The lottery is not a very good analogy. Let’s look at worst cases. In the lottery you put in cash and usually get nothing back. You literally learn nothing because every draw is random. At a VC-backed startup someone else gives you money. With that money you’re expected to pay yourself a salary. You get to learn at an incredibly fast rate on someone else’s dime. And you get that salary and learning even if your investors are awful and push you to do terrible things and you agree to do those terrible things and they tank the company. In the worst case, it’s a free education with room and board included. And, if it works, there’s a helluva upside.
So, lottery expected worst case: you lose all your money. VC-backed startup expected worst case: you learn a ton and end up no worse financially than you started.
As an aside, whether venture-backed or bootstrapped, having gotten to know a lot of successful founders the characteristic that seems to set them apart is their rate of learning. The best are relentlessly curious, always assume there’s something they don’t know, and seek to learn from as many people as possible.
You get almost no money in salary, and you spend something way more valuable than money: time, during your most energetic and precious years of life typically. I think it’s really dangerous to put rose tinted glasses on the whole thing.
For anyone not upper class, if you spend 6 or so years chasing a startup and fail, and you’re a good software developer.. once you factor in savings and interest, your total opportunity cost is something like 2-4 million dollars. That’s making a good software dev salary for 6 years and saving some of it. That’s life changing for someone not already rich. And you’d still be learning a lot, plus working a much more relaxing job with time for side projects.
Agree that’s the right analysis for many people. Wasn’t arguing whether you should start a startup or not. Just that if you do bootstrapping isn’t inherently better than raising venture capital.
Your broader point is important too: startups are unfortunately too often a luxury of the upper class. It is extremely scary to take a risk when you don’t have a safety net. I was personally broke when we started Cloudflare and had to borrow money from my mom to pay my rent. But I could borrow money from my mom. And I had a mom and a family that if I failed would make sure I didn’t go hungry. My family wasn’t anything close to what I now see really rich looks like, but we weren’t scraping by. Had I not had that safety net I don’t think I’d have had the confidence to start Cloudflare. And I think that’s a real issue with entrepreneurship we don’t talk enough about.
I think we also focus and celebrate too much the route of college drop out start up founders. For these cases yes some family wealth is definitely beneficial as a safety net.
But there are also plenty of people that have worked for a while, provided themselves a safety net and go on the startup journey in their 30s and 40s. Eg. Eric Yuan, who was a eng VP already before zoom.
But I guess those don’t grab the same headline attention.
I was 34 when I started Cloudflare and had had every random job from bartender to LSAT test prep instructor to adjunct law professor. Eric, incidentally, is one of the kindest, most curious people I’ve had a pleasure to get to know on this journey. Feel lucky to call him a friend. Truly great guy.
> And you get that salary and learning even if your investors are awful and push you to do terrible things and you agree to do those terrible things and they tank the company. In the worst case, it’s a free education with room and board included.
If you’re learning as much at terrible companies as at good ones, then you’ve had rotten luck. A lot of what I’ve learned at rotten companies is how not to do things, and how important mental health is to physical health. There’s much more negative space than positive space, so you have to learn hundreds of ways not to do something for every handful of ways that actually are sustainable.
So, lottery expected worst case: you lose all your money. VC-backed startup expected worst case: you learn a ton and end up no worse financially than you started.
As an aside, whether venture-backed or bootstrapped, having gotten to know a lot of successful founders the characteristic that seems to set them apart is their rate of learning. The best are relentlessly curious, always assume there’s something they don’t know, and seek to learn from as many people as possible.