Generally speaking, should tech people start startups and EtG?
For those that have done so: would you advise going for broke and trying to make those startups as big as possible? Or optimise for something more sustainable that can be exited to generate cash, and then start something else higher-risk?
The numbers in this article seem higher to me than the value I would place on most tech people doing direct work, so a naïve answer is “yes, if you can get into YCombinator you should probably do that.” However, YC is extremely competitive and “being able to make a lot of money” is often correlated with “being valuable in direct work” so it’s hard to make a general statement. “Spend six months starting a company and then shut down if you don’t get into a top incubator” doesn’t seem like crazy advice to me.
Regarding risk: returns to entrepreneurship are very fat tailed, and there are theoretical as well as empirical arguments about why we should expect this (e.g. entrepreneurs take on nondiversifiable risk, and you would expect them to need substantial additional compensation to offset this). That being said: I think the data set people use can skew these results, e.g. YCombinator intentionally invests in high risk companies, so it’s unsurprising that YC founders have fat tailed results.
I don’t understand the strategy of creating a lower risk business in order to fund a higher risk business though: if you are aligned with your investors (and if your goal is “make money” then you probably are aligned), then it seems strictly better to use their money instead of your own?
I don’t understand the strategy of creating a lower risk business in order to fund a higher risk business though: if you are aligned with your investors (and if your goal is “make money” then you probably are aligned), then it seems strictly better to use their money instead of your own?
Second-time founders (at least in my experience, and in the UK/Europe) have a much easier time getting funding for their businesses. Certainly as a first-time founder our experience of getting funding has been like pulling teeth, despite decent traction and ARR. With greater access to capital I’d expect a higher chance of building a very large company. So in essence, the goal of one’s first venture might be to just get to some form of exit to provide the cachet for then starting the next thing, rather than going for as big an exit as possible.
Generally speaking, should tech people start startups and EtG?
For those that have done so: would you advise going for broke and trying to make those startups as big as possible? Or optimise for something more sustainable that can be exited to generate cash, and then start something else higher-risk?
The numbers in this article seem higher to me than the value I would place on most tech people doing direct work, so a naïve answer is “yes, if you can get into YCombinator you should probably do that.” However, YC is extremely competitive and “being able to make a lot of money” is often correlated with “being valuable in direct work” so it’s hard to make a general statement. “Spend six months starting a company and then shut down if you don’t get into a top incubator” doesn’t seem like crazy advice to me.
Regarding risk: returns to entrepreneurship are very fat tailed, and there are theoretical as well as empirical arguments about why we should expect this (e.g. entrepreneurs take on nondiversifiable risk, and you would expect them to need substantial additional compensation to offset this). That being said: I think the data set people use can skew these results, e.g. YCombinator intentionally invests in high risk companies, so it’s unsurprising that YC founders have fat tailed results.
I don’t understand the strategy of creating a lower risk business in order to fund a higher risk business though: if you are aligned with your investors (and if your goal is “make money” then you probably are aligned), then it seems strictly better to use their money instead of your own?
Second-time founders (at least in my experience, and in the UK/Europe) have a much easier time getting funding for their businesses. Certainly as a first-time founder our experience of getting funding has been like pulling teeth, despite decent traction and ARR. With greater access to capital I’d expect a higher chance of building a very large company. So in essence, the goal of one’s first venture might be to just get to some form of exit to provide the cachet for then starting the next thing, rather than going for as big an exit as possible.
Ah yeah, certainly proving yourself in some way will make it easier for you to get funding.
Dumb question: have you considered immigrating to the US? The US has substantially more VC funding available than any other country.