7 ms·

Would love to see a series of good curves: (1) of all startup's started by people who working in the industry, quit FT jobs to do startup or put in serious moo

Would love to see a series of good curves: (1) of all startup's started by people who working in the industry, quit FT jobs to do startup or put in serious moonlighting hours in startup; total earnings - opportunity cost, annualized: (total income from startup - opportunity cost of hours worked on startup) / years spent Maybe this data-set should be split further into bins of founders whose last title prior to startup were only individual contributors, or were executives, their age and pedigree etc. Would love to see the distribution + standard deviation say, for computer programmer who quits the job to do a startup would gain or lose in earnings per year. (2) of funded all startup; the alpha of investment: total return on investment - (S&P500 Index return in duration of funding to IPO/exit) / (S&P Index Return) Maybe this data-set should be split further into bins of people involved: founders, first 10 percentile employees by join date, second 50 percentile employees and so forth... Would love to see the distribution of return on investing in startup's as an investor vs. investing in S&P500.

jacquesm 11y ago
I think that would make for very depressing reading. It would be comparable to making a documentary about everybody who ever played the lottery. For the most part you'll see people that lost. Year after year after year. And then there would be the lottery winners. A couple of them. The middle is quite narrow, it's good money for a relatively large number of people but it is still a very small fraction of the total number that 'went for it'. Still, better to try and fail than never to have tried, worst case you'll learn more in 3 years than you'd otherwise learn in your whole career.
- smt88 11y ago
  Thank you for being (seemingly) the only person on HN who understands that startups are a lottery. A very, very expensive lottery.
  - jay_kyburz 11y ago
    I think everybody knows it, but "you've got to be in it to win it".
  - nostrademons 11y ago
    But they aren't a lottery. Startups (and business in general) is about unfair advantages - knowing information that other people don't, and acting on that knowledge. As a founder, your job is to find your unfair advantage and execute on it. Startups that successfully find a valuable secret and exploit it become worth billions. Startups that have no such advantage usually die. I thought the article was getting at this, but it seems like a lot of the folks here missed it. Twitch succeeded because, as justin.tv, they were in a position to notice rising demand for gaming livestreams. And then when they did, they executed against it very effectively - look at Emmett's user interview lecture for how they systematically gathered feedback from prospective users to convert them to current users. [1] That's what Justin's talking about when he says "Trust your metrics and your growth." They had an information advantage over VCs - there was very good reason for believing VCs were ignorant there, because in this case, they were. [1] https://clip.mn/video/yt-qAws7eXItMk https://clip.mn/video/yt-qAws7eXItMk
    - jacquesm 11y ago
      > Twitch succeeded because, as justin.tv, they were in a position to notice rising demand for gaming livestreams. So, for an alternative view: This is not an unfair advantage at all. I was in exactly the same position. We however thought that having game sessions streamed was terribly boring (none of the people in our office were gamers), and so, instead of catering to this niche (which I'm sure hit us well before it hit justin.tv simply because we started much earlier) we threw the gamers out and concentrated on the people. They found another home and Justin absolutely ran with it, he recognized the opportunity that we squandered and I'm very happy that he made it. There is absolutely nothing unfair about any of this. And VCs were already funding fantasy sports, casual gaming and other game related activities, they just never made the link with screencasts that Justin did. But long before then they already won the lottery in the sense that they got more money to work with than anybody in the space up to that point. The biggest deal in that space up to then was probably spotlife, a Logitech / Philips collaboration around the theme of live video, they picked up $30M.
      - nostrademons 11y ago
