In the middle of 2015 I was hired by a unicorn, (no really, stick with me here, a unicorn is a start-up company worth over $1bn on paper) to grow the UK part of their business. A few months later I was shuttering the office and making my team and myself redundant. I’d spent more time interviewing for the job than I spent in the job.
Financial sector workers are seemingly queuing up remove their suit and ties, ditch their demanding six-figure salaried jobs to don a hoody and try to make it work at a hot tech start-up. There are definitely some upsides to working for a start-up, but as I discovered first-hand, there are also more than a few downsides.
PowerPoint and a smile
Over the last few years frenzied speculators had been busying themselves throwing vast amounts of money at anyone with a PowerPoint presentation and an engaging smile. Early investment in start-ups grew so much that from just a handful a few years ago, there are now over 200 unicorns. Things were ticking along nicely for everyone until the Chinese economy took a hit towards the end of 2015. All of a sudden all these newly moist-skinned investors were forced to look in detail at what they’d been funding, and what they found was not pretty.
The company I joined was a classic example. When I took the job I was handed an existing team of 30 people and a business model that was at least two years away from breaking even. There was no budget, no sign-off process on deals or costs and, most worryingly, no one was tracking the burn rate of the company at all.
A few weeks in the role and everything changed completely when the rounds of funding suddenly dried up. It took a staggering two months from that point for the company to tally things up and discover that it only had a further four months of funds left at the rate it was burning cash. Some of the things that were discovered were eye-watering. For example, more than a $100k was being spent on recruiter fees alone each month.
The brutal turnaround
The company had to rapidly cut costs if it were to have any hope of attracting further funding. It was brutal. More than 10% of the employees were almost immediately let go, the bulk of them only hired a month or two previously. A multitude of other cuts and changes were made, but the one that best describes the panic and confusion was when people were asked to take significant salary reductions in return for share options, while in the same week the founder was investing $500k of his own money into an unrelated business.
After another month the people running the company suddenly lost faith in the UK market and the axe fell on my team. Even this process was bonkers, at one point I was asked to performance manage out some of the people that were being made redundant. That didn’t happen.
The people running the company I worked for were inexperienced and highly-stressed. After their initial funding success they had become convinced that they were the smartest kids in the room, which meant that they didn’t take advice. They preferred to learn everything from scratch causing them to make a multitude of pointless and avoidable mistakes, which ultimately was a significant factor in piling up the trouble they face now. They were distracted by the fun bits, the speaking engagements, the flashy cars and the PR while they weren’t spending enough time working on the business itself.
Making it at a start-up
A start-up needs to have a great idea, excellent leaders and a constant focus on improvement. You need all these ducks to be lined up with a huge dollop of luck on top. The majority of start-up businesses will fail and a large number of start-ups including some unicorns are in the process of doing that right now. Powa Technologies, the UK based payments start-up recently valued at £1.8m, imploded in March and has since been broken up for parts. Those that don’t spectacularly collapse will almost certainly completely change their business model several times before it becomes successful, shedding staff each time. Each job is a gamble within a lottery and the chances of picking a winner and staying the course are tiny.
Banks are not shy about firing people when things start to go wrong – as the latest round of layoffs show – but at least most people are given generous severance packages and have some hope of getting a similar role relatively quickly. At a start-up you have as much job security as an under-performing football manager and, believe me, there’s not many opportunities out there right now.
James Brittan, a pseudonym, is the former CEO of the UK arm of a recently closed tech start-up. He’s currently looking for a new role.
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Photo: Rainbow vomiting unicorn by Christian Heilmann is licensed under CC BY 2.0.