So, You Want to Work At A Startup?
Using data to find the right stage company for you
Free meals, beer kegs, pony rentals. Direct access to C-suite. Email addresses that follow the firstname.lastname@example.org formula. There are a lot of amazing things about working at a startup.
There are a lot of potential downsides, too. People frequently cite long hours, below-market pay, and career uncertainty as reasons why someone might choose a more established organization for their career.
But are these notions stereotypes or mere misconceptions?
Not all startups are the same. If you’re currently looking to join a(-nother) startup, we found the VC funding stage of the company can make a big difference in the environment. By separating and understanding these differences, we want to help you make better decisions going forward.
We looked at 71,000+ individual respondents from 187 startups in our dataset ranging from Seed to exit event, tracking their engagement scores and aggregated responses to surveys. We grouped them into six categories to distinguish the differences between:
- A (Pre-A and A series companies)
- Late (Post C financing)
- Acquired Companies
We’ll look at the first three and how they compare in this post. Part 2 coming in two weeks.
For a more detailed look with additional data, you can download the full report at: http://hello.cultureamp.com/the-culture-crunch
Our surveys at Culture Amp measure the sentiments of workplace culture and engagement by the people who know it best — the people who work there. We measure Engagement through tracking survey responses about the level of connection, motivation, and commitment a person feels for the place they work. Each bar represents the range of average positive responses (agree or strongly agree) of every company. The dot represents the median of the group.
We believe engagement to be the best overall indicator of a person’s performance and commitment, as well as great indicator of overall culture. (An Engagement score of ~72 is considered good in our New Tech Benchmark.) While scores vary for different stages, the trend seems to be that older companies tend to slide in median Engagement. But that doesn’t mean earlier stages are better across the board. Let’s take a look at the individual factors that best characterize each round.
Early Stage (A and Prior)
We often hear ideas like startups don’t pay as well as a major downside to working for a startup. However, we found that early stage employees are actually quite happy with their overall compensation — more than any other stage company including post-IPO and acquisition.
Scoring +11 percentage points above the overall median, this is a major defining characteristic of working at early stage companies. This isn’t necessarily contrary to the argument that ‘startup employees receive lower salaries.’ It may be that working at an early stage startup affords more than just direct monetary rewards: a great career opportunity at the ground floor, terrific workplace perks, and early-stage equity. Early stage companies are also “typified by teams working shoulder to shoulder with company founders and sharing an exciting vision in its early creative phase,” says Culture Amp’s Chief Scientist, Dr. Jason McPherson.
Aside from compensation perceptions, early stage companies seem to otherwise conform to the popular view of “startups,” their people responding very positively to effective direction of resources (+8.9), day to day improvements (+8.5) and innovation (+6.7) in high regard.
People at early stage companies also rate their organization highly nearly across the board. This includes effective systems and processes to get things done (+7.4), recognizing when people aren’t delivering in their role (+7.1), accountability (+6.4), access to learning and development (+6.1), and skills development (+5.8).
Due to smaller headcount and limited access to capital, early stage companies run leaner operations with people who like to wear many hats. The sentiment suggests they are people who like to often work outside of their wheelhouse, as evidenced very positive high skills development and L&D responses.
An early stage company might be right for you if you are a learner and a doer, with an appetite and capacity to learn a wide range of skills. Perhaps due to a demanding environment, early stage companies also tend to be the most engaged overall. And contrary to popular belief, people at early stage companies are quite happy with their overall compensation. It’s a place to get things done and feel fulfilled for it.
On the other hand, there’s a lot of responsibility and accountability involved at early stage companies — as one person could be 20% of the entire company. Colloquially speaking, you could say that Stage A (and earlier) companies are better for Type A personalities.
If you can stand the higher-pressure environment and need to constantly adapt, early stage companies provide a good balance of intensity and payoff. Early stage companies offer the quintessential “startup” atmosphere. But be cautious. By definition, companies at this stage are the riskiest. Ask questions about the longer term including its future finances (runway and burn rate) and in what ways the company makes room for skills development.
Series B companies are marked by their proven value to the market, critical to securing another round funding. Venture capitalist Tom Tunguz called Series B, “the hardest round to raise.” As such, they are confident companies — the highest overall of all rounds.
Companies at this stage are typically hiring specifically for focused roles like sales and developer teams. This focus undoubtedly contributes to the sentiment of being able to make a positive difference, where Series B scores highest overall (+9.3). However, Series B also sees the lowest overall scores for longer-term commitment (-7.2).
This can seem somewhat inconsistent. Why do the people who are most confident in the leaders and feel they can make a real positive difference at work the least confident about longer-term commitments? The evidence seems to signal towards role and organizational transitions.
Series B funding is about scaling and bringing in specific talent: sales engineers, UX designers, and social media coordinators. During this transition, new hires with focused, smaller ranges of tasks feel more able to achieve the specific goals they set.
Simultaneously, many of the generalists who have been around since the early stages may feel uncertain about their responsibilities and positions. This is suggested by lower measured scores against measures of job performance evaluation (-5.4), useful feedback (-4.7), and workload (-4.2). Those who like to wear many hats may feel constrained or limited during this transition.
