this is a more articulate version of what i've been saying.
do a startup if it will make you happy. Some people are only truly happy when they're challenged as thoroughly as only running your own business can be. But don't just assume it's for you based on how cool it seems.
If you can answer the question "What you would like to do with your life?", the macro decisions, then decisions such as doing a startup or not, where to buy a house, etc. seem pale in comparison.
While I was reading this, I kept making a mental translation of the word "startup" into "grad school" (especially the bit about being 30 and single, due to the seven previous years of 80-hour weeks). It held together just as well.
I'm no defender of the blind optimism that goes along with the startup universe, but there are certainly less lucrative ways to waste the best years of your life.
Mine is that it's spectacularly easy to fail at grad school...tons of my classmates left college figuring they'd get a Ph.D and are now dropping out after (or sometimes just before) getting their masters.
It depends on what you mean by "fail". If it means "drop out before getting a PhD", then you are surely right. But that's not how most people who enter PhD programs in sciences define success. They want a tenure track position afterwards (possibly with a few years of posdoc positions in between), and eventually they want to become tenured professors. And I suspect--I can't back it with any numbers though--the failure rate for them is of the same order of magnitude as for startups.
Definitely a lot of truth in this article, but Matt barely acknowledges the advantages to doing startups. I also think that he's way too pessimistic about things like maintaining friendships and finding things to do after cashing out -- both of those are probably a lot easier than he describes.
I have to say, though, and this is totally unrelated to the article itself, that this is one of those pieces where I've thought--hey, I'd like to get in touch with this guy--and yet there's no way to do it directly. I may be the only one who still prefers to communicate specifically with one person directly from time to time, rather than via public comments, blog posts, walls, and the like, but I do. And there's no e-mail address or general contact information I could find on the site, no WHOIS information, no information in the Y Combinator profile on this board, etc. There's probably information somewhere on Facebook, but I can't access Facebook, and even if I could, I'm probably not in the right network to see it.
Good one. Being the pessimist I am, I enjoy thinking about the flip side of things.
Really good programmers also need to consider other opportunity costs. Linus and the world are better off because he has pretty much stuck with Linux through thick and thin, and never got heavily involved in running a startup. Tcl started going downhill when Ousterhout did Scriptics (although he did make lots of money). Some people are better off focusing 100% on tech, in other words.
Startups tend to be fairly binary, with you making either a very large amount off of them or nothing at all.
Recently re-reading pg's How To Make Wealth [1] made me wonder if this will soon become an outdated view of startups. The factors leading to the current and predicted rise in the number of startups (free software, cheap hardware, less personnel) should also lead to a large broading of the spectrum of failure <-> success.
The startup world has until recently been determined by its capital-intensive, high-risk nature - big money chasing big rewards. But the new dynamics may leave room for a lot of diversity in between, and consequently a lot more working on some kind of startup. 37 signals can be seen as exemplary of the other extreme to a go-big-or-die startup: founders and employees accept less risk, less pressure and more life for a higher chance of reward, though a lower expected reward. I think there will be a lot of middle ground: a lot of investors willing to accept less risk for lower return, and a whole lot more people will choose lower rewards for a more comfortable life, and better chance of success.
[1] [http://www.paulgraham.com/wealth.html] "The all-or-nothing aspect of startups was not something we wanted. Viaweb's hackers were all extremely risk-averse. If there had been some way just to work super hard and get paid for it, without having a lottery mixed in, we would have been delighted. We would have much preferred a 100% chance of $1 million to a 20% chance of $10 million, even though theoretically the second is worth twice as much. Unfortunately, there is not currently any space in the business world where you can get the first deal."
I think this is already happening somewhat thanks to Google's penchant for making a lot of small acquisitions, and other companies following their lead.
The problem still largely remains though. A venture backed company still has a lot more money than a bootstrapped one, and that still translates into a big advantage, even though database software is now free rather than $100k.
I suspect there is a massive, unexploited gap in the current venture model (with YC and Google leading the way in exploiting it), which will soon start to rapidly close as the opportunities become clear, and a new set of investment skills is developed.
The current economic turmoil may even help speed the process up somewhat, as investors seek to minimize risk.
I'm a little confused why there's so much focus specifically on startups, where "startup" means a liquidity event focused venture. I thought the goal was just to make a lot of money, not do it in a specific way.
