5 ms·

You Have to Be A Fool to Start a Company

12 points by tbgvi 17y ago

dpcan 17y ago
This is an article about how it's risky to start a business and all those percentages and chances at success. again. Personally, when I had a J.O.B. 8 years ago, I felt it was far more risky. At any point, of any day, with or without notice, my boss could walk in and lay me off. Done. No more money. No more job. Being at the mercy of someone else has never felt safe or less risky to me. I was constantly stressed. Working for myself means that if I need to get paid, I go out and get paid. I make it happen. I don't see how being in control of your OWN destiny is MORE risky. I rely on MYSELF, the person I trust and believe in most. Sometimes I have to rely on others for contracts, but I'm in control of that relationship too. I think the problem is that there are entrepreneurs and employees. I don't understand the employee mind-set, but it takes all kinds to make the world go around. Maybe I'll write the article, "Entrepreneurship is for control freaks. Because I said so."
- Dellort 17y ago
  You replaced your boss with a customer. No real change there; You're still at the mercy of someone. I'd say you're a dumbass for not realizing this, but I'll decline to as we're supposed to keep a higher standard here on HN.
  - codexon 17y ago
    A boss can fire you even if you are bringing in a profit. All it takes is 1 bad day, or a mistaken belief that someone from India can do the same job for half the price. If you are the owner, it doesn't matter if one or two customers are hard to deal with. All you do is stop selling to them, and you will most likely still be in business.
    - tptacek 17y ago
      A board can fire you and your whole team even if you're profitable. All it takes is 1 bad day, or a mistaken belief that outsourcing to a team in India can solve the same problem for half the price.
      - codexon 17y ago
        If your company is happens to have a board that doesn't include you, you either 1. Already sold your company. 2. Didn't really contribute to its founding.
        tptacek 17y ago
        "Not worth more than being laid-off" would be hyperbolic, but I'd guess that your private company non-preferred shares are worth a lot less than you think they are. I have stories from real, "successful" companies that screwed over everyone not currently on staff on exit. It's not hard to do.
        codexon 17y ago
        If shares of your company were undersold and you lose controlling interest in the process, that is your own fault. Founders usually have a different class of stock which has more voting rights per value. This is like an employee accepting a $10/hour contract, and then complaining later that it was too low.
        tptacek 17y ago
        Founders don't usually get preferred stock.
        codexon 17y ago
        You are correct. I meant to say that founders usually have a different class of stock that has more voting rights, rather than higher liquidation preference in case of bankruptcy.
tptacek 17y ago
I dislike posts like this because they foster a mindset that you have to "go all in" to start a business, when in fact that's just how financiers want you to do it. You don't. Plenty of businesses start cautiously and grow organically. What you have to be a fool to do is to bank 3-5 years of your life on a 1/20 shot at a 7 figure acquisition. Fortunately, only a tiny fraction of the people who try to do this get funded and shot out of that particular cannon, and they only lose ~1 year of their life to the idea.
- gizmo 17y ago
  Who are you to say that a year spent working on a startup is a lost year? Why is it foolish spend 3 to 5 years on something that might just change the world, especially if you enjoy the ride? I bet that 20 teams shooting for a 7 figure exit will be on average much more successful than 20 teams building a cautious/lifestyle business. You could even argue that shooting for a 7 figure exit is the selfless thing to do, because you're less likely to make a good living that way compared to a lifestyle business, but you are more likely to make a significant contribution to the economy (+ job creation).
  - tptacek 17y ago
    First, stop kidding yourself. The year everyone loses trying to get funded doesn't teach them anything other than "getting funded is harder than all the blog posts make it sound". The 3-5 years the "lucky" few lose on ultimately unsuccessful shoot-the-moon startups don't teach them anything other than "it is possible to waste a spectacular amount of money without much revenue in return for it, and that's a great way to spend 60% of your work day in meetings". Let me save 5 years of your life for you: * Getting funded is harder than everything on Hacker News makes it sound. * You can waste truly spectacular amounts of money without earning anything from customers in return from it, and when you do that, you wind up in meetings with salespeople, meetings with marketing people, meetings with PR people, meetings with engineers about the marketing people, meetings with the CEO, and, oops! Now it's time to go home. Second: No. Shooting for a 7 figure exit is not a "selfless" thing to do. We didn't do that and we've created more jobs than a lot of funded YC companies have. The difference between companies that exit and companies that don't isn't headcount.
johnrob 17y ago
It's really not that risky if you're willing to fight to the death, so to speak. Many 'failures' are really just cases where people gave up.
Dellort 17y ago
That must make this Paul Graham guy an idiot and this whole YCombinator thing must be idiocy in action.
- run4yourlives 17y ago
  While I don't agree with the Article's points, I invite you to read: http://en.wikipedia.org/wiki/Argument_from_authority http://en.wikipedia.org/wiki/Argument_from_authority
abstractbill 17y ago
I disagree on many counts. If you asked my wife and me on our wedding day what our chances of success were, we would have probably said something like "Well, about half of all marriages end in divorce, but we're a little older and hopefully more mature than the average couple of newly-weds, and we talk pretty openly about difficult things. There are no guarantees, but we think we have a decent chance and we're going to do our best". I have a similar approach to business - as Richard Branson is fond of saying, "Take big risks, but always think about the potential downside".
pw0ncakes 17y ago
Failure rate at 5 years is about 50%. How many jobs are there where it's worth coming in to work after 5 years? A lot of people get pigeonholed or stagnate, if not laid off, before then. On the divorce rate, that's across all marriages, and it's closer to 40%. If you marry after 20, both are college-educated, and have known each other for 18 months before getting engaged, your odds are a lot better.

