January 24, 2012 by Austin
Oftentimes it is wondered what the primary differences are between startups and large corporations. As job seekers, you probably want to know how unique each experience would be. The funding, structure, strategy, and culture of small startups are very different than that of large public corporations. Each has it’s own pros and cons, but ultimately it is up to personal preference on particular factors that matter most to you.
Startups can be defined as companies that have limited operating history, and typically have potential for high growth. They attract investors based on their risk/reward potential and scalability. Steve Blank, a serial entrepreneur and adjunct professor at Columbia’s Business School has written extensively about entrepreneurship and has defined six distinct types of startups:
1. Lifestyle: These are businesses formed by people pursuing their passion and making a living doing what they love. This could be someone who loves music opening a record store or someone who loves clothing to own a boutique fashion store.
2. Small Business Startup: These are small business owners who see their business as a vehicle to earn money and make a living. They don’t have to necessarily be passionate about what they do or intend for their business to grow. They just want their “slice of the pie.” Examples could be independently owned shops like restaurants and convenience stores.
3. Scalable Startup: These are companies whose founders intend for company to grow into a large corporation. Unlike small business startups, the founders plan to eventually go public and make money in an IPO. These types of companies tend to group together in innovation clusters (Silicon Valley, NYC, Boston, etc), and are very relevant to Talener’s business and the tech industry.
4. Buyable Startup: These are companies whose goal is to put out a marketable product, then be sold to a larger company. These can include web and mobile app companies that hope to create popular apps, attract a user base, and get acquired by more established companies.
5. Large Company Startup: These are divisions within a large corporation created to capture market share of a current trend. A large company can create these subsidiaries internally or acquire existing innovative companies to take over. An example of this is Apple acquiring Siri for the iPhone 4S.
6. Social Startup: These are companies that are founded as a means to change or improve the world more so than just make money for founders or capture market share. Someone could be passionate about a certain cause and start a company as a vehicle to help this cause. An example is Tom’s Shoes- for every pair of shoes sold, they’ll donate a pair to someone in need.
Startup companies are primarily funded one of three ways: with the founder’s own personal money, seed money from angel investors, and venture capital. Equity stake is often tied into compensation packages, but its value is tied to the success of the company. Most large companies are publicly owned or part of a larger holding company’s collection of brands. They are collectively owned through stock sold to the general public.
The structure of startups is very horizontal. The founders are entrepreneurs who have invested heavily in their project and are involved in every aspect of the business. The CEO and cofounder will also be a sales lead or hands on engineer. Large companies can have staffs that exceed the hundreds or thousands; therefore they need to be hierarchical to maintain effective structure. Some people will prefer the chain of multiple managers and organized meetings. It can get bureaucratic, but offers security and a stable career ladder to pursue.
Culture is oftentimes the biggest difference between startups and large companies. In a small company you have much more interaction with your coworkers, act as a team striving towards the same shared goal, and generally have looser administrative controls than the systematic makeup of a large company. In these larger companies you won’t befriend everyone, but may have broader company pride. Work life balance is an important factor for many people, and the perks and benefits will be different across. Some are comfortable with the structure of a corporate environment, some enjoy the flexibility of a less restricted one.
Employees can have a demonstrable impact on a startup’s overall success and play a more influential role than in a larger organization. They also have an opportunity for accelerated learning and contributing in ways beyond just their own job responsibilities. People who have worked for startups will often say that “startup years are like dog years” because of the amount of skills and experience acquired in such a short period of time. For someone young and independent, it could be a great fit in this kind of environment.
Entrepreneurs take big risks and are often gambling at critical decision-making points, with outcomes that can go either way. The company offers excitement and potential for large achievements, but can also lose funding or make poor business decisions at any moment. Startups usually take on much more risk than large companies. They have to be aware of funding concerns, keeping up with market conditions, and protecting intellectual property. A large company with conglomerate backing can offer very steady career advancement for those who desire long-term security. You have a defined path towards an end goal and stability with your work-life balance.
Employees of startups also like that they can see a company grow from nothing to a well-known name. They feel invested in the brand and know the tangible impact they had in helping the company get to this point. Startups always have the potential to evolve into large corporations though. With rapid growth, strategy and leadership often changes. Founders who think a certain way aren’t necessarily always the right leaders from a business standpoint.
Because working with a startup is much different than working with a large company, you must also approach the job search differently. Hiring managers of small and large companies will often have different priorities in what they find important in their candidates.
With startups, personality and culture fit are usually the most important factors. Hiring managers are often cofounders who want to identify candidates that share their same passion and vision. Therefore, the skill set could be great, but a genuine interest in the company’s product is just as important. These hires are very important to them because they can significantly affect the company’s future and success. These founders think much differently than a corporate manager and understand that their new hires will play a more impactful role. Ability to mesh with current employees, character traits, and outlook matter just as much as ability to perform technical aspects of the job.
With large companies, a culture fit may be important but skillset and ability excel at the job usually are still the top priority. With a larger and more diverse staff, individual behavior does not affect the company as much as it could in a startup. A hiring manager at a large company usually won’t disqualify a strong candidate solely because of their personality the way startups often will. The hiring process at large companies also tend to go through multiple rounds and need approval from several layers of managers. This ensures selective vetting and a chain of approval. Executives are rarely ever hands on in hiring midlevel positions.
There are not as many layers in a startup where the CEO/CTO/Founder is usually also the hiring authority. Startups will often offer equity share, but its value is tied to the potential of the company. Some like to be incentivized by this minority ownership of small startups. Others would rather have a signing and end of the year bonus with larger companies.
Candidates should keep these distinctions in mind when searching for new opportunities. Strategy, structure, funding, culture, and hiring practices will differ between small and large companies, so they should consider their own interests and find the right personal fit.