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Low pay, long hours and no security – does working in a startup equal slavery? Written by Charmaine Li on 19. September 2012

galley slaves

This week Joel Kaczmarek examines whether free beer and ping pong is enough to justify the punishing working conditions of startup culture…
Startups are much-glorified. They have a reputation for being agile, young, fresh, creative and having awesome office setups with foosball tables, free beer and DJ decks. In the past two years, Berlin internet founders have become the epitome of hip. But working in a startup is also often code for long working hours, low pay and instable positions. Do startups bear a resemblance to slave galleys that are working towards a meagre profit?
galley slaves

A few things to begin with…

It makes sense to start with a quick note that the startup working conditions I will be talking about are completely my own opinion. I can’t support them with numbers, have no evidence, secret information or videos. However, I have come across many of the experiences that I have included here in my day-to-day life as a journalist. I am writing about the extreme scenarios, the truth lies – as always – somewhere in the middle. I have included some of my contacts’ thoughts as I found them worthy of discussion.
Those who are critical of the working conditions in startups have to first question how it is in their own startup. I believe that Gruenderszene and associated online publishing house Vertical Media represent a good middle ground. We are there for our staff, help them when they have problems and make sure they are happy at work. Our pay cannot compare to the large, established media conglomerates, but we try to make up for this as well as we can by having other more attractive elements and the wellbeing of our staff as our number one priority.
What it’s like in the office of our investor Team Europe (I’m already anticipating comments about this) I can’t say, but it seems that they also value a fair working environment for their team. I’m sure it also looks different in countless other startups that are not directly associated with us, but what I am concerned with is discussing some stereotypical conditions.

The reality of startups: work yourselves to death

tiredIn the past week I have published multiple articles in which I have been critical about my actually much-loved startup scene. With “Time to walk the walk – Why the Berlin startup scene is still in a bubble of hype”, I discussed the self-adulation of many startups. Another issue that irritates me is startup working conditions. Startups often have working norms that are usually only seen in agencies, those who leave at 7pm are asked whether they had a lunch break. Again and again I see startups gloating about the fact that they work beyond healthy boundaries. 60-hour weeks tend to be less of the exception and more of the rule in startups.

The Groupon burnout

In response to my research about Groupon, people kept telling me about the exceptionally bad conditions in the stringent Samwer businesses, where many staff members leave with the diagnosis of a burnout.
There’s no doubt that the extreme working conditions are not only a Samwerian phenomenon and the recent outbreak of burnouts in the startup scene is not rare. Recently, I was the moderator of a panel in which DailyDeal founder Ferry Heilemann also held a short speech. One of his arguments was that when two businesses have more or less the same intellectual properties then it is only the amount of work that will determine the success or failure of the businesses.
With some pride, he told the crowd how the first 50 workers at DailyDeal worked on Saturdays and Sundays, along with the founders. Founder Sebastian Semiatkowski described similarly harsh working hours at our Heureka conference.
I like Ferry, and his business is just an example of many, but considering these realities I sometimes lose my faith in the system. Why do people do these things? Lots of founders tell me that their independence motivates them so much that they don’t consider it work. It’s definitely not healthy, but it is understandable. But what is with the many “normal” staff members?
Their contracts are often limited, their shares do not yet exist and, that aside, the startup community is everything but secure. What motivates them to work so hard? I often have the impression that the potential for self-fulfilment in a startup is extremely attractive. But is there also a sense of despair among many of the staff? Does the fear of being unemployed keep them in bad jobs and stop them from finding something new? That aside, it now seems to be almost cool to have had a burnout, at least that is an example of how hard you work.

Startup salaries are generally very low


The working conditions in startups are usually very demanding, but at the same time it’s not uncommon for staff to be paid shockingly low salaries. Startup salaries are often lower than those for jobs that don’t require a degree or that have a far more reasonable working schedule. Fulltime staff are often employed for €1,600 net per month, while the increasing number of graduates that are hired as interns and trainees can expect to receive €400 or €1,000 respectively.
Considering the current situation in Germany in regards to retirees, to avoid falling into poverty when retiring I was told that people need to earn at least €2,500 net per month for a period of 33 years. How many staff from startups, the places of hire-and-fire, work for such a long time with this kind of salary? The staff in a startup usually work with short-term contracts or work as trainees or interns, which ensures the wages are kept low in the long term for the startups.
Along with the constant lack of money in startups and the associated clichés of stinginess and improvisation, one of the arguments in favour of low wages is the fact that Berlin is one of the cheapest cities in Europe to live in. But aside from the fact that it makes no sense not to invest the saved money in wages, there is also the problem that Berlin has become more expensive. Considering this, it doesn’t seem like the wages have been similarly adjusted. Looks like Berlin, with all its universities, technical colleges and immigrants, makes it all too easy to find cheap staff members.

Monetary imbalances are not rare in startups

monopoly manAnd what’s it like for higher positions? From what I’ve heard, CEOs and key managers in startups are often paid significantly better than the typical staff members. According to information from university circles, Rocket Internet pays their business newbies up to €60,000 starting salary, plus a small share holding – and that’s for people who’ve graduated with a bachelor’s degree!
And many established management workers receive six-figure salaries in startups. There’s no doubt that Rocket and other startups would lose their staff to McKinsey & Co. without these high wages.
Programmers have it better in Berlin. After all, the next competing startup is around the corner could desperately use your own staff member. There is therefore a noticeable imbalance and many young people become disillusioned with the exploitation. In some business models, you get the impression that they rely on exploiting their staff, especially in the areas of logistics, customer service or warehouse.

But startups do have a lot to offer…

In every discussion, it becomes clear that startups have also got some strong benefits when it comes to working conditions, benefits that shouldn’t be ignored. The business culture in startups is, through the intensive team work, often a very positive experience and those who prove themselves can gain responsibility very quickly, rising in the hierarchy of the organisation. Staff not only learn a great deal in a short period of time, but also improve their resume.
Despite this, I have concerns that this promise, coupled with the argument that startups are short of money, is often being misused to enslave workers for a small amount of money. Because to really rise in the ranks does not happen very often. Maybe in the end it’s a philosophical question: those who desire freedom, a great deal of responsibility and promotion prospects are likely to be perfect in a startup – as long as they keep their distance from the startups with really bad names.

Conclusion: Can startups be any different?

ben hur
OK, I’ll admit I’ve stood on my soapbox for too long. The many jobs and people in the startup scene speak for themselves, but I still can’t handle hearing the phrase “we are a startup, we have to make sure we always cut costs” etc. And considering the conditions that I have outlined here the question of the longevity of startups that are working in this way is a logical one. There is no doubt that many people think that the intenet scene is purely a place filled with copycat ideas.
I’m probably being unfair to many startups, and here comes the really unpleasant part: for German startups, there is basically no other way for them to succeed. Despite seed funding, many startups are under financed in the long term and the VC architecture of the German internet scene means growth is the central goal of startups. That growth alone doesn’t necessarily lead to organisational growth, healthy cost structures and fair working conditions is clear. While this makes the situation no better, it does lend it a bit of context.
Despite this there are many startup clichés that get on my nerves, which is why I wanted to discuss them. Could it be that I’ve come home from my vacation and am seeing things more critically than normal or do you agree with my opinion? Can startups do it any differently or do they have to rely on trading off experience with manpower? Let us know in our comments section below…
Translated by Michelle Kuepper

For related posts, check out:

Time to walk the walk – why the Berlin startup scene is still in a bubble of hype
22 things that founders can learn from Oliver Samwer
31 awesome SEO tools to super-charge your business