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Why you shouldn't start a startup (laurentk.posterous.com)
127 points by lolizbak on June 17, 2011 | hide | past | web | favorite | 63 comments

Kind of a linkbait title since less than half of the presentation is caveats and the remainder is advice for starting a startup. Nevertheless I thought it was well done--definitely lays out the risks very nicely.

One thing I'd like to hear more about are people who took "secure" jobs for a period of time out of college and then jumped ship for a startup once they had some money saved up. I feel like most people coming out of college are very risk averse, so they'd rather get a guaranteed salary over a startup with uncertain prospects.

If you took on student loans (incredibly common), you have 6 months before the collectors come calling and survival then requires an additional $100-$1000 income per month. Failure to pay or having insubstantial means to pay can result in substantially larger amounts of interest to repay, substantially longer repayment periods or garnished wages. Since there's no way to escape repayment a debt-encumbered individual has more at risk than a debt-free peer. I think the pervasiveness of student loans and the exploding cost of higher education is dividing equally risk-tolerant people into two paths.

I'm on the "secure" path at the moment to pay off student loans between my wife and I, and we just had a child. My obligations are more than paid for and things are stable, which is good because my family life is happy and fun and I value that highly, but it means that my risky endeavors have to be on-the-side and bootstrapped because doing stuff that's likely to fail now puts 3 people at risk instead of 1. I don't particularly enjoy the jobs I've had, and that gives me motivation to do things for myself.

I know how you feel man, almost the same situation (no kid yet). My wife is finishing her Masters, I figure once she's done with that and has a secure job, it might be time for me to try something. It's risky but right now we make it with one salary. We've talked about it and she currently says that since I helped her with her dream she can help with mine. I think it's a fair trade.

But I'd be stupid enough to go for it now. They can come after me for all I've got and get pretty much nothing. In the end if you don't make any income, they have nothing to garnish. Naive view of things for sure.

>In the end if you don't make any income, they have nothing to garnish.

True, but student debt can only be discharged in very limited circumstances and living under the thumb of a debt-collector for your entire life seems like one of the worst choices you could make.

Even with debt, our quality of life is higher than anyone else in our family has ever been, it's been a great enabler of upwards mobility. My wife came from near-poverty and I'm from a lower-middle class household, and we're now solidly in upper-middle class earnings and this is still a relatively low point of our careers. The debt is totally worth it, it's just an additional thing to manage and weights your life choices towards certain things.

Technically (per Suze Orman) the two things declaring bankruptcy will not clear are Student Loan debt and debt determined by Criminal/Civil courts, in the USA.

I found it shocking that those two debt types are on the same level. The student loan one is probably limited to Federal/State funded loans. I imagine if you pay your College bill with a MasterCard then you could get around this.

Student loans, child support/alimony, tax debts, criminal penalties, civil penalties, and tax witholding for other people will all follow you even past bankruptcy.

Pretty much all you can get rid of is unsecured consumer debt. A modern bankruptcy is just a way to get out from under your credit cards (or health care debts).

I have spent 8 years in a corporate job, paid off my house and car within this period, as well as saved enough that could sustain my simple lifestyle for the next 3-4 years. When i reached 30, i got married and quit within 1 month after my wedding.

As i look back, the only real tangible return i ever got back in these 8 years of is that I met my lovely wife.

How is paying off your house and car, and saving enough to choose not to work for 3-4 years not a bunch of "tangible returns?"

(By the way, kudos on that level of self-discipline; I would be extremely happy to accomplish that much with 8 years of corporate salary.)

I did it. I took a "secure" job for two years after graduate school, then decided to jump into a startup as a first employee. The way I decided which company was that I built a script that would crawl the news for companies closing series A, and then chose from that pool (since those would be arguably less risky).

After 3 years as a startup employee (and learning everything about both technical and business side of things), I'm founding a company now.

It's never too late to become an entrepreneur. I took "secure" jobs for four years and then sold my services as a contractor for almost another six before I launched my first startup. IMHO, for the risk-averse, forming an LLC to contract your services is one of the best ways to learn how to run a business. And the $ you've (hopefully) saved will help you bootstrap when you decide to take the plunge.

I did exactly that; I had a "secure" engineering job through college and for a short period after, but have since quit to co-found a tech company.

For the same reason one might go to school, you'll rarely be disappointed if you invest in yourself. My advice to graduates interested in startups is to work in their field of interest until their learning slows down, then to move on to bigger and better things. By starting a tech business, your skills in business and technology will grow tremendously, and will continue to pay dividends.

