

Effects Of Entrepreneurship Of Savings (Graph) - jordancooper
http://jordancooper.wordpress.com/2010/01/13/effects-of-entrepreneurship-of-savings-graph/

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NyxWulf
It's interesting to see that, but not being a follower or a reader of his it's
difficult to put that into context.

Are his savings dwindling because his business is struggling and he is not
making a profit, forcing him to live on his savings? Or are they dwindling
because he's pumping more money into his business to make it grow faster?

On what basis is he extrapolating his experience to all entrepreneurship in
general? Entrepreneurship is a complex and difficult field, being a VC doesn't
make you qualified to be an entrepreneur any more than being a programmer,
engineer or manager does.

Seems like he's having a rough day, and I sympathize having been through a
very similar process of watching my savings dwindle to zero. However I believe
it's important to realize that effect happens primarily due to a lack of
understanding of the process of starting a business and is generally not
representative of a good startup.

If you are really interested in entrepreneurship, I highly recommend taking a
look at the lean startup concepts - they are specifically geared toward
helping people to avoid exactly this cycle.

Entrepreneurship is not about taking the plunge, living on your savings, and
hoping you become profitable before you run out of money. That's just a wing
and a prayer.

Anyway, sorry for the longish rant, but I get tired of these types of posts.

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jordancooper
I am now on my second business, and I am a student of lean startup...which by
the way perpetuates this graph, not prohibits it. lean startup would argue
that you find product/market fit before capitalizing a company and paying
yourself a salary. this graph is a result of bootstrapping my first business,
taking a half salary after capitalizing it with VC/Angel money, failing at
that business, and now bootstrapping my new business until we can prove
product/market fit and raise at a 3-4x step up in valuation (as well as prove
to ourselves that this is worth replicating/scaling)...

I'm not having a bad day at all...I'm having a great day and time in life in
general...I think you missed the point of the post...I sort of laugh when I
look at this graph...money is just money my friend...

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NyxWulf
One of my favorite quotes comes from the movie Quiz Show, where Charles Van
Doren says "You'll forgive me, but anyone who thinks money is ever "just
money" couldn't have much of it." I agree with the gist of that statement but
in a more general sense. I would suggest that anyone who thinks money is just
money doesn't understand it's nature. Money is imho, always, far more than
just money.

Anyway, that personal note aside. The whole point behind Lean Startups is to
avoid or minimize that type of burn rate. I couldn't disagree more that the
graph is a "result" of being a lean startup. That graph is a result of living
on your savings before the company is generating enough money to support you.
I'm not passing any judgment on whether that is a good idea or not, just
suggesting that the decline in your savings is independent of the startup
type. For instance, some of us choose to work a day job while building our
startups so we don't have to burn through our savings - but that is a fairly
personal choice.

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jordancooper
I'll refer you to this post by Steve Blank entitled "Raising Money Using
Customer Development" and then you can tell me how that graph is not the
result of lean startup thinking...as for your desire to keep burn low by
maintaining a day job while building your company, I'll go ahead and say your
aversion to risk and lack of devotion the the mission of your company is
uninspiring...enjoy your flat screen tv and 3:00 latte's while the enterprise
value in your company grows at 1/10 what it would if you sacked up and worked
full time on the startup...i'll check in with you next year when you are still
an "entrepreneur on the side..." way to go man...you're a model for us
all...way to keep that graph going up and to the right

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NyxWulf
I tried to make it clear in my previous post that I'm not passing judgment on
your choice of living on your money, however your response seems to indicate
that you are upset. If I have offended you, I apologize, that was not my
intention.

I have been down the "take the plunge" route before, as I alluded in my
earlier comment. I watched my savings dwindle and ultimately had to wind down
the startup after 3 and a half long years. So while I don't expect you to
understand my point of view, your comment comes across as overly general and
fairly inflammatory.

I am a long time follower of Steve Blank. I own and have read Four Steps to
the Epiphany several times. He makes it clear in the book, and it is alluded
to in that post that Customer Development is a discovery process. It's not yet
clear that you have discovered a viable business model and/or how long it will
take you to reach profitability. During that early stage, he explicitly
recommends avoiding raising money because of all of the complications it
brings.

The gist of my first post was that I cannot tell from your post or your graph
alone if you have discovered a repeatable scalable business system, and you
are just funneling your savings to husband your cash and accelerate the growth
of your company. If that is the case, then I heartily congratulate you and
wish you all the success in the world.

If on the other hand you are living on your savings in the hope that you can
refine and discover your business plan, and you can't fairly solidly project
your growth - then in my estimation, that is an unwise use of your savings.
But as I said, that is a personal choice. At this stage of the game I have a
wife and a son, and while I'm willing to gamble on success, I'm not willing to
gamble on putting them on the street in the "hopes" that I've hit on a
successful business. Yes, my business will progress more slowly, and my
customer development does not progress as rapidly as I like, but for me, that
is an acceptable price to pay at this time of my life.

Anyway, I wish you luck with your venture. I sincerely hope it works out for
the best.

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johnohara
Hmmm, looks like a lot of graphs in 2008-2009.

Home values, savings, wages, employment, manufacturing jobs, consumer
confidence.

On the bright side, processor energy consumption, cost of entry into software
development.

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CytokineStorm
This post might have some merit if the graph included another 10 years of data
showing the return on his investment.

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gprisament
Could also be titled: "Effects of Homeownership on Savings".

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rphlx
Rent is also cashflow negative. If anything, it's better to be a home owner in
the US; you can stop paying the mortgage and probably still live in the house
for 3+ months for free (or even cashflow positive if you rent part of it out).

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aresant
The part that this graph is missing is the effects of entrepreneurship on
savings when you get traction.

Many entrepreneurs I know have a graph like that for a year or two and then
what we call "hockey stick" growth in the opposite direction.

