5 ms·

I really question this idea that (YC-style) startup founders are taking on more risk than employees. Few founders have a significant amount of personal capital

by gamble 16y ago

I really question this idea that (YC-style) startup founders are taking on more risk than employees. Few founders have a significant amount of personal capital invested in the business. If the startup fails, they're not out of much more than a job. In fact, early employees are in a far more precarious situation, since they're much more likely to lose their job than the founders. And if the company does go down, the founders have a much better entry on their resume than someone who took a job at a small company that no one has ever heard of. At least in America, there is so little stigma associated with a failed startup that I don't see the reputation aspect of your argument. Short of flat-out malfeasance, a failed entrepreneur is far more fundable than someone who has never started a company.

wdewind 16y ago
We like to say there is no stigma associated with a failed startup. Quite frankly I think that's bullshit. It may not hurt your chances of getting hired again as an engineer because you will likely have great experience from it. But you will have just spent months/years promising people you were going to improve an aspect of their life (through your business solving their problems, or maybe through getting more financial independence for your family etc.), and you were unable to do so. In many cases you've been trusted with extremely important things. You will have been trusted with a leadership role (in society, not just a company), and you will have failed, regardless of the value of the experience. Startups don't really get traction (outside of social) without serious contributions: being involved in solving hair on fire problems. So, let's say you're starting a banking/commerce related startup like PayPal, and some fraud happens on your network which ultimately leads to it failing to gain trust (though it is relatively secure) and thus failing to gain traction and failing. Sure, you may handle the breach well, and go on to have a high paying job as a security analyst or something based on your specific experience. But good luck trying to raise capital again. Good luck getting your friends and family to support you and take you seriously when you're going down your second "I'm quitting my job to give everything I have to a startup." Good luck recruiting engineers who know you as the ex-CEO of failed startup XYZ, etc.
- mechanical_fish 16y ago
  I worked for a startup that failed. My impression is that the founders were never quite the same. It can take a huge emotional toll, especially if you're in the business with your friends. Around here we take pains to emphasize the bright side of failure, but that's because nobody needs to be coached in how to mourn. Mourning comes naturally. It is carrying on in the face of negative feedback from the world that takes practice and coaching and teamwork.
  - swombat 16y ago
    I was just about to reply something along those lines. Failing at your own startup is a bit like burying a child. You start with all these dreams of a bright future, and one day you find yourself facing the stark reality that it just didn't work out, that there's nothing you can do anymore to change that, and that basically the last X years of your life, where you sacrificed anything, were pretty much for nothing. "Well, at least I learned a lot!" is very little consolation in that context. It's a pretty fucking tough time to go through, burying your startup. I've been there, and hell, I'll probably get there again some day, but it's not the kind of thing that you go through without after-effects. As a startup employee, you're a bit like that neighbour who watches the previously happy couple tear each other apart and finally divorce. My, ain't it tough for them, geez, I hope it never happens to me. As the founder, you're right in the middle, ripping your dreams to bits. And the best part is, after all that, people still expect you to pick yourself up and do it all again! Edit: I suppose I'm being a bit melodramatic here, as pointed out by the two responses. That said, I do think that shutting down your failed startup that you poured your dreams into is a deeply demoralising experience. Character-building stuff, I think they call it, when trying to cheer you up.
    - tptacek 16y ago
      Guys, I helped blow up a startup in '01 that I started in early '99. At our peak we had over 50 people. I'm also a father of two, and I absolutely assure you that startup detonation is going to be nothing whatsoever like "burying a child". The notion that company failures are "mourned" by founders is what prompts head-explodey threads about what "fair" is for founder equity comp. The reality is a lot simpler. The market simply values a lot of stuff that geeks don't pay attention to, including: * The initiative to start a company and deal with all the personal, financial, and (importantly) logistical drama that comes with doing that. * The various forms of capital (financial, relationship, intellectual) founders bring to the critical first 12 months of the company. * The ability to recruit people into an unproven company. * The risk --- particularly, the opportunity cost --- of burning 2-4 years of career path on a startup (being the CEO of a failed startup is not a resume bonus for a subsequent engineering role). * The increased degree of difficulty of --- and, thus, to the market, the smaller pool of people available to perform --- operating a company in its unproven riskiest first 12+N months. Geeks also apparently don't see the value the market places on the flexibility required to find the best equity comp package. Being "worth 5%" (kind of a nonsense concept, but roll with it) doesn't mean you can get it at any particular company; it just means there's a class of company wherein you might find that role.
tptacek 16y ago
Really? Then go start a company. I'm completely serious.
rexf 16y ago
Too much fear of failure is also unhealthy. See this TC piece (http://techcrunch.com/2010/10/17/japan-to-fix-your-economy-honor-your-failed-entrepreneurs/ http://techcrunch.com/2010/10/17/japan-to-fix-your-economy-h...) about Japan: > But most Japanese don’t want to take the risk of starting a business. Indeed, the social stigma and financial repercussion of failure are so great that the founders of failed businesses become social outcasts; no one will work with them again or fund them; and all too often they end up committing suicide. While I wouldn't make the case that a serial failed entrepreneur is a good thing, I would make the case that practice makes perfect. A person who fails at startup #1 would ideally learn from their mistakes for startup #2.

