5 things to consider before saying “yes” to a startup

Startups are exciting! It’s something new that may become a multi-billion dollar company like Facebook and you could be in on the ground floor.

They are also risky and after months or years of dedicated hard work, you may end up broke and in the basement. Before you accept that offer from a new startup, here’s some things you should consider very carefully…

 

1) Hello work, goodbye life!

When you get that offer to work for a startup, you should make sure you believe in the product… Really believe in it, because working on it will fill your life pretty much 24/7. At every startup I’ve ever seen, the crew was carefully selected to become a “family-type” situation because you’ll be around these people for long hours and many days.

At one local startup, the staff is young and without any personal commitments that some people need for those little things in life such as food shopping, sleep and going to the bathroom more than once a day. It’s one big party that runs all day — BBQs for lunch and buckets of cold beers at night. No one drives drunk because no one goes home. In fact you might save money not even bothering to rent an apartment as many startup staff end up taking cat naps on the couch in the corner or, as one guy I knew, setup beds under their desks.

Years ago I interviewed at the hottest startup ad agency in town. They gave me the tour, which included a dark area with a dozen very comfy looking couches, a full, gourmet kitchen, stocked with frozen pizzas and ice cream and a full bar setup that was touted as where the staff would “unwind on Friday and Saturday nights.” Saturday nights?! I had two small kids and couldn’t spend all night at work.

I wonder what kind of life I would have if I worked there. The answer was: no life at all, except for work. The salary offered was good but not for a 24/7 job. I ended up taking another job at a 100 year-old corporation that had a “quality of life” promise and supported family time and other services a startup could never match.

That agency startup went strong for a couple of years but eventually crashed, the remains were bought out by a larger ad agency, but the entire staff was fired. The survivors tried starting their own agencies, getting jobs elsewhere or leaving town to find work. Only the owners made money by selling their client accounts. Still, a lot of people gained some great experience.

 

2) Who makes money?

Despite the long hours and hard work, startup salaries are not going to help you buy that house, or fancy new car. As every freelancer knows, the offer of an “opportunity” or the promises of “lots of money later” is only slightly better for people on staff (imagine you’re asked to work there for only the promise of future payments).

As many friends of mine who worked for startups found out, sometimes paychecks were two, three or ten weeks late. Many left because they needed regular paychecks for the regular bills that came in for  student loans, food, hydro, clothing, etc. Some stayed and would show up one morning to find the office locked and empty, without any hope of receiving the back pay they were owed.

As with the example of the aforementioned startup ad agency, the owners are usually the only people who survive when the startup fails.

 

3) Watch those red flags

I recently got involved with a startup I knew was doomed from the first minute the owner opened his mouth. I feigned interest and figured I would make some money until everything imploded. That didn’t take long but the income helped as I was paid upfront, which was the only way I would get involved.

The premise was simple… the owner was going to start a website on “how to start a blog.” Not only was it a crappy idea, the competition was fierce and the similar sites were better established with a half dozen dominating the market. Still, there’s always a possibility if the site could find a unique corner of the niche. Naturally, the owner didn’t want to do that.

In every Skype meeting and email, he would ignore my suggestions and lay out a plan that had no chance of success. He was cocky and insisted his MBA from Phoenix University… online, gave him super powers of intuition in business. Although I insisted he have everything in place before going live, he was impatient and published the site with many promises of blogging guides that would be posted for those wanting to start a blog in specialty niches, such as real estate, fashion, music and… well, that’s all he had in mind. The results were obvious — anyone looking for a niche guide on anything else wouldn’t find what they needed and move on to another site that would fulfil their needs. Lost customers and lost income.

Of course, the money-making end was to scam people into taking web hosting from his other business. That hosting company did not have a good reputation, so customers would most probably move on once the “50% off for one year” was over.

If you are normal and have even an iota of knowledge about how the Web works (or business in general, for that matter) you know this was all insanity. It seems hard work, proper evolution of the site and not leaning on others to increase visibility is a ridiculous way to go about building a successful business… of course you don’t have an MBA from an online university!

