Comment by lordleft
6 years ago
The simple truth is that working for the equity of an unproven start-up is a gamble, and statistically unlikely to pay off. And sadly more and more start-ups are undermining access to equity in shady ways. Not that one should never work for a start up on the hopes it breaks big, but we should also never forget that the successes are outliers, by a massive margin.
Just understand the trade-offs of your decision and the probabilities involved with your decision.
> statistically unlikely to pay off
> probabilities involved with your decision
While this is a good general approach to life IMHO as well — if you mean "be rational, not just emotional" and "work on your cognitive biases, seek objectivity" — it might also prove terribly counterproductive in this context.
It would take a book or five but briefly:
- you just can't use statistics when they say "95% fail", otherwise you just don't do startups, ever. With that mindset, joining an established company is more likely to "succeed" for you and maximize serenity.
- another stat for you: most entrepreneurs fail "about twice" before making it, i.e. you'll probably fail 1-3 times for sure before entering the 5% of those who create a profitable business. Trick #1, thus: you can roll the dice several times (consider 2-5 years per "real try").
- most valuable ideas were either not identified (rarely) or not well executed (often) before someone eventually nails a product. You thus iterate quickly on the market (MVP, feedback, lean cycles, etc) to find your best fit curve, to hone in on the product that works. Chances are you'll find a local minimum, not "the best", you'll pivot, you'll reconsider, you'll maybe focus entirely on a subsystem, a 'feature' become 'product' — think how Docker, the company, appeared after the same name product.
The reality is that a "fast scaling startup" a la California is rare and a moonshot most often — unicorns and all that — but a diligently conducted, ground, sustained effort to make a business growing organically to reach sustainability for you and a few others in 2-5 years is a realistic goal (but all things considered, e.g. probably not on your first try, likely 10 years after you began for the first time).
I don't want to claim that it's easy to create a business, it's by far harder than working the jobs in most cases; but SMBs make up anywhere from 80 to 90% of our economies, they're the real bread and butter of our collective wealth, and these 'small' entrepreneurs are our true heroes. Not many of them make it big, and that's the 'gamble' you speak of, but it's not the only way, nor is it at all required to go down that path.
You just can't use statistics when they say "95% fail", otherwise you just don't do startups, ever. With that mindset, joining an established company is more likely to "succeed" for you and maximize serenity.
Actually, you certainly can do that. Most people do. And depending on what you're optimizing for, it seems pretty rational to me.
Another stat for you: most entrepreneurs fail "about twice" before making it, i.e. you'll probably fail 1-3 times for sure before entering the 5% of those who create a profitable business. Trick #1, thus: you can roll the dice several times (consider 2-5 years per "real try").
Yes, but that's for founders, not employees. If "success" here is defined as "made more in risk-adjusted income as early-stage startup employee than I would have made as big tech company employee", I doubt any early stage employees are "successful". Every failed startup you participate in (2-5 years of your life gone) adds to the opportunity cost "debt" you have to make up once one succeeds.
As I see it, if it comes down to such criteria to decide which path you'll take — i.e. you're in tech for the money — then it makes no sense to dabble in startups. Statistics clearly don't lie in this regard.
What I meant however was a bit meta: those who are deeply cut for entrepreneurship and startups are not motivated by money first or even at all; they thus don't and shouldn't care about statistics aiming at maximizing personal benefit... to a founder, "personal benefit" is more about getting things done, creating the dream. They'd rather optimize for long-term success (the kind that's much harder to take away from you, that creates real value).
Wealth, personal or collective, is but a consequence of a successful economic endeavor. As an employee, you'd choose to work for a startup because there's something in it that corporations money can't buy for you. There's no bet if you already believe in the work, you will get what you want every single day on the job. Different values, different goals, different rewards for different people I guess.
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- another stat for you: most entrepreneurs fail "about twice" before making it, i.e. you'll probably fail 1-3 times for sure before entering the 5% of those who create a profitable business. Trick #1, thus: you can roll the dice several times (consider 2-5 years per "real try").
I've never heard of this stat. Seems like a case of survivorship bias more than anything else.
For every entrepreneur that "made it" on their third try, there are millions who had to declare bankruptcy and set their career back years because their ventures didn't work out.
So the exact statistic is indeed about "entrepreneurs who make it", those who eventually create a successful business, how many time did they have to try?
Average is ~3 times, and your typical successful business (across sectors) takes ~2 years in "survival mode" (most don't make it past that mark), then 3 more (~5Y total) before things may feel "sustainable", cruising.
So indeed, we are not all considering those who don't make it in this picture. Creating a business is hard, very hard.
Small business does not equate to a startup. It's not nearly as huge of a gamble starting a small business as most aren't pursing new ideas in unproven markets, and trying to find product market fit/scale rapidly.
You're right that "startups" are harder statistically I'd suppose, more moonshots.
Still these numbers are general, not tech specific.
The mindset in entrepreneur circles:
- failing is ok. Happens to most. Those who eventually succeed try again, and again.
- you have about 2 years of surviving hell to overcome first
- going alone (by design) lowers your chances of success; hiring gets you in the right growth mindset, strategy (eg most people don't charge enough in the beginning)
Honestly, it's almost masochistic when you've failed twice yet keep trying. Obsessive. You could but just won't fold, get a regular job. This is what it takes.
That's why I said the money is far from the first goal of those who succeed. At best that kind of money is 10 years later when you first try. You'll suffer so much and statistically would probably do better at a regular job. You'll be broke often. Stressed and uncertain. Unable to make promises in your personal life to a certain extent. So why?.. Doesn't make sense from a utility standpoint. You do it because that's what you do, like artists or athletes. This is the general profile of entrepreneurs who make it, and age of success is 45-55 on average.
I mean this is really not talked about more frequently. At this point, with all the shady tactics that most startups now pull, it would appear that only an idiot would really want to be swindled this way. Furthermore, this is not something that will go away since with less IPOs actually being successful and a mature tech market, hoarding the most value you can from your company seems to be in vogue these days.
It's the leading response on HN to the topic, so I'd say it's talked about frequently.
> Furthermore, this is not something that will go away since with less IPOs actually being successful and a mature tech market
You’re implying that less successful IPOs mean less liquidity options for private company employees. That increasingly isn’t the case as private markets opens up to sales of startup equity. Success is no longer the same as an IPO and the number of companies that are becoming successful and the cumulative value in those companies are both increasing