Founders, Don’t Burn Your Boats

Class, entrepreneurship, and the myth of the ‘all in’ founder

You don’t have to grow up rich or even upper middle class to get rich as a startup founder, but few successful founders grew up desperately poor.

— Paul Graham, Founder of Y Combinator

If you look at most successful founders, they are pretty smart, upper-middle class people. They are very rarely the children of super successful people. They are very rarely born in real poverty.

— Sam Altman, former President of Y Combinator

In 1519, Hernán Cortés landed on the coasts of a strange land in the far away corners of America. As the story is told, a resolute Cortés turned to his men and gave one of the most legendary calls to adventure ever recorded in history: he ordered them to burn the ships. Two years later, with just 600 men at his disposal, the Spaniard had completed his conquest of the Aztec empire. Cortés’ legend grew, serving as an archetype for heroism, and today has made its way into countless “leadership lesson” listicles and our modern grit/hustle porn culture. The figure of the ‘all in’ adventurer has become an entrepreneurial trope.

This would all be fine if it wasn’t for one small detail: Cortés never burned his ships out of ballsy defiance. He sank them because he was a dead man walking.

More specifically:

• Cortés had already sent a ship back to Spain charged with presenting Emperor Charles V with a petition by the ‘city of Veracruz’ authorizing Cortés to conquer the mainland.
• When Cortes left Cuba, its Governor, Velázquez, had only authorized him to trade and explore, not conquer. Founding the city of Veracruz (on paper) allowed Cortés to get around that. As a result, he was a dead man walking and could no go back to Cuba
• Those of his men still loyal to Velázquez conspired to seize a ship and escape, but Cortés quashed their plans by deciding to sink his ships on the pretext that they were not seaworthy. Further, since Cortés was short on men and outnumbered by the Aztecs, scuttling the ships turned his sailors into footmen, fortifying their captain’s ranks.
• Lastly, all the ships used by conquistadors were privately owned and operated. Scuttling the ships ensured that Cortés’ men became partners in the conquest and were eligible for the spoils, which they would not have been as mere transport contractors.

The Cortés story is not a tale of reckless risk taking. The man wasn’t gambling by sinking his ships; he was consolidating his assets before embarking on a risky journey. In other words, this episode showcased that one of the fundamental skills for founders is knowing how to put themselves in ideal situations to successfully complete a daunting endeavor — a strategic safety net of sorts. Like Cortés, great startup founders almost never burn their boats; they just hide their safety nets, usually through the romantic aura bestowed by entrepreneurial success.

Why bring any of this up? I would suggest to you that a specter is haunting the world of startups, and that specter is called class. It is unseen, and rarely discussed, because countless stories and legends of drop out founders willing their companies to billion dollar exits on ramen and nights spent showering at the YMCA have blinded generations of founders to the fact that entrepreneurship is a game of volume, and as such, only those with big enough reserves get to play again and again.

This myth is why well-meaning figures like Paul Graham can say this:

When the real Airbnb story is this:

The myth of the startup founder with no safety net, so sure of his outlier-level talent, willing his company to the promised land is just that: a myth. In reality, startups are — mostly, but not exclusively — a rich kid game. If you doubt it, consider the very fact that it is common practice for most startups to launch with a ‘Friends and Family Round’. This is an unmissable tell of the classist nature of startup entrepreneurship today, because as I am typing this, 60% of Americans cannot afford a $1000 emergency, let alone fork $50k for their friend to launch a company.

In reality, most of the great founders you admire — Gates, Bezos, Zuckerberg, Spiegel, Musk, Thiel — either grew up well off, were connected to high net worth individuals, or attended institutions with people that checked both those boxes. This in no way takes away from these men’s greatness. But do not let the stories fool you: all of them, to a man, had a safety net of some kind while starting up.

Gates famously grew up in a wealthy family and could return to Harvard at any time if Microsoft flopped. Bezos also came from wealth (parents invested $300k in Amazon), as did Zuckerberg (dad put first money in Facebook), as did Evan Spiegel (high powered lawyer parents), as did Thiel (raised $1M from friends and family to launch Thiel Capital after quitting his prestigious law firm gig). And while Elon’s story is less privileged than the others, what with his stints of menial jobs in college and his mother being on welfare, his dad invested the first money into Zip 2 to get it off the ground.

I say all this not to shame these founders. Everyone is born with different circumstances, and there are countless rich kids who end up being mediocre laggards. But there is a reason why we’ve seen few startup founders who grew up genuinely, legitimately poor launch a $Billion company: most just can’t afford the risk. Marc Andreessen had this to say about the nature of entrepreneurship:

Quality of output does not vary by age… which means, of course, that attempting to improve your batting average of hits versus misses is a waste of time as you progress through a creative career. Instead you should just focus on more at-bats — more output…the periods of Beethoven’s career that had the most hits also had the most misses — works that you never hear.

In other words, like most creative endeavors, entrepreneurship is a game of volume (the more tries you can afford, the more likely you are to succeed). As such, it is obvious why founders with stronger safety nets have dominated the first waves of startups. The question, and what is at stake here, is whether this is a law of nature, or whether we can do something about it.

So what can you do?

Yes, it is hardly a revelation that wealth enables even more wealth, and that poverty can be a self-reinforcing trap. Despite this, there are founders out there who did not grow up with a silver spoon, grinding to hit escape velocity without capital or a strong network. More importantly, there are probably millions more potential founders who could do just as well as Steve Jobs if the startup world didn’t treat founders like fodder for a pump and dump system; a system which ensures that an entire class of people remain locked out of the game of wealth creation. If solving the wealth inequality problem is a matter of creating more wealth, then millions more need to be able to play the game at a high level.

So what can be done? First, if you’re a founder from a financially destitute background, you must first realize that you are not playing the same game as the Stanford/Harvard/MIT contingent. Do not buy so eagerly into ready made myths of young founders dropping out of school to appear on the world stage as world beaters through sheer will. Those founders have levels of access that you don’t, and likely have been obscured to prop up their story.

Second, understand that ensuring you have a safety net is not a sign that you are an inferior founder with a low appetite for risk. Rather, it means that you must find a way that enables you to play the game of startups many times over. One thing that you can do here is simply diversify your startup outcomes, either by pooling equity with other founders or running multiple small experiments at once. Whatever it is you choose to do, make sure you are deliberate about the risks you are undertaking.

To conclude, the fact is, regardless how good you are, most startup success depends on timing and — like Cortés — being smart about risk. That means that while some exposure to failure is necessary to do great things, an equally small amount of diversification enables great founders to take more swings when they (inevitably) get timing wrong. That’s what the best founders do.