The Startup Double Standard

Part of my disenchantment with startups has come from the ways that startup employees are discouraged from making responsible investment choices, while the VCs that fund them are allowed and encouraged to use sound investment principals in their own companies. There are two interrelated principals that I found at odds in the startup world, which ultimately caused me to leave it.

Investing in more than one startup

In the investment world, investing your money in only one stock is a huge no-no. Diversify, diversify, diversify. If the company fails for reasons you weren’t able to foresee, you’re out of luck if that was your only investment. VCs understand responsible investing and invest in many startups at once to diversify and both increase their chances of picking a winner and decrease their exposure to a particular failure.

Yet, as an employee, investing your time in a handful of startups at once is frowned upon; you are expected to work full-time at a single company at irresponsible investment risk. VCs use the knowledge that most startups fail and diversify. As an employee I’ve twice seen attempts (at one company, led by me) to use this knowledge to at least encourage personal investment and get the company to offer a decent retirement savings (IRA / 401K); both times it failed.

Oh, and don’t pull out early just because the forecast isn’t good like a smart investor would, or you might be labelled a job hopper.

Working part-time

When I asked if I could do work on the side for another company, it was rejected. I then asked if I could work part-time so that I could diversify my time between work and personal growth in other ways. The response was that that would be tantamount to quitting, so I had to choose.

And yet VCs only spend a fraction of their time each week or month on one particular startup, so that they each get attention, because that’s healthy. Why is it considered unhealthy for an employee to do the same? Isn’t in unhealthy to spend the majority of one’s waking hours during the week on one particular thing? How often have you seen a bug tracker response / project status analogous to “Sorry, I don’t have time to work on this anymore, I have a real job now.”?

Some might argue that VCs are paying, while employees are getting paid, so VCs are both at more risk and deserve more control. What I’m trying to point out though, is that we’re both investing; VCs invest with money, employees invest with time. However, lost money can be re-gained, while lost time cannot. Which is the riskier and more meaningful investment?

(Update) Finally, I want to mention that the general problem seems to be the startup work culture (and perhaps Western work culture in general), not the individual people involved. Everyone I’ve worked with and met, including managers, CEOs, and VCs, are all good-hearted people, and I’m quite grateful for the experiences I’ve had with them. This just serves to make the double standard a little more fascinating.

  • http://dinomite.net Drew Stephens

    The investment of time that employees make isn’t exactly equivalent to the VC’s monetary investment—while an employee gets paid for that time, the VC is merely getting the /potential/ for gain in the future. In part it’s a time value of money calculation.

    A more accurate characterization would be the investment by a VC in a company compared with an employee who is paid purely in stock.

    • mrooney

      It’s true, but the other side that I tried to point out is that you are expected to invest large amounts of time you’ll never get back. People often take significant pay cuts to work at startups for longer hours. If the startup fails and lays off its employees, they might feel that their time and loyalty was wasted, while a VC loses money that they knew was likely to be lost anyway and was perhaps already regained by a successful exit elsewhere in their portfolio.

      Also, I know this isn’t you, but consider how many startup employees making nice salaries still live paycheck to paycheck. I’d be interested to know how much the average startup employee actually saves. On the responsible side, consider the generally poor retirement options startups often provide (which I updated the post to mention), which make it more challenging to effectively invest the money you do save.

    • Dana

      While I see how the VC’s initial involvement is an uncertain sink (money spent), while the employee’s is an initial gain (wages), I think the point is that the VC’s level of commitment allows for risk (this startup is one monetary investment as part of a diversified portfolio) and their risk is therefore much lower than the commitment/risk of the one-job employee, who is both directly asked and socially expected to put all their eggs in one basket.

  • http://twitter.com/Heewa Heewa

    Another big difference is that from the company’s perspective, taking a VC’s money who’s also investing in 10 or 30 other companies is very valuable, not any less than taking money from a VC investing in just them, possible more valuable than that fragile situation.

    On the employee’s side, however, a startup needs fulltime employees to execute. A worker that only comes in once or twice a week is not only much less valuable than one that comes in all the time, but can potentially be a drag on projects they’re responsible for. You know how it is, you can’t always wait a week for something to get done, and you can’t transfer tasks around fluidly with no cost.

    Basicalyl, the VC model is possible, and the employee model isn’t.

    • mrooney

      Thanks Heewa, that’s a great point, I generally agree. Though, I’ve also worked for and seen companies that value employees who have their own businesses outside of work and appreciate the benefits they are getting from that employee’s extra experiences, exactly like a startup benefits from a VC working with multiple companies. I don’t see why a healthy, happy, part-time employee couldn’t contribute positively to the company, and I’m not sure a stressed, burnt out full-time employee is always an asset.

      What’s best for an employer isn’t necessarily what’s best for an employee, and I think that’s really important to be aware as someone in either role, but I do think it is worth really evaluating the ideas passed down to us and verifying them for ourselves.

  • Randall Ross

    There’s a strong case for not joining start-ups in the first place, particularly if one seeks work-life balance, has a family, wants to volunteer, etc. Thanks for the article.

  • Jon Watte

    Everybody had the same amount of time, and money is how we as a society allocate other people’s time. The golden rule: he who has the gold, makes the rules. If you don’t have your own gold, you don’t control your own time.

  • Daniel Aquino

    I think this should actually apply to any employment startup or not.

    I’ve worked for both startups and large corporations and in both you see people pulling 50+ hour weeks or 12+ hour days without wishing so.

    I actually recently left a very large company for better pay at a startup with more flexible life style.

    You also get the same stigmas of being a job-hopper or expected to be fully invested not only time wise but as a full blown cheer leader too…

    I personally think it’s selfish to expect any human to dedicate them selves that much to you or your company..

    I think there should be nothing wrong with moving around and working in different places.

    Each place I’ve worked at has taught me new skills, built new connections, exposed me to new problems, lessons, etc.. People who are exposed to many places bring strong experience, fresh eyes to a problem, and a strong network of people behind them.

    I generally notice today in the tech field people stick around for at least 2 years but why is less than that bad ?

    I really think it should be based on projects and work available / desired. If someone is brought in to build out or take over a given project at the end of it I see nothing wrong with them evaluating what the company currently has to offer or letting them move on and perhaps return again another day.

    Another problem that lies there is that people are usually forced around into positions they never desired or tasks they loath to do. I’d rather much have employees who see an opportunity to do something innovative or exciting “to them” and the company agrees that they/the-task is worth the investment..

    Mike also gives me some new fuel in my fire I really like the points he brings up…