        That's what I'm trying (and apparently failing) to get at: For Twitch, being gamers who also ran a video streaming site was a huge unfair advantage, because they were in a position to recognize a trend as it just started. There was no reason, if you look at statistics or data, to believe that this was a combination worth a billion dollars - that moment had never happened before in the history of business, and will probably never happen again. There was a lot of reason, if you look at personal experience of them and their early customers, to believe it would be. Similarly, Mark Zuckerburg was a college sophomore at an elite institution who had also built a machine-learning music player. He had a huge unfair advantage, because he realized what he could do with the personal data of a few thousand students. I was also a college student at the same time, at an elite college, and was (as a volunteer) involved with writing our own campus social network. It never occurred to me that it could be a business, let alone a $300B one, because at the time I thought that software companies were things that sold high-performance databases to Fortune 500 companies for real money. What other unfair advantages do Hacker News readers have that they don't realize are advantages?
  - vonklaus 11y ago
    That is the wrong wy to think about it. If you want to take an analogy, and I still dislike it but if pushed, I would call it sportsbetting. There is a degree of chance (lets stop using luck) about both start ups and sportsbetting. They depend on forces outside of one's control. However, a lottery mathematically dictates that you will have a poor outcome of winning and all you can do is increase your probability by buting tickets. A startup has more control over how it operates. A gambler can watch tapes and use past performance to find a perceived mismatch between the spread or gaming lines, and their appraisal. Many gamblers are unsuccessful. However there is a reason that the same couple guys seem to make it to the end of the world series of poker every year[0]. Peter Theil discusses it in depth in You're not a lottery ticket[1]. Startups are risky as hell and even smart people with good ideas fuck them up. However, smart people with good ideas only rarely win the lottery[2] [0]amnended qoute from rounders. https://m.youtube.com/watch?v=g7VMjutSNHk https://m.youtube.com/watch?v=g7VMjutSNHk [2]http://m.nydailynews.com/news/crime/mit-students-scammed-massachusetts-state-lottery-8-million-report-article-1.1128482 http://m.nydailynews.com/news/crime/mit-students-scammed-mas...
jasonkester 11y ago
You'll want to divide again by hours worked per year, since that's where the true payoff comes from running your own business. Imagine a SaaS product that brings in just shy of a single Bay Area dev salary. Is that a success for a single founder who has put six years into building it? Of course not, right? But what if said single founder now needs to put in roughly 100 hours per year to keep that business ticking along and delivering that salary? What if he can spend another 1000 hours per year building the next product, leaving a little over half the year to pursue his dream of competitive kite surfing? Stick that into your curve, and I bet it'll trend a little more up and to the right.
- noname123 11y ago
  Thank you jasonkester, it is indeed very complicated because to be nitpicky, you have to consider the growth or decay of the said established SaaS business over the years, the probability of the next SaaS business taking off; which I'd go out on a limb and say is highly variable but assume the median case to be: steady of loss of income from established business (e.g., BingoCard Creator) and very high risk/reward of next business in pipeline taking off.
jmathai 11y ago
Dug up a post of mine from 2 years ago [1]. I bootstrapped for 14 months without salary and then took a pay cut for 2 years. Here are my numbers. I blogged about this as well [2]. Loss of salary for 1 year, 2 months Does not include loss of 401k match or ESPP -$140,000 Successful Kickstarter @ $25k +$20,000 8 week contracting project @ 20hrs / week +$16,000 Living expenses for 14 months (savings/stocks) -$70,000 Post funding difference in salary from market rate -$50,000 (year 1) -$40,000 (year 2) Total ≈ -$264,000 [1] https://news.ycombinator.com/item?id=7570428 https://news.ycombinator.com/item?id=7570428 [2] http://jaisenmathai.com/openphoto-trovebox/ http://jaisenmathai.com/openphoto-trovebox/
- noname123 11y ago
  Thank you jmathai for digging up your numbers and posting them again. Really appreciate it, echoing the previous poster, I think living expenses really shouldn't be part of equation as you would incur them anyways if you had a FT job. I think it is really impressive that you generated a significant income, which puts you arguably in a relatively high percentile of people who try to do startups.
- xiaoma 11y ago
  What about taxes?
- sergiosgc 11y ago
  Thanks for the numbers. I imagine you got equity of the company in the end, so in terms of your personal asset accounting, it should be factored in (not that getting a valuation on equity is easy, if it hasn't been traded).
  - jacquesm 11y ago
    Trovebox shut down in January 2015 so that equity is worth nothing.
    - jmathai 11y ago
      We sold the technology to Western Digital and went along for an acquihire. In the end it approaches break even but even that's nearly negligible.

