Always New Mistakes

April 3, 2008

Why forcing an entrepreneur into a big company is a mistake

Filed under: Business — Tags: , , , , , , — Alex Barrera @ 3:16 pm

Lately I’ve been hearing many negative comments about creating startups and being an entrepreneur. Most of them can be reduced to: “You should work for a big, well know company and after several years you can go and start you own“. In my experience this idea is pretty widespread. I’ve heard it from my father, from my friends, from friends of friends, etc. The problem with it is that, ALL the persons that express this idea have a common characteristic: they are conservative.

The idea that working in a big company you have better odds of creating a successful startup is bullshit. There are no statistics for that. Even more, people like Paul Graham from Y Combinator recently wrote an essay precisely about this same issue:

We’ve now funded so many different types of founders that we have enough data to see patterns, and there seems to be no benefit from working for a big company. The people who’ve worked for a few years do seem better than the ones straight out of college, but only because they’re that much older.

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The three most common benefits I keep hearing about working in a big company are the following:

  • At a big company you’ll have the chance to get high profile contacts that might aid you when you go and create your own startup.

Contacts are of great help, everyone knows that by now, nevertheless, the idea that you’ll haveexecutive-talent.jpg better and more contacts working in a big company has no ground. First of all, to contact truly influential persons is, in general, way beyond a normal worker. You’ll need several years to reach a status within a company to get access to the management team or high profile executives. I’m pretty sure Apple employees can’t phone Steve Jobs or mail him at any time with total freedom. Even if this isn’t true (there are always exceptions), the psychological perception for many top executives is that they are better and you are worse, that they belong to the executive class and you don’t. This means that even if you can reach them, you won’t be seen as an equal and the true advantage of recommendations et al. will be diminished. Of course, there are always special cases, but we probably wouldn’t be talking about a BIG company then.

Secondly, contacts within a same company are pretty much endogamic. This means that, if you work as a beta tester, most of your friends and coworkers will be related to the beta testing environment. Reaching interesting and influential persons in other fields is much more difficult.

Finally, the rate at which you contact new people is determined by external factors like thewaiting4raise.jpg number of people in your department or how frequently you engage with other departments or clients. If we throw some numbers we get a glimpse of the big difference. I usually go to a couple of entrepreneur meetings per month. In average I meet 2 persons of interest for my startup at each meeting. That makes 4 good contacts each month. In the software industry (my field), projects usually take between 2 to 6 months on average (even more if it’s a huge project in a big company). During that period and if you are lucky you’ll meet an average of 3 persons (which might not even be good contacts) at the client. That means that for a 6 month project you’ll only meet 3 new persons and probably only 1 or even none will be of interest to you. Check that against 15-20 interesting persons in a 6 month period by yourself (and no, you can’t go to many entrepreneur meetings if you work at a big company). Although this estimates will also go down if you keep meeting with the same persons, it’s clear which rate is better. Please, as usual, takes these numbers with caution, they are very gross estimates and there are always exceptions.

  • Working in a big company you’ll get the change to work or see really big projects that employ huge resources. This vision will help you when working on your startup.

Nobody disagrees that you acquire very interesting experiences while working for a big company. Specially if you work with large teams. The problem is that when building a startup you won’t be managing huge teams or resources, you won’t (normally) need real-time critical systems either. You won’t even deal with a lot of clients at first. So, even though it’s a plus if you have the experience, it’s not critical, as a startup is NOT a big company.

  • Working in a big company will give you a good resume and it will be easier for you to find investors.

Good resumes are always good things. Specially if umbrella.jpgyou approach investors, your team’s resumes must be great. The problem is that many persons don’t differentiate between the team and the founders. An investor isn’t looking for a top notch programmer founder, they are looking for people with experience setting up companies, growing companies, selling companies. They are looking for people with a track record of not wasting money in useless things. They are looking for a true leader that is able to get the best out of his team. If you are also a top notch programmer then be it so. Working at a big company won’t get you more money from investors. VCs that invest on people only because they are ex-googlers or ex-yahoos are wrong and they’ll pay for it. That it’s harder to find investment if it’s your first time and you haven’t been working at a known company, true. Impossible to do it, false. Actually, most of the investments I see are to founders with not experience in big companies, just take a look at Apple, Microsoft, Google, etc.

