When entrepreneurs come to me, I always point out the following:
1) The chances of a venture-backed startup being a hit and returning meaningful wealth are about 1 in 10.
2) You’re likely to have about 20-25 years in your career where you can found a company.
3) Each time you found a company, you’re going to end up spending 4-5 years of your life on it.
4) Therefore, the equation for entrepreneurial wealth is the following: You have a 10% chance of success per startup, and you get 5 swings to hit it out of the park.
5) 0.9 x 0.9 x 0.9 x0.9 x0.9 = 0.59. In other words, even after 5 startups, your chances of a major success are just 41%. If you become a startup founder, the most likely outcome is that you never get rich, and that if money is your goal, you should go into a different line of work.
Let me reiterate–you have a less than 50/50 chance of founding a successful startup, even if you manage to raise VC every time (which is not a forgone conclusion) and even if you devote essentially your entire professional life to it.
And yet, that’s the choice I made. I decided that I was willing to live with the odds being stacked against “success” because entrepreneurship and the startup life makes me happy–a lot happier than when I was a consultant, or when I was a corporate employee.
7 years ago, I told a good friend, “I have everything that money can’t buy.” That truth was brought home to me in a particularly poignant fashion when my friend, an ambitious and incredibly successful entrepreneur and corporate executive, died of a heart attack last year at 41.
Live your life and be happy, because some outcomes are out of your control.
Inspired by this excellent post from Mark Suster.
(Cross-posted @ Adventures in Capitalism )
i like how you were able to come up with the statistics or the probability of a startup being a success. thoroughly enjoyed your post!