5 ms·

Startups are Financial Suicide

58 points by codentropy 8y ago

uptownfunk 8y ago
Sound advice.. a sobering note for anyone looking to get into a startup like myself..
- keeptrying 8y ago
  Yes! And if you're actually heeding this advice it means you're smarter than most. BUT this should not stop you either - just need to find a way to work around it. :) Essentially you should calculate your opportunity cost. And then figure out a dollar number you are willing to lose. So lets say you save $10k per year. Also assume that you will reduce your lifestyle so as to spend only 2k/month (including medical insurance) on living expenses to start your company. So for a year of unpaid work you will be down the hole of 24k + $10k + $6k (it will take 3 months to get a job after 1 year of being an entreprenur) + $10k in incidentals (server hosting costs to seeing the doc a few times). So thats a total of $50k. Now thats in fantasy land or Utah. In NYC and SF you're looking at probably $120k or more per year if living in decent housing. The more you make the higher this number becomes, becuase of the opportunity costs. So its should become very apparent to you that you need to raise money if you start a startup in SF or NYC. Else move somewhere else immediately. It should also make apparent that you should work as much as possible in your free time before quitting. After this you should put a number in your savings account after which you will quit entrepreneruship. So say on hitting $100k in your bank account (after starting with $200k) you'll quit. People focus too much on just their monthly bill and I think thats the biggest mistake. The opprotunity cost is very very real. You don't get that time back.
  - ksahin 8y ago
    What about the learning/experience that goes with a "failed" startup? Can we put a number on it? I think so !
m3kw9 8y ago
Ain’t all companies used to be startups?
- teddyh 8y ago
  No. Very much no. All companies used to be small, which is a different thing to being a startup. See here, where the difference between Ben and Jerry’s and Amazon (when both were small companies) is explained. https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-ben-and-jerrys-vs-amazon/ https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...
  - collyw 8y ago
    Depends if you are using the dictionary definition of startup (both) or the Paul Graham definition (Amazon).
- analog31 8y ago
  Something I learned from reading enough HN, is that "startup" specifically refers to companies that are started for the purpose of ultimately being sold. This is as opposed to a so called "lifestyle business," which you expect to operate and produce an income to support yourself and your family. Of course these businesses can look similar from a distance, one can turn into the other, and it's possible to bet wrong on which category your business should align itself with.
  - dvfjsdhgfv 8y ago
    I don't know why you're being downvoted. Maybe because some founders don't think they're going to be rich by acquisition but rather by organic means (i.e. customers actually buying your product/service), although frankly I don't know anyone who wouldn't at least consider acquisition as a possible outcome.
  - matchagaucho 8y ago
    More specifically, the equity in a "startup" is not solely owned by the founder(s). There are liquidity exit expectations within 7 years.
hartator 8y ago
> We raised over $25m and sold millions of dollars of product to real customers. I don’t fully get this part, even if the startup wasn’t financialy viable, why didn’t he pay himseslf something around $10-35k per month as CEO? He won’t have his savings crushed now, and probably made money for himself. Maybe I am missing something obvious.
- jacquesc 8y ago
  He wouldn't have been able to raise $25m if he was paying himself that much. Investors are very sensitive to founders who pay themselves enough to live comfortably. Sadly this biases investors towards funding either the young and the rich.
- lev99 8y ago
  A sacrifice for shareholder value.
- tristanj 8y ago
  >Why didn’t he pay himseslf something around $10-35k per month as CEO? I take you've never planned a startup budget before ;). Try running the numbers on how much it costs to run a startup with 5 employees for 3 years given $2m. You can't afford to pay the CEO $35k/month because you will run out of money far to quickly.
  - ksahin 8y ago
    You are right, but paying a founder $120k/y is totally fine when you raised $25m. It's more than that, money shouldn't be a problem for founders, so that they can focus 100% on their company. This subject has been discussed over and over again by top tier VCs !
    - AstralStorm 8y ago
      Why would a founder of a start-up need 120k$/y though? Are they saving to buy a property? Renting in an extremely expensive place? Perhaps hiring servants? If none of this happens (and I bet some of this could be set add cost of business) yore just filling your bank account with VC money and reducing the chances of success.
BIackSwan 8y ago
The point here (which seemed to be muddled in the post) is that you can’t assume that your startup succeeds and not save with that expectation. Its not that startups are financial suicide - the suicide is not saving and not keeping the personal burn rate low. A clearer way of saying the same point - keep on saving like a regular employee would - you will protect yourself in case startup fails. Do not assume that the startup succeeds and have no safety net. That sets up for a disaster.
