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Everyone knows startups are not the optimal economically rational way to make money. But to an entrepreneur, living off 6% muni bond interest is profoundly unin
by fearless 14y ago
Everyone knows startups are not the optimal economically rational way to make money. But to an entrepreneur, living off 6% muni bond interest is profoundly uninteresting, and dare I say soul crushing.
Repeat after me: If you think it's only about the money, you're missing the point.
And even if it is all about the money, most 25 year olds would jump at a 1% chance to make $10 million over a $100% chance to make $200K. Not mathematically rational, but if everyone was rational there would be no outliers.
- sukuriant 14y agonitpick: It's a loooooooooot less than 1%
- fearless 14y agoSource? I've seen data pegging startup failure rates anywhere between 50-90%, but I've never seen a credible source claim that over 99% fail. Mathematically, no investor would be able to stay in business if 99% of their investments fail. I'm guessing failure rates for startups that have funding or bootstrap through revenue are closer to 75%.
- Timothee 14y agoThe thing as always is how you define failure and success. Do all the founders of a startup that is considered a success make $10M? Of course not. In my opinion, that's where the "it's a lot less than 1%" might come from.
- dredmorbius 14y agoIt's not that 99% fail, it's that well over 99% of participants fail to hit a $1m payout. Top founders and early VC, as well as key executive hires, may win. For staff, including early engineering hires, "a good year" is a more likely outcome, after 2-6 years, or more, of sweat equity. Payout of 5-6 figures.
- fearless 14y agoAssuming this is referring to founders. If you're an employee, you're the engineer making $100K in OP's comment.
- potatolicious 14y ago> "If you're an employee, you're the engineer making $100K in OP's comment." Except when you're not. I can't count how many times people I've met have been suckered into taking substantial pay cuts for not a lot of equity. It's a real facepalm moment - what do you mean you're giving up $40K+ a year in salary. Did you know that even if your startup hits all of its wildest dreams you'll cash out for $80-100K after about 5 years? How in the world did that math ever make sense?! I flat out refuse to talk to any founders that try to swindle people like this. Either put more equity on the table or pay me market. Quit relying on a tired lie.
- noname123 14y agoBetter way to make money is to take out a personal loan for 100K, same opportunity cost of two years of programmer-salary on startups. Buy out of the money options on small-cap pharmacuetical facing FDA decisions, you have the ability to also make $10 million overnight with 30% success. Go for insider-tips to max out on your success.
- dreamdu5t 14y agoTell me more.
- arbuge 14y agoWouldn't the insider tips be illegal insider trading?
- Alex3917 14y agoIANAL, but I don't think it would in this case. Insider trading generally applies to using private information held by the company. But in this case what you're looking for is information from the CRO or FDA.
- the_cat_kittles 14y agoIs this... legit? or was it ever?
- redschell 14y agoWow, I had no idea Mathew Martoma frequented HN.
- waterlesscloud 14y agoA scheme similar to this is why I was reading medical and science journals in the late 90s for background knowledge, then scouring the pink sheets for applicable companies. In the end, the hits I had were more or less luck, though. And on microscopic levels of investment, so I didn't get rich.
- dennisgorelik 14y agoThat sounds like the beginning of typical amateur trader career that ends up with 90+% probability in losing all invested money.
- sayemm 14y agoMaybe the rational way to play the game then is to make that $200K, then stretch your reach and make $1M, and so on... until you've taken care of the money problem. Then that's when you're ready to start taking shots at the big opportunities, without being motivated by money or being held back by it.
- kloncks 14y agoI would argue it's easier to go all with a smaller hand.
- sayemm 14y agoEasy, but a lot higher-risk. It takes money, resources, and connections to actually do big things, and past wins improve your execution ability and chances of success. But prescient market timing greatly skews the odds in your favor and gives you a huge edge too -- I think that's apparent in all the startup successes that started off with a small hand.
- joonix 14y agoThe problem is by the time you've saved up $200k, most people are committed to a certain lifestyle based on their annual income. They're generally in their 30s or older, married, couple of cars, kids in school, mortgage, used to spending $X/yr on a vacation, etc etc. And, they've worked so hard to save up that $200k that it's unlikely they burn it to fund living expenses while they work on a startup. Most entrepreneurs (generally, not just tech) are in fact in their 40s-50s. Well established professionals with good relationships and skills. Thing is they are usually doing it with Other People's Money, not their nest egg.
- sayemm 14y agoI don't think we're talking about "saving up $200K", at least I wasn't at all. Instead build and grow a profitable business to achieve that, not as ambitious as a "startup" but also nowhere near as risky. You're still an entrepreneur either way, just learning to crawl before you walk, so to speak.