salaryStart ups are sexy for many reasons. I personally would also prefer to work in a dynamic environment with flat hierarchies sorrounded by people with a common vision that is not a 9-5 routine.
However, this picture is distorted by the survivorship bias. Everybody knows about Facebook and Instagramm but no heroic stories are told about the masses of failing companies. Steve Jobs et al. seem to have a monopoly on enterpreneurial wisdom - but what of that really leads to reproducible results?
Most start ups fail (see e.g. here) even they have been screened by professionals who have a large interest in developing valuation models (Damodaran). There are also empirical studies that try to quantify econometrically the effect of the founders’ eductions and work experiences on the survivorship probability.
All this refers to the financial risk for the investors. However, what is the career risk for the founders and employees of working in a startup? Say you can work at McKinsey or Goldman Sachs (A) versus founding your own startup (B). Choice A means you can be quite sure that your CV looks very strong after three years. Choosing B means that you can be 95% confident your CV contains years of failure. Who is supposed to be impressed by that?
Are there studies/qualified opinions on whether a failed startup harms your career? (Plus: If the career risk is higher, shouldnt start up founders and employees be paid much more than employees in an established company?)
I think the majority of the people who become entrepreneurs do so because they personally like the benefits of being in a startup such as control (financial, decision and time) rather than to impress someone or have it on your resume.
Most entrepreneurs who become successful have a string of failures to their name which becomes important learning tools if the failure is analysed in retrospect. This is why optimism and persistence are said to be important qualities for an entrepreneur. For most founders, the control and independence a successful startup brings is more alluring than being in the work force and working for someone else. Even if there was a 5% chance of success.
Entrepreneurial work is hard to list on your resume usually because it doesn’t look congruent with your other career moves (eg. you work a couple of positions as a mid level developer and suddenly you are the CEO.) And explaining failures may not be easy. (Answering what you did at your last job when your last job was the founder of a 5 man business that worked for 3 years, burnt through a pile of money and produced nothing isn’t good). Since your entrepreneurial jaunts can take years from your normal career, if you choose to omit it in the resume, its going to leave a huge gap that wouldn’t be easy to explain either.
If you were a founder and you decide to abandon your entrepreneurial work and get back in the work force, you may have some difficulty. Since the common problem is the title gap between your last regular job and your title in the startup, one of the things you can do is use reasonable titles that go with your past positions. Not mentioning that the company is a failure and focusing on the achievements, keeping the startup running until you and your cofounders can get jobs are other ways to ease the transistion. Most of the time, the problem is from recruiters because if you have listed founder or CEO as your title, they assume you are looking for similar work and would pass you on. That being said, there are some employers who value entrepreneurial qualities especially if you held a senior title before your jaunt and it would make your resume stand out if you can include it in an appropriate way.
I don’t know of any formal studies that were done on this subject. But there are some interesting articles related to this.
http://www.quora.com/Would-working-on-my-own-startup-devalue-me-if-I-dont-succeed-and-try-to-get-a-job-somewhere-else-later
http://www.quora.com/How-does-being-the-CEO-of-a-failed-startup-affect-your-career-prospects
http://www.fastcompany.com/1841038/startup-failure-boom-and-what-do-when-it-happens-you
I think it is all about the narrative and the goals of the person hiring you. Frankly anytime you are applying for a job, you’re attesting that you are a fit for the role and the company is assessing you against their own criteria. Some people are really bent on hiring people who they consider properly credentialed. They want someone who has the right letters after their name (educational, professional, etc). Some care more about your tangible capabilities.
I would not overly worry about it. If you are ever on the verge of getting a job and the thing that keeps you from getting the job is your time at a startup… Do you really want that job?
Think on the flip side how valuable the experiences you get as a founder are for your future career. You learn to think lean, you learn to prioritize, you learn to face your fears. You also learn the difference between perception and reality.
Some companies actually seek out people who have experience at startups… Simply because it has prepared them to think with the right mindset. It’s not so important that the startup was successful or not… It’s important that you had the experience.
I would suggest reading Noam Wasserman’s “The Founders Dilemma” - which draws on a number of very large studies (HBS, Kauffman Foundation) that explore the transition between industry and startups. The focus on mid- and late-career transitions is especially interesting. To your precise question, I am not aware of studies that treat employment success after leaving a startup as a dependent measure (but there certainly may be some).
Speaking from my qualified (?) opinion (founder, hiring manager), one problem I’ve seen with re-joining industry is title inflation. If at 21 you are a CTO/VP Eng/Sr. Dev, for example, it will be nearly impossible to return to industry laterally. A resume where someone was a CTO at one position, and software engineer I at their next, raises a red flag.
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