So, in conclusion, from my point of view, there isn’t any competitive advantage in working on a big company. Actually for me it’s the opposite. Two years of inferno, with a tight leash around your creativity and without the freedom you’ve got in a startup. Worst of all is that the environment affects you in a negative way and it takes a while to get used to breath again. Finally, the years after graduation are the best to play the high risk game of creating a startup as people haven’t got so many financial debts (a house, a family, etc.). Wasting those precious years in a restrictive environment instead of changing the world is wrong.

Choose what YOU want and follow your gut. If you don’t feel comfortable at a company, take the time to think about what you really want. And most of all, don’t listen to those that try to project their own insecurity on to you, as that will only block your true feelings.

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As usual, everyone is invited to drop a comment. I would love to read what other entrepreneurs or big company guys think about this. It would be interesting to have a VC or an angel to comment on this issue as well.

Images: leakyfaucet.wordpress.com, legendsofhorror.org, lifedynamix.com, synergy.ralf.netmindz.net, interbgr.com

16 Comments »

  1. Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

    Comment by Allen Taylor — April 3, 2008 @ 3:34 pm

  2. You are blowing my mind here. I’ve always been in the “get some true experience before you go entrepreneur” group, but now you are really showing some facts that make my reset my mind and re-evaluate the whole thing… Execelent post!

    Comment by Ángel Medinilla — April 3, 2008 @ 4:16 pm

  3. As a strategic consultant to companies big and small, I agree with you, but with reservations.
    Yes, working for a big company does not guarantee you’ll be a good entrepreneur; but the opposite is also true — you may get nowhere as an entrepreneur either.

    A larger company setting can teach you about business processes that are needed in a startup. But only if you’re willing to observe, question, and learn.
    The entrepreneurial route can do the same, also if you’re willing to observe, question, fail and learn.

    I think it’s about what you learn, not where you learn it.

    Comment by wanless — April 3, 2008 @ 11:18 pm

  4. I started my own web company and ran it for five years before taking an in-house contract at a major bank. I learned loads from being exposed to so many talented people, and now, four years later, I travel ten months a year and work from home wherever I am, because now I have the contacts and skills that I lacked before. In my case, working for big companies has been a huge help, and it’s something I still regularly go back to to keep learning from new people.

    Comment by richlowenberg — April 3, 2008 @ 11:32 pm

  5. I agree with you, it’s all about what you learn. I never said that going on your own would make you a successful entrepreneur. Actually, chances (big ones) are that you fail. What I wanted to shed some light onto, is the fact that you don’t need to work for a big company to do it. Working on a big company does gives you a lot of experiences, but it’s not (except for rare exceptions) a competitive advantage.

    Learning how business processes work on a large company do help, the problem is that most of the times you wont be able to implement them as-is in a tiny startup. You’ll have to adapt them or even ignore them until you grow a little more at which point you can always hire someone that does have the experience.

    As someone once said: “I don’t know everything, but I have the phone number of the one that does”.

    Comment by Alex Barrera — April 3, 2008 @ 11:33 pm

  6. Richlowenberg the question is, did you learned loads because you had had a startup and knew the problems you had had or you think you would have learned the same if you had taken the job straight out of collage?

    The point is, do you feel you would have been more successful had the story been the other way round?

    Comment by Alex Barrera — April 3, 2008 @ 11:37 pm

  7. Hmm I’m hearing that a lot too. You make some very good points. Thanks for the post it made me think.🙂

    Comment by ameshin — April 4, 2008 @ 1:44 am

  8. Love this post! You echo my thoughts entirely and I’m so glad that someone else agrees!

    Comment by Jacque — April 4, 2008 @ 9:59 am

  9. I liked the article, when I started my business I allways thought about this.

    I agree with you with the fact that working in a corp does not guarantee success in a startup. IN order ro succeed in a startup my recipe is: Lots of Energy, Great ideas and good luck (you know, being at the right place and time).