Obviously not the only way, though.

Hi, that was my case actually. My first two statups (if you can call this so) were done while having a well paid job in New York. For my last startup, I quit my job and went welfare :)

I worked as a developer at Amazon after college to get experience. I paid off my loans, saved up enough to support myself for 2 years, and then quit to start my business: http://www.restbackup.com/

I think the 'peanuts' slide is an especially good point. Many people here seem to think that a startup is a fast-track to success, but it's not fast at all. It's a lot of work and sacrifice for years.

Don't get me wrong... That time has some valuable lessons that will help you constantly for the rest of your life. But it's not easy. If you go into it with your eyes open, you shouldn't regret it.

toughest part is dealing with sig. other who'd really like to have a nice meal every once in awhile and wonders aloud when she learns of your friends/peers who make six figures in "real jobs"... "Maybe you should go to law school?" <-- have you heard that one? cringe

been lucky, didn't hear it much!

my girlfriend has been very supportive. the only thing she asked, is that we still continue to travel/backpack, at least once a year - which I of course "granted" her (while she's granting me with the rent .... :)

maybe that's another reason that the mean age for founders is quite low. I mean if you're older and have dependents it's not the best time to throw your salary out the window and go it alone.

The mean age for founders in the US is 39:


I think the mean age for YC founders is ~26 from what I gather.

That's because I don't think older entrepreneur usually would go for a YC like program. A lot of them have worked long enough to have savings to bootstrap and connections. At least that's my hypothesis.

That may be so. I see the real value of YC as being mentorship from the team and the connections that follow rather than just funding and a stamp of approval for connections. Then again I haven't been in the business as long as most older entrepreneurs so I'll withhold judgement.

There's a value there for sure, but for folks like me (30's, savings, used to a large salary, own a home, married, etc...) relocating and everything else required may not be worth the trade off.

This is my big interest in YC and why I'll try applying this Winter--There are plenty of resources for doing all of this yourself, and many people have but given my background and experience I have, I probably can't get my idea off the ground without proper guidance and I think many people are like me who genuinely need that little bit of help more than they need large sums of money, a stamp of approval or what have you--that guidance will carry you to all of that stuff in the end.

Not for the type of start-up we talk about on HN.

Why, is the risk somehow greater ?

We mostly talk about internet software start-ups. Founders can be succesful with only coding experience and little capital, while most other industries require a roster of contacts, experience, capital and etc. Not that these don't help online software start-ups, but they are not as important.

There are two factors that can allow you to throw your salary out the window. Being young and having no expenses/obligations and being a bit older and having some accumulated wealth.

But I think you're right. MOST younger folks have no obligations. Relatively few older folks have actually managed to keep their burn rate low and accumulate wealth.

Totally on board. I quit a well paid job in New York two years ago, and didn't earn a dime since. But I would make that decision again in a heartbeat :)

It depends on what kind of startup you are doing, there are many startups out there that don't need to find 1M people to start making money, some of them just sell stuff and if you are a 1 man shop you might be easily start making good money after 1 year

That was a good point in the presentation I thought, but I objected on the slide that suggested you wouldn't learn anything from it either (slide 28). How could you not learn something from the experience, even if you fail hardcore?

This rings true with the TEDx video posted last week about what skateboarding can teach us about learning methods. http://www.youtube.com/watch?v=lHfo17ikSpY&feature=playe... We learn from mistakes, so failure is to be as embraced as success. The startup community should be just the same. Take the lessons you learn and try again and again.

The goal should be to have frequent, small failures that you have enough time to learn from, rather than a few catastrophic failures which end your startup and saddle you with baggage afterwards.

Failure is a part of success, but only when taken in the right quantities.

Slides from a presentation I gave last week at HEC - would love some feedback if I reuse. Thanks!

How about writing something up to give a bit of context to those slides. I clicked through 20 or so of them and couldn't find anything resembling a narrative.

i thought they were self explanatory, but you're right - thx !

Laurent, I'd like to get in touch, but couldn't find your email. Can you ping me? My email is in my HN profile. Or just reply here where I can get in touch.


Just wondering, did you have any dev experience prior to taking on Rails?

Great presentation, wish there was a video version too.

I started from scratch a month ago, and I'm a biz guy by training. I'm not saying it's easy but accessible to put up an mvp. You should try http://fastfwdme.com, my second app !

There are 63 slides, the 60th slide ends with: sell anything, learn to code the 61th slide contains a photo of the author the 62th slide contains the word: Questions?

