America is a startup nation. Whether it has been manufacturing, whaling or software, one of this country’s defining characteristics seems to be taking unnecessary risks to create markets where none existed previously. As an entrepreneur, I'm a huge fan of startups. Both my parents started their own small businesses, so entrepreneurialism runs in my family. So it may be surprising to know that I don't always encourage people to take the same path. Here's why:
You probably won't get rich. Unless you are one of the founders, the stock options you are granted in a tech startup likely won’t make you independently wealthy. Only a small percentage of startup employees make huge amounts of money when a company is sold. The only exception is if you happen to join the next Google or Facebook -- but with thousands of companies started each year, that’s a bit like winning the lottery.
Still, most startups today can afford to pay competitive salaries and benefits. While the upside may ultimately be limited, joining a new company isn’t a vow of poverty.
The odds are against you. It’s estimated that last year only 36 ad-tech startups were acquired out of the thousands in existence. Think about that: For every Invite Media, Dapper or Pictela, there were countless others that nobody wanted to buy last year. And here’s another sobering fact: Of the 36 ad tech companies that did get acquired, it’s estimated that only half were purchased for more than the money than they raised from venture capitalists. If you were part of the other half, then nobody made any money.
You will work really hard. Starting your own company has been compared to staring into the face of death every day, because every startup is in a race against time. Can you create a new market before you run out of money? It's imperative that everyone at a startup work like there's no tomorrow.
Things could get ugly. Doing a startup during an economic boom can be fun, but when a recession hits, it can really suck. Years ago I started an online marketing agency where things went well until a severe economic downturn hit. Revenues decreased, and sadly I had to lay off 20 people in one day. That's just 15 to 20 minutes to break the bad news to a person, console them, give them their paperwork and move on to the next one.
You may have to buy your own drinks. If you’re currently working for a big media company, it may seem like all the drinks are free and concert tickets grow on trees. But once you join a startup there's nobody with an expense account to take you out. If you’re in sales, it may be a challenge just to get people on the buy side to return your call or email. There are so many startups now clamoring for attention from marketers and agencies that it can be difficult to get a meeting.
Someone has to work at the big companies. While many people romanticize the startup experience -- and truthfully, it can be one of the most exhilarating experiences in business -- the reality is that not everyone is cut out for the highs and lows of a speculative venture. The reality is that if everyone left their jobs tomorrow to do a startup, our economy would probably collapse. Also, the goal of many startups is to be bought by a big company. Who is going to buy all of these startups if nobody is working at companies like IBM, Google or Microsoft?
Despite the drawbacks to joining a startup, there are excellent reasons to make the leap. A startup can be an incredible opportunity to make a significant contribution and develop a new skill set. There is also an infectious energy present when a group of people are trying to do something that's never been done before. Life at a startup is rarely dull.
But before you make the leap to a startup, make sure you’re doing it for the right reasons.