5 ms·

Paths to $5M for a startup founder

104 points by revorad 15y ago

alain94040 15y ago
Interesting, but just like Jason's criticism of the startup genome project, I'd say optimize for what is most likely to lead to success. Do you need a co-founder? Yes, if you find a great one who adds value. It's all about creating value.
nhashem 15y ago
So many successful startups began as two or three good friends kicking around some ideas at dinner or drinks, or relaying some spike of insight they had during a seemingly insignificant conversation. Whenever I think I have The Next Great Idea, I know my first thought is, "man, I could be on to something here, let me talk to Joe about this, I bet he'd love to work together with me to see if this would work!" It is is definitely NOT, "oh well I'd better just go ahead and execute and get a product out and get customers all by myself, and then talk to Joe and cut him in for less equity, because I want to set myself up for needing only a $17MM acquisition to make $5MM." Now none of me or Joe's Next Great Ideas have ever panned out, so maybe we're doing it wrong. But I still don't think trying to optimize for a payout when considering co-founders is doing it right, either.
- redsymbol 15y ago
  I believe it depends on the personality of the entrepreneur. For some, working together with others is much more likely to produce success. Richard Branson seems to be in this category, and it sounds like you are too. At the other extreme, some founders' personalities are such that they almost have no choice but to build it completely on their own - a "lone ranger", as a investor I once knew put it. My favorite example of this is Felix Dennis, founder of Dennis Publishing (which publishes Maxim, and many other magazines). (That's not to say lone rangers build their company alone; if that's ever been done, I don't know about it! But the additional key people are employees, not founders, and may not even get equity.) Aaron (edit: grammar)
- briggsbio 15y ago
  I don't think this post was advocating screwing anyone. If you and Joe come up with an idea over drinks and decide to pursue it then splitting equity should be based on involvement/commitment/investment. However, onboarding multiple cofounders and splitting equity equally for an idea that you just had and has barely made it "off the napkin" (or that you've worked on for a while) is probably a bad idea. This post is really just trying to get people to "consider the maths" of startup equity for various structures and it's impact on your "take." I started a project with 6 guys (yes, 6) and cut everything equally. But it shouldn't have been an equal split, and thinking about the long-term dilution of multiple rounds and share of possible exit (discounted for execution risk, among other risks), it became a drag on my motivation. Which then made me mad at myself for getting influenced by the monetary aspects of the project, and a vicious cycle ensued. Needless to say, the project failed and we never got close to launch and disbanded. So this is an important post, and extremes should be avoided (Zuckerberg on one end, open-source on the other - is that a good spectrum?).
pitdesi 15y ago
pg's take: http://www.paulgraham.com/startupmistakes.html http://www.paulgraham.com/startupmistakes.html 1. Single Founder Have you ever noticed how few successful startups were founded by just one person? Even companies you think of as having one founder, like Oracle, usually turn out to have more. It seems unlikely this is a coincidence. What's wrong with having one founder? To start with, it's a vote of no confidence. It probably means the founder couldn't talk any of his friends into starting the company with him. That's pretty alarming, because his friends are the ones who know him best. But even if the founder's friends were all wrong and the company is a good bet, he's still at a disadvantage. Starting a startup is too hard for one person. Even if you could do all the work yourself, you need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong. The last one might be the most important. The low points in a startup are so low that few could bear them alone. When you have multiple founders, esprit de corps binds them together in a way that seems to violate conservation laws. Each thinks "I can't let my friends down." This is one of the most powerful forces in human nature, and it's missing when there's just one founder.
- dstein 15y ago
  Can anyone give some examples of big companies that were solo founders? I think Dropbox was.
  - cheez 15y ago
    SAS?
  - sskates 15y ago
    Drew found a cofounder before doing YC. Can't think of any truly one man operations off the top of my head, although Zuckerberg was almost running the entire show at Facebook.
  - Humourisok 15y ago
    this is exactly the idea: as a single founder you can cash the same amount as a small company
  - 15y ago
ubasu 15y ago
Previous discussion: http://news.ycombinator.com/item?id=1408564 http://news.ycombinator.com/item?id=1408564
Androsynth 15y ago
The only conclusion he draws in this article is not to take on a third founder immediately, everything else is just numbers and showing what happens in the typical acquisitions all the way out to the extremes. He's not advocating single founder startups, stop the pointless arguments. The most interesting part: "if you raise a third round (or even a fourth), that pushes the needed sale price up further. If you're at 10% founder share with two co-founders, you'd need a $100M exit to get your $5M." Yikes.
dgunn 15y ago
I think it's very useful to actually see, in numeric format, a continuum of possibilities. I think it’s wrong to create a blanket rule of, “every great startup shall have >1 founder” as some projects simply won’t need more than one. That said, it’s also smart not to dilute unnecessarily. If you actually need a larger team, I say get a larger team. If not, do it yourself. Either way, it’s a decision that should be made rationally, not because you read an article that said you’ll fail without a buddy.
dreamdu5t 15y ago
That many successful startups have multiple founders does not mean that multiple founders are required for success, or a recipe for it.
sayemm 15y ago
Interesting... this was posted a year ago and was also discussed on HN before too. Anyhow, this combined with his post on the startup career path (http://www.gabrielweinberg.com/blog/2010/11/are-you-in-a-startup-career-path-or-are-you-one-and-done.html http://www.gabrielweinberg.com/blog/2010/11/are-you-in-a-sta...) are two of the very best pieces of advice you're going to get IMO. @yegg is the man and his posts always deliver.
catilac 15y ago
I don't think the point is to be a single founder, but to think hard before bringing someone else onboard. Personally, I'd prefer to have a co-founder, but only one.
dlevine 15y ago
I think that the way to succeed is NOT to fuck over your co-founder. I know of places where that has happened, and it is not a happy situation. You don't really want to optimize for the present, but on building connections that you will keep for the rest of your life. It is super-easy to throw someone under the bus so that you do better now, and a lot harder to make sure that you all make a bit less but continue to work together in the future. Don't be short-sighted.

