Entrepreneurs are working 50 to 80 hour weeks across the country to get their own businesses off the ground and almost a third of them fear that they will be unable to pay the mortgage or the rent. A BGF Ventures survey of 500 entrepreneurs across the country, conducted by Streetbees, the global data and insights platform, found that a long-hours culture is deep-seated among startups and that the stress of creating a business from scratch was taking its toll on entrepreneurs’ personal lives and financial security.
More than a quarter of startup founders reported that they were working over 60 hours a week to get their business up and running, while more than half were working at least 50 hours a week, according to the research.
The survey of 500 tech startups across the country found that four-fifths of those questioned for the survey worked at least 35 hours a week, with 26 per cent of those asked were working between 50 and 59 hours a week and 26 per cent working more than 60 hours a week.
The number of hours worked increases with tenure, with those whose businesses are less than a year old, less likely to be working more than 35 hours per week (69 per cent) compared with those 1-2 years’ in (84 per cent) and 3-4 years’ in (92 per cent).
More than half of those asked also said that they never switch off from the business, indicating that entrepreneurs are prime candidates for health and relationship problems, because of the way that they work. Again, the ability to switch off becomes more difficult with time, with 50 per cent not able to switch off in their first year, rising to 65 per cent 3-4 years in.
Despite the findings, 76 per cent of founders say that they would definitely start a business again and an overwhelming 95 per cent think that running a startup is more rewarding than working for an employer.
But the impact on personal life, health and financial status of founding a tech startup is not to be underestimated, the BGF Ventures survey found. 41 per cent of people questioned say they feel stressed everyday, while 33 per cent said they were stressed at least a couple of times a week.
Starting their own business had had a negative impact on the finances of 40 per cent of those asked, while 34 per cent said it had had a negative impact on their social life and 31 per cent said it was negatively affecting relationships and family life. Not surprisingly, finances take the greatest hit early on, with those in the business for less than two years saying that this area of their lives has been negatively affected the most.
Some 44 per cent of people asked have either had to take out a loan, borrow from friends and family or use a credit card to make ends meet. 31 per cent of respondents said that they worried about paying their mortgage and/ or rent each month.
The biggest issues that concern entrepreneurs are:
Managing cashflow (50 per cent)
Raising funds for the business (49 per cent)
Their own management skills (29 per cent)
Hiring skilled staff (25 per cent)
Rising costs – eg salaries, property costs (21 per cent)
Harry Briggs, partner at BGF Ventures, said: “Starting your own business is a huge commitment and this survey shows that it can really take a toll on people’s lives, affecting their family life, their financial status and their health, to some extent.
“Entrepreneurs need to be resilient and be able to learn from their experiences, but they also need wiser heads to help guide them if they are to make a success of their business idea. Investors can be as much a part of the problem as the solution and at BGF Ventures we work closely with our founders to make sure that the needs of the business are balanced with their own needs as managers and leaders.”
Half of startup company founders said that they felt optimistic about being in the UK in the next few years and 57 per cent of entrepreneurs said that they would not consider relocating from the UK, according to the survey.
Among companies that were considering a possible relocation, more said they would move to a city outside Europe and only 13 per cent said that they would consider moving to a mainland European city suggesting that Brexit is not the prime motivator for those thinking about leaving the UK.
Non-EU cities feature strongly among the top ten cities that entrepreneurs are considering moving to, which are:
The tech industry was heavily in favour of a remain vote in 2016, in part because the sector depends heavily on a flow of educated, skilled tech workers from mainland Europe. In London, 31 per cent of tech workers are born overseas, according to industry figures.
However, the survey shows that just ten months on from the referendum, tech company founders are more concerned about business issues such as managing cash flow and raising funding to take the business to the next stage than issues such as staffing or access to the single market, raised by Brexit.
Of those companies that do say they are considering relocating, reasons other than Britain’s imminent departure from the EU appear to be just as significant a motivating factor since non-EU cities feature strongly among the top ten cities that entrepreneurs are considering moving to.
The main reason entrepreneurs give for moving is to give their business better opportunities to grow. However, more than a third of entrepreneurs (39 per cent) say that better work life/ balance is also prompting consideration of a move.
A third of those asked also mention cheaper premises (33 per cent) and cheaper homes for themselves and/or employees (31 per cent), reflecting concerns that the very high price of property in London in particular could curtail the attraction of the capital for startups.
The survey shows that depending where you are in the country, entrepreneurs are facing different challenges.
When it comes to hiring, a third of London-based entrepreneurs have worries about hiring skilled staff. In the South West of England, the problem of recruiting is cited by 37 per cent of entrepreneurs.
However, in the East of England, the Midlands, the North West, Northern Ireland and the South East hiring is considered a problem by much fewer people. In Scotland just five per cent of entrepreneurs say they have worries about hiring.