I think the highest EV is from founding a private going concern and pocketing profits over the course of ten years. Statistically the majority of millionaires are entrepreneurial sole proprietorships or partnerships. We're talking about people who bought or built a few car washes and ran a tight ship, or built a reputable private accounting practice.
I don't know this for a fact, but I bet a lot more people have got wealthy (by my standards) from software contracting and ISV work than from startups.
That was my impression, too--the article seemed to focus more on the VC path to success, which is like making it big as a professional athlete or entertainer.
For contractors and ISVs, I suppose you have to find a profitable niche.
"Startups tend to be fairly binary, with you making either a very large amount off of them or nothing at all."
Like a lot of thing in life: The most popular movie/book sells 10 times more than the #2.
MS Word vs WordPerfect.
Harrison Ford vs Mark Hamill...
People like stars.
It takes really long to make 2 millions as a regular employee, though. Even freelancing, making much more than my employed friends, it would probably take me >= 15 years to make one million EUR (bloody taxes get in the way). And that estimate is without a family. One million really is not a lot of money, if I consider having to live off savings for maybe 30 years or more, in a future time by which money will probably have been devaluated a lot, too (though now I can't imagine life without work, maybe eventually due to aging one has no other choice?).
OK, so maybe betting on a startup to succeed is a dumb plan, some hedging might be in order (occasional consulting gigs to ensure a minimum income - any other ideas?).
Btw., I wonder what is the average savings rate for employees? I am 35 now, and I recently realised that I am probably way behind on my savings compared to my peers... I think maybe to save about 10000€ per year is realistic?
Still, in my first year of work after getting my degree, according to some statistics I was already in the top 10% of earners of my country. Nevertheless I felt that without inheriting some money from parents (which I won't), I would never have been able to even afford to buy a flat. That is kind of sick, I think. Maybe life as an employee is not so easy, after all. A friend of mine is also an I worker in the top 10% range, and he said he couldn't support his family without help from his parents.
The price of houses in the UK for one has gotten ridiculous in the last couple of years - I was lucky and got a place a few years back, but if I hadn't, I wouldn't be able to afford it now - I think its becoming more and more common. The only way around it is to:
* buy a place with one of your mates and share it
* Meet a girlfriend/wife that earns a similar amount to yourself
The important thing seems to be to get onto the property ladder as quickly as possible.
As for savings, save as much as you can afford - I probably save 10 - 15% of my salary at the moment (no family to worry about) and it leaves me with enough beer money too!
The UK situation is extreme, particularly in London. My girlfriend and I got jobs straight out of university, and we could forget buying a place, and even renting was using up so much of our income that it was just a treadmill.
We left, basically. We've moved to Vienna (Austria) and living relatively cheaply in my late grandmother's place. I'm trying to get a startup off the ground, she's slowly figuring out what she wants to do.
And yeah, we're super-lucky to even have that opportunity.
I honestly don't know how London is staying as populous as it is. As far as I can see you're completely stuck with graduate salaries. (except in banking)
Yea, London is a total joke, as is Dublin - I have a few friends who rent in Dublin, and they live in a shoe box for a lot of rent (don't really know anyone in London)!
I am in Belfast, where the property prices only ballooned about 2 years ago, so I got lucky. Only a year or so after I got my house, friends were buying similar sized places that are less central for twice what I paid, not good!
by changing the order of the words from the title, and creating a new phrase to remind you that you should do a startup because you may regret of not doing so.
this also shows that the startup world is so fluid as much a title can be. everything has a different intepretation by different people.
a startup is a personal experience and the reasons for someone who choses not to pursue a startup should not be the excuse or affect anyone's choice to make their attempt.
Good article, Matt. Thanks. I like the way you think.
I think that part of the confusion of people when they get into the startup scene, is that they loose sight of what a successful exit does for you: solves the money problem. That's it. Nothing else. Nada.
A successful exit will not buy you love. It will not make you instantly happy. An exit will not provide you with meaning and purpose in life. It will not make you immortal. It will not fix all the other problems in your life. It solves one and only one problem: the money problem.
If you talk to people in the valley who were sudden millionaires in the first dot.com gold rush, I think that you'll find that sudden wealth brings its own set of problems which you touched on in your article. I actually remember reading a number of articles about the struggles of the nouveau-rich after their dot com went public.