by gamble 16y ago

wdewind 16y ago

We like to say there is no stigma associated with a failed startup. Quite frankly I think that's bullshit. It may not hurt your chances of getting hired again as an engineer because you will likely have great experience from it. But you will have just spent months/years promising people you were going to improve an aspect of their life (through your business solving their problems, or maybe through getting more financial independence for your family etc.), and you were unable to do so. In many cases you've been trusted with extremely important things. You will have been trusted with a leadership role (in society, not just a company), and you will have failed, regardless of the value of the experience. Startups don't really get traction (outside of social) without serious contributions: being involved in solving hair on fire problems. So, let's say you're starting a banking/commerce related startup like PayPal, and some fraud happens on your network which ultimately leads to it failing to gain trust (though it is relatively secure) and thus failing to gain traction and failing. Sure, you may handle the breach well, and go on to have a high paying job as a security analyst or something based on your specific experience. But good luck trying to raise capital again. Good luck getting your friends and family to support you and take you seriously when you're going down your second "I'm quitting my job to give everything I have to a startup." Good luck recruiting engineers who know you as the ex-CEO of failed startup XYZ, etc.

mechanical_fish 16y ago
I worked for a startup that failed. My impression is that the founders were never quite the same. It can take a huge emotional toll, especially if you're in the business with your friends. Around here we take pains to emphasize the bright side of failure, but that's because nobody needs to be coached in how to mourn. Mourning comes naturally. It is carrying on in the face of negative feedback from the world that takes practice and coaching and teamwork.
- swombat 16y ago
  I was just about to reply something along those lines. Failing at your own startup is a bit like burying a child. You start with all these dreams of a bright future, and one day you find yourself facing the stark reality that it just didn't work out, that there's nothing you can do anymore to change that, and that basically the last X years of your life, where you sacrificed anything, were pretty much for nothing. "Well, at least I learned a lot!" is very little consolation in that context. It's a pretty fucking tough time to go through, burying your startup. I've been there, and hell, I'll probably get there again some day, but it's not the kind of thing that you go through without after-effects. As a startup employee, you're a bit like that neighbour who watches the previously happy couple tear each other apart and finally divorce. My, ain't it tough for them, geez, I hope it never happens to me. As the founder, you're right in the middle, ripping your dreams to bits. And the best part is, after all that, people still expect you to pick yourself up and do it all again! Edit: I suppose I'm being a bit melodramatic here, as pointed out by the two responses. That said, I do think that shutting down your failed startup that you poured your dreams into is a deeply demoralising experience. Character-building stuff, I think they call it, when trying to cheer you up.
  - tptacek 16y ago
    Guys, I helped blow up a startup in '01 that I started in early '99. At our peak we had over 50 people. I'm also a father of two, and I absolutely assure you that startup detonation is going to be nothing whatsoever like "burying a child". The notion that company failures are "mourned" by founders is what prompts head-explodey threads about what "fair" is for founder equity comp. The reality is a lot simpler. The market simply values a lot of stuff that geeks don't pay attention to, including: * The initiative to start a company and deal with all the personal, financial, and (importantly) logistical drama that comes with doing that. * The various forms of capital (financial, relationship, intellectual) founders bring to the critical first 12 months of the company. * The ability to recruit people into an unproven company. * The risk --- particularly, the opportunity cost --- of burning 2-4 years of career path on a startup (being the CEO of a failed startup is not a resume bonus for a subsequent engineering role). * The increased degree of difficulty of --- and, thus, to the market, the smaller pool of people available to perform --- operating a company in its unproven riskiest first 12+N months. Geeks also apparently don't see the value the market places on the flexibility required to find the best equity comp package. Being "worth 5%" (kind of a nonsense concept, but roll with it) doesn't mean you can get it at any particular company; it just means there's a class of company wherein you might find that role.

tptacek 16y ago

Really? Then go start a company. I'm completely serious.

rexf 16y ago

Too much fear of failure is also unhealthy. See this TC piece (http://techcrunch.com/2010/10/17/japan-to-fix-your-economy-honor-your-failed-entrepreneurs/ http://techcrunch.com/2010/10/17/japan-to-fix-your-economy-h...) about Japan: > But most Japanese don’t want to take the risk of starting a business. Indeed, the social stigma and financial repercussion of failure are so great that the founders of failed businesses become social outcasts; no one will work with them again or fund them; and all too often they end up committing suicide. While I wouldn't make the case that a serial failed entrepreneur is a good thing, I would make the case that practice makes perfect. A person who fails at startup #1 would ideally learn from their mistakes for startup #2.