
Paths to $5M for a startup founder - jordhy
http://www.gabrielweinberg.com/blog/2010/06/paths-to-5m-for-a-startup-founder.html
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matt1
I'm a sole founder and just want to add that if you're looking for the
independence that a multimillion dollar acquision brings, you should also
consider alternative ways to achieve that end.

Specifically, consider whether building one or more $X,000/month apps can help
you achieve a similar lifestyle that a $5M payday would bring. For me, I want
the independence to work on what I want when I want, have the flexibility to
take breaks to spend time with my wife and future kids, take a nice vacation
or two each year, etc.

This will obviously depend on your life situation, your savings, your spending
habits, etc, but for me, I think I can achieve that with $4K-$5K profit/month.
And making that much via a few niche web apps is much, much more likely than
selling for a few million dollars down the road. (I currently have two ~$1K/mo
web apps and am still at my day job for the moment, so getting to that point
from where I am should definitely be doable.)

If this appeals to you, I recommend checking out Rob Walling's Micropreneur
Academy, which is a great start for anyone going down this route:
<http://www.micropreneur.com/>

~~~
AznHisoka
For me, $5k/month won't be able to do it. It's good enough if it's a salary,
but a job also includes other things such as health insurance, 401K, and
intangibles such as social contact with other human beings. So for me, the
amount would have to 3 times my normal annual salary.

I currently make $7K a month with 10 minutes of work a month (creating a
newsletter), so I agree - the path to residual income is much easier than
creating a startup. But it definitely doesn't feel like I can quit my job
anytime.

~~~
matt1
Yep, the figure is going to vary person to person. For example, I'm married
and my wife brings in an income and will be able to provide health insurance
once I jump ship, so that number is lower for me than it would be for someone
without that additional income.

My point though is that for every person there is a monthly mostly-passive
income which, if achieved, would let them live a similar lifestyle as being
part of a multimillion dollar acquisition. And it's a hell of a lot easier to
reach.

Do you think it's easier for you to make $5K/month passively or make $5M from
a acquisition? $10K? $20K?

 _Edited to add:_ Why not invest more time into your newsletter so that you
can leave your job? If you truly invest 10 minutes per month and believe that
there's still room for growth, why not spend more time getting it to the point
where it does cover your health insurance and 401K? Or if there's minimal room
for growth why not try to replicate it? Or does the money not even matter: do
you want to stay with your day job because it gives you purpose and
socialization? Your situation is fascinating and I'd love to hear more about
how you got to where you are.

~~~
AznHisoka
I got > 90% of the subscribers from SEO over the course of 2 years. The growth
rate of those subscribers has dwindled ever since my sites got punished by
Google Panda.

For those curious, the newsletter has to do with a very niche product that
people usually order every single month. I'm simply an affiliate and write a
newsletter with tips for that product along with a coupon code.

The affiliate program is pretty friendly as I get paid a commission every
month even if I don't get them a new customer (but get an existing customer to
order it through my link).

~~~
matt1
Thanks for the details. How much do you get paid if you get no sales? How much
extra on average per sale?

~~~
AznHisoka
If I get no sales, I get paid $0 since it's pay per performance. I usually get
$40 as commission per sale.

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PStamatiou
All this talk of millions; it'd be a happy day for me when I have no student
loans left :-P

~~~
loceng
Think bigger. Give your mind the opportunity to discover the path.

~~~
geoffschmidt
He's 25 and already a two-time YC founder -- I think he's doing OK :)

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yangez
It may be wiser to focus on the absolute best way to make something that
people want rather than just crunching your optimal exit strategy. In most
cases this probably means you want a co-founder.

10% of something is better than 100% of nothing.

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niico
Gabriel if you are reading this, please make a light/white version of your
site. Thanks!

~~~
epi0Bauqu
I am. Are you (collectively) against all dark versions or just this one,
because I've been trying to tweak it incrementally for readability. If you
have any specific improvement suggestions, I'm happy to try them.

~~~
ed209
@Gabriel, here's some css that makes it readable for me
<http://pastebin.com/XKQSC2z9> (just a 5 minute hack)

It's hard going from light text on black back to most other sites as you end
up having those lines in your eyes where the white writing has burnt it into
your retina!

~~~
epi0Bauqu
Thanks -- will mess around with this -- appreciate it!

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ed209
How many companies actually sell for $17m? We mostly hear about the $50m+ ones
or we hear about "talent acquisitions" which I presume are not $50m.

What sort of companies get bought for $17m?

