If you’re making the jump into the startup world, or at least considering it, you’ve probably heard a lot of buzz about what it means to work at one.
The media has certainly had a lot to say too. If you’ve ever read a book or seen a movie about a famous startup or their founders, think Elizabeth Holmes or Mark Zuckerberg in the Social Network - you’re probably familiar with the tropes that they are full of young technical geniuses working chaotic 90 hour weeks in Silicon Valley. But beyond the somewhat comical exaggerations and real life success stories or flops, you might find yourself wondering, what is it really like to work at a startup?
Whether you’re a new grad or you’re looking to change gears in your career, there are definitely some things you should know about startup life and why now is a great time to consider working at one.
Despite market conditions and a shaky 2022, innovative startups are still being funded by Venture Capital firms.
We’ve actually seen this trend in seemingly adverse market conditions before. During the covid pandemic the year prior in 2021, data from the census bureau indicated that applications to start businesses were up 24% from the year before, breaking the 40 year slump in declining entrepreneurship and on track to continue to go up (NYT). And who can forget the 2008 crash that birthed the likes of Uber and Airbnb?
It seems as though adversity is the breeding ground for innovation, even now. New ideas are continuing to be funded and leading investors predict that the economic conditions are driving positive long term changes in the market. Changes which they expect to result in producing more resilient and strategic founders focused on solving the most pressing issues in our world right now (Forbes).
And while big tech is currently experiencing waves of layoffs, many startups including seed Series A companies are still hiring! So cut through the noise with us as we shed light on startup compensation, equity and culture.
One of the biggest things to understand if you’re considering joining the startup world are the differences you’ll see in compensation in comparison between public or private big tech or midsize companies.
If you’re looking at a total cash compensation model that’s made up of three parts consisting of base, equity and bonus - the difference you’ll see in upfront cash value is in your equity.
With larger public or private tech companies, you’ll typically receive restricted stock units (RSUs), stock options or other company equity which can have immediate short term value. Startups of course don’t have stock value yet, so you’ll typically need to negotiate a stock option agreement that outlines the details of your future equity grants when you get a job offer.
Negotiate your stock option agreement!
One perk to working at a startup and getting in at earlier stages is your ability to negotiate future cash value through stock option agreements.
A couple of factors you’ll want to pay attention to in your agreement are the number of options you’ll be able to purchase, your percentage ownership of the company’s total outstanding equity, strike price, vesting schedule and post-termination exercise (PTE) window (ycombinator).
Of course this is nothing that you can cash in on in the short term, but can really pay off in the long term, especially if you’re able to negotiate favorably.
See if your contract can include a future equity refreshment.
Another piece of compensation you might be able to negotiate for is including a future equity refreshment in your contract or offer letter. Sometimes you might receive a set amount of stock options, so be sure to ask if there are ways to gain more equity in the future like through promotions or merit based grants. If not, negotiating for a future equity refreshment is always smart.
Skin in the game is the name of the game.
With the potential upside that comes with percentage ownership of the company’s total outstanding equity, startup employees should really believe in the mission and the company's path to profitability.
Working at a startup also can mean larger scope of work, bigger impact from initiatives, more exposure to leadership and the critical decision making processes that come in early stages of a company. For better or for worse, you’ll be an important part of the journey!
Working at a startup = job insecurity?
If you’ve never worked at a startup before, it could feel like you’re signing up for job insecurity. Although there is some risk involved, that’s not entirely true. Early stage startups are less insecure than you might think and while big tech has seen layoffs, startups are still being funded and are still hiring.
Startups, just like any other company, use funding earmarked to make hires and budget for salaries. There’s also a lot to be said about the skills you gain working at a startup. Top Tech Companies now look for candidates who’ve specifically had this type of experience or who have been entrepreneurs themselves.
Our advice? Don’t take yourself out of consideration for a role at a startup until you understand the compensation, culture and long term benefits it can create for your career!
Are you looking? We have some great startups clients who are hiring right now - check out some of our open roles!
Want to keep reading? Here are our sources.
- Start-Up Boom in the Pandemic is Growing Stronger, Ben Casselman, NYT.
- 12 Predictions for Venture Capital in 2023, Maren Thomas Bannon, Forbes.
- Understanding Startup Stock Options, Y Combinator.
We share our thoughts on Industry news.
Ready to Talk?
Feel free to contact us!