These things are worth keeping in mind when you're thinking about that startup, or in dealing with relationships while you're in a startup. Be careful burning bridges with family and friends when you're working 100 hours a week with your startup. They might not be there when you find your exit.
A finely written article, and he almost had me going there for a while. The most frustrating thing for me, though, is how he implies that a default life of "ballgames," "ballet recitals," and working for someone else is superior by its very nature. Not everyone wants to not live up to their full potential and trade freedom for some veneer of security. Ultimately, this kind of thing is just more inspiring because it makes me want to prove him wrong (no offense to the author, of course).
None taken, you just didn't understand it. I'm not saying it is superior, just that a lot of people would find it to be, and those people may not belong in startups.
Ah, I do see your point. Basically, you were saying people should make sure they really know what they want out of life before blowing their best years, yeah?
Right, I'd be interested to see 10 years down the line how many successes fit into each category (and in between). Still, if you can remain in the black with just 30% ending in an HR acquisition that's pretty strong. Seems like you should easily accomplish profitablity.
@Matt, You might enjoy Status Anxiety by Alain de Botton. A lot of the criticisms you attribute to startups could just as well be directed toward the entire system that ties social status to money and success. If startups are more blameworthy than other things, I suspect it's mostly because they move the locus of responsibility for success/failure closer to oneself, thus having a multiplier effect on social status.
Staying employed and slowly building your wealth is not a riskless proposition. Past 20 years have been very nice to the tech sector and to equities in general. What are you going to say when your employer suddenly collapses and takes your pension/stock wealth with it (Enron, Bear Stearns etc)?
Even more extreme -- what if the whole economic cycle reverses, the currency devalues and inflation eats up your savings? Hard to imagine, but economic systems have this capacity for extreme events. I know the whole generation of honest engineers in Soviet Union who have not built a capital to retire on (obviously) and who were left desolate in their 50s-60s without pensions or jobs when their state companies/research labs collapsed.
Startup offers an option to strike it rich. If you hit the sweet spot of some business 'fitness function' - then you're set for life. If not, the most obvious strategy is to try as many startups as possible in your lifetime. This is like having a venture fund spread in time. One of your holdings should make it, the rest of them you expect to fail. It's nice if the winner comes when you're in your 20s :) But not necessary.
However, focusing on a single make-or-brake business idea and betting your farm (life) on it is a stupid idea. It is sad that many engineers are actually one-idea phenomena simply because of their specialization. Venture capitalists are in the best position, as they sit on the portfolio of options (startups).
Of course nothing is riskless, but it's pretty close if done properly. Plowing all of your retirement savings into the stock of your employer is something that anyone who spends ten minutes Googling "how to manage my money" knows is retarded.
I'm sure it's possible to instead put your 401k and IRA money into a diversified collection of ETFs and bonds and such and still end up broke, but it hasn't happened yet, and if it does, our entire country is in a very bad place.
There are some really good points in his article. It doesn't deter me from continuing to work on my startup but a lot of it hit pretty close to home.
I had a high paying job, which I hated, and quit to do a startup last year. The problem was that while I was motivated and working night and day, the other 'founders' weren't nearly as devoted to it. As I went months and months without a paycheck, living off credit cards mostly, my new wife and I got further and further into debt (I quit my job 2 weeks before our wedding, that went over REAL well with the in-laws). After about 6 months I realized I was working all hours of the day for no money on a project that had a single digit chance of working out. At that point even if we did get the funding we were looking for I was still going to be paying off my credit card debt for years just to get back to the place I was before I started. So what could I do?
I got a real job, high paying enough that money isn't a problem anymore. We are still paying on the credit cards but we should have them taken care of in about 6 more months. The failure didn't stop me from working on startups though, I've seen what I'm capable of when I work for myself and after that I can't stand to spend my days working for someone else. In fact I'm already deep into a new startup, something that I'll hopefully be able to share with all of you in the next month or so.
Hopefully this time will turn out better than the last.
87 comments
[ 2.3 ms ] story [ 144 ms ] threadI think allowing arbitrary karma transfer on here would be an interesting experiment in reputational economies.
