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This article makes little sense. It claims that the average cost to launch a startup is $30k - approximately 1 year of savings for a software engineer working f

This article makes little sense. It claims that the average cost to launch a startup is $30k - approximately 1 year of savings for a software engineer working frugally. The article doesn't even begin to support it's claim that family with money is necessary - at most, it seems one needs a frugal lifestyle and a middle class job.

notacoward 11y ago
I think you just made the authors' point. Sure, that's one year of savings for a software engineer - but what percentage of people are software engineers? What's the family-income profile of those who become software engineers? You can't refute the authors' claim by providing an example that exactly conforms with it.
- yummyfajitas 11y ago
  The point is that the average business can be started with little more than the savings of a middle class American? 1 year of savings for a software engineer might be 2 years of savings for a person at the median income of $50k - my brother is below the median and just spend about that much on his wedding. I used "software engineer" as an example because it applies to most of us on HN, that's all.
  - notacoward 11y ago
    Your math is off. Let's say software engineers make twice median income - probably low, but it simplifies things. Twice the income means way more than twice the savings rate. In fact, if we take $100K/year of income and subtract $30K/year of savings, we're still well above median income. That means the median-income earner with the same cost of living would be falling behind to the tune of $20K/year. And no, factoring in taxes doesn't change anything significant. Factoring in the costs of home ownership might, but not in the way you'd like. The fact is that a median-income earner might be able to save some sliver of their pay, while a software engineer can save that same sliver plus darn near the entire top half. One year of software-engineer savings is several years' worth of median-income savings. That's a huge difference in terms of willingness to assume risk. Let's take two people who have each worked seven years saving $30K/year before spending $30K on a business that takes two years to fail. The software engineer could devote themselves full time and still come out with $180K (not counting interest) in their retirement account. The median-income earner can devote only spare time because $30K isn't even enough to live on for two years, and at the end his retirement account is wiped out. One risk is a trivial one that most people would accept. The other is a yawning chasm. As the authors said, willingness to risk that much is strongly correlated with already being pretty wealthy. There's only one word to describe the idea that risking $30K is no big deal. That word is "privilege" and you should check it.
    - yummyfajitas 11y ago
      I'm not disputing that it's easier to save $30k if you earn $100k than if you earn $60k - that's just arithmetic. I'm saying that $30k is easily within the reach of a software engineer and also reasonably within the reach of a used care salesman earning far less (e.g., my brother), it just takes more time. Also, $30k is easily enough to live on for 2 years, provided you are willing to reduce consumption. Among other things, there are lots of folks consumption below $15k/year (e.g., college students if you ignore the cost of college, some illegal immigrants in regions where they don't get welfare). Most people simply aren't willing to reduce consumption to college student levels, but that's a matter of willingness rather than ability.
      - notacoward 11y ago
        > it just takes more time That's the key. Willingness to risk that money increases with the time it took to save it, and not just linearly. When the time increases by almost an order of magnitude, you're going to find darn few willing to risk it. > that's a matter of willingness rather than ability It doesn't matter why; the fact stands. Entrepreneurs are far more likely to come from the first and second quintiles than the more populous third through fifth. Sure, people in some parts of the country could live on $30K if they're willing to make severe sacrifices in their quality of life, but treating that as just a matter of slight degree compared to a software engineer who can still live as they please while making the same attempt seems a bit callous. At a certain level of sacrifice it's a qualitative difference between "crazy if you do" and "crazy if you don't".
        yummyfajitas 11y ago
        Yes, that's my point. Middle class and slightly upper middle class professionals, with no family support, are completely capable of starting a business. They are simply unwilling to do so. Also if living like a college student is considered to be "severe sacrifices", does this mean that upper class kids who go to college understand and experience poverty and deprivation? And therefore, when discussing it, they don't need to "check their privilege" and can simply think back to college?
WalterBright 11y ago
Basically, it's the cost of a new car. There are lots of new cars on the road. You could buy a $500 truck like mine, and invest the rest in a startup.
unprepare 11y ago
You're forgetting opportunity cost here, which is by far the largest factor. Say you worked a 9-5 for two years saving up $30k. You reach the end of two years and youre going to quit your job, losing all of your income, and then also spend 100% of your savings right away on beginning some new business that could fail at any point? You are thinking from the perspective of someone from wealth, missing the realities that would be faced by someone actually considering starting a business without a history of even middle class wealth. Most businesses are not the kind you can start on your off time, as a side project. You cannot keep your salary, you have no investment income, or passive income of any kind. What happens when you fail? you've spent every last cent of your savings, you have no job, you have a sizeable gap in your resume, and going back to your old career means youll have to take a pay cut compared to what you were making before you left to start the business. This is a real fear that keeps many people from going out on their own. If you are from wealth on the other hand, having no savings might not be as big of a deal. You wont become homeless if you have family and friends that have the means to take you in. You wont go hungry, you can even take a few weeks to reevaluate your decisions and decide if you want to start another business with your lessons learned, or if you should return to the job market and get yourself back on your feet.
- yummyfajitas 11y ago
  You are thinking from the perspective of someone from wealth... That's quite a feat, given that I'm not from wealth at all. I've probably got more money than anyone else in my family and I've earned it mainly from salaried employment and personal investments. The opportunity costs you've described apply equally well to someone who came from wealth - resume gap, time spent not working, no job, etc. I'm not disputing that startup capital from family would be helpful. I'm disputing the article's implication that the amounts of capital needed are unavailable to regular people, or that only people from wealth can start a business.
  - unprepare 11y ago
    >I've earned it mainly from salaried employment and personal investments If investment income is a relevant part of your income stream, then congratulations - you are among the wealthiest and most financially literate of all americans. You are now someone who speaks from a position of wealth because of this. >opportunity costs you've described apply equally well to someone who came from wealth Oh really? Because when youre poor and your parents live in a one bedroom apartment and cant afford food for an extra person, maybe youve even been sending them money because they have problems keeping up with their bills and being able to eat everyday. Thats the same as a stanford grad, whose parents live nearby in a 4 bedroom plus house, can easily afford to send their children money when they need it, let alone allowing them to move back home with free room and board at any time. If you honestly dont see a difference, from the perspective of starting a business, between these two people, then we have nothing further to discuss. > or that only people from wealth can start a business. I have yet to see the article or a single commenter make this claim.
thirdtruck 11y ago
$30k might not sound like a lot, until it's your parents that are asking you for financial help and not the other way around. And that's before adding in the psychological "tax" of worrying about them. I'm not even asking for rich parents, just financially neutral ones.

