When I start a new company and successfully get it funded, I sometimes get eye rolls from first-time entrepreneurs. What they are communicating is “of course you did—you have done it before.” While that’s true, I have done it before, and it is a little easier the second and third time, there are aspects that actually get harder every time.
Following are things to expect and anticipate in the first few years as a CEO for a startup.
Year 1—Work a Lot, but Worry Even More
A good run with a startup can often take seven to 10 years. In the first year of a startup, expect to do about two years’ worth of work. Why? Well, in the first year there’s typically a lot of product-creation and compensation anxiety.
Product-creation anxiety is managed by just doing. Writing code all day, into the evening, on the weekend, etc. If you are exhausted at the end of the day, that’s good, you should feel like you’ve moved the ball down the field.
Compensation anxiety is trickier. If you are young and this is your first company, this is often minimized by the fact that you have a fairly “unencumbered lifestyle.” If you are older and have a more “complicated lifestyle” then this can be tough.
Regardless of how many times you start a company, you generally pay yourself between 0 and 25 percent of what you could be making nearly anywhere else. Having the resolve to work twice as hard for 25 percent of the pay is difficult. As the CEO, you are lead cheerleader; you really aren’t treated special. There is nothing exciting about your role.
Year 2—Work a Lot, Get Paid a Little
In the second year of the company, expect to do about one and a half year’s worth of work. You really aren’t getting paid any more than you were in Year 1, but the anxiety of product realization is minimizing as you see it take shape.
A new anxiety, however, takes its place: market acceptance anxiety. You are trying to hold your ground on the idea, convince your employees what they are building is filling a need in the market even though there is no validation yet. You are transitioning from doer to decider. The company is no longer the democracy it was at first. You feel more exposed. Will people buy the product?
Year 3—Start to Find the Balance
In the third year of the company, expect to do about a year’s worth of work.
By now, let’s hope, you have found the product-market fit. People are buying the product, and it has problems but they are generally manageable. With some success, you can raise more money and pay yourself 75 percent of your street value.
Product-market acceptance anxiety is diminished. You have a few specialists who can unload you a bit. Employees are getting excited and everyone can explain the product in an elevator.
By Year 3, I find that thinking is almost as valuable as hands-on working. I try to start taking vacations again as a way to help the creative thinking process. By being in different physical locations, you can just think and solve problems or challenges more easily. Usually at this stage, you need to strategize your way to success.
A new anxiety enters the picture at this stage, however—making-the-numbers.
The Out Years—Life Is Good, Until …
In what I call the out years—Years 4 and beyond—is where the company establishes its more mature trajectory.
You have good people who understand their roles in the company with great clarity. You know what generally works and what doesn't. In the out years, there tends to be a bit of decompression and your life can be more normal. You are finally paying yourself a standard market salary and, if the company is performing, nice bonuses that help on the home front.
Life is good again, until someone comes along and makes an offer to buy the company. Eventually, you move on and it all starts again. You need to take a deep breath and find the courage to go back in that house.
Startups are front-loaded with respect to work versus life. It almost goes without saying that it's quite different from working for someone else—almost. Creating startup after startup in a serial manner presents a feast or famine situation with relation to compensation. Entrepreneurs need to be ready for it. On the flip side, it can be one of the most rewarding careers you can have.
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