    But working in a corp gives you experience in the fields you work. If working as programmer or analyst (techie guy), gives experience on common systems problems with corporation systems, way to organize a good technology team. If working in sales, I think could bring good sales experience, contacts, etc…

    All that experience can later on be great help to succeed not only being the founder of your idea-business, but being the CEO, having experience in sales, tech, etc…

    This is the way I see these things. I have a startup and also worked in companies in the last years. Now I want to move to a commercial job (more sales) than the Java thing.

    When I was in University in Kansas, my professor during his life worked some years in different departments in Airplane bulding: structures, design, propulsion, etc… He ended up being an expert in everything and taught us to be generalysts instead of spetialists. I believe in this philosophy.

    What I belive is certain is: If you have a good idea, just do it. Doing instead of thinking. And the sooner the better.

    Also, working in a corp gives you information on how not to build your company. Sometimes it is hard to know how you want to do things, but it is easier to know how you don´t want things done.

    Comment by Jorge Alegre — April 4, 2008 @ 10:56 am

  10. Hi! Nice article.

    Here in the Philippines the mindset is very much the opposite of what you’re asserting in this entry. This should give fresh encouragement to aspiring entrepreneurs. I’ll be graduating from college in less than a year, and a startup is on my list of to-do things.🙂

    Comment by tropicaljeepney — April 4, 2008 @ 12:46 pm

  11. tropicaljeepney you are very lucky indeed! And I wish you very good luck!😀

    More people in Europe should encourage collage students to start their own businesses.

    Thanks for the comment!

    Comment by Alex Barrera — April 4, 2008 @ 1:53 pm

  12. Jorge,
    Thanks for giving you insights!😀

    Jorge, I never said that working in a big company doesn’t gives you experience. It does, and pretty valuable in many fields.

    The problem is when people try to make you think that it’s the ONLY experience that is valuable. I would even dare to say that from a technical perspective, you even learn more in a startup (as you have to do everything yourself and you play multiple roles) than in a big company.

    Again, most corporate processes, albeit very useful, can’t be deployed as-is in a startup because it would only slow the process down (among other things), so even though the experience is useful, it’s not a MUST have at first.

    I agree with you though in that you need a good CEO and most founders don’t have the experience nor the qualities to be good CEOs. That’s the point where normally you bring someone from the outside (normally someone related to your VC or business angel) to take the rol.

    Many people have told me the same about how not to build a company hehe It’s true that for most people it’s an experience of how certain business processes don’t work at all and are better leaving them alone. Humans always learn from their errors so it’s a good learning. Personally I see more than enough problems from the outside and I’m not willing to sacrifice 2 or 3 years of my creativity just to learn how deep the iceberg goes😉

    Comment by Alex Barrera — April 4, 2008 @ 2:04 pm

  13. Hi! It’s me tropicaljeepney in comment #10. Actually I’m new around here at WordPress. I have you in my Sage RSS reader. You have a very informative blog. Keep it up!🙂

    Comment by Kit — April 5, 2008 @ 5:18 am

  14. Alex,

    We basicly agree. No need for a corp work to be successful in a startup, but gives you valuable background.

    Neither having a MBA, by the way. Many people also told me that, without an MBA I did not have the background to be successfull, and it also totally wrong. A couple months I read an article about an MBA professor (dont remember where I gues an spanish business school) that agreed to this. MBAs are for management people working in companies, but not for entrepeneurs, they need a totally different background: beleive in own’s work, great ideas, etc…

    Comment by Jorge Alegre — April 5, 2008 @ 3:27 pm

  15. hi, Alex,
    I agree with you totally!!
    Through the web, we, current and future entrepreneurs should form alliance to build new competitiveness across national borders!

    Comment by Paul — June 2, 2008 @ 2:58 am

  16. When working for a big company “to gain experience”, you must keep an eye on your creativity… You could risk letting it “die”, or just “fall asleep”. I’ve seen it with several people already.

    Comment by Jonás — August 25, 2008 @ 5:03 pm


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