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tensafefrogs
Does anyone provide data on startup acquisitions each year? I know the amounts
are usually private, but the numbers always seem to leak out (or at least
estimated numbers). It would be interesting to do some data processing to look
for trends and averages.

~~~
ed209
after being curious myself, remembered that crunchbase has some data. Around
page 50 by price you get the $17m
[http://www.crunchbase.com/acquisitions?page=50&sort=pric...](http://www.crunchbase.com/acquisitions?page=50&sort=price_desc)

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hsuresh
A great article. I am a solo founder myself and this article has given me more
confidence about doing this alone, at least for a while. I have a couple of
employees on board, so work load is not a big problem. I'd still love another
founder to join me though, especially someone with complementary skills. I
haven't raised money yet, and would like to do a small round, so not sure how
much of a challenge this is going to be, as a solo founder.

~~~
fourmii
I agree, I'm also running solo to begin with. It's sometimes pretty
demoralizing when you read and hear that you would get nowhere if you're a
single founder. I subscribe to the notion of building something first and
perhaps gaining traction before bringing complementary skills onboard.

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radagaisus
You can get 8 cores 8GB RAM server for 150$ a month. If giving up ~70% of your
company the norm - we need a revolution.

~~~
cperciva
If you're giving up 70% of your company in order to pay for servers, you're
doing it wrong. If all your server costs combined adds up to more than one
developer salary, you either have a mammoth scaling disaster or a runaway
success which should have VCs begging to give you money on whatever terms you
like.

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aseem
I'm afraid this article will lead people to mis-prioritize their decision
making. When doing a startup, all of your focus needs to be on the building
the best product possible. If you can do that as a single founder, great! But
if you need more people, you should do that if that's what the product calls
for. In my opinion, making decisions based on future equity and payout is poor
management.

Everyone complains about coporate CEOs who are so focused on the stock price
that they forget to make good products. Focus on the product, and the $$ will
take care of itself.

~~~
dasil003
I agree, but it's just one of an infinite number of ways to mis-prioritize
your decision making. That's the hardest part of entrepreneurship: you have
very limited time and you need to make smart choices day after day about how
to spend it.

The value of this article IMO is to offer a counter-point to the multiple-
founders mantra. A lot of people take that as gospel, but I think if you are
spending time looking for a co-founder you're doing it wrong. Rather, if you
know the right person to be a co-founder, by all means extend the offer ASAP,
but if you don't then get to work and stop fretting.

To maximize your chance of success you have to focus on the greatest ROI at
every moment in time. Hiring the right person is the biggest ROI a one-person
operation with a lot of work to do can achieve, but on the same token, finding
the right people is often nearly impossible.

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jt2190
Previous discussion here:

<http://news.ycombinator.com/item?id=2625143>

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fmw
Obviously, a single founder gets more when and if a payday happens. Most
startups fail, however. If attracting a co-founder increases the odds of
success it is surely worth it. The article points out that you can also
attract a co-founder in return for a smaller stake after you get traction.
This could be the best of both worlds, unless it leads to envy and friction
within the team.

~~~
jacquesm
Good co-founders you take on where and when you can until you have all the
skills you need to make your team complete.

Compensation should be relative to value added rather than relative to time-
to-get-on-board. That's because typically both sides know the value
contributed and if one side tries to slant the division in their favour this
will inevitably lead to trouble down the road.

Start-ups are fragile, if you build in tensions right at the beginning you'll
get that back when you need it least.

For instance, during negotiations about an acquisition your key co-founder
that you successfully screwed over during the founding days now has you over a
barrel. After all he/she has very little to lose and you will stand to lose a
lot. You could of course try to take care of that in your articles of
incorporation and your shareholder agreements but you can't actually force
someone to perform unless they are willing.

Keeping your goals aligned is good for everybody and fairly sharing a much
larger pie is the best way to have the story end happily.

"After you gain traction" is sufficiently vague that I don't think that is a
good criterion. Better would be that you would take into account the amount of
capital already sunk and the risk that you perceive at the moment of joining.
Lots of traction can actually mean _more_ risk rather than less.

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ronbeltran
What advice can you give to potential founders who will be pitching on events
like StartupWeekend,etc.? For us who attended, after someone pitched, random
people approached him/her and wants to be on the group. Is it right to just
say sorry that you're not accepting potential co-founders with random people?

~~~
jaxn
StartupWeekend is not the best place to really start a company. I know it has
been done (and I have done it myself).

Go have fun at StartupWeekend and if you find some people you like working
with then do a real startup with them later.

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reilly3000
Honest Question: Who buys companies for $5M-$15M? What do they do? What makes
a company in that range attractive?

I like the idea of doing one of those every 3-5 years for the rest of my life
rather than go for the glory IPO and... then what?

------
efsavage
From 2010 (although still relevant)

