You *will* lose money working at a startup – why do it?

You are going to lose money working at a startup – full stop. Is it true that some people make a lot of money working at startups? Most certainly – just like how some people worsen their health by exercising through spraining ankles and eating entire boxes of Cheez-its after running (Don’t judge me).

People have trouble calculating small amounts of risk (example: By getting in a car today you increased your chances of dying today 100x) they also have trouble understanding small chances of success.  Since it is unlikely that you win big with a startup you need to know how much you are paying to work at a startup.

Opportunity Cost

Working at a startup means that you need to commit to doing something for a few years. While the normal IT turnover is about two years to really have a chance of making money with a startup you need to be obsessively focused on that one thing for greater than two years – no side work or consulting unless absolutely needed.  You have to turn down that call from a friend who just got a job writing the billing system for Krispy Kreme with – you guessed it – awesome employee perks.

Personal Cost

At a startup you are all-in in most cases. Not all startup are like this, but the average startup is based on building a product that scales from the start as fast as possible to meet a certain market need. You are expected to work longer hours and be more committed than in a traditional job. This means it will cost you personal time – everything that isn’t nailed down or a way to recharge yourself for more work will be replaced by work. Watching TV, hanging out with friends, having a close family, lawn care, listening to podcasts, competitive knitting, blinking contests with your parrot – whatever.

Literal Cost

There are many cases where the startup just costs you straight-up money. You make less at a startup and can’t take on additional work so if the options/equity doesn’t work out you lose money.

Well then why do it?

Every startup is different – not all demand 80 hour weeks, no vacation, and daily blood-letting for 3 years before there is any relief. Some cost less than others – but they all cost something compared to other opportunities; it’s the nature of the risk/reward equation in play.

This post so far has come off as anti-startup – it isn’t. You just need to know what the cost is before you pay it; for many the rewards are worth it. So what do you get from paying all this time/money?

Learn to play offense

Big companies play defense, small companies play offense. The bigger the company the more likely they are to be protecting revenue from existing products which means there is less creation/innovation going on and more maintenance/low-risk activity. This is not as exciting, and not something that challenges every type of worker. In addition big companies play defense with themselves – politics between departments and personalities get ugly and awkward and creepy.

Avoid Defense

Getting tired of the co-worker on co-worker political crime? If you have worked more than a few years in IT working at a startup is a breath of fresh air. No HR, no maintenance, no bureaucracy, no weird politics, no grand-standing, no asking for permission, no entrenched product managers on foobar’d products that aren’t evolving.

Make contacts with people who create opportunity

Working at a big company you can meet more people than at a startup and many of them are wicked smart, but the type of people you meet working at a startup are the type of people that a few years later will probably build another company while the big company people probably won’t. Working alongside people that are smart, courageous, and motivated enough to work at startups can teach you and expose you to more than the default choice of a typical job.

Learn by watching fireworks up close

Working at a typical IT firm you don’t normally get to see the whole picture. How much are we billing customers? Who is our most profitable client, and how do we treat their contract negotiations? What is the CTO/Product Manager doing day to day? How much are we growing, and in what markets? What was the thinking behind this decision, and how was it analyzed and tracked after it was made? At a startup you typically get to see the feedback loop up close since it is a buzz saw moving closer to your neck every day. What features should we put in the product, what market should we go after, what is working, what is failing? These are questions you get exposed to all the time working at a startup.

So should I work at a startup?

Every startup is different and every worker is different and every snowflake is different. For some stability is more important, or better insurance, or maybe there really are people that like awkward corporate work parties. For others the chance to learn to move fast, build something from nothing, rub up against people that want to do things differently, and avoid all the defense and hedging in big companies are worth it.  The experience you gain from being that close to the fire at a super-small business like a startup can all be applied at later jobs with bigger companies – everyone wants someone who can play offense, avoid defense, and make smart decisions.

I’m writing a book about successfully working from home; click here if you want to know when it is complete.
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