jacquesm 11y ago

I think that would make for very depressing reading. It would be comparable to making a documentary about everybody who ever played the lottery. For the most part you'll see people that lost. Year after year after year. And then there would be the lottery winners. A couple of them. The middle is quite narrow, it's good money for a relatively large number of people but it is still a very small fraction of the total number that 'went for it'. Still, better to try and fail than never to have tried, worst case you'll learn more in 3 years than you'd otherwise learn in your whole career.

smt88 11y ago
Thank you for being (seemingly) the only person on HN who understands that startups are a lottery. A very, very expensive lottery.
- jay_kyburz 11y ago
  I think everybody knows it, but "you've got to be in it to win it".
- nostrademons 11y ago
  But they aren't a lottery. Startups (and business in general) is about unfair advantages - knowing information that other people don't, and acting on that knowledge. As a founder, your job is to find your unfair advantage and execute on it. Startups that successfully find a valuable secret and exploit it become worth billions. Startups that have no such advantage usually die. I thought the article was getting at this, but it seems like a lot of the folks here missed it. Twitch succeeded because, as justin.tv, they were in a position to notice rising demand for gaming livestreams. And then when they did, they executed against it very effectively - look at Emmett's user interview lecture for how they systematically gathered feedback from prospective users to convert them to current users. [1] That's what Justin's talking about when he says "Trust your metrics and your growth." They had an information advantage over VCs - there was very good reason for believing VCs were ignorant there, because in this case, they were. [1] https://clip.mn/video/yt-qAws7eXItMk https://clip.mn/video/yt-qAws7eXItMk
  - jacquesm 11y ago
    > Twitch succeeded because, as justin.tv, they were in a position to notice rising demand for gaming livestreams. So, for an alternative view: This is not an unfair advantage at all. I was in exactly the same position. We however thought that having game sessions streamed was terribly boring (none of the people in our office were gamers), and so, instead of catering to this niche (which I'm sure hit us well before it hit justin.tv simply because we started much earlier) we threw the gamers out and concentrated on the people. They found another home and Justin absolutely ran with it, he recognized the opportunity that we squandered and I'm very happy that he made it. There is absolutely nothing unfair about any of this. And VCs were already funding fantasy sports, casual gaming and other game related activities, they just never made the link with screencasts that Justin did. But long before then they already won the lottery in the sense that they got more money to work with than anybody in the space up to that point. The biggest deal in that space up to then was probably spotlife, a Logitech / Philips collaboration around the theme of live video, they picked up $30M.
    - nostrademons 11y ago
      That's what I'm trying (and apparently failing) to get at: For Twitch, being gamers who also ran a video streaming site was a huge unfair advantage, because they were in a position to recognize a trend as it just started. There was no reason, if you look at statistics or data, to believe that this was a combination worth a billion dollars - that moment had never happened before in the history of business, and will probably never happen again. There was a lot of reason, if you look at personal experience of them and their early customers, to believe it would be. Similarly, Mark Zuckerburg was a college sophomore at an elite institution who had also built a machine-learning music player. He had a huge unfair advantage, because he realized what he could do with the personal data of a few thousand students. I was also a college student at the same time, at an elite college, and was (as a volunteer) involved with writing our own campus social network. It never occurred to me that it could be a business, let alone a $300B one, because at the time I thought that software companies were things that sold high-performance databases to Fortune 500 companies for real money. What other unfair advantages do Hacker News readers have that they don't realize are advantages?
- vonklaus 11y ago
  That is the wrong wy to think about it. If you want to take an analogy, and I still dislike it but if pushed, I would call it sportsbetting. There is a degree of chance (lets stop using luck) about both start ups and sportsbetting. They depend on forces outside of one's control. However, a lottery mathematically dictates that you will have a poor outcome of winning and all you can do is increase your probability by buting tickets. A startup has more control over how it operates. A gambler can watch tapes and use past performance to find a perceived mismatch between the spread or gaming lines, and their appraisal. Many gamblers are unsuccessful. However there is a reason that the same couple guys seem to make it to the end of the world series of poker every year[0]. Peter Theil discusses it in depth in You're not a lottery ticket[1]. Startups are risky as hell and even smart people with good ideas fuck them up. However, smart people with good ideas only rarely win the lottery[2] [0]amnended qoute from rounders. https://m.youtube.com/watch?v=g7VMjutSNHk https://m.youtube.com/watch?v=g7VMjutSNHk [2]http://m.nydailynews.com/news/crime/mit-students-scammed-massachusetts-state-lottery-8-million-report-article-1.1128482 http://m.nydailynews.com/news/crime/mit-students-scammed-mas...

jasonkester 11y ago

You'll want to divide again by hours worked per year, since that's where the true payoff comes from running your own business. Imagine a SaaS product that brings in just shy of a single Bay Area dev salary. Is that a success for a single founder who has put six years into building it? Of course not, right? But what if said single founder now needs to put in roughly 100 hours per year to keep that business ticking along and delivering that salary? What if he can spend another 1000 hours per year building the next product, leaving a little over half the year to pursue his dream of competitive kite surfing? Stick that into your curve, and I bet it'll trend a little more up and to the right.

noname123 11y ago
Thank you jasonkester, it is indeed very complicated because to be nitpicky, you have to consider the growth or decay of the said established SaaS business over the years, the probability of the next SaaS business taking off; which I'd go out on a limb and say is highly variable but assume the median case to be: steady of loss of income from established business (e.g., BingoCard Creator) and very high risk/reward of next business in pipeline taking off.

jmathai 11y ago

Dug up a post of mine from 2 years ago [1]. I bootstrapped for 14 months without salary and then took a pay cut for 2 years. Here are my numbers. I blogged about this as well [2]. Loss of salary for 1 year, 2 months Does not include loss of 401k match or ESPP -$140,000 Successful Kickstarter @ $25k +$20,000 8 week contracting project @ 20hrs / week +$16,000 Living expenses for 14 months (savings/stocks) -$70,000 Post funding difference in salary from market rate -$50,000 (year 1) -$40,000 (year 2) Total ≈ -$264,000 [1] https://news.ycombinator.com/item?id=7570428 https://news.ycombinator.com/item?id=7570428 [2] http://jaisenmathai.com/openphoto-trovebox/ http://jaisenmathai.com/openphoto-trovebox/

noname123 11y ago
Thank you jmathai for digging up your numbers and posting them again. Really appreciate it, echoing the previous poster, I think living expenses really shouldn't be part of equation as you would incur them anyways if you had a FT job. I think it is really impressive that you generated a significant income, which puts you arguably in a relatively high percentile of people who try to do startups.
xiaoma 11y ago
What about taxes?
sergiosgc 11y ago
Thanks for the numbers. I imagine you got equity of the company in the end, so in terms of your personal asset accounting, it should be factored in (not that getting a valuation on equity is easy, if it hasn't been traded).
- jacquesm 11y ago
  Trovebox shut down in January 2015 so that equity is worth nothing.
  - jmathai 11y ago
    We sold the technology to Western Digital and went along for an acquihire. In the end it approaches break even but even that's nearly negligible.