Startup Funding Impact On Employees

We see news every day. A small company gets a big cheque. Someone puts ten crore or fifty crore into a startup. The founder posts a happy photo. Everyone claps. But we do not ask one simple question. What happens to the normal employee who sits on a desk and writes emails or makes calls or fixes code?

This article is for that person. The person who joins a startup because they believe. The person who works late. The person who leaves their old safe job for something new. We will look at startup funding impact on employees in plain words. No finance talk. No management jargon. Just what you feel and see when your company gets money or does not get money.

Let us start.

First Thing – Money Does Not Mean Your Salary Jumps Tomorrow

Most people think – company got funding, now I will get more money. This is wrong most times.

When a startup gets investment, that money is not for giving everyone a bonus. That money has a job. The job is written on paper. The investor says – use this money to grow fast, get more customers, build more product, hire more people. So the founder takes that money and spends on ads, on new computers, on office rent, on lawyers, on marketing team. Your salary might stay same for six months or one year. But there is a good side. If company grows well after funding, then after some time your salary can go up. Also some companies give you a thing called stock options. We will talk about that later.

The simple truth is – funding first helps the company, not directly your pocket. You have to wait. And waiting is hard.

Read Also: Funding Options For Early Stage Startups In Tier 2 Cities India

Two Kinds of Funding Days – Good One and Bad One

Not all funding is happy. Let me explain.

The Good Funding Day

This is when company gets more money than they asked. Example – they asked for two crore but got five crore. Investors fight to give money. News writes good things about the startup. On this day, employees feel safe. They think – now my job is safe for two years. The pressure on founder reduces. Founder does not wake up every night thinking about running out of money. When this happens, the company can hire more people. So old employees get less work. Teams get bigger. Work life becomes little easier. Also company can buy better tools. No more using free version of software. No more sharing one laptop between two people.

The Bad Funding Day

This is when company gets money but less than they wanted. Or company takes money at a low price. Meaning the founder had to give more ownership of company to investors. News does not write this. But inside office, people know. The founder looks tired. The investor asks for many reports. The company has to fire some people to show good numbers.

This is real. Many startups take funding but also have to remove ten or twenty percent of their employees on the same day. Because investor says – your cost is too high. Cut cost first.

So funding is not always a party. Sometimes funding comes with a firing list.

Stock Options – The Thing No One Explains Properly

Many employees join startup because founder says – we will give you shares. When company value goes up, your shares become money. You can buy a house. This sounds good. But in real life, most employees do not get rich from shares. Let me tell you why. When you get stock options, you do not get actual shares now. You get a promise. That promise says – you can buy shares later at a cheap price.

But there are rules. You have to stay in company for four years to get full benefit. If you leave after two years, you lose half your shares. Also the cheap price is decided before. If company does not grow, your shares stay cheap. You cannot sell them till company gets bought by big company or lists on stock market. That takes many years. Sometimes ten years. And even when company gets bought, common employees are last in line. First the big investors take their money. Then founders. Then what is left comes to employees. Often nothing much left. So do not join a startup only because of shares. Join because you like the work. Treat shares as a maybe bonus. Not a sure thing.

Your Team Changes After Funding – Good and Bad

When new money comes, new people also come. Senior people from big companies join your startup. They have big titles. They talk different. They ask for many reports.

• For old employees, this feels strange. Suddenly your small family type office becomes little formal. The free food still there. But the feeling changes.
• Some old employees get promoted because company is growing. Some old employees get ignored because founder wants new people to lead.
• This creates inside fight. Not loud fight. But quiet fight. Old people think – I was here since day one. New people think – I have more experience.
• Founder has to manage this. But many founders are bad at managing people. They are good at getting money. So this fight stays.
• Also new people bring new rules. Attendance tracking. Performance reviews. Weekly reports. The freedom of startup starts to go away.
• So funding brings growth but also brings small small pains.

Fear of Losing Job Does Not Go Away – It Changes Shape

• You think after funding, fear of firing goes away. But it does not.
• Before funding, you feared company will run out of money and everyone will be fired.
• After funding, you fear that investor will push for fast growth and fire people who are not performing.
• Both are fears. Just different flavour.
• When company has money, investor asks for results every three months. If results do not come, investor says – change the team. Fire the slow ones. Bring fast ones.
• So suddenly you have to work faster. More targets. More pressure. Manager calls on Sunday also. If you say no, they remember.
• Funding does not bring peace. Funding brings a new kind of pressure.

The Good Parts – Let Us Be Fair

We talked about hard things. But some good things also happen. Let us list them.

Better Health Insurance

Before funding, company had cheap insurance. After funding, they buy good policy. Your parents can also be added sometimes. This is real help.

Free Food and Travel

Small thing but matters. Company pays for lunch. Sometimes dinner. Team trips to hill station once a year. These feel good.

