Should you take a pay cut to join a startup?

Chris Tottman

One of our speakers was Chris Tottman. Chris is a Partner at Notion Capital, who helped us stage the event. Notion Capital is one of the top VC firms in the SaaS sector. However, like most of us, Chris is a salesperson by trade. He spent 9 years as Chief Commercial Officer at MessageLabs, a messaging security startup, growing their annual turnover to over £150 million. In 2008 MessageLabs was sold to Symantec for an amazing $700 million.
Chris took a 70% pay cut to join MessageLabs in 1999, but it certainly paid off for him. He can speak with pretty good authority on this topic! When you’re in the market for a new SaaS sales role, you’re bound to be confronted with jobs at brand new startups. You’ll probably be asked to take a pay cut to join them, with the possibility of extra riches further down the line. What should you do?

Get real

Firstly, you have to acknowledge the situation you’re in, that you’re taking a big gamble if you join a startup. Chris summed it up.
‘You contact some recruiters. You get 6 or 7 opportunities. You choose one. Statistically, it’ll be the wrong one.’
Only 1% of startups turn out to be ‘the home run’, as Chris called it. If you’re going to increase your chances of joining that 1%, you need to think like a VC.
Chris identified 3 ways in which you can do this.

1 – Find the home run

When a VC is looking for companies to invest in, they’ll see around 2500 companies, and invest in 25. It’s a numbers game. They’re looking for the 1 in 100, so the more companies they see, the better their chances are of finding them.
As a salesperson looking for a new role, this probably isn’t possible, but it’s possible to wait for the right opportunity rather than take the first one that comes along.
Look for the role which complements your skills. Look for the opportunity to sell a solution that will change the world.
Back to Chris, ‘Advanced technology. Propellerheads. A great idea, but with no market share. A VC today is looking for one of those, then they can get loads of market share.’
If you’re going to think like a VC, you need to find the 1 in a 100 opportunity. Give yourself the best shot by not settling too early.

2 – Look for the company that will exit

Not all startups want to sell themselves to a big player at the first opportunity, some are in it for the long haul, building something permanent. However, from a purely monetary standpoint (it’s OK, we’re all salespeople here!), it would be good to find the one which will be snapped up soon.
If you can join a company that already has VC backing, that’s a good sign. A VC will often have their eye on the exit door.
Next, if your prospective employer already has a great idea and an advanced technology platform, this will make them attractive prey for a slower-moving big fish.
As Chris put it, ‘You can do 2 or 3 of those over the course of a decade. Make £0.5 million to £1.5 million. Build some incredible relationships with some incredible technology people.’
These companies are rare, 1 in 100, but if you can see the signals, you’re more likely to find one.

3 – Find a startup opportunity to match your skills

If you have the right skills and can land a role where you have real influence, such as GM or CRO, suddenly you have the power to make your startup a success. It’s all on you.
If you can build the right relationships, provide a great service, and do business like the sales leader you are, you become the driver behind the company. You’re making the numbers. Not the Founder, not the tech guys, you.
Chris summed it up, ‘My favourite people are the people that come in and they transform the outlook and the performance of that company. Forget the investors and the founders. The power curve moves to the people that can make that transformation. To me, that’s a really interesting opportunity.’
If you back yourself, these opportunities are there for you, and the rewards that come with it.

Stick or twist?

It’s certainly a gamble to take a pay cut to join a startup, but if you can sustain the pay cut in the short term, you could make long-term gains. Give yourself the best chance by thinking like an investor, rather than someone who needs a job.
Over to you now. Have you ever taken a pay cut to join a startup? How did it work? What advice would you have for someone thinking of taking the plunge? Leave us a comment down below.
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About the Author

James Ski works for Linkedin and advises companies on recruitment, employer branding and how to achieve scalable, predictable sales growth.
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