HR Reality Check | Working For a Startup vs. a Corporate Job
When you are in search of your first job, in addition to looking for a post that matches your qualification, you may have to choose between working for a startup and working for an established firm. The decision you make should be taken after careful consideration of the pros and cons of both work environments in terms of the kind of environment that suits your personality and preferences (such as core beliefs, job role and career goals). Before that, it is worthwhile to gain a basic understanding of the various stages of development in a business’s life cycle from startup to corporate.
This article examines first 1) stages of a company in order to understand 2) what you can expect when working in a startup?
STAGES OF A COMPANY
Just as human beings develop from a baby to a teenager, a business too goes through a life cycle starting from the seed stage. Each stage is characterized by different challenges, priorities, operations and financing sources. For example, a business owner may have to devote a considerable amount of his time in the course of the business’s initial start-up period. As the company makes progress, he can start delegating responsibilities to others.
The five key stages in a typical business life cycle are described below.
1. Seed Stage Startup
At this point, the business is only an idea, concept, thought or prototype. The business must pursue one key opportunity and work to gain market acceptance. In addition, it must concentrate on selection of a business ownership structure, business planning and locating professional advisors. Owing to being in a period of no certain market or customers, the business is forced to rely on family, friends, possibly angel investors, government grants, suppliers and customers for cash.
2. Early-Stage Startup (venture capital backed)
The business is now a living entity and a legal one too. The production of goods and services has begun and the company has its first customers. At this stage, the business must be careful not to deplete whatever little cash is available in hand. With respect to the area of focus, it is establishing a market presence and customer base in addition to preserving and tracking cash flow. The business is funded by its owner, family, friends, grants, suppliers and customers. Venture capital (VC) financing is another option. Venture capital is fiscal capital given to early stage, growth startup companies of high potential. The venture capital fund brings in money by holding equity in the companies invested in.
3. Growth-Stage Startup (more than $10m in funding)
Now, the business has grown from a baby to a child. Profits are strong and customers and revenues are increasing with the addition of opportunities and problems. Competition is beginning to rear its head. At this stage of its growth, the business has to handle the challenge of constant concerns, calling for more money and time. The company should be able to perform effective management, possibly come up with a fresh business plan and start delegating and training to pass this development stage with flying colors. Money is acquired through banks, partnerships, profits, leasing options and grants.
4. SME (established stage)
The business is prospering at this stage and has a position in the market along with faithful customers. There is more routine in the company’s working with manageable sales growth. It has to concentrate on the bigger picture so that all the laurels gained up to this stage are not depleted because of an unyielding competitive marketplace, changes in customer tastes, the economy or other factors. Survival at this stage would call for better business practices, outsourcing and automation to increase productivity. Investors, profits, banks and the government are key sources of money at this stage.
5. Corporate (Expansion Stage)
This stage is marked by a new phase of growth into new distribution channels and markets. SME owners typically prefer this stage to acquire a bigger market share and discover new channels for income and profits. The research and planning of the first two stages comes in handy here. Companies at this stage of the life cycle would do well to concentrate on businesses that match their current abilities and experience rather than risking disaster by venturing into unrelated businesses. They can either take their existing business to new markets or introduce new goods and services to existing markets. The key money sources at this stage are joint ventures, new investors, licensing, banks and partners.
WHAT TO EXPECT WHEN WORKING IN A STARTUP COMPARED TO A CORPORATE?
Working in a start-up (seed stage, early stage, growth stage) is more fast-paced, fast- and ever-changing and on the whole, a place where there’s a lot of action and free communication in contrast to the slower-paced and more structured corporate environment. On the one hand, there’s more flexibility, opportunities, a steeper learning curve and better chances to create an impact here than that in a corporate setup (SME, corporate). At the same time, it comes with lower compensation and greater risk than that which can be expected in a more established work setup.
The following points describe working in a startup in more detail and how it compares to working in a corporate:
Startups are typically more transparent than their corporate counterparts. Information that employees become aware of in startups include: company performance week to week, what made the company begin a new arm of business, changes in business plan(s), how the company progresses and its reaction to competitors. In addition the leadership may reveal the triggers behind organizational decisions and provide insight into them rather than looking for blind obedience and possibly, even ask for feedback before executing them. Though startups don’t usually reveal salary information just as corporate companies don’t, Buffer co-founder Leo Widrich surprised many by making the salaries of Buffer’s employees and the formula behind them transparent to the world.
If you work in a startup, you can expect to have to wear different hats, being required to carry out tasks you may consider outside of your job description. It is even possible that you may have to perform grunt work. On the other hand, working in a more established or corporate environment means you know exactly where you stand in the hierarchy. You’ll have a well-defined job role. Your work will remain within that job role. So, the startup offers the opportunity for multitasking and gaining knowledge about other aspects of business besides your speciality. The varied roles make it suitable for those who dread monotony. In the corporate environment, one’s responsibilities are clear-cut and one can’t expect to be able to enter into or learn about other areas of work but then again, this is deal for people with specific career goals.
