
Harsh Realities From 500 Startups Founders - DanielRibeiro
http://500.co/2010/11/04/harsh-realities-from-500-startups-founders/
======
badclient
_You will LOSE all of your money that you ever earned, and then a bunch that
you still have not earned. If you’re not prepared to put it all on the line,
you’re not prepared for a start-up._

Terrible assumption at best, a lie at worst. Putting _everything_ on the line
is not the only way to do a start-up that's successful.

~~~
devmach
Why people such obsessed with running business like playing poker ? If you're
puting your everything on the line, i think you are doing something wrong.
What's hard with starting small, taking small risks and growing slow but
steady ? Starting a business shouldn't be about going crazy, acting like a
fool, putting everthing you have on the line and at the end loosing
everything.

People please, while you are at the university ,please, visit some (m)ba
lesssons. If you don't have this chance, take advices from someone who you
trust and runs a business.

------
ryanwaggoner
In 2009 I started a company with another guy, and I used to read articles like
this, about how startups are so very difficult, and how you have to put
everything on the line, your health, your wealth, your relationships,
everything. It's a very common theme in startup-land, and I constantly hear
from founders who sacrificed their marriages, worked 19 hour days, slept under
their desks, and racked up tens of thousands in credit card debt, all to make
their dream a reality. The message is very clear: you have to be willing to do
_anything_ to succeed. Articles like this fed my ego, and made me feel like I
was part of an elite cadre of founders. Then my startup failed, leaving myself
and my cofounder with tens of thousands in debt and a pretty rough mess to
clean up.

In the meantime, a good friend of mine who started a little project on the
side slowly grew it over a period of a couple years into something that
supports his family very well and has a good shot at doing millions in revenue
within the next 5-10 years. And I don't think he's been very stressed while
doing it. He loves what he does, has tons of time for his family, etc. The
cynical among us might term this a "lifestyle business" and they'd be right.
But I don't think that bothers him and I can't say I blame him.

There's this really ugly side of the startup world that drives founders to
completely unreasonable levels in pursuit of fast wealth creation, and it
comes as a result of two factors: founders are naturally ambitious, driven
people, and investors are in a hit-driven business. So the result is that
investors naturally gravitate towards founders who either hit a billion
dollars in a few years, or die trying (sometimes literally), and then
investors and founders both are incentivized to craft this story that they
only way to win is to win big, fast, and with all your chips on the line. And
these things become self-reinforcing, so you have investors talking about how
the real reason startups are so valuable is that founders can work so hard
that they accomplish a career's worth of work in just a few years. The message
is clear: you need to work 90 hours a week and either be the next Dropbox or
flame out. And for the model most investors work under, that's the only way
they really make money.

But the more I look around, the more I wonder if there's really much
correlation between blowing your life up and startup success. Yes, you hear a
lot of successful founders talking about how they killed themselves to get
there. But thanks to survivorship bias, you don't hear from all the ones who
risked everything, turned their lives and relationships and health upside
down, and then lost. And increasingly, I'm seeing a lot of examples of very
successful founders who definitely work hard, but keep an eye on themselves,
their health, their relationships, etc. and have lines they're just not
willing to cross. 37signals is the classic example here, but there are scores
of others, many of them right here on HN. The key seems to be patience and
humility, two things a lot of 20-something founders (including myself) have in
very short supply

Maybe startups are so hard because we're doing them wrong.

~~~
pg
_Yes, you hear a lot of successful founders talking about how they killed
themselves to get there. But thanks to survivorship bias, you don't hear from
all the ones who risked everything, turned their lives and relationships and
health upside down, and then lost._

