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Lessons I Learned from Co-Founding a Tech Startup (sueraisty.com)
66 points by greenyoda on Apr 25, 2015 | hide | past | web | favorite | 36 comments

Paul Graham said something about startups that I think was very, very wrong for most people. That you "compress your career into a few short years." That might be true for a very small number of very smart people, but for most everyone, it's a long road of several failed startups and well over a decade before they find success. It's like being a musician, only not quite as depressing. You don't know beforehand what you need to be focused on, all too often you're buying in whole-cloth to a idea that hasn't been vetted being implemented by a team that's never worked together and you just ignore all the risks because reasons and oh god this is too hard to think about so I'll just focus on what's in front of me.

You only get to compress your working life if your startup actually finds legs, and manages to find a lucrative exit, and you didn't get screwed on the cap table. Unless it does, you're working awful hard for what's effectively a lottery ticket.

Some people really really really need to work really really really hard. These people would be well-served to do some self-inquiry as to why they need to do this rather than try to find the right vehicle for their efforts, because that kind of effort is rarely rewarded, no matter what vehicle you put it in.

There is a quote which goes by "Nothing to fear but fear itself". Doing startup is for the brave hearts who believe in this. To the people on sidelines it may make little sense (varying from career suicide to lottery tickets). But for the people in middle of it, they are just doing what needs to get done (albeit with lots of fighting/sacrifices and more)

There is a bias in startup world towards young ( early 20's) founders. Though it looks unfavourable towards the rest (in 30's and more), it seems more humanly justifiable. Guys in the former age group could easily squeeze in 5 to 7 years of life and still do a career/life reboot if things don't work out. But, if you are in 30's with family/kids, it becomes a lot more tragic and difficult( or even worse if you did'nt even get to start a family and missed life).

But even then, there are people who have ventured and found success against all odds. There is something about human will/courage/tenacity which is difficult to quantify and applied generically to people. Everyone needs to decide for themselves.

> it's a long road of several failed startups and well over a decade before they find success

How is that not compressing your career into a few short years? Most people start working at about 20 and retire at about 65. That's 45 years of a career.

A decade sounds like "a few short years" compared to four or five decades if you ask me.


It says 4 in there, that's the figure Vince will probably be referring to.

4 years is missing a few of your kid's birthdays. 10 is missing most of them.

Or if you're in your 20s, 4 years is missing out on some great life experiences in your prime. 10 is missing out on all of them.

I'd be interested to know how many YC grads actually successfully exited and earned out within four years. I'd guess it's a pretty small fraction.

You don't need to exit to stop missing out on your family life. Some people may choose to focus exclusively on work, but there are plenty of founders who have a life outside of work long before an exit/ipo event.

> only not quite as depressing

That depends on what depresses you more, poverty or responsibility.

Not to mention, at least as a musician you may create some beautiful things, even though people may not appreciate them. With a startup, you may not do anything of the sort. It only makes sense if it makes you a lot of money, and that's not likely for most founders.

"It costs roughly 10 times as much for a startup to provide health insurance for a person in their 50s with a family than it does for a single 20-something. (Just one more thing contributing to the rampant age discrimination in Silicon Valley.)"

Maybe someday we'll get to the point where we realize that it's economically better for everyone to have single-payer health insurance in this country.

Putting aside single-payer, what's the rationale for doing health insurance through employers, rather than individuals paying for it out of their income?

It's a hold over from World War 2 wage controls. Offering to pay health insurance on the side got around them. It no doubt continues because of the pre-tax benefits. That is, if your employer pays for it then it isn't subject to federal and state income taxes as well as FICA taxes. Depending on your income level and state, those could be around as 30-35% at a programmer's salary range.

I know someone who while working for Citbank was paying around 25% that just for his insurance (for him self his partners some FBI officer) - makes the UK's NI at 13.8% seem very good value.

For one, it reduces the effects of adverse selection[1]. The idea is that everyone reaps economic benefits through such programs, as an average company will have a pool of workers, some who are "healthy" although others may have medical problems.

Compare this to a individuals wanting health insurance - if they're young and healthy they're less likely to want to pay much for insurance, which leaves older and sicker people to pay higher and higher premiums. Of course this is really only an issue with privatized insurance and is a great argument for having a single-payer solution.