You can expect more responsibility thrust on your shoulders if you’re working in a startup, when compared to a corporate. The teams in a startup are usually smaller than those in a corporate business and because of that, you may probably be the only person with the skill set or problem solving ability you have and probably no one else thinks in the same manner you do. Expect to have to pull your weight from the first day itself. However, because of the great degree of responsibility you get, your skills would develop faster than in a more established environment. You can also be happy about the fact that you are contributing to something potentially major, right from the start. This doesn’t just have to be skills. You could be contributing to shaping the company’s products or even its goals, values and culture. You may get the opportunity to road test or improve on your ideas in actual scenarios.
Working in a startup is far from easygoing and involves working under tight deadlines. You can expect considerable pressure, more pressure than what you’d find at other kinds of companies. If you don’t have the personality for it, you may feel overwhelmed by the pressure to hit metrics, acquire more traction, accomplish growth and results, and so on. The environment at a corporate company is comparatively more regimented.
Exposure and Mentorship
As mentioned earlier, in a startup, there is greater exposure to the business side when compared to the corporate environment. There’s also plenty of exposure to the founders. However the management is busy and most probably, may be less experienced than you in a particular field. You’ll have to learn things on your own. In contrast, the opportunities for specialist training or mentorship are better in a more established or corporate business setting. There are specialists in each department and in addition to specialist knowledge, you have access to best practices. The management is better trained and experienced than those in smaller companies.
In a startup, working hours are mostly long (12 hour workdays are common) and you may have to make personal sacrifices. In addition, you’ll have to respond to emails and phone calls outside working hours. The founders of startups have put in so much time and dedication to their foetus that many of them would want their startup employees to work very hard and so the irregular hours (and also tight deadlines as discussed under “pressure”) to complete projects on time. In spite of the often crazy working hours though, startups compensate by flexibility for telecommunication, allowing to work from home or letting one look after personal business at short notice. With respect to corporate companies, the working hours are explicitly laid out (fixed schedule such as 8 a.m to 5 p.m or 9 a.m to 6 p.m.) which is favorable for work-life balance.
You can expect more security of your job and less volatility when you’re working for a more established company than for a startup. When you’re at a startup, you must keep in mind that you could be laid off at any time owing to financial problems. Seed funding won’t last forever. If you’re lucky, good for you, if you’re not, you’re going to be jobless.
Documentation reveals that three out of every four startups (75 percent) fail. According to separate studies by the Bureau of Labor Statistics of the U.S Department of Labor and the Ewing Marion Kauffman Foundation, a not-for-profit concern that encourages U.S entrepreneurship, while approximately 60 percent of start-ups manage to endure only up to the age of three, only about 35 percent survive till the age of 10.
In the startup environment, getting work done is more important than perfection. Products and projects are not set in stone and improvement and revisions may have to be carried out as and when required. An employee in a startup shouldn’t allow himself to get stuck with one project for the sake of perfection. Secondly, scaling is not expected in this kind of environment. In fact, according to the Startup Genome Report, one of the common reasons for startups performing worse is premature scaling. Perfectionism and scaling are more welcome in a corporate environment.
The atmosphere in a startup is characterized by more fun and open communication than that you’ll find in a corporate business. The opinions of all employees are valued.There’s rarely a dull moment as something is always happening. Dressing can be casual. There’s also great creative energy and team spirit. A startup employee’s colleagues usually share the same excitement and energy that he has and they all typically are aiming to achieve the same goals.
In a startup environment, if you do good work, most probably your boss will notice it and even give you credit for it. At the same time, your boss will also easily notice whenever you’ve done something wrong. In contrast, when you’re at a corporate environment, most probably your “job well done” may hardly catch the attention of your boss so you can’t expect recognition for all the hard work you’ve put in. However, large companies do tolerate individual mistakes better.
In a startup, you get a lot of opportunities, skills and experience (from having to be a jack of all trades) which you can adorn your CV with. What’s more, these will help you climb up the career ladder quite fast. Opportunities in a corporate setting are less or even lost. For example, owing to the difficulties associated with changing product lines hastily at a large firm, the company could lose opportunities. The flexibility associated with a startup makes it easier to change key products fast. In the larger company setting, it is more of a challenge to progress up the career ladder.
Compensation (Pay and benefits)
The salaries and benefits in a startup are not much compared to what you’ll get in a corporate business. According to the Harvard Business Review, it is a common trend among startups to pay average salaries that are 30 percent less than the market norms. In a startup, there is even a chance that you may be asked to accept a reduction in pay in exchange for equity. However, there may be in-office activities and paid lunches.
The corporate environment offers better salary and benefits packages (such as holidays and healthcare). Insurance packages here are typically better than those seen with their startup counterparts. There may be more choice in the corporate insurance package which makes it possible to find something ideal for you and your family.
Both the startup and corporate setting provide for a great professional experience. They both have their own distinct set of advantages and disadvantages so one can’t really say that one is better than the other – both types are just different. The most important thing to keep in mind to make the right choice of job (startup or corporate) is to know yourself and the different companies you are comparing, to work for. Whatever the environment you opt for, it shouldn’t take a toll on your health, or make you too uncomfortable. You don’t want to get fired just because the company structure and environment didn’t suit you in the first place.