- ramen-san 8y ago
  To put a finer point on that, it’s important to remember not all startups succeed. We never hear the TechCrunch stories about the startup that quietly shuts down, or was sold to make the investors whole, leaving founders and employees holding the bag. Reality is starting your own startup is a very risky proposition. Huge upside potential (serious generational wealth), but tons of downside scenarios. If financial security is important to you, then pursuing a more measured approach to reaching some basic level of financial independence is probably a good idea before going that route - I write a lot about this here: https://ramenretirement.com/ https://ramenretirement.com/ On the other hand, starting or joining a startup can be a huge accelerator to career and skills growth. You’ll get opportunities you’d have to wait years for at a larger company. That’s (arguably) the best reason to join someone else’s startup.
  - collyw 8y ago
    Interestingly the startup I joined had work very similar to the big established company I work for now - cleaning up someone else mess and trying to keep it running.
    - ramen-san 8y ago
      Ha! No doubt. No shortage of schleps and ‘tech debt’ at startups too. But if the company is doubling every year it will hard to not be swept up by that rising tide in terms of seniority and responsibility.
alphabettsy 8y ago
Pretty sure all new businesses are startups. Many just don’t work, part of entrepreneurship.
jfk92n8 8y ago
Alternative title: how I learned $100k isn’t a lot of money Another alternative title: rando offers little details about how he ran a business that lost him money and insists its just cause statistics
quickConclusion 8y ago
>"Over 90% of startups die" One of those widely repeated number, but not true: number is below 60%. https://www.google.com/amp/amp.timeinc.net/fortune/2017/06/27/startup-advice-data-failure https://www.google.com/amp/amp.timeinc.net/fortune/2017/06/2...
- Judgmentality 8y ago
  > Cambridge Associates, a global investment firm based in Boston, tracked the performance of venture investments in 27,259 startups between 1990 and 2010. Its research reveals that the real percentage of venture-backed startups that fail—as defined by companies that provide a 1X return or less to investors—has not risen above 60% since 2001. Even amid the dotcom bust of 2000, the failure rate topped out at 79%. I am wildly skeptical of these numbers, and could not find the actual study after a quick search on Google. It seems to ignore seed investments for starters, and many "exits" (acquihires) aren't public information, so how they quantify this is ambiguous. If we consider a startup to begin when someone decides to quit their job and work on it full-time and a successful exit as a positive ROI to most investors in less than 10 years, I'd estimate the number as closer to 99% (most people never get any funding for their startups at all). Of course, I have no hard numbers to back that up.
  - ghaff 8y ago
    It would be hard to really quantify. You have everything from worked nights and weekends for a year and nothing ever came of it to acquihires with a nice but modest payout to breakeven acquisitions to IPOs or other big exits. I'm sure if you include friends & family money (or personal money) and sweat equity the failure rate goes way up.
tim333 8y ago
For the curious the startup was Shoe of Prey, I think "bespoke, hand-made women's shoes designed by the customer" The article is a bit light on details. forbes https://www.forbes.com/sites/davidhochman/2017/05/31/shoes-of-prey-delivers-womens-custom-footwear-in-two-weeks-at-retail-prices/#65d420d23971 https://www.forbes.com/sites/davidhochman/2017/05/31/shoes-o... crunchbase https://www.crunchbase.com/organization/shoes-of-prey https://www.crunchbase.com/organization/shoes-of-prey
trevyn 8y ago
There are more things to optimize for in life than finances. :-)
nicodjimenez 8y ago
Everyone over-extrapolates based on personal circumstances. On one end you have guys like Paul Graham and Peter Thiel that truly believe in the startup way of life. On the other end, you have people that quit their job at Google, posted a "Why I left Google to do a startup" article on medium, and then ended up regretting the decision years later. Most people that start companies are either people that are unemployable and can't help themselves, or employable people that could do well in more traditional career paths. If you're in the employable group, I think it's important not to start a company for the sake of doing it because it's cool. The type of startup becomes really important. As an old man, would you regret not trying to solve this particular problem that you're passionate about? It's different for serial entrepreneurs / hustlers, who are always scheming for new ways of making money no matter what.
- ghaff 8y ago
  Or: at one end you have people who got really lucky and at the other end have people who didn't--and walked away from a fairly sure thing in the process. Grass is greener and all that. There are definitely people who just wouldn't be happy any other way. And people who are at least seemingly in the right place at the right time to give it a shot.
