fast enough to join the NASDAQ, and then left that company a few years later to join a five-month-old one, replete with a CEO with big visions and $70m of venture capital.
I’ve worked directly for founders who did actually become incredibly wealthy (as in hundreds of millions of dollars), have friends who are startup-aholics. I know venture capitalists. I’ve invested some of my own money in startups and regularly get asked to hone startup pitch decks or their comms.
I want to separate the myth from the reality if you are thinking of working at a startup.
Start at the start: What is a startup?
What do I mean when I say ‘startup’? In this case, I am talking about an early-stage, venture capital or investor-backed business. Typically, this fledgling company is only a few years old. The phase after startup – when the company is seeing some growth or about to – is called the scale-up phase. The distinction is important.
Let’s look at a definition supplied by Steve Blank, serial startup entrepreneur and author of numerous startup books, including ‘The Startup Owner’s Manual’. Blank is one of the best writers and teachers about entrepreneurship.
- A startup is an organisation formed to search for a repeatable and scalable business model.
- A business model describes how a company creates, delivers and captures value.
- Existing companies execute business models; startups search for them.
The third point is probably the most important: if you work in an existing business that has been around for a good few years, your role as a marketer is normally to execute plans. A startup is a business that is working out what is called ‘product-market fit’ – in other words, is there a market for this product? A startup is an ongoing series of experiments to work out who is the target customer and what are their ‘pain points’ – and to see if there is repeatable and scalable (and profitable) business model.
A scale-up is a startup that already knows there is a market for its product and has a sustainable business model. It exhibits many of the traits of an existing business but there is a huge focus on growing the business.
A comparison between startups and existing businesses
A lot of what we read in Marketing Week is about existing business models with clearly defined products in clearly defined markets. We are reading about execution of plans; predictable steps assuming a series of known facts: known customers, known products and propositions, known pricing, known distribution channels.
This is the antithesis of how startups work. In a new venture, little is truly known. Most business plans don’t survive first contact with customers. Startups are searching for product-market fit and a scalable business model – at the same time as hoping that the cash in the bank will continue to be enough to fund the business during the search. Searching, unlike execution, is not a predictable pattern. Everything is a hypothesis.
As a result, startups work with uncertainty, unanswered questions and partial answers. In short, startups live – and thrive – in chaos. You have to be comfortable with the unknown and the unknowable. This is at the heart of the challenge for marketers working with startups: any success appears to actually be derived from chaos, in the absence of having all the answers. You might think you know chaos; until you’ve worked in startup or scale-up, you really don’t. Trust me, you really don’t – there is no comparison.
If you hate chaos and disorganisation, and love structure, processes and plans, then forget about startups. You will have a heart attack. Michelle Goodall, CMO of professional communities startup, Guild, points out: “Most startups can feel extremely chaotic to someone used to process, routine and structure. If you’re a marketer who is used to assistants, if you like hierarchy and you’re not prepared to roll up your sleeves and get stuck into whatever needs to be done, then early startups are not for you.”
Startups work with uncertainty, unanswered questions and partial answers. In short, startups live – and thrive – in chaos. You have to be comfortable with the unknown and the unknowable.
When working in startups, I found that I had to become comfortable with discarding beliefs and ideas. You might have a great idea in marketing terms, but still have to jettison it a few weeks later and come up with something new, simply because the situation is so fluid. More than once, I’ve had to make several 180-degree turns in marketing approach within in a few months. Long-term thinking means next month, not three years from now.
So ask yourself this question if you are thinking of joining a startup: am I comfortable if there are no customers, no plans, no product worth its salt and very little budget? Remember, your existing marketing training may have limited value. Will I cope with chaos? Am I really that flexible? And am I willing to roll up my sleeves and fulfil different roles, regardless of title? Do I prefer a well-oiled machine instead? Do I prefer to have all the answers?
Matt Lerner – a marketer, strategist and venture capitalist, who worked for many years building growth teams for startups and now advises early-stage startups on marketing – puts it another way: “I tell my startups to hire someone who can do 50% of the stuff they need and can figure out the other 90% [sic], because everything is changing all the time; either scaling up or down or pivoting, and just generally figuring stuff out. The way you figure stuff out is a lot of experimentation and just trying stuff out.”
The 90% is not a typo, because startups always have a backlog by the time they find the right hire.
Robert Cohen, managing partner at Benson Oak Ventures and investor in scaleups, says: “There is a great opportunity for high-quality and ambitious marketers. Many investors – like myself – require such experience and experience within the founding team, creating opportunities for ambitious (and yes a little crazy) marketers to add their unique skill-set to the early stage startup ecosystem.”
You probably won’t get rich
Let’s cut to the chase. What are your chances of a startup going to the moon and giving you unimaginable wealth?
The stories appear to be so pervasive and attractive. Maybe you should first consider how likely financial success is, as the probability is lower than you think. First of all, the failure rate of startups is high. Sam Altman, former president of famous American startup accelerator Y Combinator, remarked that the formula for estimating a startup’s chance of success is “something like idea times product times execution times team times luck, where luck is a random number between zero and 10,000”.
Evan Armstrong, serial startup adviser and author at Napkin Math, did the ‘math’ on the chances of becoming wealthy. He points out that “truly obscene wealth is typically only available to the first ~10 employees of a company that exits (via IPO or acquisition) at a valuation of $1bn or more – a so-called unicorn company”.
