Journalist/comedy writer Dan Lyons is on a publicity tour for “Disrupted,” his new memoir about working for marketing tech startup HubSpot. He wrote a summary version of his experiences there for the New York Times.
He’s right about a lot of criticisms, but ignores one very important point: Successful startups share some of their wealth with employees more broadly than almost any other company in any other field.
That means that rank-and-file employees can gain sudden life-changing wealth by working there. Where else can that happen?
First, the parts he’s right about.
Startups do often have a cult-like atmosphere, complete with funny language and overblown rhetoric about changing the world. Managers do tend to be young — sometimes younger than their direct reports. Some startups do fire underperformers or conduct layoffs with little or no warning, although that’s common in other companies as well. A lot of hyped-up tech startups have gone public without making profits, including Twitter (which lost over $521 million in 2015), Box (lost over $202 million in the year ended January 31, 2016), and Square (lost nearly $180 million in 2015). And, yes, HubSpot lost $46 million last year.
As Lyons writes, “Wealth is generated, but most of the loot goes to a handful of people at the top, the founders and venture capital investors.”
That is true. The investors and founders, who take the biggest risk, tend to own the biggest percentage of a company and reap the highest rewards when they go public or get swallowed by a bigger company.
But most tech startups dole out stock options and stock grants much more broadly to rank-and-file workers, including engineers and salespeople. That means they share in any happy outcome.
I personally know plenty of former startup employees who used their exit money to buy a first home. Or to travel the world. I even know one who travelled, then bought a house on the beach in the country he fell in love with. He’s not an entrepreneur. He’s not an executive. He’s a lucky programmer who happens to be very good at his job and has picked a couple winners.
In today’s economy, how else can a rank-and-file worker suddenly get a life-changing sum of money? By winning the lottery?
I don’t want to put too much of a shine on it. Most startups fail. Most startup workers’ options and grants end up being worth zero. It’s wrong to exchange too much salary for equity, and you should never make any big bets based on the value of unvested pre-exit options.
But still, in the hollowed-out economy of today, there are few jobs that offer a better prospect of upward economic mobility than working in a young tech company. It’s not paradise, but it’s not a horror show either.
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