Ruby on Rails is easy, if you're a business guy learn to code and save yourself some money & equity

Okay, now I know I don't want to use this guy's products...

Comon', you know what i mean :) I'm not saying i have an "engineer-level", but i'm good enough to throw an MVP together. Try out http://fastfwdme.com, it works fine for a small project I developed. Of course there are years of training to be a good hacker, but my point is that you can achieve a sufficient level to test ideas out yourself.

Nice attitude... but just the sentence "throw an MVP together" makes me cringe :) do yourself a favour and find yourself a good dev before you realize your code doesn't actually scale...

Why not build something yourself and find a dev when scaling is needed? With Rails it's quite easy to create okay code that'll work just fine in the beginning. The code obviously won't be great, but it'll scale to a couple of thousands of users without major problems.

There's no point of spending a lot of money on a professional developer until you have validated that your business idea has any potential. That's especially true in most early startup where money is really scarce.

And even if you don't plan to be a technical founder, it's quite a good idea to at least could program a little bit. It will make it much easier to communicate with developers and understand technical issues.

who would you rather work with, a "biz guy" who has built a prototype that can't scale or a "biz guy" who has been talking about an idea for 3 months but doing nothing?

I would rather not work with any developer who underestimates business guys at this level.

Now, if you want to make the next "To Do" app, a dev can be fine, but if you want to do something useful, you will need a biz guy.

I mean, this thinking from the dev side is exactly why companies today are full of crappy products (SAP, Windows, etc.).

Read the comment you replied to again; you misinterpreted it as attacking "biz guys," but it's actually commending those willing to get their hands dirty.

It is implied. It is kind of the norm to think of business people as useless around here.

My point is that this is stupid, really stupid. There are tons of problems in the business world and they are tackled with old software from the '90 (Windows, Office, SAP, etc.). Web technologies have not even touched the corporate world.

Devs will never get the potential behind business problems because they hardly know about them. They need business people, they really do. And the business world needs them, because things are getting crazy, mining data with Excel...

I'm not the grandparent poster, but I think his point was:

Programming is not the only thing that constitutes "getting your hands dirty," i.e. the "real work", and that anyone who thinks this is completely overlooking the importance of business principles.

just to be clear, I am a "biz guy" who also happens to write usable code...I am the last one to discount the value of "the biz guy." So there.

Andrea, I agree. But depending on where you are, "finding a good dev" can take months, more if you're looking for a partner. And it's easier to attract talent with a working prototype than with ideas around a beer...

I was probably mistaken, let me rephrase: it's awesome that you, as a business guy, actually took the time and had the patience to learn Rails, no matter what the results - and it will surely impress the developers you will try to hire in the future. Between that and Rails is easy, learn it yourself and save money there's quite of a difference :-)

If you want to be an awesome business guy, learn how to code so you can talk with your devs more effectively. But for the sake of your project don't try to replace them :-)

Of course, you're right. And I think we agree.

The other thing is that in tech startups, being the "crunch the number and shit slides" guy can be quite frustrating. Knowing how to put up a prototype yourself is pretty satisfying!

... and sorry to make your cringe :)

Not to mention how freaking harder is to startup it from South America.

Observation: the topic of "think mobile and platforms" yes, but they're a plus (not the core of the thing.) Besides, relying too much in platforms are a bad idea (adds to the equation some risks parameters that are out of your control.)

The best is to start with the epicenter and iterate often keeping happy the people that will leverage you to ramen profitable.

Lastly, the epicenter should be human centered.

"You're a visionary product guy? You'll spend your time chasing money, customers, users, employees, facing No's."

How true!

it sounds like the talk would have been good, but i learnt nothing whatsoever from the slides (possibly because i've been through the startup experience, albeit as an employee, but it just seemed like the usual collection of platitudes)

thus the title: beating a dead horse :)

the talk was for last year + mba students at HEC, and most of them never started / worked at a startup.

ah, okay, missed that bit :)

Slightly off-topic, but how did you make the SecretPoke video? http://vimeo.com/19517022

Did you make it yourself or was it done by someone else?

There are a few services online where you can download after effect source files, and then edit. we used videohive, but don't tell anyone :)

Nice slides! Thanks for spreading the word about Rails at HEC ;-)

I think it is a good article, nowdays EVERYBODY is triying to go rich just like that, mostly because of"The social network" movie, we need to understand that this succes cases are rare BUT we need to learn from them, this guys made something different that the rest and place them on the top. Follow me on twitter: @storm_kid

What's wrong with trying to go rich like that, even if it is because of the movie?

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