Entrepreneur Office Hours - Issue #64
Bad news: startups aren't a good way to get rich
Since the entrepreneurs that get glorified in the press and pop culture tend to be entrepreneurs who built enormously valuable companies — entrepreneurs like Jeff Bezos and Elon Musk and Oprah Winfrey and Martha Stewart — people tend to assume being a successful entrepreneur means getting rich. Unfortunately, that’s not the case. In fact, if getting rich is what’s motivating you, I’ve got some bad news for you: entrepreneurship is a terrible retirement strategy. Just ask Josh Abramson, founder of College Humor — one of the most popular comedy websites in history — who joined me on this week’s episode of Web Masters.
Sorry if “not getting rich” isn’t what you want to hear about. I know most of the other entrepreneurship gurus out there are snapping pics of themselves in front of fancy cars and private jets while telling followers if they work hard enough they, too, can someday “have it all.” But I won’t lie to you. That’s not what I’m paid to do. I’m paid to teach entrepreneurship, and entrepreneurship is hard. It rarely goes according to plans. And, more often than not, you’ll fail.
However, this doesn’t mean you can’t make a good living and — more importantly — enjoy yourself and your work.
Incidentally, that’s a big part of the advice I gave to a reader who wrote to ask for help deciding whether or not to take a job with a startup. You’ll find my full answer in this issue’s Q&A.
What questions do you have? Just reply to this email, find me on Twitter, or message me a question on LinkedIn and I’ll do my best to answer (as honestly as possible!) in a future issue of EOH.
Founder of a $6 Billion Company Came Away With Nothing, and He’s OK With It
How would you feel about someone else getting rich from your hard work? It happens all the time in entrepreneurship. In fact, it’s the core model behind venture capital.
The Freshman Who Helped the Internet Laugh
When you see something funny and want to share it, you’ve got tons of options for where to post it. Instagram. YouTube. TikTok. Twitter. Reddit. Facebook. Maybe LinkedIn if it’s not too NSFW. But what would you have done with that content before social media? Josh Abramson helped solve that problem, when, as a freshman, he launched a website called College Humor.
Hear the full story on Web Masters:
…or search “Web Masters” wherever you listen to your favorite podcasts.
FROM THE ARCHIVES…
What My 70-Year-Old Mom Can Teach Startups About Competition
Maybe age isn’t as big an issue to adoption as most people think. After all, under the right circumstances, you actually can teach an old dog new tricks.
Office Hours Q&A
I’ve been invited to join a small, pre-revenue startup. They found me on LinkedIn and said they really like my background. But they don’t have significant enough funding to pay me right now (and aren’t paying themselves, either).
I usually don’t respond to random requests like theirs, but I actually liked what they do, and I’m tempted. I spoke to the founders this week and the conversation went really well.
How do I decide whether or not to join them? And how do I decide how much equity to ask for? Any easy advice or things I should consider?
On their own, there’s nothing wrong with joining a pre-revenue startup, and there’s nothing wrong with not getting paid. Startups have to start from somewhere, and “somewhere” is usually with no money and everyone taking equity.
However, that scenario doesn’t necessarily fit everyone’s lifestyle and current obligations. For example, if someone wanted me to join a pre-revenue startup for equity only today, I wouldn’t be able to do it. I have to help support two young children, and they’re my top priority.
Your life might be different. Only you know the kinds of risk you can afford to take and what would make that risk worthwhile.
As a result, my advice is to consider the opportunity as though you’re an investor. And, by the way, that’s exactly what you’ll be… an investor. You’re investing your resources (time, skills, etc.) in exchange for equity.
With that in mind, the best way to approach the venture is to try to evaluate it like a VC would. You want to ask yourself things like:
Does the company have a clear understanding of the problem it’s solving?
Does the company understand its target customer?
Does the company know how to access its target customers?
How is the company’s timing? Are they on the leading edge of a trend, or are they a “met too” venture?
What does the rest of the team look like? Do you feel as though they’re qualified to achieve what they’re proposing?
How do you (and your investment) fit into their current team and resources?
And so on…
If you haven’t already, spend some time in my archives poking around articles about fundraising and VC (also... why haven’t you already done that?????). I often try to help explain investing from the investor’s perspective, which is exactly what you need.
Also, if you can, speak with some investors and ask how they judge startups. It might open your eyes a bit to the kinds of things you should be concerned about, and it’ll almost certainly help you make your decision.
The only big caveat I’ll add here is that investors invest money and they expect to get a return on that monetary investment in the form of more money. You’re investing something other than money. You’re investing time and significant mental energy. As a result, I’d encourage you to look for a return that isn’t entirely about money. In other words, will you enjoy the job? Will you enjoy the people you’re working with? Will you be excited to get out of bed every day in order to get to work? Will you be proud of the things you’re doing? Those kinds of questions should be a big part of what you ask yourself. It’s not that money doesn’t matter. After all, you still have to pay the bills. But your work for this startup is going to impact a lot more than just the numbers in your bank account, and you should be thinking about those other types of impacts as well.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!