Again, the upside is significantly higher if you start a company (financial independence is just one piece). It can be risky (see OP), but it's pretty rational to be a founder, especially if you can weather the adversity. I'm not even sure how my claims are controversial (especially here on HN, of all places).
Oh sure the upside is higher because you might start the next Uber or Facebook or Dropbox. However the utility of money diminishes IMO for most people past the point you no longer need to work. It depends on what you goals are and the probability distribution you are after. Also many founders end up burned and in poor physical health so there is that risk too.
I was specifically talking about founders (but even early stage engineers can do extremely well if the startup takes off). The upside is much higher doing your own thing rather than working at BigCorp (the two aren't even remotely comparable, but neither is the risk). Not to mention the end goals/QOL of working on what you want, commanding your own ship, being financially independent, etc.
Virtually all self-made millionaires+ started companies[1]. There's really no other way to get there.
This is only true where the founder has the most risk relative to the rest, but I'd say that's often not so. Founders can have a career stream to fall back to, additional capital, Etc. Some people could risk being on the street if they lose their job.
There are also numerous ways the founder can walk away
I’ll probably get downvoted for this, but I think it’s really important for you and your family.
If you don’t have a big safety net (college money for kids, many months of living expenses, emergency fund, etc.) then don’t try to become a founder. You are almost guaranteed to fail (as all startups are). If your appetite for risk is low, don’t do it.
There’s a lot of confirmation bias on HN (“I have small kids and started a company, so can you!”) but I’ve personally seen the other side of the coin, and it’s very ugly.
Lots of people in the US that start companies are well-off, too, and they don't "desperately dream" of escaping their life situation. They just have a very different risk profile, and are happy to risk failing for a better chance at success.
I find this to be one of the biggest indicators. I have friends whose parents are extremely wealthy and they tried all sorts of random careers before finally settling on something. For them there was zero real risk since they always had their parents to fall back on. One's dad even told him to come up with a business idea and he would fund it and help him make it happen. Instead he goofed around for awhile, before simply going back to school.
Personally, I'm more irked at potential wasted than jealous. I have no one to fall back on, and that has made me fiercely independent, but also very risk conscious. The good thing is that it is easier than every to bootstrap ideas with minimal time.
It places less risk on the founder. They can easily gain funding so why not create something that, if it fails, won't negatively effect your personal net worth?
> This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist.
Is this always true though? I've worked with a grand total of one company where, if the company went bust, it would mean the end of the founders' life savings. Every other startup/company I've seen, the founder was already very well off. Yes, they put a big chunk of capital and/or time into the start-up. Yes, they were highly motivated to make it succeed. But if it failed, they would... be sad, fall back to family money for a while, and then later do another start-up (or go back to their previous career in Investment Banking). I think this idea that the founder must be singularly taking a huge amount of "risk" is a romantic, stereotypical take, not always true.
Start-up employees, however are shouldering risk. They are by and large not already wealthy so if the start-up fails, there goes their livelihood until they line up another job. I think we should stop thinking that "risk" is exactly the same as "how much of the company's raw dollar equity did you contribute".
Let me qualify that: as a founder, of course there is risk. That's what makes you a founder. And that's why not everyone is cut out to be a founder: you need to be mad. (And there's madness is a bit of all of us, but as a twenty something bachelor, being a mad man affects me less than a 40 something father of three.)
My response was in the context of being an employee. I was an employee at a 5,000 person consulting firm in Australia when the financial crisis hit in 2008 and I had more fear losing my job then then when I moved to recession-plagued America in 2009 to work at a search-engine startup (and Australia has been one of the strongest economies in that period since). In fact, I was paid more (in salary, not counting options), given more responsibility, and enjoyed life more.
A founder may only be investing an amount in the venture that does not affect their own quality of life. They could have other wealth or means, and losing the entire investment would not be catastrophic. They might have a personal runway of several years before they have to give up and get a day job.
Meanwhile, the early employee at a startup is far from without risk themselves. They are almost certainly not well paid (until the last decade of multi-Billion-dollar Unicorns, startups were NEVER known to pay well). They are also likely not making meaningful savings or even eating into them in the hope of hitting it big. They are almost certainly sacrificing a substantial part of their personal life just as the founder is, risking personal relationships and health.
I think the OP makes some excellent points, but unfortunately he uses the phrase "no risk" instead of, as I'd phrase it, "dramatically less risk." There is definitely opportunity cost. At the beginning you won't have an income. If you're 30, like myself, you'll watch your friends who didn't go down the same road start to pile up "stuff." Cars, houses, whatever. They'll have it and you won't. Even if your startup turns a corner to provide lifestyle income, there are still issues. This is a purely anecdotal example, but yesterday my wife and I went to a bank to talk about pre-qualifying for a mortgage loan, and apparently you need two years of self-employment history.
But here was the point that I think got lost in such a binary stated view of risk: right now it's easy to jump back on the totem pole. If I really wanted to buy property that bad, I could get a job making well over my previous salary within weeks. There are not a lot of entrepreneurial endeavors where that is true.
Consider something like opening a restaurant. There is not just opportunity cost but real investment cost before you even get started. And if you bomb, and statistically it's very likely you will, there is not nearly the the likelihood you can at least go back to where you started. As another anecdotal example, my friend is a second year lawyer at a firm, one of the few people in his graduating class that got a nice corporate law job so that he actually has a chance to pay off his massive loans. And he pretty much hates his life, but there's a huge chance that if he left to pursue one of his dreams, there would be no "reset" button. There is no easy chance that if he doesn't succeed, he can just go back to being a highly compensated corporate lawyer within a few weeks.
So yes, there's obviously risk in starting your own startup. There's always a cost to pursuing a dream, and not everyone wants to pay that cost. The distinction is as a technology startup founder in this current environment, your cost is dramatically lower than anyone else's, and I think that's ultimately what I think the OP is trying to say.
The founders I've known were already wealthy when they decided to do a startup. They aren't at risk because even if the startup falls through without making a cent they have enough money in their bank account to withdraw $200k/year for thirty years. There's no risk there.
You sound like you are making a lot of excuses, but I actually deeply agree with every negative point that you make.
As you are pointing out, the risk of being a founder is just not worth it for you or most people, financially or socially or personally. It rarely makes sense even if you are already wealthy or privileged: even given the advantages you have correctly identified, the expected outcome is failure. Without those advantages the rewards for the risks are even worse. Calculate the median return[1][2][3] implied for the majority of ycombinator founders and it is approximately zero.
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