
The Problem with Founders (2014) - prostoalex
http://techcrunch.com/2014/07/20/the-problem-with-founders/
======
technotony
"Feeling bored at work? Just go start a company. Feeling depressed about life
and lack any direction? Just go start a company. Broke up recently? Just go
start a company. Had a parent die and can’t move on? Just go start a company."

This is how we end up with statistics like 27% of founders have mental health
issues. Source: [http://www.businessinsider.com/austen-heinzs-suicide-and-
dep...](http://www.businessinsider.com/austen-heinzs-suicide-and-depression-
in-startups-2015-7)

~~~
Animats
About 10% of VC-funded companies are big successes, defined as making 10x
their investment. About 20% go broke, and most of the rest end up in zombie
mode, able to pay their bills but not pay off their investors.

Most founders, therefore, are doomed to be losers.

But VCs look for people who are sure they will succeed. Most of them turn out,
in hindsight, to be wrong. This is inherently going to push a sizable fraction
of them into mental health issues.

------
nnain
What every founder will tell you -
[https://www.youtube.com/watch?v=SVKKRzemX_w](https://www.youtube.com/watch?v=SVKKRzemX_w)
[Louis Armstrong - Nobody Knows the Trouble I've Seen (1962)]

...and it's true.

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meesterdude
> has now become something akin to Hollywood: a world of stars amid extras and
> hopefuls.

wow, nailed it.

------
baudehlo
The numbers in this article are way off. A higher end employee (senior/chief
engineer) who joins at say #30 in a company will still have a decent exit on a
$250million exit. I say this as someone experienced in this.

~~~
rosser

      s/will still/can/g
    

Your experience, while fortuitous and probably well-earned, is far from
universal.

~~~
baudehlo
Totally true. I developed the product that was responsible for >50% of the
company's revenue and walked away with 0.04% at exit.

It was decent, not life changing. I probably should have negotiated
significantly higher. Hindsight etc.

~~~
bhangi
That is $100k or $25K per year assuming a 4 year vesting schedule. Even
assuming that you did not take a pay cut relative to working for a bigger or
more established company, it seems a little low reward for the risk involved.
Particularly considering that $250M exits have low odds to begin with.

~~~
baudehlo
It was low risk on my behalf. A full time job taken in 2000 when everyone was
letting people go (and I had been out of work for 6 months despite a high
profile in the open source community). At a decent pay.

I do think I should have at least negotiated double what I had. But I was
young and had no clue about stock and exits etc. Even given that, I did ok
considering I was #30.

I still stand by what I said. The numbers are a bit off. A $250m exit is good
for most of the early employees. Although of course a $250m exit is extremely
rare.

~~~
hga
_A full time job taken in 2000 when everyone was letting people go (and I had
been out of work for 6 months despite a high profile in the open source
community). At a decent pay._

While I grant that at that point in my life I was older than the startup norm
(40 but _very_ productive due to a quarter century's experience and study from
the very start of software engineering), there was some serious value to such
a job back then. I.e. a lot better than the job I took in semi-desperation at
Lucent in 2001 just when it started downsizing from 106,000 to 35,000
employees....

And doing "OK" with equity being employee #30 plus the wonderful resume
enhancer of "my product earned over 50% of the company's revenues" is not bad,
not bad at all. Being able to tie a serious technical accomplishment to an
outsized portion of the company's bottom line speaks to everyone.