Armstrong looked at the actual numbers and reckons that only 2% of seed-funded startups will do much financially for anyone beyond the founding team. The best data set he could find shows that unicorns are ~1% of venture-backed startups. In one particular study, of the initial group of 1,119 seed-stage tech startups in the US, only 12 made it to becoming a unicorn. This data was taken from 2010 because startups can take 10-plus years to deliver on their promise.
Lerner concurs: “Realistically, your equity is a long shot. A series A backed startup has about a 10% chance of potential life-changing money. Another 40% of them might give you some decent cash, but not enough to justify passing up a lucrative career elsewhere. And the other 50% probably won’t ever pay out. Even a big exit doesn’t guarantee big payouts to employees.”
Siofra Flood, general counsel and executive adviser to numerous startups, describes the reality: “We’re tempted by the lure of share options, but the earlier we join a startup, the less likely we are to realise any value. This sucks, because the early days are the least secure and the least well paid.”
The challenge for marketers who wish to work in startup is not only finding the right company; you might need to think long-term to see if it is successful, and buy into the fact that the chances are below 5%.
The big risk to the marketer considering a startup appears to be ‘will this start-up actually work?’. That’s not the only risk. There is also the very real opportunity cost. If you do get offered a role at a startup, chances are the offer will take the form of a lower salary, accompanied with a story of share options or a share of the equity that will ultimately make up for it.
This sounds appealing. Indeed, I was part of a startup back in the day where lots of people joined on the promise that this startup was the hottest thing in town and nothing was going to stop it. The company had just got $20m in venture capital. The water-cooler conversations were all about what you were going to spend your millions on. A year later, all those hired in anticipation of ‘product-market fit’ were fired and the following four years were a slog with numerous rounds of firings, until eventually it was sold for a song.
You need to be clear on why you want to do this, because it cannot be for the money.
A ‘real’ job in an everyday company would have paid me more – and I would not have been associated with a turkey for years after. The benefits package would have been better and the stress a lot lower.
So, you need to be clear on why you want to do this, because it cannot be for the money. Lerner is right in saying: “Generally, startups pay less money and (the good ones) have longer hours and harder pace.”
Less money, harder work at a faster pace, with a slim chance of success. Sign me up anyway, I hear you say, because ‘working at a big company is all about politics; I want to do work that is more fun and fulfilling than being some faceless corporate marketing drone’.
Bureaucracy and politics
One of the most enduring myths – and lures – of working for a startup is the lack of politics. Here, they claim, we have flat structures, no politics and you get to ‘move fast and break things’ (or whatever is the mission tagline du jour).
Wrong. The politics is just as bad. Where two or more people are working together in any context, there is always politics – that is a law of human nature.
I found startups more bureaucratic rather than less. Getting signoff for any campaign or any plan could take days, weeks or months. This sounds paradoxical, but it’s obvious. If, as Blank writes, “a startup is an organisation formed to search for a repeatable and scalable business model”, then, by definition, there are no budgets, no annual marketing plans, no nothing.
You can end up, as I did, working with founders who are good technically but have zero frame of reference about marketing. Getting each and every purchase order signed off, whether it is £1 or £100,000, for years gets to be a pain. I get why this happens – the business cannot run out of money, or there may be conflicting needs greater than marketing – but it means you are not as agile or flexible as is made out.
This is not just my opinion. Evan Armstrong writes that “in my experience, lack of politics is never true. Startups are just as political, but rather than the voting bloc consisting of various cross-functional stakeholders, it is instead an electoral committee of one: the founder. Startup politics are about making the founder like/respect you enough so they will give you permission to get things done. The question you have to ask yourself is: would you rather appease one person who has barely any check on their power or a group of individuals who need to be aligned on the same objective?”
I could not have put it better myself. With startups, you better be good at managing the founder – and managing their ego.
Founders and startup CEOs
Yes, I know it takes guts, bravery and even a bit of craziness to create a successful business from nothing. I know this because I have worked for two former Entrepreneurs of the Year – as well as a few others who should not be allowed run a bath.
However, this ‘bravery’ comes with downside: they might not have a run a firm before and, indeed, have no clue how to do this. They might have a big ego and even a bit of a messiah complex, or, worse, they can be total psychopath. And, as Lerner wryly points out: “Lots of startups are full of clowns.”
It can be hard to detect the messiahs and the clowns, as they are often clothed in charming and charismatic exteriors. It’s only later – after you have been sucked in by this – that you find they also have a penchant for delusion, for example declaring their business is a movement “designed to elevate the world’s consciousness”, as WeWork’s Adam Neumann did.
More prosaic habits of founders can include throwing things at people, screaming abuse at them and creating a culture of intimidation. For good measure, they are also prone to asking employees to work exceedingly long hours, limiting holidays, making public criticisms of people, and reprimanding staff for not answering messages immediately – even late at night and on weekends.
Yes, I’ve seen all of the above in person.
These can be very tricky waters to negotiate. If you could, the ideal would be to ‘turn the table’ at the interview stage, and get insights and references from people who have worked with these founders before. Trust the gut instinct you get from the founder and anyone you meet. If in doubt, the answer should be ‘no’.
I have one final, simple test: has the founder read the Start Up Owner’s Manual by Steve Blank, The Lean Startup by Eric Ries and, if it’s a tech startup, Crossing the Chasm by Geoffrey Moore? If the founder does not know the basic texts of the startup game, then run.
Look out for part 2 of Colin Lewis’s career tips for working in startups, looking at how to survive and thrive in a startup as a marketer, coming soon.