#startupturnover #normalturnoverrate #founderchallenges #entrepreneurshipstruggles
Understanding Startup Turnover Rates
Being part of the startup world can be an exhilarating experience, but it also comes with its fair share of challenges. One common issue that many startups face is high turnover rates among employees, especially in the early stages of growth. As a founder or a member of a startup team, it can be disheartening to see talented individuals come and go, leaving you wondering if this is just a normal part of the startup journey or a sign of deeper problems.
The Reality of Startup Turnover
For context, I worked with two different startups last year:
- Startup A: Over the span of a year, they went through 5 engineers, funded by their success from their first successful exit.
- Startup B: Went through 7 engineers and 5 employees on the business side (operations, sales, product managers, etc.), totaling 12 employees. Both are currently seeking Series A funding, with B being more VC-backed than A.
So, is this turnover rate just normal or a sign of bad founders?
Navigating the Challenges
High turnover rates in startups are not uncommon and can be attributed to various factors, such as:
- Lack of clear communication and direction from founders
- Inadequate onboarding processes for new hires
- Insufficient resources or support for employees
Solutions for Better Retention
Here are some practical solutions for founders and startup teams to reduce turnover rates and build a more stable and successful company:
- Invest in onboarding: Create a comprehensive onboarding process that helps new hires integrate into the team and understand their roles and responsibilities.
- Provide growth opportunities: Offer career development opportunities, training programs, and mentorship to support employee growth and retention.
- Improve communication: Foster open and transparent communication within the team, ensuring that everyone feels heard and valued.
- Cultivate a positive culture: Create a positive work environment where employees feel motivated, engaged, and supported.
By addressing these challenges and implementing practical solutions, startups can improve their retention rates and build a stronger foundation for growth and success.
Remember, high turnover rates may be common in the startup world, but with the right strategies and mindset, founders can overcome these challenges and create a thriving and resilient company.
Closing Thoughts
Startup turnover rates can be a source of concern for founders and team members alike, but it’s essential to approach these challenges with a proactive and solutions-oriented mindset. By acknowledging the factors contributing to turnover and implementing effective retention strategies, startups can create a more stable and successful work environment for everyone involved.
So, next time you see employees coming and going in your startup, remember that it’s not just a sign of bad founders – it’s an opportunity to learn, grow, and build a stronger company together.
5 out of how many? 5 out of 6 is terrible. 5 out of 100 is a great success.
Something smells amiss. Firing all 5 sounds like the founder doesn’t have a clue what sort of skill sets he needs or maybe has emotional intelligence issues. That’s my outsider impression. Ditto with seven and 5 fired.
All lower 20% is ok for Seed – Series A
That’s in one year?
Something is very wrong. Did the people actually get paid…? And they weren’t contractors…?
If they haven’t done an A round, what exactly does “way more VC backed” mean…?
That is very wrong. We’re about 45 people, it’s been about 4 years and we havent lost anyone yet. We did let go a few people who weren’t a fit thought.
I have helped a few startup projects building the engineering team from scratch. I observed how CEOs build and shape the team. I work at a pre-IPO company as engineering managers.
Each team (in startup or late stage company) has different hiring strategy to get through the bootstrapping phase. Some via big check from early investment, some were scrappy to get helps with lower compensated resources. Some stay aligned with the company visions, some joined to make quick cash.
Either in startup or late stage company, they are called different process but carries similar goal. Managers are different level and settings are all humans. Some managers are AH, some are nice, some are with good balance.
Some are bad bosses, some are decent bosses, some are good bosses. They may show very similar patterns without dial into the details. In people management, there are no two identical teams, no two identical persons.
I’m just saying, I don’t think there are or should be a “normal turnover rate” defined. It’d be case by case, by looking into the company and team settings, team cultures, each individuals, the stages of the company, founders-VC relationships, and way more.
“Normal” is subjective. But generally speaking, if you have a startup with a good trajectory and management that aren’t shit, the turnover rate should be fairly low. Most people will have options and can at least tolerate the environment until they start to vest and/or want to wait out a liquidity event.
High turnover often indicates deeper issues.
Depends on why these people are leaving, and who’s left. If employees are being exited because they aren’t performing, that’s a good thing. If great employees are leaving on their own volition and the company isn’t replacing them, or unable to hire similarly talented replacements, then that’s a big red flag.
It’s pretty common to see 50%+ annual turnover in high growth startups. People scale linearly, companies (can) scale exponentially, so people often get outgrown quickly. And hiring mistakes are more common when growing quickly too, and good founders fire quickly when they make mistakes (the best founders get more hires right in the first place, but 50% turnover is still common).
Also depends on the function. I’ve seen near 100% turnover in sales orgs at seed/A startups that turned into unicorns.
VC funding isn’t an indicator of founder quality or viability of the business. However, a founder with a successful exit is significantly more likely to succeed in subsequent ventures, especially compared to first time founders or founders who haven’t had an exit.
If the company is growing quickly, and there are several talented people still left, and the company is still able to hire top talent, then it’s likely more “normal churn” than “terrible founders”.
startup founder here, in reading your followup descriptions of the startups involved, they aren’t the usual archetype of a startup and hard for you and others here to evaluate. there are lots of contractors in your description, equity and risk isn’t shared by those doing the work.
founders who pay their team need results they can see asap, whether it be product or sales from the business team side. startups led by founders who have successfully built something from zero and had a verifiable exit are the ones to bet on especially if they are using their own money.
You didn’t say how big the companies were in total size, unless someone is responding with example sizes there really is no way to answer this question.
Is it half the company turning over or 1%?
Quality matters too – if the good people are staying that’s all I would really care about. If the good people are leaving, figure out why and you have your answer. But there is not standard regardless.