In my previous post I wrote about my journey from wanna-be CEO to serial marketing entrepreneur. This got me thinking – how much risk is there living on the perpetual startup merry-go-round?
We’ve all heard the statistics. Most startups fail. It is hard to find official VC success rates (most VCs don’t disclose financial results) but anecdotally I’ve heard that less than one in ten investments hits big and most result in investment losses. Even with these low success rates, many VCs generate excellent overall returns.
As individual team members we don’t have the luxury to make a portfolio investment of our time across multiple startups (at least not without significantly diluting our efforts). I’ve averaged about 5 years in each of my two startup experiences. I consider myself extremely lucky to be 2 for 2 in joining pre-funded companies that hit big. The typical stats would suggest I would hit big one in ten times. Those odds aren’t very appealing, especially when you consider the other risks and costs of a startup.
According to Salary.com, a Marketing VP in the Boston area should earn a median income of $219,000/year. However, marketing VPs at most venture funded startups are lucky to earn $150,000/year. So right out of the gates, a startup marketing exec is likely giving up more than 30% in salary. Then consider that there is a lot less job security with little if any severance if things don’t work out. Also you’re fortunate if you can get fully paid health insurance, 401 K contributions, etc.
Still, startups attract great talent. Why? Well for one thing, there is a lot of upside with the rare successful exit. But successful startups also offer employees at all levels a better opportunity for fast career growth. Most run as a meritocracy – generally larger companies have internal political pressure to offer somewhat equitable structured career paths and salary increase caps. Startups have to reward the stars or risk losing them. Without star employees, they are sure to fail.
So considering the risks and rewards of startup life, is it wise to base a career on startup hopping? For some, yes. Success generally requires a combination of luck, skill, self confidence, perseverance and careful assessment of each opportunity. A comfortable, secure lifestyle requires all of these to mesh within the first couple of opportunities. Otherwise, you could easily be on the startup treadmill for your entire life – working hard and providing little long-term financial security for your family.
In future posts I will explore some key ways to increase the likelihood of success for startup hoppers. I’ll also discuss the profile of people with a decent chance of success and those who should avoid a life in startups.