I love the world of startups. I first jumped in with no idea what I was doing when I was about 17 and together with two friends built a CMS company. The process was invigorating, and we continued to grow the company over the next few years. Eventually we all decided to focus on the company full time and continued to grow the business until it all came crashing down. At a fairly young age, we were left trying to simultaneously figure out how to lay off staff, sell our remaining assets, and do a postmortem on what exactly went wrong. Winding the business down was one of the most traumatic experiences of my then-young life. I was both terrified and intrigued, which happens to be my personal recipe for addiction.
Little did I know the issues I faced with a failed startup were nothing compared to the issues founders eventually face with one that is successful. The last few startups I’ve been a part of have done well, but whenever I connect with my fellow startup friends, the same topics come up.
You don’t have to look very far to find someone preaching the values of entrepreneurship. It’s become such a popular topic for business leaders, politicians, and educators to endorse, and you see more people pursuing new business ideas than ever before. The influx of seed and pre-seed capital around the world has fueled this even further, helping to encourage even more people to start businesses. I believe this is good for society overall, but there should be a few more disclaimers tacked on to all of this encouragement so entrepreneurs can enter this world with their eyes wide open. People like to talk about how incredible it feels to pursue your passion, change the world, and build something from nothing. Sure, that feels good. But it comes at a cost, and few talk about the sacrifices it takes for most to do that, your realistic outcomes, and the reality of what you end up doing the majority of that time if you head down that path.
My thoughts on this topic obviously include my own experience having started, help start, eventually led, or invested in about a dozen startups. Dots is most recent experience, but by no means is it the only startup that I’m drawing from. In fact, I’m mostly including observations from close friends that started and exited companies. I also had a unique vantage point at Microsoft for several years, seeing large and small startups from the other side of the table as they were acquired. These observations in particular are consistent across failed startups and unicorns.
I want to build a case against jumping straight into entrepreneurship. It can be a horrible decision for some, maybe most, but that doesn’t mean you shouldn’t do it. I did, and plan stay in the startup world for the rest of my career. I simply want to paint a more accurate picture of what life is often like so you can weigh your options when you’re considering a new venture, joining an existing venture, or spending time at a more established company in technology at various points in your career.
Leaders eat alone.
Most people like to work in teams, and get energy from their peers. When you succeed, having a colleague congratulate you feels incredible. When you fail, your peers, and often your manager, are there to pick you up, help you learn, and grow. When you start a company, and get any reasonable level of a traction, you end up building a team. While it’s fun and rewarding to build and grow strong teams, your goal in doing so is to make them succeed. Everything you do is about the team succeeding. This makes sense, you need them to scale and hit their goals. Your wins become theirs, and their losses become yours. I subscribe to this style of leadership, it’s what good leaders have to do. However, after a long period of time you start to miss out on the dopamine effect you would otherwise get as an employee.
You might be lucky enough to have a supportive and engaged board that gives you small doses of this, but at best it will be a monthly, high level shot of dopamine, not the daily dose most humans crave to stay happy and motivated. I’m no psychologist, but I believe this is the root cause of founder depression, a serious condition that effects founders disproportionately to the rest of the worker population. Few will tell you that the moment you become an entrepreneur, you no longer are a builder of things and are now a builder of people, on a team all by yourself.
You will not be rich.
Too many people equate entrepreneurship with wealth. The two are completely and totally unrelated. Very few startup “exits” provide founders with enough wealth to give them true financial freedom. When you factor in 5–10 years of opportunity cost from significantly reduced compensation relative to what most of the founders I’ve observed could get as employees or freelancers, most of these founders will be lucky if they break even. In this equation, I’m not even considering the startups that failed. Those founders end up with nothing financially, if they’re lucky. In the distribution of startups, those that exit are clearly outliers; and if you only look at a distribution of founders that have exited, those that achieve life-changing wealth are also outliers in that subset as well. You’ll most likely make more money working at Facebook or Google than you will starting your own company, and entrepreneurs should be sober to that reality.
Customers will turn on you.
If we assume you’re one of the successful startups, and you find some level product market fit, you should feel satisfied: you built a product that solves a problem for a reasonably sized population. You’ll want to do your best to remember that moment, because in the years that follow you’ll likely encounter scenarios where your biggest product advocates start to turn on you. To manage this, you’ll want to invest significant time and energy to maintain the goodwill you’ve garnered by solving your customer’s problem. Business, technical, and market forces will necessitate a number of changes to your offering, and over time the constant balancing act between customer satisfaction and literally everything else you’re trying to solve for, starts to feel unsustainable. You’ll lose early customers to competitors, including those that fast-followed (copied) your product offering. If you thought you’d find solace from the love your customers have for you and the solution you’ve built for them, you will be disappointed.
Even good people can really suck.
Everyone around your startup, including investors, co-founders, and employees will oscillate between fear and greed multiple times during the life of the company. It’s hard enough to manage for yourself, but even harder to manage, or at least control, these two forces in others. Serial entrepreneurs and seasoned investors are typically grounded enough to do this well, but it is a struggle for new venture funds, angel investors, and less experienced founders and employees. Even the most successful startup founders have moments where they aren’t sure if they’ll be able to keep the business going. Six months later they could feel the urge to turn down an acquisition offer at 10x what they thought they were worth earlier in the year, because they think they can get more. A few months later, fear sets back in as the market adjusts and the likelihood of a less attractive round of financing sets in. You’ve likely heard people describe successful startups as a rollercoaster, and maybe you’re prepared for that, but you need to be prepared for everyone associated with your company to be on their own unique rollercoaster, often driven by entirely different factors.
Initially, problems don’t really get in your way. You necessarily take a scrappy approach to getting things done because the odds are already stacked against you, and you’re light on resources. But, once your business shows any sign of growth, you hire employees or take investment, you all of the sudden the small problems start to take up more of your time. You also have a growing set of people that are counting on you to return a premium on a VC’s investment or keep an employee’s job safe. You only need one big problem to start losing sleep (which then effects literally every other aspect of your life), and what I’ve observed is it’s rarely just one problem. In fact, it’s unusual not to have a least one big problem at any given time. Some are great at managing this anxiety, most are not. Unfortunately, I haven’t observed any correlation between those that are good at managing anxiety from problems and those that run successful companies. Get used to that sinking feeling in your stomach, because you will have one big problem or another hanging over your head. You now have your own problems, your employees’ problems, and every customer’s problems, and you have to deal with Trump, too.
Being an entrepreneur is simply not all it’s cracked up to be, and too many people are misleading the next generation of builders into thinking it’s the only way to do something meaningful and rewarding with their lives.
If you choose to be an entrepreneur, and are fortunate enough to achieve some level of success, plan for a long, lonely ride eating ramen, dealing with people that will do anything for you one day and try to take advantage of you the next. Your problems just hockey-sticked. Life just got infinitely more complex. But screw it, if you’re one of the crazy ones… have a brutally honest conversation with your family, then slap yourself in the face and get to work.