You seem to be conflating the concepts of necessary and sufficient conditions.
Working hard may be a necessary condition for success, but I don't think
anyone has ever claimed it was a sufficient one.

~~~
ryanwaggoner
I'm not talking about working hard at all; I think success pretty much always
requires hard work of some kind. My friend definitely worked hard to get his
business up and running and to the point where it supports him.

I'm talking about the idea that you have to work so hard that it threatens or
consumes everything else in your life. And no one claims that doing that is
sufficient, but a _lot_ of people claim it's necessary.

It probably _is_ necessary if the plan is to hit a billion-dollar exit in a
few years. I just think that path entails a lot of extra risk that investors
overwhelmingly benefit from, and founders end up paying for in the event that
things go south. And sadly, I feel that a lot of investors essentially exploit
young founders who don't know enough yet to know that they're paying a very
high price for a 1/10000 chance at a grand slam (making $20m in 2-5 years),
when they'd be better off in almost every way by going for the 1/10 or 1/100
base hit (making $2m in 5-10 years).

And to be clear, I'm not lumping YC in with most investors here. However, YC
does place a little too much emphasis on raising VC and not enough on building
revenues. But that's a bubble for you :)

~~~
pg
Your reasoning exhibits another common fallacy. While the average probability
of making $20m in 5 years may be low, that doesn't imply each individual's is.
For the right sort of person the probability might be 2/3 or even higher. For
most people it's epsilon. The reason the average is low is that it's the
average of a lot of epsilons and a handful of higher numbers.

This is easier to understand if you consider e.g. the question of being over 7
feet tall. Maybe only 1 in 10000 (or whatever) people is over 7 feet tall. But
that doesn't mean your probability of being over 7 feet tall is .01%. Your
probability is either 0% or 100%.

~~~
ryanwaggoner
Isn't this only valid in hindsight? Isn't your probability of anything 0% or
100% once it has happened or not happened? The problem here is that we have no
idea in advance which bucket you'll end up in.

So yes, I suppose some founders have a very high probability and some have
almost no probability. But that's not useful when you don't know which group
you're in yet. So the average actually IS useful.

You have either 0% or 100% probability of being over 7 feet tall, but what
about your unborn child? Genetics aside, if 1 out of 10000 kids are born over
7 ft and you have a gun to your head, how will you calculate your kids odds of
being that tall?

~~~
YuriNiyazov
An individual himself can't predict whether he or she will be successful or
not, but someone who's seen many such individuals in their "before" state and
in their "after" state can make more accurate predictions.

For example, YC's whole investment model is based on the assumption that it's
not just hindsight, and that the YC partners can use the data model that they
have, that gets better with each batch, to predict which founders fall into
the "success bin", and they choose to invest in those.

~~~
ryanwaggoner
Investors are incentivized to not only pick the founders they think have a
very high chance of huge success, but to make as many founders as possible
think they belong to that group. If they're right, big rewards. If they're
wrong, the founders (and LPs) pay the price.

More: <http://www.paulgraham.com/venturecapital.html>

~~~
pg
The VC firm in business for the fees was mostly a product of the Internet
Bubble of the late 90s. There were still a significant number around when I
wrote that 6 years ago, but in the last few years (and particularly since
2008) the bad firms have been ruthlessly pruned.

No VC whose name you recognize will invest in bad startups to get the
management fees.

------
csomar
You are doing it wrong. I started my business 4 years ago, while being a full-
time student. Only this year I have decided to drop from University to test
the waters. I made during the last 4 years enough to survive for 1 year
(rent+food+internet), setup my desk, register my company and hire an
accountant, and buy some cool stuff (smartphone, watch, tablet...)

Looking back and connecting the dots, if I have decided to take on my business
full-time 4 years ago and be financially independent, I'll be a total fail.
There is a hell lot of things that I learnt during this 4 years that can't be
learnt just in few months.

Start your business in the side to learn the clues. Get a few clients and make
some profit. Save at least a full year expenses. Go full time and work 40/45
hours a week while reading stuff and HN in the remaining of the time.

This is actually hard work.

