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The risk of a startup has moved from investors to founders and now from founders to employees. Investors diversify their investments to minimize the risk. They

by msoad 12y ago

The risk of a startup has moved from investors to founders and now from founders to employees. Investors diversify their investments to minimize the risk. They don't really care if a particular startup they invested in will fail. They have tons of other investments... Now with this new generation of "entrepreneurs" who start five startup at a time, they are not too afraid of startup failure either. They did diversify their risk too! The only one who really loses when a startup fails is the employee who bought promises of "learning a lot" or "probably getting rich" and compromised his/her income and lifestyle. It's very hard to find a startup that is like early Google where everyone is firmly believing they are doing something huge and everybody is all-in the company.

birken 12y ago
Startup employees have a lot of advantages to mitigate this risk though: - They can be much more selective of only joining startups that already has good traction - They generally can command a higher salary than founders pay themselves - If things go south they can jump ship much sooner There are certainly disadvantages, but it is a free market. If you choose to go the startup employee route, then use all the advantages you've got available to you. Depending on a your goals being a startup employee might not be the right thing, but they can mitigate their risk just like everybody else.
crdb 12y ago
My first "startup" was a Rocket Internet company where I knew I'd have little career future, that my pay would be way below market, and that I'd get no equity (I was fortunate that the person who recruited me was upfront about it). Three years and two more RI ventures later, I've observed enough and figured out what to learn, learnt it and even found both my market and co-founders. This happened because of the breadth of work that needs to get done in a startup/"small underfunded mostly online company" and the lack of people available to do it, meaning little bureaucracy and much more responsibility, with immediate feedback from the real world on your performance. Career switches are hard and sometimes, starting at the bottom again, risk included, can be worthwhile. I do agree with you that few people hired as "employees" should expect to "get rich". But provided you are willing to observe and learn, especially learn what to learn, it can still be worth it, even just to see what a hyped up "5-at-a-time" startup looks like from the inside and the signs of what to avoid.
scobar 12y ago
I generally agree with you that investors and founders mitigate their risk through diversity and networking. However, I wouldn't single out employees as "the only one who really loses when a startup fails." Like you said, choosing a Google-like startup is tough, and most founders believe theirs will be incredibly successful when they hire early employees. But I can think of at least one example where the employee of a failed startup will have benefited greatly, possibly more than the investor and founders. Imagine an employee who chose the startup because she passionately shared its vision, and the position available was exactly what she wanted to be doing. She worked out a budget so that her family would be fine with the lower salary. She gets to do what she enjoys in a fast-paced environment learning many new skills alongside others who share her vision. If that startup fails, she's out of a job, and the equity she earned is worthless. If she was paid enough to stay within her desired lifestyle range without taking on debt, and she enjoyed working at the startup much more than she would have enjoyed being a cog in the BigCorp machine working on projects she felt indifferent about, then I believe her risk as a startup employee was relatively low. Opinions will obviously vary depending on how important compensation (after a certain threshold) and prestige are versus working on what you want.
- deleted 12y ago
  [deleted]
- derekp7 12y ago
  Some people make very good employees, but lousy sales people, when they are trying to sell their skills to a prospective employer. So becoming suddenly unemployed, especially after having a year or two of substandard pay (so no savings) can cause damage. Especially if it takes 6 months to find another job. The only way I personally would work for a startup is if I could purchase supplemental unemployment insurance. I know you can get unemployment insurance on various loans (mortgage, car, credit cards, etc), and state unemployment pays a small amount. But I would like to see an option where the startup pays an insurance company to cover my full salary for up to a year (or until a job is found) after a business folds.

by msoad 12y ago

birken 12y ago

Startup employees have a lot of advantages to mitigate this risk though: - They can be much more selective of only joining startups that already has good traction - They generally can command a higher salary than founders pay themselves - If things go south they can jump ship much sooner There are certainly disadvantages, but it is a free market. If you choose to go the startup employee route, then use all the advantages you've got available to you. Depending on a your goals being a startup employee might not be the right thing, but they can mitigate their risk just like everybody else.

crdb 12y ago

My first "startup" was a Rocket Internet company where I knew I'd have little career future, that my pay would be way below market, and that I'd get no equity (I was fortunate that the person who recruited me was upfront about it). Three years and two more RI ventures later, I've observed enough and figured out what to learn, learnt it and even found both my market and co-founders. This happened because of the breadth of work that needs to get done in a startup/"small underfunded mostly online company" and the lack of people available to do it, meaning little bureaucracy and much more responsibility, with immediate feedback from the real world on your performance. Career switches are hard and sometimes, starting at the bottom again, risk included, can be worthwhile. I do agree with you that few people hired as "employees" should expect to "get rich". But provided you are willing to observe and learn, especially learn what to learn, it can still be worth it, even just to see what a hyped up "5-at-a-time" startup looks like from the inside and the signs of what to avoid.

scobar 12y ago

I generally agree with you that investors and founders mitigate their risk through diversity and networking. However, I wouldn't single out employees as "the only one who really loses when a startup fails." Like you said, choosing a Google-like startup is tough, and most founders believe theirs will be incredibly successful when they hire early employees. But I can think of at least one example where the employee of a failed startup will have benefited greatly, possibly more than the investor and founders. Imagine an employee who chose the startup because she passionately shared its vision, and the position available was exactly what she wanted to be doing. She worked out a budget so that her family would be fine with the lower salary. She gets to do what she enjoys in a fast-paced environment learning many new skills alongside others who share her vision. If that startup fails, she's out of a job, and the equity she earned is worthless. If she was paid enough to stay within her desired lifestyle range without taking on debt, and she enjoyed working at the startup much more than she would have enjoyed being a cog in the BigCorp machine working on projects she felt indifferent about, then I believe her risk as a startup employee was relatively low. Opinions will obviously vary depending on how important compensation (after a certain threshold) and prestige are versus working on what you want.

deleted 12y ago
[deleted]
derekp7 12y ago
Some people make very good employees, but lousy sales people, when they are trying to sell their skills to a prospective employer. So becoming suddenly unemployed, especially after having a year or two of substandard pay (so no savings) can cause damage. Especially if it takes 6 months to find another job. The only way I personally would work for a startup is if I could purchase supplemental unemployment insurance. I know you can get unemployment insurance on various loans (mortgage, car, credit cards, etc), and state unemployment pays a small amount. But I would like to see an option where the startup pays an insurance company to cover my full salary for up to a year (or until a job is found) after a business folds.