Why Not To Do A Startup

I’ve been doing a lot of thinking about startups lately, and I’ve come to realize that they’re really not for most people, probably even most people who attempt them. All of the guys who are and should be doing startups write about how great they are, but I feel like the opposing viewpoint is largely glossed over. So, always the contrarian, here is why you might not want to start a startup.

For one, the mainstream media focuses almost exclusively on the outlying startups that work out extremely well. Almost every startup-related article you read in Wired or The New York Times is about some guy who started a free dating service, worked 10 hours a week on it for a year, and now collects millions from Google ads, or some 14 year old trailer-dweller who grew her MySpace layouts website into a million page views a week.

Even in Y Combinator you have a few examples of companies that went from conception to acquisition in under a year. Those happen, and your odds of that are probably far better than winning the lottery, but it’s still highly unlikely. It’s on the order of a few percent, and that’s with the YC advantage. Without it’s clearly a longshot. And just like the lottery, everyone thinks their chances are better than they really are.

In reality, startups are a lot of work over a relatively long period of time. Your most likely experience starts with 6 months to a year of working with no salary, trying to simultaneously build a product and raise some funding. Eventually you get a small angel round, which means a paycheck and some breathing room, but you’re still getting paid less than guys who break rocks with other rocks while everyone you still talk to from your business or CS program is making a six figure salary with full health and dental.

If your startup does well, you have years more of this to look forward to. Your user base grows slowly but steadily, your product improves, the competition is always nipping at your heels but never quite catches up because you’re that much better than them. Google either doesn’t release a competitor or they do and it’s more like Orkut and less like Google Maps. The self-perpetuating cycle kicks in, and you keep getting better and better, and users love you more and more.

You go through a few more funding cycles, each of which is hair-raising and takes a few years off of your life due to the stress. And after 5-7 years, you get acquired for a bundle, or if you’re really hot, maybe you IPO instead, and the 5% of the company you still own is worth so much that you’re free to sun yourself on a beach for the rest of your life if you choose.

Of course by that time, you’re 30 years old, and you’re still single because you were working 80 hours per week for the last 7 years, making any meaningful relationship impossible. You probably lost contact with most of your friends, but even if you didn’t, making an obscene amount of money tends to put a strain on relationships between you and those who didn’t. You think going in that that won’t happen to you, but it always does.

So all of the friends you have left are startup people too, but now you even have to question your relationship with those who haven’t made it yet. You’re naïve at first and think you don’t, but then the requests for funding or acquisitions or introductions start pouring in, to the point where you can’t just go grab a beer anymore without it turning into a business meeting. You’re in the club and they aren’t, and though it’s never spoken of, that dynamic is pervasive in every facet of life. From sports to poker to music to finance to acting to startups, you name the industry, and I’ll show you the bright red line separating those who’ve “made it” from those who haven’t.

So rather than buying a nice house in Hawaii and raising a family, or travelling the world with the friends you don’t have any more, what do you do? You dive right back into another startup. And if that one works out similarly well, maybe 5 years later you do it again, or maybe instead you decide to take it easy because your doctor told you that you won’t make it to 50 otherwise. So you move into angel investing or venture capital, but even that turns out to be more work and more stress than you thought going in. It doesn’t matter too much though, you’ve never bothered yourself with things like work-life balance before, so why start now? At least this time you’ve got the extra 10 hours a week needed to pick up a trophy wife and have two kids whose ballgames and ballet recitals you’ll miss until you finally retire, three years after they go off to college on your dime, only to be seen again around Christmas for the rest of their lives.

And all of that is more or less best case scenario. Meanwhile your friends from MIT went off to Google, worked 50 hours a week, got married, had kids whose ballgames and ballet recitals (well, they’re a Google employee, so maybe it’s more like chess matches and, well, chess matches, but you get the point) they had time to watch, vacationed every year on that same island in Hawaii where you would have bought a house if you weren’t too busy to, and saved up a pretty good amount of money while they were at it. They don’t have the tens or maybe even hundreds of millions of dollars that you do, but they’ve got one or two. Just enough that any more wouldn’t make them significantly happier anyway. They’ll get a summer home in Montana, or wherever else is fashionable at the time, and retire at 50 to spend their time with their grandkids.

And don’t forget, this is all if your startup succeeds. PG hopes that Y Combinator will provide enough value through guidance, connections, etc., that one day 50% of the companies they fund will succeed. That’s a lofty goal, but even if he succeeds at it, and I’ll be seriously impressed if he does, that means there’s a 50% chance your startup will fail, and you’ve burned two of the best years of your life. That’s if you were lucky enough to get selected by YC. And if you didn’t (which most startups don’t) your odds have to be significantly worse.

It wasn’t a total waste, of course, as it probably makes you more employable amongst other startups, but it’s not as valuable as just working for one for two years would have been, and you’re a hell of a lot poorer for it. And you’ve spent just enough time working for yourself that the thought of having a project manager telling you what to do with your time makes your stomach churn.

