Now is a Great Time to Minimize Risk

Note: When I decided to republish this email as a blog post I was in a foul mood and suffering from an intestinal bug, and titled it "Now is a Terrible Time to Join or Found a Startup". I'm feeling much better, and in retrospect think the headline should be something along the lines of "Now is a Great Time to Minimize Risk". So I've changed it.

This morning fellow Enterprise Irregular Bob Warfield wrote a post titled Now is a Great Time to Join or Found a Startup. I respectfully disagree. We've been having a discussion of this on our private mailing list, but I'd like to offer up my thoughts in a more public forum and ask you what you think.

The original question posed was:

One could make a good argument that now would be the ideal time to go to a start up. Thoughts?

Here's the answer I sent to the group this morning:

The question I would ask myself is "How am I going to get paid while I start this thing up?"

Ideally you can work a "real job" while you get your startup to profitability on the side. (That may sound crazy, but it's what I did. You'll need an accommodating IP agreement with your employer, and an understanding boss.) Otherwise you're going to need to simply go without a paycheck for some amount of time and live off of your savings, which in this environment is just irresponsible.

I don't think it's very viable to think about trying to raise any kind of investment in this climate. Even if you're able to, the terms you get are going to suck. Plus the whole process of trying to raise money is a job in itself, and one that absolutely sucks. Try telling your boss you need the day off to go talk to some VC's who are never going to call you back. Rock on.

That being said, it's a great time to be working for yourself, for one very important reason: what Scott Adams calls "boss diversification". When you work for a company, your employer is your customer and you have only one customer for your services. Lose that customer and you're screwed. When you work for yourself, each of your customers/clients is your boss. Lose any one of them and it's not the end of the world. The more customers, the more diversified you are. So consulting is good, but high-volume products are better. In this economic climate, the chances of losing any one customer/boss is higher than normal. Therefore if you only have one, the risk is higher than normal that you could wake up tomorrow with none, and that's not what you want.

Now that I re-read the original question, it might have been about going to work at an existing startup, not starting one yourself. If so, I would say that doing that would be the worst of both worlds: you still have only one customer for your services, so your livelihood hangs by a thread. And since they're a startup, presumably they have less wherewithal to withstand the financial storm than does an established company. Worse yet, they may have VC's on their board telling them to "do the right thing for the company" and lay people off as a knee-jerk response to any bad news. And the news these days is mostly bad.

So go dig out your Proprietary Inventions Agreement and see what it says about stuff you create on your own time using your own resources. If you own it, go for it. But don't quit your day job.

Obviously Bob and I are of different minds on this. What do you think?

Comments

[Craig]

"How am I going to get paid while I start this thing up?"

There are two groups of people suited to founding startups. People less than 25 years old who have no responsibility and don't care if they have to crash on friends couch for a few months, and people who have already gotten rich on previous startups. If you are asking how am I going to get paid then it is obvious you are not in one of those groups and you should probably not look at founding a startup (unless it is a can't lose).

I know because I am in this exact boat. A few years back I went literally bankrupt founding startups and it was never a real problem for me. I was more worried about my parents being worried about me than not having any money. But now, with a wife and baby, any startup talk in my house is given some very stern words from my wife, "I'm not living on the streets".

[sözlük]

don't start up if you will end up bankrupt! one in every 10 can end up rich!