notacoward 11y ago

I think you just made the authors' point. Sure, that's one year of savings for a software engineer - but what percentage of people are software engineers? What's the family-income profile of those who become software engineers? You can't refute the authors' claim by providing an example that exactly conforms with it.

yummyfajitas 11y ago
The point is that the average business can be started with little more than the savings of a middle class American? 1 year of savings for a software engineer might be 2 years of savings for a person at the median income of $50k - my brother is below the median and just spend about that much on his wedding. I used "software engineer" as an example because it applies to most of us on HN, that's all.
- notacoward 11y ago
  Your math is off. Let's say software engineers make twice median income - probably low, but it simplifies things. Twice the income means way more than twice the savings rate. In fact, if we take $100K/year of income and subtract $30K/year of savings, we're still well above median income. That means the median-income earner with the same cost of living would be falling behind to the tune of $20K/year. And no, factoring in taxes doesn't change anything significant. Factoring in the costs of home ownership might, but not in the way you'd like. The fact is that a median-income earner might be able to save some sliver of their pay, while a software engineer can save that same sliver plus darn near the entire top half. One year of software-engineer savings is several years' worth of median-income savings. That's a huge difference in terms of willingness to assume risk. Let's take two people who have each worked seven years saving $30K/year before spending $30K on a business that takes two years to fail. The software engineer could devote themselves full time and still come out with $180K (not counting interest) in their retirement account. The median-income earner can devote only spare time because $30K isn't even enough to live on for two years, and at the end his retirement account is wiped out. One risk is a trivial one that most people would accept. The other is a yawning chasm. As the authors said, willingness to risk that much is strongly correlated with already being pretty wealthy. There's only one word to describe the idea that risking $30K is no big deal. That word is "privilege" and you should check it.
  - yummyfajitas 11y ago
    I'm not disputing that it's easier to save $30k if you earn $100k than if you earn $60k - that's just arithmetic. I'm saying that $30k is easily within the reach of a software engineer and also reasonably within the reach of a used care salesman earning far less (e.g., my brother), it just takes more time. Also, $30k is easily enough to live on for 2 years, provided you are willing to reduce consumption. Among other things, there are lots of folks consumption below $15k/year (e.g., college students if you ignore the cost of college, some illegal immigrants in regions where they don't get welfare). Most people simply aren't willing to reduce consumption to college student levels, but that's a matter of willingness rather than ability.
    - notacoward 11y ago
      > it just takes more time That's the key. Willingness to risk that money increases with the time it took to save it, and not just linearly. When the time increases by almost an order of magnitude, you're going to find darn few willing to risk it. > that's a matter of willingness rather than ability It doesn't matter why; the fact stands. Entrepreneurs are far more likely to come from the first and second quintiles than the more populous third through fifth. Sure, people in some parts of the country could live on $30K if they're willing to make severe sacrifices in their quality of life, but treating that as just a matter of slight degree compared to a software engineer who can still live as they please while making the same attempt seems a bit callous. At a certain level of sacrifice it's a qualitative difference between "crazy if you do" and "crazy if you don't".
      - yummyfajitas 11y ago
        Yes, that's my point. Middle class and slightly upper middle class professionals, with no family support, are completely capable of starting a business. They are simply unwilling to do so. Also if living like a college student is considered to be "severe sacrifices", does this mean that upper class kids who go to college understand and experience poverty and deprivation? And therefore, when discussing it, they don't need to "check their privilege" and can simply think back to college?

