Why it's (not) cool to be the first startup employee

Being there from the very beginning, building "something big", playing a major role in shaping an idea and at the same time seizing the very big opportunity for your own career and financial independence... Sounds good, doesn't it?

60 percent of startups fail because of their team. The reason is not so much a lack of expertise as a lack of shared values and vision. While recruiting at established companies is all about filling vacancies, the first employees at the startup form the scaffolding and foundation for the culture of the later team. In the best case, they share the same motivation and sense of responsibility, work similarly hard as the founders themselves and - consciously or unconsciously - take a comparable risk should the idea go to the wall.

Same pressure, same appreciation? Why it's not cool

Whether founders or employees, early-stage challenges are the same for everyone: there's no structure, no boss, no direction. However, through relevant programs, events, or in the fundraising process, founders are exposed to experts, funders, and decision makers early on. In a quasi-coaching way, they not only build a resilient network in the ecosystem, but also gain access to capital, experience and the help to help themselves. In contrast, the first employees in the start-up are usually on their own. Then, as the company grows larger, the first hierarchies are put in place. This is when an unexpected distance to former colleagues often arises.

"Being a founder is hard, but the first employee has the most difficult role. You're not quite a founder, but you're not quite a team either. You often feel isolated as a leader and rarely get the proper appreciation," founder and angel investor Anh-Tho Chuong, former first employee of French neobank Qonto, once summed it up. "Founders constantly have the opportunity to exchange ideas, have their own lobby and regularly receive feedback and recognition from the outside. First employees, on the other hand, often experience the same pressure but not the same compensation... and not just financially," she says.

Employee shares & the dream of big money

The motivations for becoming the first employee of a startup are as varied as those for founding one. Some find the idea and the market environment exciting, want to get out of the corporate mill, believe in the positive impact or decide quite consciously to join in the early phase, similar to investors with a clear strategy: If the idea takes off, my ESOPs or VSOPs will make up for the risk from the beginning and the low salary x-fold, so the hope. Start-up-experienced "key hires" then demand a concrete percentage share in the company as early as the contract negotiation stage. The prerequisite for this is a completed financing round and valid information on the valuation.

However, the dream of big money thanks to early employee shares is a risky bet, especially for VSOPs: Even though more start-up capital is currently available than ever before, 90 percent of all start-ups still fail within the first three years. For VC-financed companies, the survival rate is somewhat better at 25 percent, but even among these, only very few make it to the IPO stage and only about 2.5 percent achieve the dreamed-of unicorn status. Early-stage VCs therefore take into account the risk that a large proportion of their investments will fail. This should also be taken into account by primarily financially motivated employees, especially since they can only invest their "sweat equity" in one company.

Time as a limiting factor: Family and friends as a starting team

In contrast to the strategic planners, however, a large number did not consciously decide on a start-up career at all, but landed in the role by chance. This is because time, rather than money, is often the limiting factor when founding a company: the more disruptive the business model and the lower the market entry barrier, the faster you have competitors on your back. Depending on how "hot" the topic is, it is more a matter of days than months to get the right start-up team together. This means: no time for job profiles - mostly it's not clear what/who will be needed in the following weeks anyway - no long candidate search and there's no money for the headhunter (yet).

Much more efficient is recruiting from the personal network, mostly ex-colleagues or family and friends. Here, recruitment is based on trust, often there is a lack of clear framework conditions - sometimes even the entire contract. Rarely does the previous experience match the tasks at hand. The big advantage: a close-knit, loyal team, one hundred percent intrinsically motivated, close to the topic and which ticks similarly to the founders themselves. Fellow campaigners instead of employees.

Many hats, steep learning curve - Why it's cool

No matter where they're from, first-time employees do jobs and take responsibility for tasks they've never done before. This can be beneficial because there's less worry about what could go wrong. On the other hand, you often have no idea how to achieve your - usually self-imposed - goals. This leaves a lot of room for development, personal initiative and "affected people" inevitably find their own creative solutions. The job is never clearly defined, changes daily and you constantly question yourself. Sometimes you're Head of SEO, sometimes Head of HR, sometimes you're setting up Ikea tables for your new colleagues, a personal decision... Either you put on a hat, or this hat continues to lie on the ground. Many only find their "real" vocation here and independently develop new growth areas for which there is no course of study (yet). It's hectic, chaotic, demanding and...extremely cool.

About Bettina Engert: Bettina Engert built up the mobility provider's communications together with the FlixBus founders and joined Munich-based VC Acton Capital in 2019. Her heartfelt topics are the promotion of young female founders and more diversity in the startup scene.