The Startup Payoff Is Long-term

benbuie | 4/4/13

Without a long-term mindset, you’re not likely to survive in an entrepreneurial company either as a founder or early employee. I recently heard a great story from a local startup that illustrates this point; for the purpose of anonymity I’ll call them Growth Inc.

When Growth Inc. was first created, the founders were open to adding one more person to the founding team. One individual in particular reached out to them after seeing their crowd funding campaign, we’ll call him Bob. He had an impressive corporate background and had an even more impressive startup success. After several years in a corporate job he quit, leveraged some of his contacts to roll out a new product nationwide at Best Buy, and then sold the company.

Bob’s success was in the same industry as Growth Inc, and he seemed like a perfect fit. Not only was he excited about the idea, but he also offered to invest a small amount of his own money. They quickly brought him on as a founder.

Almost immediately, Growth Inc. was concerned at how Bob was overly focused on a short-term payoff. He negotiated hard for a bigger-than-usual salary claiming that he had a higher burn rate than the other founders. Although the other founders were a little annoyed, the logic was sound, so they gave him more money. Shortly after raising their first round of financing, Bob was again hyper focused on a salary increase. Growth Inc. quickly realized that Bob was hyper focused on his current lifestyle, and a short-term payoff.

This story doesn’t end well. Bob left the company within a few months of the funding round and wanted the new investors to buy his investment back at a premium. The new investors didn’t like that idea and to this day the situation is not resolved.

In general, there is nothing wrong with people who are focused on short-term money. That mindset is totally understandable, but not in the context of a startup. Why? Because startups don’t have money. Yeah, the headlines make it seem like they are flush with cash, they raise millions from wealthy investors and “there is more where that came from,” but the fact is startups have to put that money to work, they have to put it to growth. If they can’t grow amazingly fast on a small amount of cash, they die.

What is true for founders is true for early employees. Everyone in a small startup needs to buy into the vision, they need to buy into the long-term payoff. Growth Inc. learned its lesson. They now judge job candidates by how they choose compensation. They offer potential employees either a salary heavy option or a equity heavy option and see which one they pick.

If your thinking about working in, or launching a startup, make sure your passionate about the idea and the vision. If you’re just there for the paycheck, get another job.

About the Author

Ben currently works as a contract web developer and business consultant in Boulder, Colorado.

His passion for entrepreneurship led him to study business and learn to code. Although he never anticipated working on the web, Ben has spent the past 9 years learning everything he could about building and operating websites and web assets.

When not at work, Ben spends a lot of his time with family. He is married to a “beautiful” woman and they are raising 4 energetic boys. In his spare time he loves keeping up with technology, playing guitar, eating Sweet Cow ice cream, and painting (although he has very little time for painting these days). Other than that, Ben is a supporter of freedom and liberty, a fluent speaker of Russian, and he tries to be a humble follower of Jesus.

Read more about Ben.