More concisely: everyone perceives they can make a difference, but not everyone knows exactly how, leading to uncertainty about the future. Moreover, during this stage, managers are given the tough job of easing through and navigating ambiguity. It’s also entirely possible that managers may not be completely sure of the transitions taking place themselves.
A company in Series B would be a great fit if you are more established in your career trajectory and welcome a little (or a lot of) ambiguity in your role. It can also be a great time to demonstrate leadership in a growing company that is in a transition stage. As a candidate, ask about how feedback is given (and received) and opportunities to for growth and movement within the company.
It might also be a good time to touch upon overall compensation, where Series B companies score lowest overall, and -15.4 points below early stage companies. While it may be true that B companies offer less, it also may be due to market perceptions. As Series B is typically a confirmation of market-viability via increase in capital, people may be expecting increased salaries. Series B hires are also likely getting less overall equity. We advise market comparisons to ensure you are getting the compensation you deserve, but also to ensure your expectations aren’t too lofty.
Series C companies don’t excel in too many categories, with only two drivers exceeding more than +4 points over the median — autonomy (+4.3) and learning and development (+4.2). Without extremely high positive responses in any category, Engagement can be real concern during this stage — Series C companies rank second-lowest overall.
It seems that some time between Series B and Series C, the organizations have corrected earlier issues with feedback, responsibilities, and roles. However, these issues have evolved into efficiency issues: recognizing when people deliver in their role (-6.1), day to day improvements (-5.2), and effectively directing resources (-3.1).
Confidence in the company also takes a hit, likely originating from the lack of efficiency. People at Series C companies score -5.9 points on confidence in a company’s success over the next three years, and -3.9 on leadership confidence.
Another area dragging down Engagement and confidence is the ability to act on new and innovative ideas (-5.3).
Because this stage is typically a period where companies look to massively scale, be acquired, or discover new markets, it might be the case that leadership often struggles to keep their people in the loop about what’s going on with the company. Addressing that properly could help assuage some of the confidence issues and issues with perceived efficiency.
Keep in mind: product maturity and company stability aren’t necessarily bad things. It’s a place almost every company wants to be. The defining characteristics at this stage is autonomy. When used properly, it can help scale and grow the company. When mishandled, it leads to inefficiencies and bureaucracies.
A Series C company is probably the best fit if you’re good at scaling, growing the company, or managing teams; preferably all three. If you ultimately seek stability and maturity at a startup, a Series C company would be desirable. Intrapreneurs can also be a good fit here, but be aware that while innovation is desired, it may not always be what’s right for the company at this time, so ask. And, frankly, this might be your last chance to get some startup equity.
Our data shows that there’s a lot of truth in the stereotypes that float around about startups:
- Earlier stages do emphasize innovation more than later stages
- The capacity to learn and develop skills is very important, particularly in earlier stages
- Later companies impose more focus and structure
And some misconceptions:
- Early stage employees are quite happy with their overall compensation
- Not every startup can or wants to act on innovation
Be mindful that companies both exceed and underperform in different categories. While we just gave you a look into how groups of companies perform, it’s much more important to have an honest discussion with your recruiter, interviewer, and potential peers about engagement, culture, and working environment. Asking tough questions like the following are great ways to learn more about the organization:
- How does your company keep its employees engaged?
- Why do engineers/sales people/designers choose to stay here?
- What’s the length of average tenure?
- How does your company foster innovative practices and what are they?
The responses you get can act as a good indicator of overall culture and what the organization does to amplify and encourage a healthy work environment.
If you are in discussions with a company that uses Culture Amp, you should feel OK asking them directly about their Engagement score and the factors that drive their scores. Learn more about our factors here and start the conversation.
In our next post, we’ll look at late stage and exited companies and how they fare across different engagement factors.
Hyon S Chu works at Culture Amp using data to articulate on culture, process, and engagement. He’s probably most like a Series A company.
Index of Survey Responses
Shorthand forms are used in place of the full question for brevity and readability purposes. The full forms of survey items are presented here following the shorthand: full survey item format.
- Accountability: “We hold ourselves and our team members accountable for results”
- Autonomy: “We have enough autonomy to perform our jobs effectively”
- Availability of the right information: “The information I need to do my job effectively is readily available”
- Collaboration with other departments: “Other departments collaborate well with us to get the job done”
- Company success over three years: “Hooli is in a position to really succeed over the next three years”
- Confidence in leaders: “I have confidence in the leaders at Hooli”
- Day to day improvements: “Day-to-day decisions demonstrate that quality and improvement are top priorities”
- Effective systems and processes: “Most of the systems and processes here support us getting our work done effectively”
- Effectively directing resources: “Hooli effectively directs resources towards company goals”
- Innovation: “At Hooli, we act on promising new or innovative ideas”
- Job performance evaluation: “My job performance is evaluated fairly”
- Learning and development: “I have access to the learning and development I need to do my job well”
- Leaders communicating motivating vision: “The leaders at Hooli have communicated a vision that motivates me”
- Long-term commitment: “I see myself working at Hooli in two years’ time”
- Making a positive difference: “Hooli really allows us to make a positive difference”
- Relevant skills development: “I am given opportunities to develop skills relevant to my interests”
- Useful feedback: “My manager gives me useful feedback on how well I am performing”
- When people aren’t delivering: “When it is clear that someone is not delivering in their role we do something about it”
- Workload: “Workloads are fairly divided among people where I work”