12 points by tbgvi 17y ago

dpcan 17y ago

This is an article about how it's risky to start a business and all those percentages and chances at success. again. Personally, when I had a J.O.B. 8 years ago, I felt it was far more risky. At any point, of any day, with or without notice, my boss could walk in and lay me off. Done. No more money. No more job. Being at the mercy of someone else has never felt safe or less risky to me. I was constantly stressed. Working for myself means that if I need to get paid, I go out and get paid. I make it happen. I don't see how being in control of your OWN destiny is MORE risky. I rely on MYSELF, the person I trust and believe in most. Sometimes I have to rely on others for contracts, but I'm in control of that relationship too. I think the problem is that there are entrepreneurs and employees. I don't understand the employee mind-set, but it takes all kinds to make the world go around. Maybe I'll write the article, "Entrepreneurship is for control freaks. Because I said so."

Dellort 17y ago
You replaced your boss with a customer. No real change there; You're still at the mercy of someone. I'd say you're a dumbass for not realizing this, but I'll decline to as we're supposed to keep a higher standard here on HN.
- codexon 17y ago
  A boss can fire you even if you are bringing in a profit. All it takes is 1 bad day, or a mistaken belief that someone from India can do the same job for half the price. If you are the owner, it doesn't matter if one or two customers are hard to deal with. All you do is stop selling to them, and you will most likely still be in business.
  - tptacek 17y ago
    A board can fire you and your whole team even if you're profitable. All it takes is 1 bad day, or a mistaken belief that outsourcing to a team in India can solve the same problem for half the price.
    - codexon 17y ago
      If your company is happens to have a board that doesn't include you, you either 1. Already sold your company. 2. Didn't really contribute to its founding.
      - tptacek 17y ago
        "Not worth more than being laid-off" would be hyperbolic, but I'd guess that your private company non-preferred shares are worth a lot less than you think they are. I have stories from real, "successful" companies that screwed over everyone not currently on staff on exit. It's not hard to do.
        codexon 17y ago
        If shares of your company were undersold and you lose controlling interest in the process, that is your own fault. Founders usually have a different class of stock which has more voting rights per value. This is like an employee accepting a $10/hour contract, and then complaining later that it was too low.
        tptacek 17y ago
        Founders don't usually get preferred stock.
        codexon 17y ago
        You are correct. I meant to say that founders usually have a different class of stock that has more voting rights, rather than higher liquidation preference in case of bankruptcy.

tptacek 17y ago

I dislike posts like this because they foster a mindset that you have to "go all in" to start a business, when in fact that's just how financiers want you to do it. You don't. Plenty of businesses start cautiously and grow organically. What you have to be a fool to do is to bank 3-5 years of your life on a 1/20 shot at a 7 figure acquisition. Fortunately, only a tiny fraction of the people who try to do this get funded and shot out of that particular cannon, and they only lose ~1 year of their life to the idea.

gizmo 17y ago
Who are you to say that a year spent working on a startup is a lost year? Why is it foolish spend 3 to 5 years on something that might just change the world, especially if you enjoy the ride? I bet that 20 teams shooting for a 7 figure exit will be on average much more successful than 20 teams building a cautious/lifestyle business. You could even argue that shooting for a 7 figure exit is the selfless thing to do, because you're less likely to make a good living that way compared to a lifestyle business, but you are more likely to make a significant contribution to the economy (+ job creation).
- tptacek 17y ago
  First, stop kidding yourself. The year everyone loses trying to get funded doesn't teach them anything other than "getting funded is harder than all the blog posts make it sound". The 3-5 years the "lucky" few lose on ultimately unsuccessful shoot-the-moon startups don't teach them anything other than "it is possible to waste a spectacular amount of money without much revenue in return for it, and that's a great way to spend 60% of your work day in meetings". Let me save 5 years of your life for you: * Getting funded is harder than everything on Hacker News makes it sound. * You can waste truly spectacular amounts of money without earning anything from customers in return from it, and when you do that, you wind up in meetings with salespeople, meetings with marketing people, meetings with PR people, meetings with engineers about the marketing people, meetings with the CEO, and, oops! Now it's time to go home. Second: No. Shooting for a 7 figure exit is not a "selfless" thing to do. We didn't do that and we've created more jobs than a lot of funded YC companies have. The difference between companies that exit and companies that don't isn't headcount.

johnrob 17y ago

It's really not that risky if you're willing to fight to the death, so to speak. Many 'failures' are really just cases where people gave up.

Dellort 17y ago

That must make this Paul Graham guy an idiot and this whole YCombinator thing must be idiocy in action.

run4yourlives 17y ago
While I don't agree with the Article's points, I invite you to read: http://en.wikipedia.org/wiki/Argument_from_authority http://en.wikipedia.org/wiki/Argument_from_authority

abstractbill 17y ago

I disagree on many counts. If you asked my wife and me on our wedding day what our chances of success were, we would have probably said something like "Well, about half of all marriages end in divorce, but we're a little older and hopefully more mature than the average couple of newly-weds, and we talk pretty openly about difficult things. There are no guarantees, but we think we have a decent chance and we're going to do our best". I have a similar approach to business - as Richard Branson is fond of saying, "Take big risks, but always think about the potential downside".

pw0ncakes 17y ago

Failure rate at 5 years is about 50%. How many jobs are there where it's worth coming in to work after 5 years? A lot of people get pigeonholed or stagnate, if not laid off, before then. On the divorce rate, that's across all marriages, and it's closer to 40%. If you marry after 20, both are college-educated, and have known each other for 18 months before getting engaged, your odds are a lot better.