[1] http://en.wikipedia.org/wiki/Adverse_selection

Compare this to a individuals wanting health insurance - if they're young and healthy they're less likely to want to pay much for insurance, which leaves older and sicker people to pay higher and higher premiums.

That's NOT what adverse selection is. That's simply actuarial pricing - everyone pays for their own risk.

Adverse selection is caused by information disadvantage - the party buying insurance has information the insurance company does not have or is unable to incorporate into the price. https://en.wikipedia.org/wiki/Adverse_selection

The main cause for adverse selection in health insurance markets are regulations against pricing in various forms of pre-existing conditions.

That's NOT what adverse selection is.

It's absolutely an adverse selection problem - insurance companies, as you say, can't necessarily price based on your existing health condition (not only because of regulations, but also because of asymmetrical information which is too costly, if not impossible to obtain).

As a result, healthy people will choose not to purchase health insurance, since due to the adverse selection problem, there doesn't exist a mutually beneficial transaction for both parties (insurance policies have to price for the average due to the lack of health data, which is economically disadvantageous for the healthy to take). And thus begins the adverse selection death spiral[1]


Taxation is a huge part of it. Employees don't have to pay taxes on the benefit.

I think with the ACA, some small business can claim a tax credit for providing health insurance to their employees, but I'm not 100% sure about that part.

After WWII, with the start of widespread income tax, employers started giving health insurance to their employees as a way of giving a tax-free additional benefit.

Initially, it wasn't obvious this was a legal tax loophole, but the law was amended to explicitly allow it.

Now it's very hard to change, because getting health insurance from your employer makes you tied to your job. Even with the new health insurance exchanges, getting insurance through your employer is a pre-tax benefit, but if you buy on your own, it's with after-tax money.

I need to know is that 10 times $20 per month or 10 times $100 per month? What percentage of salary are we talking?

Depending on the size of the engineer's family and the quality of the insurance, I'm sure you'll go over $1000 pretty easily. People don't realize that their employer pays most of their insurance. The 20-something probably costs $100/month for a high deductible HSA.

Edit: I've only seen what it costs for me personally, a single engineer in my 30's and a non-smoker. It's around $200/month for the catastrophic coverage. I vaugely recall paying around $65/month in my 20's pre-ACA. I know there's a hockey stick, though, so I expect 2 adults in their 50's with 4 children would add up. Again, this is for an HSA high-deductible plan.

On what planet is insurance $20 a month that covers anything of value?

10X is a bit of an exaggeration, it's more like 4X. about 250 for a young single person up to over 1000 for a family.

As a fiftysomething high-cost employee, I am aware of this in negotiation. May be illegal or immoral, but I can't blame potential employers for factoring this into the equation.

I better understood now, why I have hard time to switch my job now. I am working at high visibility projects in a very big company: cloud computing, SDN/NFV, etc. I have a master degree in engineering and a MBA from fairly reputable universities. I had my professional engineer licenses in 10+ states before (I have not keep up with annual fee). And, I received 20+ some patents on wireless and devices for my company.

But, I feel I am under used and under paid. The things they want me to do is too easy. My working life is easy for me, and I want to do battle. So, I am training myself with by finishing on 2-3 Coursea classes per year (math, ML, SNA,..), attending workshops and Meetups in the valley. I worked 10-12 per day for many years now.

It works, I have fair knowledge on new areas and hands on development skill now. I get average 2-3 Linkedin head hunter requests per month for link or discussion job opportunities. I turned most of them down, because some of them too narrow scoped and I also do not want to embarrass myself: I gave my links/phone number to some, but they never call me back.

I will be 69 years old in few months. It took me a little efforts to get here.

No problem, I will create my own battle ground. I am not done yet.

A better question might be, "What country do you come from where you don't know how much health insurance in the US costs."

But thank you for the numbers. An extra 9K a year doesn't really sound that much to pay for experience but I guess penny pinching is the order of the day for too many managers.

10 times $100 I assume. I'm in my 20's and pay my health insurance myself, it's ~$250 per month for a high deductible plan.

Do you have the source for the quote?

the linked post.