Resilience and mental health
Entrepreneurs can often feel that they have no one to turn to for advice or simply just to talk things through. However there are big regional differences in how people respond to questions on their mental health. When asked whether starting a business has had a negative impact on their mental health, more than a third of people in London responded that it had.
In other parts of the country, respondents are much less likely to say that starting a business has had a negative impact on their mental health.
Has starting your own business had a NEGATIVE impact on any of the following areas of your life?
London – 34 per cent say mental health
Figures for other regions are:
Midlands – 17 per cent
North East – 22 per cent
North West – 6 per cent
Northern Ireland – 33 per cent
Scotland – 11 per cent
South East – 26 per cent
South West – 29 per cent
Wales – 15 per cent
Many of the entrepreneurs questioned also report that they have no one to turn to for advice, which not only takes its toll on company founders, but also means that expertise and advice in the tech ecosystem is not being effectively shared.
Entrepreneurs in London are amongst the least isolated. Only 11 per cent say they have no one to turn to for advice. However, beyond London and the South East, a much greater proportion of entrepreneurs say they have no one to get advice from, suggesting that any ecosystem in the regions is more sporadic and inevitably less supportive to early stage companies and entrepreneurs.
Proportion of people from various regions that responded that they had no one to turn to:
East of England – 7 per cent
Midlands – 27 per cent
North East – 11 per cent
North West – 22 per cent
Northern Ireland – 33 per cent
Scotland – 32 per cent
South East – 7 per cent
South West – 26 per cent
Wales – 23 per cent
Case study 1 – work/life balance
Simon Hay, CEO Firefly Learning
Simon Hay has just returned to work after two weeks off on paternity leave. That may not be so unusual for a 31 year old, but Hay is a co-founder and CEO of startup company Firefly Learning, an online learning platform that 400 schools use to manage homework.
Hay says: “I’m pretty lucky because I met my wife Claire, when we were at university, before the business was launched. Also, she’s extremely patient and tolerant.”
“Things are a bit easier now, as the business has grown, because we have reached the stage where there are processes and systems in place. Things will work without us having an eye on something every minute of the day.”
“But in the very early days I was working 7am to 7pm at an investment bank and then coming home and trying to build Firefly. That was massively unsustainable.”
“The long hours did cause tension. Claire thought it was unhealthy and unsustainable. We really were not getting any quality time together. I was always either exhausted, distracted or both.”
Hay says that he is not certain that he has made many new friends since university. Time-consuming hobbies, like rowing and the RAF Reserves, have also had to go.
“In this life, it’s very difficult to meet new people. I feel guilty that there are friends that I have drifted apart from. Even good friends I only see intermittently. Your best intentions get bulldozed by the reality of running a business.”
“Most people who work long hours make friends at work but you have to be careful when you are also the manager and employer.”
Hay is grateful that he hasn’t had to skip a major family event – a wedding or funeral for instance – for work. “It would be easy to fall into a martyr pattern. There is this myth of the startup- founder who works 100 hours a week and has a sleeping bag under the desk, but I am not sure that that leads to good decisions or being productive.”
Hay has been working on Firefly Learning, which now employs 55 people, since he was at school and intends to build a long-term business, not a flash in the pan. “I’ve consciously tried to find some balance. I need to find a way of working that is sustainable.”
Case study 2 – financial implications
Tugce Bulut, CEO Streetbees
Before Tugce Bulut started her global research platform Streetbees she was a senior strategy consultant so enjoyed a stable income and the lifestyle to match.
However, with no income for nine months while launching the business she had to change her lifestyle drastically. At first she shared a flat with friends, to keep her costs down but eventually she wanted to have her own space again.
“When I tried to rent a flat as an entrepreneur, it was very difficult. I was told that since I had no obvious source of income I had to pay six months rent up front, as well as the deposit, which was a massive cash outlay at the time.”
When Bulut applied for a credit card with Barclays and with American Express she was also turned down, since she did not have enough credit history and now had no record of income. Instead, she has learned to make do with her debit card, even for things like buying flights for business meetings.
“When I had no income I used up all my savings and I borrowed from close friends. I will be able to pay it back later because the business is very successful and I do expect to be able to replace my savings, by many multiples, but not immediately.”
“As an entrepreneur you play a long term game. 7 years, 10 years, before you can enjoy the results. The question is how do you manage the cash flow in the meantime while you have restricted income and no credit access. I was able to downsize without feeling stressed but many friends in the ecosystem who need to care for a whole family do stress about personal cash flow issues.”
She says that some entrepreneur friends have had to step out of the property market. “Lots of entrepreneurs have a very high earnings potential for the future but they are going through a long-term journey during which they cannot secure a mortgage. They feel that they have to put that part of their life on hold.”