104 points by revorad 15y ago

Interesting, but just like Jason's criticism of the startup genome project, I'd say optimize for what is most likely to lead to success. Do you need a co-founder? Yes, if you find a great one who adds value. It's all about creating value.

nhashem 15y ago

So many successful startups began as two or three good friends kicking around some ideas at dinner or drinks, or relaying some spike of insight they had during a seemingly insignificant conversation. Whenever I think I have The Next Great Idea, I know my first thought is, "man, I could be on to something here, let me talk to Joe about this, I bet he'd love to work together with me to see if this would work!" It is is definitely NOT, "oh well I'd better just go ahead and execute and get a product out and get customers all by myself, and then talk to Joe and cut him in for less equity, because I want to set myself up for needing only a $17MM acquisition to make $5MM." Now none of me or Joe's Next Great Ideas have ever panned out, so maybe we're doing it wrong. But I still don't think trying to optimize for a payout when considering co-founders is doing it right, either.

redsymbol 15y ago
I believe it depends on the personality of the entrepreneur. For some, working together with others is much more likely to produce success. Richard Branson seems to be in this category, and it sounds like you are too. At the other extreme, some founders' personalities are such that they almost have no choice but to build it completely on their own - a "lone ranger", as a investor I once knew put it. My favorite example of this is Felix Dennis, founder of Dennis Publishing (which publishes Maxim, and many other magazines). (That's not to say lone rangers build their company alone; if that's ever been done, I don't know about it! But the additional key people are employees, not founders, and may not even get equity.) Aaron (edit: grammar)
briggsbio 15y ago
I don't think this post was advocating screwing anyone. If you and Joe come up with an idea over drinks and decide to pursue it then splitting equity should be based on involvement/commitment/investment. However, onboarding multiple cofounders and splitting equity equally for an idea that you just had and has barely made it "off the napkin" (or that you've worked on for a while) is probably a bad idea. This post is really just trying to get people to "consider the maths" of startup equity for various structures and it's impact on your "take." I started a project with 6 guys (yes, 6) and cut everything equally. But it shouldn't have been an equal split, and thinking about the long-term dilution of multiple rounds and share of possible exit (discounted for execution risk, among other risks), it became a drag on my motivation. Which then made me mad at myself for getting influenced by the monetary aspects of the project, and a vicious cycle ensued. Needless to say, the project failed and we never got close to launch and disbanded. So this is an important post, and extremes should be avoided (Zuckerberg on one end, open-source on the other - is that a good spectrum?).