- xenonite 8y ago
  Hi! Interesting point. Makes me interested in reading more about your quoted ex googlers who regret it. Do you have any particular links to share?
- oligopoly 8y ago
  Personally I view it as self expression. Like someone who has to go out and paint not because he has to.. he longs it
matchagaucho 8y ago
For some context, the "startup" in question appears to be an online woman's shoe website. https://www.crunchbase.com/organization/shoes-of-prey https://www.crunchbase.com/organization/shoes-of-prey I would hope this Founder has more to share in retrospective explaining the true reasons for suicide, such as: * The margins of an online retail shoe business are poor (typically single digit). * The costs of carrying unsold inventory will bury a company in debt. * Being the first to deliver a product online is not a sustainable competitive advantage. * Amazon is crushing everyone in retail.
- nicodjimenez 8y ago
  Very true. Businesses like this feel "greedy" to me, in that they are not particularly inventive or novel, but appealing in the financial sense that the market is big. Greedy companies fail.
- patd 8y ago
  For some context on why it might have seemed like a good idea at the time (April 2009): * Zappos hadn't been acquired yet by Amazon (July 2009) * Amazon failed to compete with Endless (launched in 2007) * Shoes seemed like a great vertical at the time : Zappos did 1B in revenue in 2008 (vs 19B for Amazon) and competitors were popping up all over the world (Zalando launched in 2008)
tomashertus 8y ago
This is meaningless article. I think this is common sense that when you are starting business, you have to adjust your life style to that. Suddenly, you won't be getting regular hefty paycheck from Google and have to rely on your business income. If the income is not able to sustain your current life style, you have to adjust otherwise you will burn through your cash. That is reasonable in the short term, but should ring a bell if it takes more than 1 year to be able to live from your startup salary. On the top of that, you have to adjust the company to the "startup" budget as well. I have seen so many people go nuts with hiring, benefits and useless spending after getting large seed or series A.
- keeptrying 8y ago
  Thats like saying weight loss is common sense and theres no need to talk about diabetes. Also building muscle and weightlifting is common sense and thus theres no need to talk about growing old. And finding the right spouse is common sense and theres no need to talk about divorce.
  - tomashertus 8y ago
    ohh c'mon this is childish argument, we can do better no? Have you read the article? It does explain why they, after 9 years of hard work, end-up having financial issues. What was the reason for them to not to have financial viable product? Was it cause of over-hiring; over-engineering; wrong market? There are always problems in companies, so what was the unique experience they have that they can confidently put all startups into one bucket and say: "Look this bucket, this is suicide bucket!".
not_a_moth 8y ago
> To be clear, my startup is still very much alive and, apparently, well. I left the company over a year ago. I might get a return in the future... This kind of takes the bite out of his argument.
- ghaff 8y ago
  Well, he's arguing that he spent close to 10 years (in his 20s/30s ?) depleting his savings. But, yeah, "financial suicide" seems a bit strong. Lots of people get grad degrees and take jobs that don't work out (and don't save as much as they probably should) during that period. Of course, there have also been a couple of serious stock market dips during the past 20 years even for people who did save. As other have said, "don't bank on the home run" is good advice but if the worst you do is to give something you really want to do a try when you're young and it doesn't work out financially, you'll probably still be fine.
deleted 8y ago
[deleted]
jandrewrogers 8y ago
The mistake many founders make is not analyzing the financial impact of doing a startup in the context of their entire life, both before and after a startup. You can mitigate much of the financial risk by choosing the right times in your life/finances to do a startup and having a plan for executing the startup that minimizes the downside if you fail. It is a long-term financial modeling exercise that let's you optimize the risk-reward ratio. Too many founders, myself included at one time, start companies because the passion strikes without seriously considering if their finances/life are well-positioned to minimize long-term downside or the constraints on the startup required to ensure that failure doesn't empty your bank account. If you are careful and thoughtful about when and how you do a startup, the downside risk can often be a reduced rate of financial growth (versus a normal job) rather than financial ruin. It is quite possible to build startups without jeopardizing your financial future but it requires some diligence and discipline.
- lifeisstillgood 8y ago
  could you expand on this - sounds interesting
vannevar 8y ago
As someone who has spent a significant part of his career (and income) in startups, I strongly agree with this succinct advice. Particularly the bit about the 401K.