------
mfkp
Somebody should add [2014] to the title. I started reading it, then realized
that it all sounded familiar.

~~~
dang
Thanks. Done.

------
michaelochurch
The founder/engineer social class division is one of the reasons why I expect
the Silicon Valley ecosystem to implode and will be disappointed if it
doesn't.

First, there are two types of founders: Made Founders and Hustling (it's a
nicer word than "Marginal") Founders. Made Founders (often called "serial
entrepreneurs") already have it worked out that, unless they rip off their
VCs, they'll get a soft landing. I won't say that they don't work, but they
have enough investor-rank friends that they don't really worry about anything,
because if their companies tank, they'll be lined up with VP-level positions
where they'll probably make twice the salary that they had as founders
(typically, founders don't make more than $175k). They probably put in 30-60
hours per week, but they work on the fun stuff and have double-digit equity
so... yeah. They worry more about managing up into the investor ranks than
running a company, for obvious reasons. (If you build a successful company but
lose control and most of your reward, you lost. If you fail but the investors
like you and make you a Partner at their VC firm, you won.) It ain't a bad
gig, although it's a bit boring because, well, you're a corporate executive.
Being a Made Founder is based on pre-existing social class; either something
you're born with, or something you luck into. Merit's not a part of it.
Hustling Founders are the ones who don't have investor-level people pulling
strings all the time and who really, really, really fucking have to pound the
pavement-- and hope that a Made Founder doesn't decide to compete in their
space, because then they're up against someone who's going to have 50 times
the capital.

In the 1960s, _all_ founders were of the Hustling variety because the
pedigreed people were still in banking, during the Bateman days when it wasn't
a real job (3-martini lunch), and in a time when the pedigreed asswipes still
thought the West Coast unprestigious.

What the OP is describing is a cultural shift as pedigreed people with
_generational_ social connections jump into the game as Made Founders. They've
never been employees or subordinates of any kind (except to VCs) so they don't
have the empathy that it takes to run a company, and they tend to be low on
competence spectrum (since the mainstream business elite puts its successes in
hedge funds and private equity to manage billion-dollar deals, and throws its
failures into VC and VC-funded tech).

What hoodwinks a lot of people is that the Made Founders are great at
presenting the appearance of Hustling Founders, and thereby they justify
getting 100 times the equity as the employees they manage. In reality, most of
the Hustling Founders (a middle-class crew) have been driven out and are
unfundable due to a lack of social connections, and also because the amount of
stress involved in dealing with VCs and abusive investor-level personalities
is such a mental-health crusher that even normal people become paralytically
neurotic after about 5 years in that game.

~~~
gull
> Merit's not a part of it.

If you are good enough to build something people want, skip VCs and get paid
directly from users.

~~~
S4M
+1.

What michaelochurch seems to ignore is that it is now so easy and cheap to
start alone and without investment _something_ with a non zero probability
that people will want. It's not easy - I am trying to do that, so far
unsuccessfully - but definitely doable, by renting a cheap VM from Digital
Ocean or Amazon and start making a web app, or putting a mobile app in the App
Store or Play Store.

------
sparkzilla
This was ridiculous the first time it came out. It's just as bad now.

~~~
hemantv
care to explain?

~~~
sparkzilla
Here's what I wrote at the time: So much nonsense in one article. If you think
the "bar is so much lower" to becoming a founder then stop whining about being
one of the forgotten early employees and get off your ass and start a company
for the right reasons: finding a market opportunity and making money from it.
If you can't or won't, then you can't expect the rewards.

Early employees are important, and should be given credit and fair payment for
their work, but their risk profile is far, far less than the founders and
investors. Investors stand to lose their investment (which is an accumulation
of work) and the founders can lose money, reputation, and time. In my last
business I lost hundreds of thousands of dollars of my own money and five
year's 24/7 sweat. Every employee walked away.

------
kordless
The simple solution to this problem is to enable a new type of sales model for
software. The current models are broken and lean toward the investor-founder-
operations-developer chain of control, with the investor and founders
controlling the revenue. Flipping the model on its head would allow for the
revenue to flow directly to the developers, bypassing the chain. I think I may
have a solution for this, but it's going to require some infrastructure
changes.

~~~
paulhauggis
The problem is money. There is no way to magically get money into the hands of
the founders and the people that have it (IE: investors), will never make a
deal where they won't get a good ROI.

~~~
MichaelCrawford
Sell software directly from your own website.

software you write all by yourself.

Lots of coders do this, some are brilliantly successful. The ones that dont
make money dont know how to Read The Fine Manual.

For example, SEO is not a black art, it is well documented.

~~~
jpmoral
> The ones that dont make money dont know how to Read The Fine Manual.

Can you elaborate, do you mean that making money selling software from one's
own website is a well understood and replicable process? Not trying to argue,
I'm genuinely curious.

~~~
jacquesm
It _used_ to be a well understood and replicable process. But these days I'm
really not so sure that it is either well understood, or replicable. The late
90s are gone and won't be back and selling software got harder, not easier
since then unless you sell apps.

~~~
fsloth
"selling software got harder, not easier since then"

Can you elaborate? I'm fairly clueless - I thought services like stripe which
streamline payments and Steam that serves as a whole distribution platform
would have made software sales (for PC:s) easier.

~~~
jacquesm
There was a time when everything you did with your computer was an
application. Nowadays a very large portion of that work is done with a
browser, either for free or ad supported. So the market for licensed software
sold to end-users has contracted, and the delivery mechanism (installing
downloaded software for your PC) is more and more tainted because of malware
and rogue installers.

