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This article was published on the Innovate Arkansas website!

Startups: Workers Take a Chance on Benefits

By Mark Carter
9/6/2010 12:00:00 AM

Ryan Green understands he rolled a 7. His decision to eschew more money and better benefits to join a promising startup after graduating from college five years ago has paid off.

He has risen through the ranks of Fayetteville's Acumen Holdings at an accelerated pace, and this month will be granted minority-ownership shares in the growing e-commerce firm.

Most of the time, however, entrepreneurs and those who play the startup game roll craps.

The career path leading to big corporations is worn for a reason - the stability, benefits and guaranteed paychecks they offer. Still, the pang of regret over not having taken a chance is something many job seekers fear more than not making good money or enjoying good health benefits.

Entrepreneurs talk a lot about "end games" - the successful transition of their venture to capital success or acquisition - but really, for them it's about the quest. The stability and benefits offered by the corporate world are replaced by the high risk but sometimes high reward associated with working for a startup.

Such is the mindset necessary in the startup game, and for those who choose to play, "corporate" concepts like group health and paid time off are luxuries that sometimes remain part of the quest. That is, if they're even considered much at all.

"For me, that was never the primary objective," said Jeff Amerine, a serial Silicon Valley entrepreneur who currently teaches entrepreneurship classes in the Walton Business College at the University of Arkansas, works with the UA's Technology Licensing Office and serves as an adviser for Innovate Arkansas. "Surviving and excelling during the jungle warfare that startups require was the most fun."

Most startups can't afford to offer health plans or vacation time. What they can provide, however, are other benefits like ownership shares and the satisfaction of doing rewarding work. In his 18-year run with multiple ventures, Amerine said stock options were available to employees at all levels.

"These were the main financial incentives short of being a founder with an equity stake from the outset," he said.

Tradeoffs

But not every entrepreneur can afford to wait it out for things like stock options. One Little Rock techie had to return to the corporate world earlier this year when the startup he worked for underwent a structural hiccup. The only reason to return to "9-to-5," he acknowledged, was for the health coverage his family needed. He preferred that his name not be used for fear of upsetting his new bosses, because while he appreciates the stability his new gig affords, he misses his startup days - the flexibility, the creativity, the personal satisfaction.

Some folks are willing to leave behind corporate salaries and benefits. Pathagility co-founder and CEO Mark McCuin said he was drawn to the energy of starting something new after a long and successful corporate career with Fidelity Information Services and USAble Life. He won't be able to offer a benefits package to prospective employees, or even himself - at least not right away. "As we look to add to the team in the future, I believe we'll be able to sell the experience of being part of a startup," he said. "We'll be looking for people that have a founder's mentality. Individuals with this attribute don't place as high a priority on the specifics of the benefit package."

McCuin's software-as-a-service firm is considered one of central Arkansas' more promising and is presenting at the prestigious Arkansas Venture Forum on Sept. 15. He said his decision to leave USAble may not have been logical, but has been fulfilling.

Acumen Holdings CEO John James gave up not just a great corporate job to chase his dream; he gave up a medical practice. James helped launch Farmington Family Clinic in 2004 after completing a family practice residency. But soon afterwards, he answered the call of entrepreneurship. Acumen, a Fayetteville e-commerce company, began with one online shop, ScrubShopper.com, and has three more up and running: ToughWeld.com, TheBabyHabit.com and HotStuffChemicals.com.

The firm plans to open 10 more by the end of the year and go public in the next five years. James, founder Terry Turpin and Acumen's current management team have been involved with projects generating revenue of about $50 million.

So why slum it as a doctor?

None of Acumen's 30 full-time employees is over the age of 40, and thanks to the firm's recent growth, each of them now enjoys a full benefits package.

Acumen is, of course, the exception. James hired Green five years ago - Green was employee No. 3 - with limited benefits and a dream. He understands that startups have to sometimes get creative to overcome the pull of better money and more robust perks.

"First, we try to create upside for every employee," James said. "Getting in on the ground floor of a rapidly growing company can catapult a young, aggressive employee's career to levels they simply couldn't reach in a larger organization in a similar time period. When joining a startup, the upfront risk is high, but the long-term reward can be great if the company succeeds."

Green is a 27-year-old Walton Business College graduate who didn't think he fit the "corporate mold" when he graduated. It's likely he could have interned at and eventually been hired by one of northwest Arkansas' corporate giants after finishing school. But a family connection led him to James, whose pitch was true. And now Green is about to become a minority owner of the firm. While he didn't want to reveal just how much of a minority owner he'll be, Green said his salary at Acumen is now on par with what he could be making at Wal-Mart corporate after five years.

From the start, Green handled every detail of the firm's shipping, supply chain and customer service - an almost overwhelming amount of work for someone three weeks out of college. He knows he never could have accrued the same level of experience at a corporate office in anywhere near the same amount of time.

"The breadth of learning in a startup is amazing," Amerine said. "As a founder or early entrant, you have to learn every aspect of the business - cold. This provides an education in what really matters in a fashion no large company can match. To be both specialist and generalist gives the early-stage entrepreneur an education that compresses seven years of education or big-company time into one year."

And that's how it played out for Green. Which worked out well for him - he and his wife just welcomed their first child, a son. Children tend to bump things like higher salaries and family health coverage up the priority chain, even for young idealists.

"Ryan could have made more money at the Wal-Mart or J.B. Hunt logistics departments straight out of college, but I doubt he could have risen so rapidly," James said. "He took a calculated risk as one of our first four employees, but the risk paid off."

'It's Fun Coming to Work'

Aside from the potential payout, James believes it's just plain more fun to work at a startup. For many entering the job market these days, fun trumps cash.

"We try to create an exciting atmosphere that's just not possible at a larger company," he said. "Believe it or not, it's fun coming to work at Acumen Holdings. We have a pingpong table, a gong that rings multiple times during the day, and scooters are constantly whizzing around blind corners. ... It's an exciting, though somewhat dangerous, place to work."

The prospect of instant gratification is another lure. Employees - especially, as studies suggest, those in their 20s and 30s - want to feel like they're helping make the world a better place, and they want to feel that way from the get-go.

"The prospect of doing something that could really change the world and having a tangible, meaningful say in how the product or service was delivered was also a big motivator for me," Amerine said. "When I first began a startup in international telecommunications, I felt like we were democratizing access to the late 20th century's version of the railroad: telecommunications. We brought affordable communications to parts of the world that had been under the thumb of the government-controlled telecom monopolies for a hundred years.

"Fighting the good fight was big fun."

Whether it's the gratification, the prospect of success or simply the pingpong, Acumen Holdings has grown into an attractive option - now at 35 total employees and boasting an employee retention rate of 100 percent in its first five years.

Green weighed the risks involved, dipped his toe and jumped in. The water's fine, he said.

"You'll learn more than you ever could otherwise, and from my experience you'll reap the benefits in the end."

Of course, this comes from the guy who rolled a 7.