The entrepreneur’s financial sacrifice

“After raising money for your startup you no longer have personal financial problems, right?” — a young future entrepreneur from the audience asked me at a panel about underrepresented founders. “I have $3.75 (yes, there’s a decimal point after the three) in my bank account, $12,000 in credit card debt and I owe $3,000 in personal loans”- I told him. Everyone in the audience was silent and then he asked me if it’s normal for startup founders to make that sacrifice. I simply replied by saying, “It is normal for startup founders to spend a lot of their money while bootstrapping, yes. But it’s not a sacrifice, bur rather, an opportunity”. Sometimes you come from a rich family, sometimes you saved a lot from your previous job. Then, sometimes, you are on a visa that doesn’t give you many opportunities, no financial aid in college, and come from a family that can barely make ends meet. No matter where you come from, when you see an opportunity to do something amazing, you take it.

“It’s really common for people to want an extraordinary outcome for themselves in this life, but it’s rare to see folks make extraordinary sacrifices for the *chance* to get one of those outcomes” — @jason

Your financial sacrifice is really an opportunity

If you think about it, as an entrepreneur, you’re putting your entire life and energy into something with the potential of being so big that it can really make an impact in the current society. If you have already decided to spend many years of your life dedicated to this venture, then money is really one of the most insignificant things you’re giving up. Money that you raise from investors, or money from your loans or credit cards, is really giving you an opportunity to live x more months and grow your startup. When you grow your startup, its valuation grows and given that you own more than 30% of the company, whatever little money you put in will allow you to get to the next step where you will own 30% of a lot more. Next time you go out to fundraise and ask private investors for millions of dollars, ask yourself, would you first invest all of your money times two into your own company? If yes, keep reading.

The opportunity comes with a deadline

Once a month it will hurt when you struggle to pay bills and transfer balance from one credit card to another, but it’s only for about an hour, once a month. That is unless you know the day is coming. Credit cards are almost maxed out, personal loan is almost over. Well, by then you better had made the most of the time you bought for yourself, and your company better be at a great position to raise venture money and accelerate its growth, or be generating enough revenue to sustain itself.

I always hear from investors that after you raise your first round you should always treat it as your last and now the clock is ticking. The funny thing is that for an entrepreneur with no wealthy background, the clock started ticking a long time ago. It started the minute he decided to start a company, which could easily be 2 to 3 years before raising a round or being profitable.

Once you hire employees you’re now responsible for their salaries (meaning them and their families), so if your company is ever short of money you have to take the hit and cut whatever salary you’re making (which should already be the minimum) by a lot. Again, this is to give your company an opportunity to rise and avoid a premature death.

Many of the most successful companies have been founded by people who have a completely different goal from becoming millionaires and that helps them stay focused while making sacrifices in life (friends, family, health, etc. and no, work-life balance is not a thing in the startup world). If you want a chance to build something people want, you’re going to have to make extreme sacrifices, which will lead to unimaginable opportunities.