Venture-backed Founders are Overworked, Underpaid and Stressed
Entrepreneur's New Year’s Guide
In today’s competitive world, a company aiming for high-performance growth cannot function without a high-performance founder. But such an approach has its downsides. A recent survey by the Australian chapter of consultancy firm KPMG found that constant stress and high-risk of failure is making start-up founders, backed by venture capital, work an average of 64 hours a week, affecting their physical and mental health. What’s worse: majority earn less than their previous salary.
The average work-week hours in the Silicon Valley is 80, while Down Under, it is a standard 40.
“... Stress and poor mental health can derail success. It’s critical that founders ...don’t burn out before their business has a chance to succeed,” says Amanda Price, head of High Growth Ventures at KPMG Australia, in the report, “Startup Founders Research Report: Fitness, Fulfilment and Foresight”.
James Cameron, Partner at Airtree VC, recognizes that founder mental health is a “massive issue”, which isn’t discussed much. “This means we’re failing a lot of people who might be struggling. Because of the cultural stigma that still gets attached, many founders feel that talking openly about their own struggles will somehow mean they’re seen as less competent. This, of course, is complete bullshit. Suffering from bouts of depression or other mental health conditions doesn’t mean you’re any less than capable in your role as a founder.”
Work, work, work
The pressure to build a successful brand is so high that of the 70 founders surveyed between 2-29 April by KPMG, 40 percent said they worked every day for over three months. Almost half of them bring devices to bed to work at night and use them first thing in the morning, says the report.
None of the respondents says their job is not stressful, and 43 per cent felt unhappy with the fact that their lifestyle took a toll on their fitness level. Still, 71 per cent see this as an acceptable trade-off for heading their own business, rating their satisfaction with their work-life balance eight out of 10.
In the report, Imogen Baxter, community manager of Australian venture capital firm Square Peg Capital, says, “Founders tend to be purpose driven, determined to get complex things done in tight time constraints. Longer days are often required and not everyone sees them negatively. However, every person needs rest and recovery. ‘Length of day’ or ‘hours worked’ is a weird badge of honour that doesn’t need to exist in our ecosystem. Sustained high performance is far more important to optimise for.”
Despite earning less (seven in 10 founders earned less than in their previous job; only 11 per cent earned more), many founders understand it is vital for the benefit of their company. Price says founders are aware that building a startup is a "high-risk, high-reward activity", and “involves significant personal investment in terms of money, time and opportunity cost.” “As venture-backed startups progress, the question of founder salary becomes more questioned. Investors understand that founders need to be paid accordingly, given their hard work and long hours, however, it also needs to balance the capital needs of the startup,” she adds.
Perseverance and hard work are among the key drivers for any successful business but, as the report says, founders should be mindful of a statistic presented by Noam Wasserman, author of The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup and professor of clinical entrepreneurship at the University of Southern California, US: “65 percent of startups that fail do so due to ineffective management from the founders, not product or marketing problems.”