The Risks of Joining a Startup

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The obvious risk of joining a start-up is that it may shut down, leaving you out of a job. This article looks at some of the other risks.

Kanav Bharma (Business Operations, Dovetail)

Joining a startup can be a pretty big commitment, at earlier stage startups you’re basically buying into the vision of Founders and team, and basically saying ‘yes I’m keen to take this plunge with you, we’re in it together, let’s do this’. The natural risk that comes up from that is not finding alignment with the company’s values, philosophy or decision-making rationale. There’s a lot of decisions to make in earlier stage start-ups, often which need to be made quickly and it’s important to find and feel that affinity early to smoothen the process.  

Some of the other general risks are the startup not being able to find product-market fit, not solving a real customer problem, or running into other challenges that cause it to cease operating (e.g. running out of money). On face value this can be daunting, but it’s incredibly likely the skills and experiences you’d have picked up with that startup along the journey are valuable and transferable in another environment. 

And then there are risks more specific to being a generalist joining a startup. Generalists are often underrepresented in start-ups, especially SaaS, so it can be a little more isolating compared to working on big corporate projects with ambitious people coming from similar educational or working backgrounds. That gap is really easily made up though by an awesome broader community of Operators who openly share their experiences and learnings with each other. For example, there are Slack communities for Finance folks in Tech, and an Australian Tech Startup’s CFO group. The Operator communities really rally together. 

Rhiannon White (Chief Product Officer, Vend)

Start ups and scale-ups are usually have more ambiguous roles and role definition that larger organisations. There is a risk that the role you think you are joining to do is not the role that actually exists or is needed. Of course, this is also an opportunity as you can very rapidly identify things or areas that need attention that perhaps weren’t being focused on and reshape your own role as you see need. 

Harriet Johnson (Head of Content and Partner Marketing, Brex)

A lot of the same risks you’ll have if you’re going to a big company; you want to make sure that you’re excited about their mission, genuinely understand the product, and want to work with the team. If you have flags going up on these items–it probably isn’t the right business for you. To make this more tactical here’s a quick checklist to also go through:

1. Do I align with the company’s mission (ie. would you be proud to tell your grandma what they are doing)?
2. Are you excited about working with the people? (ie. do you trust their competence and would you be excited about working with them)?
3. Are they well funded/do they have at least 12-months of runway (Do they have enough money to pay you for the next 12-months and who is investing in them/are they already generating enough revenue that they can successfully bootstrap)?
4. Once you’ve asked these three questions and had a yes on each, then you also want to understand the business much better and depending on the stage, I would want to speak either to a customer, investor, or even a peer in the industry to see what their reputation is like, what the experience with their product is, or why they were invested in.
   

Will Dennis (APAC Commercial Finance Director, Afterpay)

There can be some career risk in becoming a generalist with a broad skill set, instead of gaining experience developing a more niche skill set in another career. There is also the remuneration risk that the equity pays off less than hoped or not at all.

Amelia Crawford (Legal Counsel, TikTok)

There are inherent risks with moving from any job: you don’t like the culture, you don’t like the work, you don’t get along with your colleagues/boss. You must remember that the interview process is just as much about you finding the right fit as them filling a role! Ask questions that are important to you. This can sometimes help identify red flags before you start. Some questions I like asking are:

1. How do you give feedback (whether structure or unstructured)?
2. Are you going to / do you want to stay here long term?
3. How have you been building the team, has retention been consistent?
4. What are yours and the company’s strategic objectives for the next year? 
   

Ellen Dinsmoor (Head of Operations, Vow)

I’ll flag a few potential risks:

1. Risk that your role becomes redundant. Startups and their needs change quickly, which does mean there’s some risk that a role which was once absolutely necessary may become significantly less relevant.
2. Founders can make or break a startup, from many perspectives, including a cultural one. Great founders can help to build a company with a fabulous working culture, kindness, and support. Less than great founders can (unintentionally) create a challenging work environment. There’s greater risk of these people influencing the culture in a very significant way at a startup than there is a larger, more established company with a more set culture.
3. You may see a lot of things done in a scrappy, non-scalable way. Startups will move and do things quickly, and with good reason and positive intentions. I think it’s important to keep in mind though that the processes we build at a startup may not (... will not!) work at larger size companies, and shouldn’t assume that something which worked at Startup A will work at Startup B or especially at Corporate C.
   

Tom Bass (Cofounder of Flirtey / Growth PM Atlassian)

Likely an immediate earnings hit that is meant to be offset by POSSIBLE equity upside. That is the main one. 

Matt Thurin (Growth, AirWallex)

The fast pace isn’t for everyone. A risk is joining and not liking it, and wanting to look elsewhere after a short time in the role. I also think start-ups are more likely to let people go before their probation ends. 

Lee Lubner

Lack of certainty (the company may not be around in twelve months), there are countless unknowns.

Darryn Rabec (Venture GM at BCG Digital Ventures)

Other than the obvious risk of failure, it might not be what you were expecting. Working at a startup sounds cool, but it really isn’t glamorous and there is a lot to complain about if you’re the type of person who likes everything around you to be figured out.

Chris Quirk (Investment Manager, rampersand)

• IMO they are a lot smaller than most think - it’s not a one way door into a startup (there are few one way doors in this life) you can always go back
• You’ll just need to demonstrate what you’ve done in a role (whether the company is alive or not) just like with a corporate
  

Tim Atkins (COO, CancerAid)

Joining any organisation has risks: that you hate the job, the culture is terrible, or do you don’t like the people. The key differentiator with start-ups is whether it will be around in 2 years’ time.

When I took my first role at a start-up, I had very few commitments (i.e. no mortgage nor children), which meant that I was able to assess my next role on the likelihood of it being a successful learning experience, rather than being financially lucrative.

Looking from this lens, if the company I joined had failed within 12 months and I was left out of a job (it didn’t), that 12 months would have been worth it for me, as the experiences and learnings I gained over that time outweighed anything else. 

The next article to read is 'How to reduce the risk of joining a bad startup'.

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