You Learn Faster

When company grows fast, you have to do many things. A marketing person has to learn basic design. A developer has to learn talking to customers. This makes your skill set bigger. Even if you leave startup later, you have more value.

Your Resume Looks Strong

Working in a funded startup helps your next job. Other companies see that name and think – this person worked in a company that big investors trusted. So your next salary can be higher.

Sometimes You Get Bonus

Few companies give cash bonus after a big funding round. Not common. But sometimes founder is generous. Especially if company got more money than needed.

So good parts exist. But they are not guaranteed. Every company is different.

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What Changes in Your Day to Day Work?

Let us be very practical. Here is how your Monday morning changes after funding.

Before funding – you sit with founder. He says do this do that. No meeting room. You work from home two days.

After funding – you have a manager. That manager has a manager. That manager reports to founder. You have stand up meeting every morning at 9:30. You have to write what you did yesterday. You cannot say I did nothing. Also the work becomes more specialised. Before funding, you did everything. After funding, you only do one thing. Example – you only write emails. Someone else makes calls. Someone else makes reports. Some people like this. Some people miss the old way. Also company starts tracking your time. Software on laptop sees when you are active. This feels like school teacher watching. Not good feeling.

The Silent Truth – Some People Get Rich, Most Do Not

We see news of one employee who got five crore when startup was sold. That news spreads fast. Every employee thinks – next time it will be me.

But numbers do not lie. For every one employee who got rich, nine thousand got nothing. Their shares became zero because company closed down. Or company sold for very less money. Or their shares got washed away in many funding rounds. When company takes more and more funding, your share of company becomes smaller and smaller. This is called dilution. No one tells you this when you join. Example – you joined when company value was ten crore. You got shares worth ten lakh. After three funding rounds, company value is hundred crore. Your shares should be worth one crore. But because new shares were created for new investors, your part becomes smaller. So you get fifty lakh instead of one crore. Still good money. But less than you expected. And many times company never reaches hundred crore. It stays at forty crore. Then your shares worth twenty lakh. And you worked four years for that. So be careful. Do not join a startup thinking you will become crorepati. Join because you like the risk and the learning.

What Should You Ask Before Joining a Funded Startup

If you are reading this and thinking of joining a startup that has taken funding, ask these questions.

• Ask – what is the vesting schedule. Means how many years I have to stay to get my shares. If they say four years, that is normal. If they say five years, think again.
• Ask – what happens if company fires me before four years. Do I keep my shares. Many companies have rule that you lose shares if you are fired. This is bad for you.
• Ask – how much money is left in bank right now. If founder says less than one year of expenses, be careful. Next funding may not come.
• Ask – has any employee ever got money from selling shares. If founder says no one yet, that is honest. If founder says yes, ask who and how much.
• Ask – what is the work pressure after funding. Talk to one normal employee privately. Not the manager. The person who sits in corner. That person will tell truth.

What If Your Company Does Not Get Next Funding?

This is important. Many startups get first funding easy. Second funding is hard. If your company fails to get next round, then hard days come. Salary gets late. Founders give excuses. Bank says no more loan. Office rent becomes problem. In this time, employees have two choices. Stay and hope. Or leave and find safe job. Staying is risky. Sometimes company turns around and becomes big. Sometimes company closes after six months and you have no salary and no job at same time. Leaving early is smart for your pocket. But if you leave, you lose your pending shares. And you feel guilty like you left a sinking ship. There is no perfect answer. But if company misses two salary dates in a row, start looking for new job quietly. Do not wait till zero money.

Indian Startup Scene – Special Things to Know

In India, startup funding has its own flavour. Here people join startup because they think big exit will come fast. But exits are rare in India. Very few startups list on stock market. Very few get bought by big company. So many funded Indian startups stay in middle. They have money. They grow little. But employees never get big money from shares. Also in India, job market is tough. If you leave a funded startup, finding next job is easy if you have skills. But finding same salary is not easy. Because many startups pay high salary using investor money. Normal companies pay less. So some people get stuck. They cannot leave funded startup because normal company will pay them less. But they are not happy in startup also.

This is real problem. Think about this before you join.

Final Words

Startup funding impact on employees is not just good or bad. It is both. You get some safety. You also get more pressure. You get a chance to learn fast. You also get a chance to lose your shares. The best way is to treat your job like a job. Not like a lottery ticket. Do good work. Learn new things. Save money from your salary. Do not depend on shares to make your future.

If shares become money one day, that is a bonus. If not, you still have your skill and your savings. Do not get blinded by funding news. Do not get scared by funding winter also. Just do your work honestly. Keep your resume ready. Keep learning. And always remember – the company is not your family. The founder is not your big brother. This is a business deal. You give time and skill. They give salary and some shares. That is all.