------
laironald
I've worked on a few projects over the years and finally had one that I was
proud to call a startup. We got into a top incubator program and busted our
butts for a really long time. We had a set of willing investors, a rock solid
MVP evolving to a real product and a launch event that was the talk of the
town. We did everything right, asked good questions and were personable as
hell. And in the end, I departed from the venture due to team fit issues. No
matter how much I want to point fingers, I know I was also another source of
the problems. I guess what I learned from this situation is -- deal with your
shit early. I knew there were problems, but our team swept these issues under
the "I'm going to work hard and sleep on the floor" rug and by the time we
were ready to talk about them, they were at an unforgivable stage. Startups
are intense and I was OK with that.. but the minute I stopped having fun, I
stopped being productive. I also started to sacrifice my own activities to
make the startup work and when I eventually did get burned out, I was feeling
pretty bummed overall. A better balance and celebrating more team wins could
have definitely helped.

------
j45
I've been full time, self employed for 12+ years, starting when 2 years into
university.

In that time I've started up several businesses. Freelancing, contracting,
consulting, products. Some have gone further than others. Some had business
model limitations (finding people), others had limitations of my interest.

One thing: All made money. Why? I was too young to get credit. The only way I
got to do what I loved was to find a way for it to make money, sustainably.

12 years later, what do I have to show? Money made. Money spent. Worked hard.
Lived Hard. Partied hard. There was no middle, only extremes.

In getting there, I starved and managed my last x dollars more times than I
count. Little by little, I rid myself of desire for almost all material,
social and other desires.

What hurts me to say the most is this. This suffering was avoidable in many
ways looking back.

Software startups have two main challenges. First learning business in
general, and two, learning what they are made of as people.

The only thing I needed to develop in my self is maintaining a high work ethic
(avoiding burnout) and developing a focused pursuit of finding and doing the
right things.

That doesn't require playing all-in hold em poker with your life.

Here's the thing: The act of building a business that doesn't make money
itself, seems to me, to be a violation of what a business is meant to do --
make money.

If we as creative, creating, innovators expect to sustainably create for a
long time, we have to do this for the long haul. Right now, the culture seems
to be give it your all or get out of the way. The best financial successes
rarely have done it like this, though. Apple bootstrapped. Microsoft
bootstrapped.

If I have to love what I do, I have to spend time enjoying it and loving it.

Being absorbed to the point where my body, energy, relationships all suffer is
akin to saying I'll hold my breath long enough until I reach other side of the
pool while under water. How many drown, how many don't?

How much innovative energy and people have been sacrificed to find the
fraction of a fraction?

How much innovation has been lost where it's needed?

Here's my challenge, can we lay down our egos, our need for glory and making a
success "worth it all", to start solving problems that pay for our time to
give us the real freedom to pursue the big ideas without suffering?

For me, the quality of my relationships is my wealth. I became broke because
of startups. No time, making, or creating memories.

Now I'm taking it back and launching a few ideas a year as products. They make
money, growing slowly. I know the idea that I'm to give my all to will come on
my path as long as I keep my work ethic up, keep a focused pursuit of
recognizing what I need.

Until then, living for a living is as important as startups.

~~~
adrianwaj
Winning, man. I see you as the Charlie Sheen of startup guys.

~~~
j45
I'm not sure whether that's good or bad, I rarely watch tv and it's a habit
I'm trying to re-introduce..

Thanks, though for reading. Putting this out there was a little cathartic. If
it helps someone in any positive way, great. :)

~~~
adrianwaj
If you can't be earning, then at least be learning (ideally both) otherwise
you're burning. Cheers.

------
vbtemp
Now _this_ is hacker news (sorry, I've been fed up with some of the other
posts recently that have nothing to do with software startups). Thanks for
posting.

~~~
derwiki
Makes me miss Hacker Hacker News

------
maeon3
Putting everything on the line can focus you like never before. But if you
fail, you may never get a chance to do another startup with a bankruptcy on
your record and having to get an employee job for a decade.

Put up the money for the startup that is the extra from what you need to get
by. Throw in your 401k and every penny you own as well as money you don't
have, and you are risking living in the house of pain for 20 years trying to
service it with an employee job as a desparate man.

Have a startup "complete failure" plan because odds are you will have to use
it.

~~~
j45
If a startup is meant to become a business that makes money, does it really
have to be all-in poker?

Is there no way to make money as you go? Sooner or later it has to be figured
out, no?

