So, I think I have a bias against startups for getting rich. I think it might be reasonable.
I’ll relate my personal experience as well as the experiences of three close friends. Around eight years ago, four of us each joined different startups. I quit mine about 3 1⁄2 years in. They’ve remained at theirs. What’s the current status?
me: I’ve learned that my equity in my startup, which I took at a substantial discount to my salary, is now worth low six figures.
friend 1: his startup has almost been acquired but the deal sunk in due dilligence. Not in danger of going out of business but not exactly striking gold either. At least not yet.
friend 2: recently had his startup acquired and he received a low six figure bonus on the condition he stay another two years to ease the transition. It seems like he was cut out of the upside somehow.
friend 3: nothing close to an exit in sight; the company isn’t failing, but it doesn’t seem like it’s going to strike gold either. It’s slowly growing.
The low six figures of equity I (now) have might be seen as a positive, but 8 years on and I still can’t sell it, and I had to take low pay and do a ton of work to get it. This is better than most startups, but still not a success.
In the meantime after I quit my startup I joined an established company and made a high-normal salary + bonuses and am way ahead of the rest of my friends on net worth (we all basically started at zero).
Two of my friends are only finally now making normal job salaries, but they’re basically burned out at their respective companies and can’t bring themselves to quit because they signed deals where their equity evaporates if they walk away. This is probably the largest danger to joining a startup: what if it drags on forever, and it seems like you could get your payday if you keep hanging on for six more months and this goes on for years and years? Do you think you could just walk away? I think this is loss aversion bias at work.
Should people work at startups? Absolutely: the experience is outstanding. You will learn a lot, the energy is amazing, and there are seldom better opportunities to feel that you’re making a real difference in the world (at least for awhile). Should people work at startups to get rich? I couldn’t recommend it. It’s probably going to fail, but worse, it might nearly fail and stumble along for years never amounting to anything but tricking you into riding it for longer than you should. Even worse still, it might succeed and you might not have been ninja enough about your contract to ensure you get a fair deal.
I’m glad I worked at one startup, but I definitely couldn’t have stomached working for, say, 5 startups in a row. The emotional rollercoaster of just one startup was enough.
Do you think starting a startup in pursuit of a large exit makes sense from an expected value point of view? 80000 hours has some thoughts on this that I agree with.
Permit me to ramble a bit.
So, I think I have a bias against startups for getting rich. I think it might be reasonable.
I’ll relate my personal experience as well as the experiences of three close friends. Around eight years ago, four of us each joined different startups. I quit mine about 3 1⁄2 years in. They’ve remained at theirs. What’s the current status?
me: I’ve learned that my equity in my startup, which I took at a substantial discount to my salary, is now worth low six figures.
friend 1: his startup has almost been acquired but the deal sunk in due dilligence. Not in danger of going out of business but not exactly striking gold either. At least not yet.
friend 2: recently had his startup acquired and he received a low six figure bonus on the condition he stay another two years to ease the transition. It seems like he was cut out of the upside somehow.
friend 3: nothing close to an exit in sight; the company isn’t failing, but it doesn’t seem like it’s going to strike gold either. It’s slowly growing.
The low six figures of equity I (now) have might be seen as a positive, but 8 years on and I still can’t sell it, and I had to take low pay and do a ton of work to get it. This is better than most startups, but still not a success.
In the meantime after I quit my startup I joined an established company and made a high-normal salary + bonuses and am way ahead of the rest of my friends on net worth (we all basically started at zero).
Two of my friends are only finally now making normal job salaries, but they’re basically burned out at their respective companies and can’t bring themselves to quit because they signed deals where their equity evaporates if they walk away. This is probably the largest danger to joining a startup: what if it drags on forever, and it seems like you could get your payday if you keep hanging on for six more months and this goes on for years and years? Do you think you could just walk away? I think this is loss aversion bias at work.
Should people work at startups? Absolutely: the experience is outstanding. You will learn a lot, the energy is amazing, and there are seldom better opportunities to feel that you’re making a real difference in the world (at least for awhile). Should people work at startups to get rich? I couldn’t recommend it. It’s probably going to fail, but worse, it might nearly fail and stumble along for years never amounting to anything but tricking you into riding it for longer than you should. Even worse still, it might succeed and you might not have been ninja enough about your contract to ensure you get a fair deal.
I’m glad I worked at one startup, but I definitely couldn’t have stomached working for, say, 5 startups in a row. The emotional rollercoaster of just one startup was enough.
Do you think starting a startup in pursuit of a large exit makes sense from an expected value point of view? 80000 hours has some thoughts on this that I agree with.