There are a number of people floating around the Valley whose lives are a pretty sad story. Every startup they joined tanked, every one they passed on went public. They went without salary for years, and even when they had one, it was pretty low. They’re 50, which in the startup world, where the saying “never fund anyone over 30″ is a practically a way of life, is ancient, and they’ve got nothing to show for it.

Even sadder are the people whose startups succeeded but still aren’t happy, because they never learned that there is more to life than making money. They’ve fallen too far into the “keeping up with the Joneses” mentality, which is extra tough because in their neighborhood the Joneses are really the Jobses. That’s easy to do in Silicon Valley, maybe easier than anywhere else in the entire world.

But I don’t think that’s the biggest problem with startups, because it’s easy enough to just opt out. There are certainly guys who run one startup, cash out, and then move on. Nobody’s putting a gun to your head and forcing you to do it again, though if you looked at the recidivism rates you wouldn’t think that. The problem is the variance. Startups tend to be fairly binary, with you making either a very large amount off of them or nothing at all. In terms of mathematical expectation, the successes are certainly large enough to make them worth it on average. But when you count in the diminishing marginal utility of money, especially as related to happiness (does $10 million in the bank make one significantly happier than $5 million? What about $100 million?) you come to realize that maybe your EV isn’t so high. In fact, if you count every success as the $2 or $3 million that is really all you need, even the ones where you make a billion, maybe it’s less than just working a job.

Don’t get me wrong there are a ton of benefits to startups other than the money, and they’re written about extensively. Working for yourself is, for many people, the only way to go. I’m one of those. And some people would never find a good work-life balance even if they worked at Taco Bell, and they might as well at least try to make a bundle. So I’m not trying to say that nobody should do a startup. Like all sweeping generalizations that wouldn’t be accurate. I’m just saying that you should think long and hard about what you really want beforehand, because it will save you (and maybe your cofounders) from a lot of heartache when you figure it out later, if you’re lucky enough to do so.

About these ads

27 Responses to “Why Not To Do A Startup”

  1. Thank you. This was a very inspiring read.

  2. Now there's some lofty assumptions : ) that all startup founders are single because they work 80 hour weeks, can't enjoy their lives while they work on their startup, can't keep friends while they work on startups, will be stressed out by casual angel investing, and so on. I'm currently living proof that a founder can work on a startup and accomplish (1), (2) and (3) above, as are both of my co-founders. Work hard, play hard is definitely accomplishable.

    You're right that there are a certain amount of people that fit into this pattern. But I've found quite a few as well that live a perfectly happy, relaxed, stress-free lifestyle after an exit, managing to stay in the game at a comfortable life-enjoying pace.

    In the end, isn't it all about the type of person you are going in?

  3. Inspiring, and a little bit sad.

  4. mattmaroon Says:

    Yes, actually. It is. And most people going in aren't the type that can pull off what you and your cofounders have.

    I'm certainly not saying that it isn't for anyone.

  5. drusenko Says:

    Then again, I've also run into my fair share of completely fucking miserable startup founders. Miserable like I've probably never seen another human being in my life, aside from third-world countries.

  6. mattmaroon Says:

    Yeah, I really don't get that either generally. If I ever get down, I just think back to when I had to work for someone else. And then I'm smiling again.

  7. Why does that red line exist between those who have “made it” and those who haven't.

    Also, aren't there those (like PG) who cross back to help others who wouldn't have had the chance without them?

    I'd prefer to think that the red line problem should be magnified and fixed.

  8. Interesting article. Certainly one that i enjoyed. And you're right that the media often only writes about startups that have succeeded while thousands others have probably failed.

    But this story has a lot of variables. Just remove google from the story and replace it with a company that treats its employees as slaves and hardly pays them. Or a deadend job that causes you more stress than its worth. Or a company that chooses to “let you go” after you gave it your life and you're now too old to possibly get work somewhere else in the tech industry. Or…Or..Or….

    Frankly, I'll take my chances with starting a startup.

  9. That's . . . poignant. I've printed out a nicely formatted copy to give friends.

  10. Great read. I think as long as a person knows and evaluates his choices with the question, “what's the worst that could happen” they can make intelligent decisions. I think it comes down to what you love to do. To some people, startups are worh it, to others a life doing humanitarian work for some remote village in a third world country is what they want their life to be about. There's nothing wrong abt either choice, as long as that is what that person wants to do.

    The worst thing is taking the easy way out; not thinking through the choices that you have and not getting to know what you really want, because you will definitely regret it later and feel like you've wasted years of your life.

    Don't be lazy and just take the status quo =)

  11. We see a lot of bootstrappers who run “small successful” software firms who are about as happy as they would have been in “a real job.” Some break out and some fail, but many fall into a fairly large middle ground: they achieve modest success but stay below the radar screen of most observers. It's one of the reasons we facilitate the Bootstrapper Breakfasts http://www.bootstrapperbreakfast.com/ as a service to the startup community.