If you can answer the question "What you would like to do with your life?", the macro decisions, then decisions such as doing a startup or not, where to buy a house, etc. seem pale in comparison.
I'm no defender of the blind optimism that goes along with the startup universe, but there are certainly less lucrative ways to waste the best years of your life.
I have to say, though, and this is totally unrelated to the article itself, that this is one of those pieces where I've thought--hey, I'd like to get in touch with this guy--and yet there's no way to do it directly. I may be the only one who still prefers to communicate specifically with one person directly from time to time, rather than via public comments, blog posts, walls, and the like, but I do. And there's no e-mail address or general contact information I could find on the site, no WHOIS information, no information in the Y Combinator profile on this board, etc. There's probably information somewhere on Facebook, but I can't access Facebook, and even if I could, I'm probably not in the right network to see it.
Oh, well! Still a good article.
Really good programmers also need to consider other opportunity costs. Linus and the world are better off because he has pretty much stuck with Linux through thick and thin, and never got heavily involved in running a startup. Tcl started going downhill when Ousterhout did Scriptics (although he did make lots of money). Some people are better off focusing 100% on tech, in other words.
Recently re-reading pg's How To Make Wealth [1] made me wonder if this will soon become an outdated view of startups. The factors leading to the current and predicted rise in the number of startups (free software, cheap hardware, less personnel) should also lead to a large broading of the spectrum of failure <-> success.
The startup world has until recently been determined by its capital-intensive, high-risk nature - big money chasing big rewards. But the new dynamics may leave room for a lot of diversity in between, and consequently a lot more working on some kind of startup. 37 signals can be seen as exemplary of the other extreme to a go-big-or-die startup: founders and employees accept less risk, less pressure and more life for a higher chance of reward, though a lower expected reward. I think there will be a lot of middle ground: a lot of investors willing to accept less risk for lower return, and a whole lot more people will choose lower rewards for a more comfortable life, and better chance of success.
[1] [http://www.paulgraham.com/wealth.html] "The all-or-nothing aspect of startups was not something we wanted. Viaweb's hackers were all extremely risk-averse. If there had been some way just to work super hard and get paid for it, without having a lottery mixed in, we would have been delighted. We would have much preferred a 100% chance of $1 million to a 20% chance of $10 million, even though theoretically the second is worth twice as much. Unfortunately, there is not currently any space in the business world where you can get the first deal."
The problem still largely remains though. A venture backed company still has a lot more money than a bootstrapped one, and that still translates into a big advantage, even though database software is now free rather than $100k.
The current economic turmoil may even help speed the process up somewhat, as investors seek to minimize risk.
I think the highest EV is from founding a private going concern and pocketing profits over the course of ten years. Statistically the majority of millionaires are entrepreneurial sole proprietorships or partnerships. We're talking about people who bought or built a few car washes and ran a tight ship, or built a reputable private accounting practice.
I don't know this for a fact, but I bet a lot more people have got wealthy (by my standards) from software contracting and ISV work than from startups.
For contractors and ISVs, I suppose you have to find a profitable niche.
Like a lot of thing in life: The most popular movie/book sells 10 times more than the #2. MS Word vs WordPerfect. Harrison Ford vs Mark Hamill... People like stars.
OK, so maybe betting on a startup to succeed is a dumb plan, some hedging might be in order (occasional consulting gigs to ensure a minimum income - any other ideas?).
Btw., I wonder what is the average savings rate for employees? I am 35 now, and I recently realised that I am probably way behind on my savings compared to my peers... I think maybe to save about 10000€ per year is realistic?
Still, in my first year of work after getting my degree, according to some statistics I was already in the top 10% of earners of my country. Nevertheless I felt that without inheriting some money from parents (which I won't), I would never have been able to even afford to buy a flat. That is kind of sick, I think. Maybe life as an employee is not so easy, after all. A friend of mine is also an I worker in the top 10% range, and he said he couldn't support his family without help from his parents.
* buy a place with one of your mates and share it * Meet a girlfriend/wife that earns a similar amount to yourself
The important thing seems to be to get onto the property ladder as quickly as possible.
As for savings, save as much as you can afford - I probably save 10 - 15% of my salary at the moment (no family to worry about) and it leaves me with enough beer money too!
We left, basically. We've moved to Vienna (Austria) and living relatively cheaply in my late grandmother's place. I'm trying to get a startup off the ground, she's slowly figuring out what she wants to do.