WalterBright 11y ago

Basically, it's the cost of a new car. There are lots of new cars on the road. You could buy a $500 truck like mine, and invest the rest in a startup.

unprepare 11y ago

You're forgetting opportunity cost here, which is by far the largest factor. Say you worked a 9-5 for two years saving up $30k. You reach the end of two years and youre going to quit your job, losing all of your income, and then also spend 100% of your savings right away on beginning some new business that could fail at any point? You are thinking from the perspective of someone from wealth, missing the realities that would be faced by someone actually considering starting a business without a history of even middle class wealth. Most businesses are not the kind you can start on your off time, as a side project. You cannot keep your salary, you have no investment income, or passive income of any kind. What happens when you fail? you've spent every last cent of your savings, you have no job, you have a sizeable gap in your resume, and going back to your old career means youll have to take a pay cut compared to what you were making before you left to start the business. This is a real fear that keeps many people from going out on their own. If you are from wealth on the other hand, having no savings might not be as big of a deal. You wont become homeless if you have family and friends that have the means to take you in. You wont go hungry, you can even take a few weeks to reevaluate your decisions and decide if you want to start another business with your lessons learned, or if you should return to the job market and get yourself back on your feet.

yummyfajitas 11y ago
You are thinking from the perspective of someone from wealth... That's quite a feat, given that I'm not from wealth at all. I've probably got more money than anyone else in my family and I've earned it mainly from salaried employment and personal investments. The opportunity costs you've described apply equally well to someone who came from wealth - resume gap, time spent not working, no job, etc. I'm not disputing that startup capital from family would be helpful. I'm disputing the article's implication that the amounts of capital needed are unavailable to regular people, or that only people from wealth can start a business.
- unprepare 11y ago
  >I've earned it mainly from salaried employment and personal investments If investment income is a relevant part of your income stream, then congratulations - you are among the wealthiest and most financially literate of all americans. You are now someone who speaks from a position of wealth because of this. >opportunity costs you've described apply equally well to someone who came from wealth Oh really? Because when youre poor and your parents live in a one bedroom apartment and cant afford food for an extra person, maybe youve even been sending them money because they have problems keeping up with their bills and being able to eat everyday. Thats the same as a stanford grad, whose parents live nearby in a 4 bedroom plus house, can easily afford to send their children money when they need it, let alone allowing them to move back home with free room and board at any time. If you honestly dont see a difference, from the perspective of starting a business, between these two people, then we have nothing further to discuss. > or that only people from wealth can start a business. I have yet to see the article or a single commenter make this claim.

thirdtruck 11y ago

$30k might not sound like a lot, until it's your parents that are asking you for financial help and not the other way around. And that's before adding in the psychological "tax" of worrying about them. I'm not even asking for rich parents, just financially neutral ones.