> Don't sue your attorney for malpractice if he is a named partner at THE premier law firm in the Valley. (For the record, I did not do this, but one of my co-founders did. He personally sued John Goodrich, of the law firm Wilson Sonsini Goodrich & Rosati. Oh yeah, the same guy sued ME and all my other co-founders too.)

And...? What happened? Such a cliffhanger!

Bottom line - don't sue any attorney. You will be financially exhausted before they even break a sweat (I know this - I'm a lawyer for a big investment firm). For you to win the attorney will have had to be literally fall down drunk throughout the entire process; a bad judgment call doesn't equal a big cash settlement. Instead, hit them where it hurts. Big law firms are hemorrhaging money and their only hope for survival is a steady stream of victims - I mean - clients. If you think your attorney is a effing up, threaten to tell all your friends, colleagues, etc. about your bad experience. You won't win in court, but you might win in the court of public opinion.

Also, negotiate the sh&t out of your bills. Think of bills from your lawyer/firm as an opening offer. Only suckers pay what is put in front of them. Any savvy client gets hours written off.

Also, avoid future hassles with co-founders by setting the terms early and often. A simple LLC will clearly delineate who gets what and protect everyone from liability extending beyond the company's own holdings. If you feel like you can't afford an attorney at this juncture, a LOT of law schools offer free services and will gladly do the contract work for you. And when you get that letter of intent or first inkling of an offer, get a lawyer ASAP. They will help you get the best terms in the most tax-efficient manner possible.

Oh, that mentions that the startup happened 15+ years ago. I feel like that might've been relevant to mention in this post too... It's a fast changing world in the valley.

"Some VCs won't believe that a 25-year old white woman (who -- gasp! -- wears skirts and makeup) is capable of being a technically solid engineer. We soon figured out that pitches to potential investors went better if I was dressed like a slob in sweatpants."

Sad but I can see this happening..

"No matter how dreamy the startup, it is not worth sacrificing your health."

I just wish more bosses of start ups felt this way about their employees! But I suppose that's because they have much more to gain and not much to lose from making their employees work more than they should.

"Some VCs won't believe that a 25-year old white woman (who -- gasp! -- wears skirts and makeup) is capable of being a technically solid engineer. We soon figured out that pitches to potential investors went better if I was dressed like a slob in sweatpants."

I've seen that one happen, and I had a lesser version of it happen to me because I dress east coast prep. I started wearing sloppier clothes for some outside meetings and got treated better. Even inside the company, it took new hires a while before they realized that I have skills.

SV culture on appearance is every bit as stupid as the culture of the dinosaurs, it's just flip-flopped. Instead of 'you must dress professionally', it's 'you must wear unflattering hoodies, t-shirts, and jeans.'

I think I missed out on funding once for wearing a collar.

I am from a subset of the world that believes one is not to be taken seriously in the business world (including the engineering professions and software) unless one is dressed full business professional, so that was definitely culture shock.

It does feel strange to be talked down to when dressed professionally, yet talked to like you understand what's going on when you show up in Vans and a hoodie, indeed.

Logically speaking, if everyone dresses down, that includes women as well. Kickass male "code warriors" aren't stereotypically known for their sharp grooming habits either.

Many reasonable points, but misses the biggest lesson you MUST learn to have a chance of being successful at anything.

The lesson is simple. It is that you know nothing, and nobody else does either.

On the note of cofounders... I can't understand why more people don't end up in business with childhood friends. Met my cofounder aged 12. Started our first business at 13. Then 14, 15, 16... Then 22 - and that one stuck - 31 now, both in years and headcount. Trust isn't something we even think about. It just is.

Agreed on this. My CTO and co-founder is a friend from highschool (~18 years ago, at this point); we've weathered being teenagers together, and stayed closed through the trials of young adulthood, kids, marriages, and mortgages.

It doesn't make starting a company from scratch easier, but it does mean that (a) there are few "hard conversations" that can compare to the ones we've already had at some point, (b) trust is implicit, and (c) we can communicate very efficiently and effectively.

If founding is like marriage, then marry your best friend.

>Order the rug pad for your booth at trade shows.

Old MSFT trick from Comdex/Windows World days. Everybody was always standing at their cubes because they used double pads under the carpet.

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