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This essay highlighted something for me, you actually end up having a 2x2 matrix for "work for" vs "invest in" and "startup" vs "non-startup." For example, a c

by gfodor 14y ago

This essay highlighted something for me, you actually end up having a 2x2 matrix for "work for" vs "invest in" and "startup" vs "non-startup." For example, a certain person may try increasing their wealth by investing in startups, but prefer working in a non-startup. Or another person may prefer investing in non-startups (safe, dividend paying stocks or bonds), but try increasing their wealth by working for startups. For people with talent in creating products, best to focus their investing in safe, low maintenance non-startup investments and their wealth creation in working for startups. For people who have access to capital and a knack for choosing winners, they should work for non-startups (or philanthropy, or whatever, since they are probably already fairly wealthy) and invest in startups they think can win. For the really talented, who both know a thing or two about building products, and also can pick winners, then you should work for a startup that invests in startups. See: pg.

nodemaker 14y ago
Yes. Every startup guy must save and invest in traditional stocks to mitigate risk. One other investment that a startup guy should consider is investing time into building good a freelancing business as a side business from their startup.
dchichkov 14y ago
Your math is looking wrong. Because working in a startup is an investment.
- gfodor 14y ago
  Obviously I meant investment in the traditional sense, the deployment of capital with the expectation of yield and preservation of principal. Working for a startup is an "investment" in the figurative sense, since you are trading your time for equity instead of cash, but what I meant here was literally putting money into some asset or security to increase your wealth or income.
  - dchichkov 14y ago
    What I meant is that there is no 2x2 matrix like this. You can: work for/be a founder. And you can invest. There are no 'figurative sense investments'. You can't 'invest time'. Nobody cares about your time. You can only invest money [or hours * your market rate, which is money].
    - gfodor 14y ago
      I think you are just repeating my point and misunderstood my original description. There are people who invest in and work for startups, people who invest in and work for non-startups, people who invest in startups and work for non-startups, and people who invest in non-startups and work for startups. The interplay between time and money and risk and growth with these combinations became clearer to me because of this post.
      - dchichkov 14y ago
        There are founders [owners] and investors. Fact that there are people who 'work for' startup is irrelevant to the interplay between the investment risk/return. True, one can be not-a-founder and work for startup. But this person would be just working for salary, and hopefully at market rate. So it is irrelevant to the investment risk/return equation. Now if one is not working at MARKET RATE - here we have some muddy waters. Because this person would be essentially making a monthly investment. This investment would likely go towards COMMON [not restricted] stocks, WITH vesting/cliff, with NO CAP. If this is the case, one can just assume that startup would have an angel investor doing a monthly investment on these terms. This would go into risk/return equation. Again fact that somebody is working is irrelevant to risk/return. That's why I've said that your 2x2 matrix doesn't make sense. Now, you can replace 'work for' with 'founder' and it would make sense. And by the way, if you read the original pg article, he doesn't mention people who 'work for' startups at all. He is talking about founders and VCs.
        gfodor 14y ago
        Yeah when I said "work for" I was referring to founders or those working for significant equity.
pcwalton 14y ago
Most people can't just invest in startups. You need to be an accredited investor, which rules out most people who haven't had a liquidity event or are independently wealthy. The restrictions on what your net worth needs to be are here: http://startuplawyer.com/startup-law-glossary/accredited-investor http://startuplawyer.com/startup-law-glossary/accredited-inv...
- gfodor 14y ago
  Right, I specified that when I said they were already likely wealthy. The point being however that even once you have had a liquidity event, it might not make sense to invest in startups, it might make sense to build wealth via another startup, but reserve your capital for less risky investments. I think there's a tendency for founders who have had an exit to immediately transform into angel investors. But, this only makes sense if you have a knack for picking winning ideas and identifying founder talent, which is probably only somewhat correlated with, if at all, with what is necessary to be successful at building a startup yourself.
- alexatkeplar 14y ago
  Accredited investor rules only apply to US and Canadian companies. It's possible to angel invest in companies in the rest of the world without being a 1%er - in Europe at least it's very common to angel invest in friends' small businesses/startups.

by gfodor 14y ago

nodemaker 14y ago

Yes. Every startup guy must save and invest in traditional stocks to mitigate risk. One other investment that a startup guy should consider is investing time into building good a freelancing business as a side business from their startup.

dchichkov 14y ago

Your math is looking wrong. Because working in a startup is an investment.

gfodor 14y ago
Obviously I meant investment in the traditional sense, the deployment of capital with the expectation of yield and preservation of principal. Working for a startup is an "investment" in the figurative sense, since you are trading your time for equity instead of cash, but what I meant here was literally putting money into some asset or security to increase your wealth or income.
- dchichkov 14y ago
  What I meant is that there is no 2x2 matrix like this. You can: work for/be a founder. And you can invest. There are no 'figurative sense investments'. You can't 'invest time'. Nobody cares about your time. You can only invest money [or hours * your market rate, which is money].
  - gfodor 14y ago
    I think you are just repeating my point and misunderstood my original description. There are people who invest in and work for startups, people who invest in and work for non-startups, people who invest in startups and work for non-startups, and people who invest in non-startups and work for startups. The interplay between time and money and risk and growth with these combinations became clearer to me because of this post.
    - dchichkov 14y ago
      There are founders [owners] and investors. Fact that there are people who 'work for' startup is irrelevant to the interplay between the investment risk/return. True, one can be not-a-founder and work for startup. But this person would be just working for salary, and hopefully at market rate. So it is irrelevant to the investment risk/return equation. Now if one is not working at MARKET RATE - here we have some muddy waters. Because this person would be essentially making a monthly investment. This investment would likely go towards COMMON [not restricted] stocks, WITH vesting/cliff, with NO CAP. If this is the case, one can just assume that startup would have an angel investor doing a monthly investment on these terms. This would go into risk/return equation. Again fact that somebody is working is irrelevant to risk/return. That's why I've said that your 2x2 matrix doesn't make sense. Now, you can replace 'work for' with 'founder' and it would make sense. And by the way, if you read the original pg article, he doesn't mention people who 'work for' startups at all. He is talking about founders and VCs.
      - gfodor 14y ago
        Yeah when I said "work for" I was referring to founders or those working for significant equity.

pcwalton 14y ago

Most people can't just invest in startups. You need to be an accredited investor, which rules out most people who haven't had a liquidity event or are independently wealthy. The restrictions on what your net worth needs to be are here: http://startuplawyer.com/startup-law-glossary/accredited-investor http://startuplawyer.com/startup-law-glossary/accredited-inv...

gfodor 14y ago
Right, I specified that when I said they were already likely wealthy. The point being however that even once you have had a liquidity event, it might not make sense to invest in startups, it might make sense to build wealth via another startup, but reserve your capital for less risky investments. I think there's a tendency for founders who have had an exit to immediately transform into angel investors. But, this only makes sense if you have a knack for picking winning ideas and identifying founder talent, which is probably only somewhat correlated with, if at all, with what is necessary to be successful at building a startup yourself.
alexatkeplar 14y ago
Accredited investor rules only apply to US and Canadian companies. It's possible to angel invest in companies in the rest of the world without being a 1%er - in Europe at least it's very common to angel invest in friends' small businesses/startups.