Want to join a martech startup in 2018? Here’s what you need to know first

The Promotion Fix is a​n ​exclusive biweekly column for The Drum from Samuel Scott, a global keynote marketing speaker who is a former journalist, newspaper editor, and director of marketing and communications in the high-tech industry. Follow him @samueljscott.

Photo by Tim Gouw on Unsplash

Almost 70% of executives will spend more on martech platforms in 2018, according to a recent survey by Conductor. Marketing technologist Scott Brinker’s 2017 martech lumascape grew 40% last year to nearly 4,900 companies.

So, it might seem like a good time to leave your agency or brand for some exciting marketing technology company. But think before you jump ship. Martech startups are like other high-tech startups – and the industry can be crazier than the portrayal in the TV show Silicon Valley.

Here is what you need to know. For the record, the column below comes from a mix of my experiences, those of friends throughout the world, and the material I cite. In addition, I am familiar with US and Israeli law and labour practices, but certain details might be different in other countries.

1. You will be there only to make a lot of money for the founders, investors, and maybe the earliest employees.

Facebook changed its mission statement in June 2017 to state that the company wants to ‘give people the power to build community and bring the world closer together’. Google's mission is ‘to organise the world's information and make it universally accessible and useful’.

Tech companies have always proclaimed lofty principles. But such goals could be accomplished by not-for-profit organisations. The goal of every high-tech startup is to make money through an eventual sale or IPO. Nothing else matters.

2. If you are not one of the earliest employees, you will probably not get rich even if the startup beats the odds and has a successful exit.

Startups must minimise their spending, so they offer low salaries with the option to purchase future shares at a cheap price (hence, ‘stock options’). The earlier that employees join, the more shares they receive. But there will be catches. The investors receive ‘preferred’ shares while everyone else – usually even the founders – gets ‘common’ stock.

Here is what this can mean (but remember, every company is different):

  • Share dilution. Preferred shares can have dilution protection, meaning that they are not diluted in future funding rounds. If an investor owns 10% of the company at the beginning, they will always own 10%. Through any Series A, B, C, and onwards, the percentages owned by common shareholders will decrease.
  • Purchasing shares. Employees have the option to purchase shares at an agreed-upon price based on a timetable. If a staffer gets, say, 400,000 shares over four years of work and the right to buy them for $1 each, then they will accrue 25,000 each quarter during that time. If they are fired or leave after a year and a half – six quarters – they will have the option to purchase 150,000 shares for $150,000.

The problem is that the ex-employee must decide whether to come up with the $150,000 while knowing nothing about the company’s financials. A random number of shares is useless information without understanding the percentage of the company owned or the per-share valuation – and private companies rarely tell employees this information. The decision is one gigantic, blind gamble.

In addition, while most startups distribute the same numbers of shares after every quarter of employment, others such as Amazon backload them so that employees will receive few or no shares unless they work for the entire period of time. (Which makes me wonder how many tech employees are ‘laid off’ just before they earn a batch of shares.)

  • Right to sell. Employees are often forbidden from selling their shares and must merely cross their fingers and wait for an exit at some unknown point in the future. Uber employees have gone into debt to keep their shares. Skype forcibly bought back shares at cheap prices that had already been purchased by former staffers.
  • First in, first out. If the company shuts down, preferred shareholders can be reimbursed by the sale of any assets. Everyone else gets nothing.

Investors say they deserve preferred stock because they take on the risk. But VCs sit on boards and write cheques with other people’s money. From the founders on down, the workers are the ones who give their most precious assets – time from their lives as well as their blood, sweat, toil and tears.

The song remains the same: the rich get richer, but most of the workers do not.

For more information on startup equity, I recommend reading An Ethical Guide to Options Grants by Ryan M. Harrison on Medium. Front has also built a Compensation and Equity Calculator.

3. If you are not young, you will face discrimination – and you will work your ass off and endure unimaginable amounts of stress regardless of your age.

Even with lower salaries and stock options that might never be gained or might be worthless, you will be expected to put in long hours at the office and be on call at almost every hour of every day.

I suspect that it is one reason that HubSpot chief executive Brian Halligan told the New York Times that ‘grey hair and experience are really overrated… we’re trying to build a culture specifically to attract and retain Gen Yers’.

At least in America, twentysomethings tolerate low salaries and sweatshop conditions because they have student loan debt in a lacklustre economy as well as the energy to work long hours and no need to care for children or aging parents. It is surprising that HubSpot, the Uber of the martech world, has never faced age discrimination lawsuits because Halligan seemingly implied above that his company violates US labour law.

Over the years, startup executives and recruiters have told me that they want young people. One report found that dozens of companies such as Amazon, Verizon, UPS, and Facebook itself use the social network’s targeting features to block older workers from seeing employment ads. In Israel, it is illegal to ask a person’s age in job interviews, but one startup company gets around the law by asking applicants for their favorite bands. Drake? Good. The Pixies? Bad.

Still, those who do work for startups are promised that they will get rich but will see instead that the life is absurd. Some startup workers are starving themselves (but calling it ‘biohacking’ instead). Others are taking LSD or using blood transfusions and meal-replacement drinks. Still more drink a daily drug cocktail.