  12. Interesting article. But I don't agree.

    What makes people working everyday in cities eight hours+ transport time happier or have more friends that those that choose a different path?

    Working 11 months, resting one. Having to do what their boss tell them to do.

    I think the stereotype of both kind of people is different. Startups founders tend to be shy, but the problem is not their work is their personality.

    If you work happy you are happy.

  13. Great! You'll only dissuade the dissuade-able, i.e. some of us are too crazy and pigheaded and hell-bent on changing the world. So we dream, push, and change the world. A man's (woman's?) need to shape is surrounding is innately part of the human experience. We don't take the money with anyway, so why not? The worst is we stay on the “have not made it” side of the beer-drinking table. And that side smells bad.

  14. i don't know about you, but for me i don;t have a choice. most of us can;t help but do startups

  15. j thomas Says:

    Not a bad read. I'm guessing Draftmix is dragging you into the “haven't made it” crowd. Oh well.

  16. mattmaroon Says:

    You start out in the “haven't made it” crowd, nothing drags you there. Draftmix is a shot to reach the other side of the red line.

  17. This post seemed to be mostly about money. Is that the only reason do startups? I kinda thought it was to create something cool, to have an impact on the planet and, maybe, leave it a little better off then it was before you were here.

    If you're in it purely for the money, well, sucks to be you. The money is good, but it' s not the reason, is it? Really? The reason is no way could you do what you're doing at Boeing, IBM or CitiBank. You want to create something right? You want to get it into the hands of millions and create a little joy and mirth out there in the world.

    Maybe this is a Silly-con Valley thing. Good thing there are places not like this where doing a startup is actually fun (Portland, Austin, Boulder, etc.)

  18. mattmaroon Says:

    Please reread the first paragraph.

  19. Running a startup for me has been the best thing since sliced bread. I don't make any money and had to move in with my parents to cut expenses. Do I regret it? Hell no. I work 80 hr weeks, but it's not really work when you love what you do. It's the excitement, it's the passion to do what you love. Haven't made much money, but I love waking up everyday and getting to work. Girlfriend is happy too, so are my friends. You can't beat the freedom of working when you want, on whatever you want. That's why I do a startup.

  20. No pain, no gain. And its because of these guys who take pain, we have these nice products..

  21. I am university student, working independently. I think having your own company while studying is perfect source of income and gives you flexibility and a lot of free-time at the same time. The only pity is that most students dream about perfect job but never tried to work in one for longer time.

  22. 6 figure income from CS? Maybe if you went to an Ivy League School.

  23. mattmaroon Says:

    Its hard not to find a job at least close to that in the bay area.

  24. Great post but seem feels very strongly to have only one perspective. I penned down my thoughts on it here:

  25. I'm fortunate enough to be writing from the “have made it” side of the line but it took me nearly 20 years across four startups to do it. I agree with much of your post but I think it also depends very much on the personality make-up of the entrepreneur. I've gone through the years of deprivation (both financially and socially) and have learned that those things were actually more of an unconscious choice in how I played the game. In several cases I had offers to sell out early but chose the “double or nothing” route and never regretted it, even those times that I ended up with less than I would have gotten if I had sold early.

    In my younger years I enjoyed the hyper-focus and ascetic lifestyle of a 'hard-core' entrepreneur. Was it healthy? No, but lots of people enjoy highly challenging extreme sports or lifestyles that aren't exactly “healthy”. For example, monks who celebrate life with a vow of silence and poverty seem far weirder to me than my particular obsession.

    In my case, when I looked at what others would call sacrifices, I saw challenges. I also accept that there are many people to whom it would be a huge mistake to do what I did. They would be sacrificing and essentially depriving themselves of a life that could make them happier. But please don't map what is ultimately a personal value judgment onto others. I'm different and I think the same is true for many of the entrepreneurs I know.
    There's a young entrepreneur training program in my area and when I teach there I spend a lot of time on this topic. I describe it as being “broken” in a certain way that makes massive challenges and huge sacrifices seem like obstacles to be heroically surmounted (as opposed to foolishly endured). I admit that this perception may even be a false illusion but to some, battling these metaphorical dragons is a source of joy even if in reality they are only windmills.

    You are quite right to be warning youngsters contemplating “the life”. If their motivation is money then they'll likely be disappointed. If their motivation is creating something unique from nothing and doing it against overwhelming odds through sheer skill and force of will, then they have a decent chance of finding rich personal rewards in this journey even if little of it is money.

  26. Good article, I think something that is underused by many people is taking advantage of outsourcing when creating start-ups, its a way to spend less time working on the project yourself and to be able to employ more people at once. I write about this on my site.

Comments are closed.


Get every new post delivered to your Inbox.

Join 31 other followers

%d bloggers like this: