I was having a drink with a family friend the other day, and he asked me how becoming an entrepreneur compares to the job I had before (my prior roles have broadly been P&L-running roles in large/mid-size companies). My initial response was that a) at one level, there were a lot of similarities as my prior experiences had also required a high degree of accountability and ownership but b) while running anything and managing people always comes with a high degree of pressure, the stress levels in a startup environment are even higher.

I have been thinking about this more subsequently and here’s what I really think — Startups are infinitely more stressful to run then larger companies.

I’ve been trying to identify exactly why that is, given my experience in going through the process of building a startup not too long ago.

I think it has to do with the fact that there are a very large number of items that can be business-ending. Things just matter more for a startup. Its that simple.

Its often one slipup and you are done. And I don’t just mean a slipup related to cash and cashflow, which I think is an obvious one. Its more broadbased. Margins of error are very thin, and so EVERYTHING matters more.

To wit:

• If you are Microsoft and you lose your largest client unexpectedly. That’s bad. But you’ll get over it. Quickly. If you are startup, its probably curtains for you. You probably won’t get through it (though you might depending on things like whether you are really well capitalized)
• If you are Reliance and a few of your largest clients pay you 3 months late, your AR looks bad and Dalal Street will not be happy with you. If you are a startup, you probably won’t get through it
• If the tax department sticks you with a big tax bill (valid or not) and you are Vodafone, you will get through it. If you are a startup, you probably won’t be able to pay the bill. Even if you can pay the bill (and herein lies the rub) you probably don’t have the time/bandwidth to even go through the process of contesting a tax bill (your 1 person Finance team will spend his entire time dealing with audit queries and thus won’t have the time to do regular work like invoicing/financial reporting/etc) . When you are small, time is probably an even bigger constraint than money. That’s the part one doesn’t normally realize going into it. One assumes that the playing field is reasonably level if the rules are the same for all competitors. But the reality is that the impact of shocks on the system is significantly greater when you are small.

For those who are visually minded, here is my simplistic depiction of the difference between startup stress vs large company stress: