Later City news
  • Mary Che

Do Startup Employees Earn More in the Long Run?

Since the average startup founder who makes it to Series A earns more than a large company employee, many believe that early-stage startup employees also earn more. Evaluating the attractiveness of startup employment requires an understanding of both what startups pay and the implications of these jobs for earnings trajectories.

Later City News: A research done by Olav Sorenson and his team members from University of California, Aarhus University of Denmark, Yale University and Cornell University shows that employees hired by startups earn roughly 17% less over the next 10 years than those hired by large, established firms. About half of this earnings differential stems from sorting—from the fact that startup employees have less human capital.

Long-term earnings also vary depending on when individuals are hired. Although the earliest employees of startups suffer an earnings penalty, those hired by already-successful startups earn a small premium.

This research also added: two factors appear to account for the earnings penalties for the early employees: Startups fail at high rates, creating costly spells of unemployment for their (former) employees. Job-mobility patterns also diverge: After being employed by a small startup, individuals rarely return to the large employers that pay more.

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However Ben West believes that a senior developer at Google will probably make about as much money as a senior developer at a startup. The difference is that startups enable you to move through the ranks much more rapidly: a skillful developer will move from “entry-level” to “senior” more rapidly at (some) startups than Google (80,000 hours).

West added as with everything else about startups, there is no free lunch and you have to do your due diligence before joining a startup – many founders are running as fast as they can just to keep their company afloat, and have no time for helping their employees.

It seems Sara White do agree with West. She believes that taking a job with a startup can be a huge risk, especially considering the startup fail rate is three out of every four, according to the Wall Street Journal. Even 25 to 30 percent of venture backed business fail, according to the National Venture Capital Association. The truth is – behind the free lunches and scooters – successful startups take a lot of hard work and passion from not only the founder, but the employees.

Sara added: ultimately, deciding whether or not to work for a startup will depend on your experience and personal goals. For one person, startup culture might be a great fit, while another might thrive better at a big company. The key is to do your researc