58 points by codentropy 8y ago

uptownfunk 8y ago

Sound advice.. a sobering note for anyone looking to get into a startup like myself..

keeptrying 8y ago
Yes! And if you're actually heeding this advice it means you're smarter than most. BUT this should not stop you either - just need to find a way to work around it. :) Essentially you should calculate your opportunity cost. And then figure out a dollar number you are willing to lose. So lets say you save $10k per year. Also assume that you will reduce your lifestyle so as to spend only 2k/month (including medical insurance) on living expenses to start your company. So for a year of unpaid work you will be down the hole of 24k + $10k + $6k (it will take 3 months to get a job after 1 year of being an entreprenur) + $10k in incidentals (server hosting costs to seeing the doc a few times). So thats a total of $50k. Now thats in fantasy land or Utah. In NYC and SF you're looking at probably $120k or more per year if living in decent housing. The more you make the higher this number becomes, becuase of the opportunity costs. So its should become very apparent to you that you need to raise money if you start a startup in SF or NYC. Else move somewhere else immediately. It should also make apparent that you should work as much as possible in your free time before quitting. After this you should put a number in your savings account after which you will quit entrepreneruship. So say on hitting $100k in your bank account (after starting with $200k) you'll quit. People focus too much on just their monthly bill and I think thats the biggest mistake. The opprotunity cost is very very real. You don't get that time back.
- ksahin 8y ago
  What about the learning/experience that goes with a "failed" startup? Can we put a number on it? I think so !

m3kw9 8y ago

Ain’t all companies used to be startups?

teddyh 8y ago
No. Very much no. All companies used to be small, which is a different thing to being a startup. See here, where the difference between Ben and Jerry’s and Amazon (when both were small companies) is explained. https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-ben-and-jerrys-vs-amazon/ https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...
- collyw 8y ago
  Depends if you are using the dictionary definition of startup (both) or the Paul Graham definition (Amazon).
analog31 8y ago
Something I learned from reading enough HN, is that "startup" specifically refers to companies that are started for the purpose of ultimately being sold. This is as opposed to a so called "lifestyle business," which you expect to operate and produce an income to support yourself and your family. Of course these businesses can look similar from a distance, one can turn into the other, and it's possible to bet wrong on which category your business should align itself with.
- dvfjsdhgfv 8y ago
  I don't know why you're being downvoted. Maybe because some founders don't think they're going to be rich by acquisition but rather by organic means (i.e. customers actually buying your product/service), although frankly I don't know anyone who wouldn't at least consider acquisition as a possible outcome.
- matchagaucho 8y ago
  More specifically, the equity in a "startup" is not solely owned by the founder(s). There are liquidity exit expectations within 7 years.

hartator 8y ago

> We raised over $25m and sold millions of dollars of product to real customers. I don’t fully get this part, even if the startup wasn’t financialy viable, why didn’t he pay himseslf something around $10-35k per month as CEO? He won’t have his savings crushed now, and probably made money for himself. Maybe I am missing something obvious.

jacquesc 8y ago
He wouldn't have been able to raise $25m if he was paying himself that much. Investors are very sensitive to founders who pay themselves enough to live comfortably. Sadly this biases investors towards funding either the young and the rich.
lev99 8y ago
A sacrifice for shareholder value.
tristanj 8y ago
>Why didn’t he pay himseslf something around $10-35k per month as CEO? I take you've never planned a startup budget before ;). Try running the numbers on how much it costs to run a startup with 5 employees for 3 years given $2m. You can't afford to pay the CEO $35k/month because you will run out of money far to quickly.
- ksahin 8y ago
  You are right, but paying a founder $120k/y is totally fine when you raised $25m. It's more than that, money shouldn't be a problem for founders, so that they can focus 100% on their company. This subject has been discussed over and over again by top tier VCs !
  - AstralStorm 8y ago
    Why would a founder of a start-up need 120k$/y though? Are they saving to buy a property? Renting in an extremely expensive place? Perhaps hiring servants? If none of this happens (and I bet some of this could be set add cost of business) yore just filling your bank account with VC money and reducing the chances of success.