It is little wonder that University of California professor Dr Michael Freeman found that 30% of entrepreneurs have depression, 29% have ADHD, and 27% have anxiety. (In contrast, just 7% of the general US population suffers from depression.) To see the dark side of the startup world, just peruse the Startups Anonymous forum that was founded by entrepreneur Dana Severson and developer Nick Ciske.

People are practically killing themselves so that rich venture capitalists can get even richer. But they will claim that they are ‘hustling’ instead.

"It’s the logical outcome of trying to compress a lifetime’s worth of work into the abbreviated timeline of a venture fund," David Heinemeier Hanson, the creator of the programming language Ruby on Rails and co-founder of communication software Basecamp, wrote last year.

As Dan Lyons, a former technology editor at Newsweek and the author of Disrupted: My Misadventure in the Start-Up Bubble, noted in the New York Times, "hustle is just a euphemism for extreme workaholism".

And you thought life at marketing agencies could be bad.

4. You will sit in an open office simply because it is cheaper even though everyone hates the design and knows that it is horrible.

The most eye-rolling claim in the tech world is that open offices encourage collaboration – as though no one ever worked together until they were all crammed into rows in single, large rooms like sweatshop factories. The cubicles that the cult 1999 comedy Office Space lampooned were meant to improve upon the open offices of the past. The tech world has since returned to them – giving their workers a permanent 'case of the Mondays'.

A 2013 study found that workers in open offices are frustrated by distractions and have lower work performance. Almost half hated the lack of sound and visual privacy. Other surveys found that people are more miserable and sick as well as less friendly and productive. Oxford Economics reported that 53% are less productive when they hear background noise.

A study of 10,000 workers revealed that "95% said working privately was important to them... and 31% had to leave the office to get work completed". Workers lose more than an hour per day due to distractions. An Australian study found that open offices cause "high levels of stress, conflict, high blood pressure, and a high staff turnover". Employees take 62% more sick leave.

If open offices are so wonderful, then why do most, if not all, startup co-founders and chief executives have private offices? If ‘collaboration’ is the reason for open offices, then why does everyone in open offices sit in rows with headphones all day and stare silently at their computer screens?

Of course, it is the money. Branding consultant Geoffrey James calculated on LinkedIn that open offices can save a 100-person startup $172,000 per year. But when he adjusted for a 15% ‘productivity tax’ on each employee, James found the open offices led to a net loss of $578,000 per year.

Startups and investors think only about the short-term savings and not the long-term cost. Or as designer Amar Singh bluntly wrote on Medium: "Cool, you’re going to spend a fuck ton of money on talented engineers and designers and then put them in an environment where they’re constantly distracted. Airtight plan."

From open offices to free food in lieu of real salaries to the scam of ‘unlimited vacation,’ almost all ‘workplace innovations’ in the startup world are simply methods to save as much cash as possible.

5. You will be bored from all the direct response of one type or another.

If you are a creative, you will find that most of the marketing is boring. Startups live and die based on a set of precise metrics, so anything that does not move the needle in an immediate, measurable way is not prioritised. (Even though not everything that is important can be quantified.)

But as Rouser chief executive JP Hanson wrote on LinkedIn, relying too much on short-term tactics leads to lower overall results because, in a metaphor that I use, companies focus only on picking existing fruit but forget to water the tree to grow future fruit. He cites an IPA UK study by Les Binet and Peter Fields showing that marketers should spend roughly 60% on brand and 40% on activation.

Startups want something cheap and quick. This is why so-called ‘content marketing’ is popular (even though the results are dubious). It is cost-effective to hire a writer to pump out blog posts and spread them throughout the internet while maximising conversion rates for the resulting traffic. But it is often ineffective because it is only one step above email spam and signals little value to the target audience. It is direct response by another name.

High-tech marketers think so much about targeting that they forget about signaling.

As I stated in a keynote marketing address at D-Summit in Tel Aviv last month, most ‘content’ yields little results. What is effective is that which serves an existing promotional mix tactic such as publicity, the communication of new product features, or SEO. Writing something just to write and spread something does nothing because most startups will never be high-quality media companies.

6. You might have missed the boat because Big Tech may falter this year.

Within the ad tech world, observers are saying that the brightest minds are moving to the duopoly of Google and Facebook. PebblePost chief executive Lewis Gersh expects to see platform consolidation and ad fraud lawsuits.

But the problems extend to the entire tech world as a whole. In a few months, the EU’s GDPR regulation will take effect and threaten any company that collects, analyses, or uses the personal data of anyone in Europe. In the US, people have fallen out of love with the tech world, which seems not to have the public’s best interests at heart and has fallen victim to massive data leaks.

Martech may have reached its peak. But if that is the case, the high-tech startup world will still be full of people in sweatshops. What about friends, family, and life? No one on his deathbed is going to say, ‘You know, I wish my Series B has been $40m instead of $30m’.

If you decide to join a martech startup in 2018, I wish you the best. Just think twice and ask the right questions of any potential employers. And if they want you to wear at least 15 pieces of flair, run for your life.

The Promotion Fix is an exclusive biweekly column for The Drum contributed by global marketing and technology keynote speaker Samuel Scott, a former journalist and director of marketing in the high-tech industry. Follow him on Twitter and Facebook. Scott is based out of Tel Aviv, Israel.

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