Sure enough, after six months of headaches and indigestion, he told me I was no longer needed. I breathed a sigh of relief and quickly replaced the income with another client. As for his site, he changed it three times over one weekend not bothering to hire a proofreader, so “How to Strat a Blog” now sits, alone and dying.

 

4) Can you protect yourself?

Whenever a startup would approach me with no money to pay for my services and the promises of “money later” or being their “go-to guy,” I would ask them for a percentage of the company. I would explain that they were asking me to invest my time and money (because there are always costs, even when you work for free) and I would only invest if I had a piece of the company I was gambling upon for their success. Naturally, no one ever went for that deal.

With any startup or established business, for that matter, listen to what is being offered to you and how it is being relayed to you. If the owner sounds sleazy and you get a bad feeling in your gut, then you should walk away as your first instinct is probably right.

If something doesn’t seem right, ask to see the design area and look at the designers working there. Are they happy and smiling or do they look like they’re serving five to ten years in a Siberian gulag? Then ask yourself if you want to dedicate every waking hour to being among the walking dead.

Expect to work hard, long hours, being flexible as the project evolves and, most of all, to have the utmost confidence in the startup leadership and direction. You won’t receive a contract or written agreement, so trust is a gamble. Most startup employees lose that bet.

So, what will you get out of all of this hard work and dedication? Will you be discarded once the startup becomes a functioning, profitable business? In many cases, because you are owed a reward, the “money later” may very well put you in a position where the owner will find it financially feasible to get rid of all employees to whom favors are owed and hire experienced people who have no other expectations aside from a weekly paycheck.

 

5) The joy of success

When you believe in what you are building, when it all starts to come together and you are firmly entrenched with a growing company, the rewards are wondrous. Keep in mind that there’s only one Facebook and one Google but thousands of startups out there and 95% of them will fail within the first six to twelve months.

Here’s hoping you find the 5% that make it. If not, accept that this is the business of startups.

Featured image/thumbnail, overworked image via Shutterstock.

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  • Mark

    This is amazingly true. Paying those bills make a lot of startup business crash. Well, passion is not the only key to succeed. Support from friends, family and those who belief in a startup really helps.

  • http://www.designingsean.com Sean Ryan

    It seems to me that there is a bit of an undertone of contempt when you mention that he received his MBA from an online university, as if that fact is proof that the guy is an idiot. I hope I am just misreading that, since MBAs from Harvard can be just as cocky and idiotic, and those people who get degrees online can be quite intelligent and talented.

  • Judy_Cole

    Which is why, I plan to get funding for my start-up, if possible, so I can at least pay people up front.

  • Jonathan Patterson

    “No one drives drunk because no one goes home” Both funny and true!

    @designingsean:disqus I didn’t read it that way entirely. It seemed to be that it’s but one example in a cacophony of things that might be concerning.

  • Moody

    And beware of the start up that doesn’t die, rather it slips into a coma-like state, offering glimmers of hope. We can only pray that the priest, that is hovering just before delivering last rights, trips over the chord providing life support and sends us to our promise of paradise. You know,…. creatives on call. *** click, click, c.l.i.”pop” ***

  • http://www.designingsean.com Sean Ryan

    I am saying that by having an online degree doesn’t make them incompetent, and having a Harvard degree doesn’t make them amazing.

  • David Deyo

    Spot on, as usual. I worked for 3 startups in Portland, Oregon over 9 years. Everybody has the big promise of truly great things yet to come. The one I worked for longest (6 years) was pre-IPO and made a big deal of that to “sweeten” a tepid salary offer. Naturally, 6 years after I started, me and 1/3rd of the company arrived at work one morning to be told we were being laid off. The value of the stock options? Well, since they never got to an IPO, they were worth zero. Some sweetener, eh?

  • http://www.lsbwebdesign.co.uk/ Luke Boobyer

    All of these points are spot on. If startups are not managed properly then you end up working for less than you are worth for longer than you should. My advice is know when to get out and trust your gut instinct.

  • http://www.melbourne-seoservices.com/ Isabella Jane

    Hard to accept by really true facts. Thinking a while about these things are always essential before getting to it!