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David vs. Goliath: Startups vs. Powerhouses

  |  January 26, 2012   |  Comments

Don't get fooled by appearances or generalizations; each company is unique and each situation different.

Amid the constant change and predictable unpredictability of daily life, not a day goes by where I don't ask a candidate, "So what's it going to be - a startup or an established company?" Especially recruiting in the digital media space, the ongoing question of startup vs. established company swarms around the mind of every employee as new startups are popping their heads to the surface every hour with stories of extreme excess, quick money, and major stock options. From my unique perspective running a recruiting agency, I can tell you that the issue goes far deeper than the risk of a new startup vs. the comfort and security of an established company. Before you make your decision, here is what you need to ask.

What to look for in any company:

Regardless if it's a startup or not, dig deep into the past few years of the company and check if they are cash-flow positive, in debt, have VC funding, or what the turnover has been like. Here's why this research supersedes the "ultimate" question: take a major company who has been around for 10+ years, is popular on billboards and websites, in magazines, and all over Times Square. You know they have offices all over the country with various divisions and are backed by a popular product. Now say you find out, from this in-depth research, that over the past two years, the company went through a series of layoffs, eliminating over 17 percent of the company, cutting back on bonuses and benefits, and rumors have been circling the web of a possible acquisition. Suddenly, this well-known company doesn't sound too appealing and the comfort and security seemingly dissipates.

Now take a startup that is one year old: you haven't seen them in any advertising online, in print or on a billboard, and you've only heard of them a few times over the past six months. Now say you discover that they are backed by top VCs such as Greylock Partners or SoftBank who have a track record of backing successful companies, they have one office in New York City and one in San Francisco, and have doubled in size over the past six months with plans to double again over the next year. Their CEO comes from years of management and strategy experience at Google and everyone on their executive board has been a part of a successful IPO. Again, this unknown startup sounds much more palatable and far more secure than the aforementioned established company.

The bottom line is that you shouldn't get fooled by appearances or generalizations; each company is unique and each situation different.

Once you understand that principle, you can move on to the more important question: who do you want to be?

In his book, "One Up On Wall Street," Peter Lynch describes that the best investment decisions are all relative to your particular situation at that time, and so too this principle applies to making a career move. Can you take the risk of going to a startup without such strong backing when they offer you phenomenal equity in the company but a very meager base salary? Do you need the money now for short-term expenses, such as a wedding, car, house, etc., or do you have the flexibility to risk the short term for the possible long-term payout? Understand the emphasis on short term and long term because most people don't realize that major companies, such as Amazon, took over six years to be profitable. Even if the cards are in place, your cards may not match up at this time.

You may be surprised at how often people tell me they do not want to go to Apple, Amazon, Google, or the like, but prefer a startup with less than 20 people - not because of the equity or money, but because of influence. Typically candidates with more than 18 years of experience are looking to go where they can make a significant impact, lead a team, grow out a territory, or put their fingerprint on a growing leaf of the future.

So the poignant point of startup vs. established company: it is more about you than the company. Goliath has an army behind him and fails. David stands alone against overwhelming odds. What's right for one person may not work for you. Truly understand what you want - and who you want to be - to find the answer. The answer is in your research.



Alan Cutter

In the jungle of recruiting, Alan Cutter is the lion. Alan is Founder and CEO of AC Lion International

Prior to AC Lion, Alan was senior manager at OTEC and played an integral part in the company's evolution into HotJobs.com. 

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