And yeah, we're super-lucky to even have that opportunity.
I honestly don't know how London is staying as populous as it is. As far as I can see you're completely stuck with graduate salaries. (except in banking)
I am in Belfast, where the property prices only ballooned about 2 years ago, so I got lucky. Only a year or so after I got my house, friends were buying similar sized places that are less central for twice what I paid, not good!
this also shows that the startup world is so fluid as much a title can be. everything has a different intepretation by different people.
a startup is a personal experience and the reasons for someone who choses not to pursue a startup should not be the excuse or affect anyone's choice to make their attempt.
Now that we’ve identified the worst case scenario, let's try to improve on it.
I think that part of the confusion of people when they get into the startup scene, is that they loose sight of what a successful exit does for you: solves the money problem. That's it. Nothing else. Nada.
A successful exit will not buy you love. It will not make you instantly happy. An exit will not provide you with meaning and purpose in life. It will not make you immortal. It will not fix all the other problems in your life. It solves one and only one problem: the money problem.
If you talk to people in the valley who were sudden millionaires in the first dot.com gold rush, I think that you'll find that sudden wealth brings its own set of problems which you touched on in your article. I actually remember reading a number of articles about the struggles of the nouveau-rich after their dot com went public.
These things are worth keeping in mind when you're thinking about that startup, or in dealing with relationships while you're in a startup. Be careful burning bridges with family and friends when you're working 100 hours a week with your startup. They might not be there when you find your exit.
Don't get me wrong, though -- they're both good writers, so the above isn't a swipe at either guy or Hacker News.
However: "trailer-dweller" seems a little mean-spirited (and inaccurate) when it's clear who you are referring to with that example.
1) Are young and have started or been part of successful startups
2) Have blogs where they exhibit a strong personality through their writings, which are sometimes controversial but always tinged with elitism.*
3) Were/are darlings of Hacker News, with a high percentage of their blog posts making it high on the front page
*Not that there's anything wrong with that
I'd be happy if it was a third, and delighted if it was as high as 50%.
Even more extreme -- what if the whole economic cycle reverses, the currency devalues and inflation eats up your savings? Hard to imagine, but economic systems have this capacity for extreme events. I know the whole generation of honest engineers in Soviet Union who have not built a capital to retire on (obviously) and who were left desolate in their 50s-60s without pensions or jobs when their state companies/research labs collapsed.
Startup offers an option to strike it rich. If you hit the sweet spot of some business 'fitness function' - then you're set for life. If not, the most obvious strategy is to try as many startups as possible in your lifetime. This is like having a venture fund spread in time. One of your holdings should make it, the rest of them you expect to fail. It's nice if the winner comes when you're in your 20s :) But not necessary.
However, focusing on a single make-or-brake business idea and betting your farm (life) on it is a stupid idea. It is sad that many engineers are actually one-idea phenomena simply because of their specialization. Venture capitalists are in the best position, as they sit on the portfolio of options (startups).
I'm sure it's possible to instead put your 401k and IRA money into a diversified collection of ETFs and bonds and such and still end up broke, but it hasn't happened yet, and if it does, our entire country is in a very bad place.
I had a high paying job, which I hated, and quit to do a startup last year. The problem was that while I was motivated and working night and day, the other 'founders' weren't nearly as devoted to it. As I went months and months without a paycheck, living off credit cards mostly, my new wife and I got further and further into debt (I quit my job 2 weeks before our wedding, that went over REAL well with the in-laws). After about 6 months I realized I was working all hours of the day for no money on a project that had a single digit chance of working out. At that point even if we did get the funding we were looking for I was still going to be paying off my credit card debt for years just to get back to the place I was before I started. So what could I do?
I got a real job, high paying enough that money isn't a problem anymore. We are still paying on the credit cards but we should have them taken care of in about 6 more months. The failure didn't stop me from working on startups though, I've seen what I'm capable of when I work for myself and after that I can't stand to spend my days working for someone else. In fact I'm already deep into a new startup, something that I'll hopefully be able to share with all of you in the next month or so.
Hopefully this time will turn out better than the last.
Me, I don't need plentyoffish money to be successful. Just give me some hope and some extra cash and I'll call it a small win.