There’s been a huge trend towards joining startups and fast growing tech companies ever since Wall Street blew up between 2008-2010. The top companies to work for no longer are dominated by the Goldmans, Mckinseys, and Bains of the world. The Googles, Facebooks, and thousands of startups you’ve never heard of are the employers of choice now.
One of the biggest realizations I’ve had going from an enormous investment bank to consulting for various startups is that if you fake it, you probably won’t make it for very long. When you’re at a huge organization, it’s easy to hide behind bureaucracy, layers of middle management, and massive amounts of inefficiencies. If you stop coming into work for a month at a large organization, chances are high the business will continue as usual. The extreme example is an Indian government employee who called in sick for 24 years!
At a small company, you must know your stuff and produce. Small companies generally have tighter budgets, less people by some definition, and a time limit to expiration given many startups are loss-making. If a company burns $10 million a year and only has $12 million left in the bank, the pressure is on!
There’s no room for holding meetings about meetings on what to do. There’s no room for people telling others what to do without doing anything themselves. Everybody must pitch in to produce something valuable.
Now think about the dichotomy between small companies and large companies from an investor’s point of view. Do you want to invest your money in ex-growth companies where people have a tendency to come in late, leave early, and do the bare minimum? I don’t. The hustle, drive, and innovation is why I’m a big fan of investing in growth companies and private startups. The problem now is that the private equity market is richly valued.
A SOLID CAREER STRATEGY
Joining a small company may be beneficial for new graduates because there is much less hand-holding. It’s either do or die. But I’m going to argue that for most people, it’s much better to join a reputable large organization where you can learn all the fundamentals and THEN go work for a smaller company, or start your own.
Five reasons why it’s better to start big, then going small:
1) Small companies fail more often than large companies. If your company fails within a couple years of you joining, you might become “damaged goods” simply due to association. “Oh, so you were working at that company who stupidly spent all their funding on ineffective promotions. I’m never hiring you!” This is despite the fact that you were working in the engineering department and didn’t have anything to do with the wasteful spending.
2) Large companies are more prestigious than smaller companies. If you spend several years working at Apple, P&G, McKinsey, the Federal Reserve, or KKR, you’re going to forever have a prestigious stamp on your resume that will allow more doors to open. If you start at a company nobody has heard of and you want to move on, you better have done great things to prove your worth because employers will instantly wonder why you are moving on if things are so good. Having a prestigious firm on your resume acts as a perpetual screen mechanism for one of the likely seven or so jobs you’ll have in your lifetime.
3) Large companies have more infrastructure to train you. One of the best things about starting off my career at a large institution was the training. I got to go to class to pass my Series 7 and 63 tests. I got to take courses in leadership, accounting, finance, and communication to develop my skills. My next employer paid for my MBA for three years at Berkeley. Meanwhile, I was able to get foreign language training in Mandarin for a year as well, all paid for by my employer. When you’re at a small company, all you’ll get is perhaps some free food and drinks to keep you in the office longer. Many smaller companies don’t even provide 401k matches or profit sharing.
4) Large companies allow you to network with more people. The larger the company, the larger the networking opportunities and the larger the alumni base. It’s a fact that people tend to take care of people who have more similarities than less. Do not underestimate the power of relationships in getting ahead. There’s a reason why plenty of children of celebrities get coveted movie parts even though they can’t act. There’s a reason why average students get into prestigious schools. There’s a reason why mediocre workers in your organization go much farther than you, even though you might be harder working.
5) Large companies may compensate you better than smaller companies. Google no longer is a fast-growing startup, but they retain people like prisoners in a medieval dungeon because of its enormous balance sheet and massive profitability. Unfortunately for so many people who want to leave Google, a lot of other employers don’t even bother because there are too many cases of Google matching and increasing any outside offer. Joining a startup will likely make you poorer than richer over the long run given the below market cash compensation and the iffy liquidity events. Richer companies have a larger capacity to pay.
THE RISKS OF GOING BIG TO SMALL
You know what happens when you work for a large organization where there are systems in place to take care of your every need? You tend to take things for granted. For example, I used to have my assistant book my flights and hotels whenever I went on a business trip. It’s a nice perk for being an Executive Director (one up from VP) at a large investment bank. Oh how nice it was for someone to do my expenses too. I just have to suck it up now as a small business owner and independent contractor.
Another drawback of going from big to small is the belief that you contributed more to the company’s success than you really did. It’s easy to think you’re the shiznits when you’ve worked for a large, prestigious company for many years. The reality is that you’re a much smaller cog in the wheel. Ego inflation is a great concern for smaller companies hiring people from larger companies. If you want to know what you’re really made of, try and create a business from the ground up.
Stay humble and always focus on doing things together as a team if you’re making the transition from big to small. If not, you’ll not only look like a prima donna, your incompetence will become very apparent.
COMPETITION WILL ALWAYS BE FIERCE
The competition for good jobs will always be extremely competitive. If you can develop your skills at a large organization that has a lot of structure, you’ll be more equipped to succeed in a smaller organization where there’s nowhere to hide. If you can’t get into a large organization, then you’ve got to put in double time to learn all you can. When you don’t know the answer, simply say you don’t know, but you’ll find out.
At some point, we will all experience a situation where we don’t really know what we’re doing and will have to fake it to get by. That’s OK, so long as we finally figure out what to do. But trust me when I say that embellishing your skills to work for a smaller company may only get you in the door. Eventually, you will get the boot if you lack substance.
So many people I know failed miserably at smaller shops after they left a bulge bracket firm because they no longer had a big name to attract any clients. Institutional clients have to talk to Morgan Stanley because they have a lot of deal flow, but clients need not speak to bucket shops. Once these job hoppers went down to the tier 3 realm, they could never return as their resumes were tainted.
Be careful what you wish for when taking a job that is tied to production. If you don’t bring in the revenue, you will probably get fired. If you don’t fill the top of the funnel faster than your predecessor, your days are numbered. If you’re able to achieve great results, then you will get rewarded commensurately. There’s something to be said about taking on a sleepy job that doesn’t have pressure. You can fake it so much easier at a larger company. But where’s the fun in that?
IF YOU’RE CONSIDERING LEAVING
Don’t quit your job, get laid off and negotiate a severance package instead. Negotiating a severance enabled me to receive six years worth of living expenses from a company I dedicated 11 years of my life to. If I had quit, I wouldn’t get any severance, deferred compensation, medical benefits, job assistance training or unemployment benefits and neither will you. I believe so strongly in the message of never quitting that I spent a couple years writing this 150-page book entitled, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.” I’m absolutely certain this book will help you recognize your rights as an employee and break free from the corporate grind to do something you truly want to do.
Start Your Own Website, Be Your Own Boss: There’s nothing better than starting your own website to own your brand online and earn extra income on the side. Why should LinkedIn, FB, and Twitter pop up when someone Google’s your name? With your own website you can connect with potentially millions of people online, sell a product, sell some else’s product, make passive income and find a lot of new consulting and FT work opportunities. Here’s a tutorial I created on how to create your own site in 15 minutes.
Financial Samurai started as a personal journal to make sense of the financial crisis in 2009. By early 2012, it started making a livable income stream so I decided to negotiate a severance package. Years later, FS now makes more than I did as an Executive Director at a major bulge bracket firm with 90% less work and 100% more fun. Start your own WordPress website with Bluehost today. You never know where the journey will take you!
Updated for 2019 and beyond.