BIackSwan 8y ago

The point here (which seemed to be muddled in the post) is that you can’t assume that your startup succeeds and not save with that expectation. Its not that startups are financial suicide - the suicide is not saving and not keeping the personal burn rate low. A clearer way of saying the same point - keep on saving like a regular employee would - you will protect yourself in case startup fails. Do not assume that the startup succeeds and have no safety net. That sets up for a disaster.

ramen-san 8y ago
To put a finer point on that, it’s important to remember not all startups succeed. We never hear the TechCrunch stories about the startup that quietly shuts down, or was sold to make the investors whole, leaving founders and employees holding the bag. Reality is starting your own startup is a very risky proposition. Huge upside potential (serious generational wealth), but tons of downside scenarios. If financial security is important to you, then pursuing a more measured approach to reaching some basic level of financial independence is probably a good idea before going that route - I write a lot about this here: https://ramenretirement.com/ https://ramenretirement.com/ On the other hand, starting or joining a startup can be a huge accelerator to career and skills growth. You’ll get opportunities you’d have to wait years for at a larger company. That’s (arguably) the best reason to join someone else’s startup.
- collyw 8y ago
  Interestingly the startup I joined had work very similar to the big established company I work for now - cleaning up someone else mess and trying to keep it running.
  - ramen-san 8y ago
    Ha! No doubt. No shortage of schleps and ‘tech debt’ at startups too. But if the company is doubling every year it will hard to not be swept up by that rising tide in terms of seniority and responsibility.

alphabettsy 8y ago

Pretty sure all new businesses are startups. Many just don’t work, part of entrepreneurship.

jfk92n8 8y ago

Alternative title: how I learned $100k isn’t a lot of money Another alternative title: rando offers little details about how he ran a business that lost him money and insists its just cause statistics

quickConclusion 8y ago

>"Over 90% of startups die" One of those widely repeated number, but not true: number is below 60%. https://www.google.com/amp/amp.timeinc.net/fortune/2017/06/27/startup-advice-data-failure https://www.google.com/amp/amp.timeinc.net/fortune/2017/06/2...

Judgmentality 8y ago
> Cambridge Associates, a global investment firm based in Boston, tracked the performance of venture investments in 27,259 startups between 1990 and 2010. Its research reveals that the real percentage of venture-backed startups that fail—as defined by companies that provide a 1X return or less to investors—has not risen above 60% since 2001. Even amid the dotcom bust of 2000, the failure rate topped out at 79%. I am wildly skeptical of these numbers, and could not find the actual study after a quick search on Google. It seems to ignore seed investments for starters, and many "exits" (acquihires) aren't public information, so how they quantify this is ambiguous. If we consider a startup to begin when someone decides to quit their job and work on it full-time and a successful exit as a positive ROI to most investors in less than 10 years, I'd estimate the number as closer to 99% (most people never get any funding for their startups at all). Of course, I have no hard numbers to back that up.
- ghaff 8y ago
  It would be hard to really quantify. You have everything from worked nights and weekends for a year and nothing ever came of it to acquihires with a nice but modest payout to breakeven acquisitions to IPOs or other big exits. I'm sure if you include friends & family money (or personal money) and sweat equity the failure rate goes way up.

tim333 8y ago

For the curious the startup was Shoe of Prey, I think "bespoke, hand-made women's shoes designed by the customer" The article is a bit light on details. forbes https://www.forbes.com/sites/davidhochman/2017/05/31/shoes-of-prey-delivers-womens-custom-footwear-in-two-weeks-at-retail-prices/#65d420d23971 https://www.forbes.com/sites/davidhochman/2017/05/31/shoes-o... crunchbase https://www.crunchbase.com/organization/shoes-of-prey https://www.crunchbase.com/organization/shoes-of-prey

trevyn 8y ago

There are more things to optimize for in life than finances. :-)

nicodjimenez 8y ago

Everyone over-extrapolates based on personal circumstances. On one end you have guys like Paul Graham and Peter Thiel that truly believe in the startup way of life. On the other end, you have people that quit their job at Google, posted a "Why I left Google to do a startup" article on medium, and then ended up regretting the decision years later. Most people that start companies are either people that are unemployable and can't help themselves, or employable people that could do well in more traditional career paths. If you're in the employable group, I think it's important not to start a company for the sake of doing it because it's cool. The type of startup becomes really important. As an old man, would you regret not trying to solve this particular problem that you're passionate about? It's different for serial entrepreneurs / hustlers, who are always scheming for new ways of making money no matter what.