pitdesi 15y ago

pg's take: http://www.paulgraham.com/startupmistakes.html http://www.paulgraham.com/startupmistakes.html 1. Single Founder Have you ever noticed how few successful startups were founded by just one person? Even companies you think of as having one founder, like Oracle, usually turn out to have more. It seems unlikely this is a coincidence. What's wrong with having one founder? To start with, it's a vote of no confidence. It probably means the founder couldn't talk any of his friends into starting the company with him. That's pretty alarming, because his friends are the ones who know him best. But even if the founder's friends were all wrong and the company is a good bet, he's still at a disadvantage. Starting a startup is too hard for one person. Even if you could do all the work yourself, you need colleagues to brainstorm with, to talk you out of stupid decisions, and to cheer you up when things go wrong. The last one might be the most important. The low points in a startup are so low that few could bear them alone. When you have multiple founders, esprit de corps binds them together in a way that seems to violate conservation laws. Each thinks "I can't let my friends down." This is one of the most powerful forces in human nature, and it's missing when there's just one founder.

dstein 15y ago
Can anyone give some examples of big companies that were solo founders? I think Dropbox was.
- cheez 15y ago
  SAS?
- sskates 15y ago
  Drew found a cofounder before doing YC. Can't think of any truly one man operations off the top of my head, although Zuckerberg was almost running the entire show at Facebook.
- Humourisok 15y ago
  this is exactly the idea: as a single founder you can cash the same amount as a small company
- 15y ago

ubasu 15y ago

Previous discussion: http://news.ycombinator.com/item?id=1408564 http://news.ycombinator.com/item?id=1408564

Androsynth 15y ago

The only conclusion he draws in this article is not to take on a third founder immediately, everything else is just numbers and showing what happens in the typical acquisitions all the way out to the extremes. He's not advocating single founder startups, stop the pointless arguments. The most interesting part: "if you raise a third round (or even a fourth), that pushes the needed sale price up further. If you're at 10% founder share with two co-founders, you'd need a $100M exit to get your $5M." Yikes.

dgunn 15y ago

I think it's very useful to actually see, in numeric format, a continuum of possibilities. I think it’s wrong to create a blanket rule of, “every great startup shall have >1 founder” as some projects simply won’t need more than one. That said, it’s also smart not to dilute unnecessarily. If you actually need a larger team, I say get a larger team. If not, do it yourself. Either way, it’s a decision that should be made rationally, not because you read an article that said you’ll fail without a buddy.

dreamdu5t 15y ago

That many successful startups have multiple founders does not mean that multiple founders are required for success, or a recipe for it.

sayemm 15y ago

Interesting... this was posted a year ago and was also discussed on HN before too. Anyhow, this combined with his post on the startup career path (http://www.gabrielweinberg.com/blog/2010/11/are-you-in-a-startup-career-path-or-are-you-one-and-done.html http://www.gabrielweinberg.com/blog/2010/11/are-you-in-a-sta...) are two of the very best pieces of advice you're going to get IMO. @yegg is the man and his posts always deliver.

catilac 15y ago

I don't think the point is to be a single founder, but to think hard before bringing someone else onboard. Personally, I'd prefer to have a co-founder, but only one.

dlevine 15y ago

I think that the way to succeed is NOT to fuck over your co-founder. I know of places where that has happened, and it is not a happy situation. You don't really want to optimize for the present, but on building connections that you will keep for the rest of your life. It is super-easy to throw someone under the bus so that you do better now, and a lot harder to make sure that you all make a bit less but continue to work together in the future. Don't be short-sighted.