ghaff 8y ago
Or: at one end you have people who got really lucky and at the other end have people who didn't--and walked away from a fairly sure thing in the process. Grass is greener and all that. There are definitely people who just wouldn't be happy any other way. And people who are at least seemingly in the right place at the right time to give it a shot.
xenonite 8y ago
Hi! Interesting point. Makes me interested in reading more about your quoted ex googlers who regret it. Do you have any particular links to share?
oligopoly 8y ago
Personally I view it as self expression. Like someone who has to go out and paint not because he has to.. he longs it

matchagaucho 8y ago

For some context, the "startup" in question appears to be an online woman's shoe website. https://www.crunchbase.com/organization/shoes-of-prey https://www.crunchbase.com/organization/shoes-of-prey I would hope this Founder has more to share in retrospective explaining the true reasons for suicide, such as: * The margins of an online retail shoe business are poor (typically single digit). * The costs of carrying unsold inventory will bury a company in debt. * Being the first to deliver a product online is not a sustainable competitive advantage. * Amazon is crushing everyone in retail.

nicodjimenez 8y ago
Very true. Businesses like this feel "greedy" to me, in that they are not particularly inventive or novel, but appealing in the financial sense that the market is big. Greedy companies fail.
patd 8y ago
For some context on why it might have seemed like a good idea at the time (April 2009): * Zappos hadn't been acquired yet by Amazon (July 2009) * Amazon failed to compete with Endless (launched in 2007) * Shoes seemed like a great vertical at the time : Zappos did 1B in revenue in 2008 (vs 19B for Amazon) and competitors were popping up all over the world (Zalando launched in 2008)

tomashertus 8y ago

This is meaningless article. I think this is common sense that when you are starting business, you have to adjust your life style to that. Suddenly, you won't be getting regular hefty paycheck from Google and have to rely on your business income. If the income is not able to sustain your current life style, you have to adjust otherwise you will burn through your cash. That is reasonable in the short term, but should ring a bell if it takes more than 1 year to be able to live from your startup salary. On the top of that, you have to adjust the company to the "startup" budget as well. I have seen so many people go nuts with hiring, benefits and useless spending after getting large seed or series A.

keeptrying 8y ago
Thats like saying weight loss is common sense and theres no need to talk about diabetes. Also building muscle and weightlifting is common sense and thus theres no need to talk about growing old. And finding the right spouse is common sense and theres no need to talk about divorce.
- tomashertus 8y ago
  ohh c'mon this is childish argument, we can do better no? Have you read the article? It does explain why they, after 9 years of hard work, end-up having financial issues. What was the reason for them to not to have financial viable product? Was it cause of over-hiring; over-engineering; wrong market? There are always problems in companies, so what was the unique experience they have that they can confidently put all startups into one bucket and say: "Look this bucket, this is suicide bucket!".

not_a_moth 8y ago

> To be clear, my startup is still very much alive and, apparently, well. I left the company over a year ago. I might get a return in the future... This kind of takes the bite out of his argument.

ghaff 8y ago
Well, he's arguing that he spent close to 10 years (in his 20s/30s ?) depleting his savings. But, yeah, "financial suicide" seems a bit strong. Lots of people get grad degrees and take jobs that don't work out (and don't save as much as they probably should) during that period. Of course, there have also been a couple of serious stock market dips during the past 20 years even for people who did save. As other have said, "don't bank on the home run" is good advice but if the worst you do is to give something you really want to do a try when you're young and it doesn't work out financially, you'll probably still be fine.

deleted 8y ago

[deleted]

jandrewrogers 8y ago

The mistake many founders make is not analyzing the financial impact of doing a startup in the context of their entire life, both before and after a startup. You can mitigate much of the financial risk by choosing the right times in your life/finances to do a startup and having a plan for executing the startup that minimizes the downside if you fail. It is a long-term financial modeling exercise that let's you optimize the risk-reward ratio. Too many founders, myself included at one time, start companies because the passion strikes without seriously considering if their finances/life are well-positioned to minimize long-term downside or the constraints on the startup required to ensure that failure doesn't empty your bank account. If you are careful and thoughtful about when and how you do a startup, the downside risk can often be a reduced rate of financial growth (versus a normal job) rather than financial ruin. It is quite possible to build startups without jeopardizing your financial future but it requires some diligence and discipline.

lifeisstillgood 8y ago
could you expand on this - sounds interesting

vannevar 8y ago

As someone who has spent a significant part of his career (and income) in startups, I strongly agree with this succinct advice. Particularly the bit about the 401K.