Startups

May 12th, 2005 | by Charlotte |

From PaulGraham.com:

The math is brutal. While perhaps 9 out of 10 startups fail, the one that succeeds will pay the founders more than 10 times what they would have made in an ordinary job. [2] That’s the sense in which startups pay better “on average.”

Remember that. If you start a startup, you’ll probably fail. Most startups fail. It’s the nature of the business. But it’s not necessarily a mistake to try something that has a 90% chance of failing, if you can afford the risk. Failing at 40, when you have a family to support, could be serious. But if you fail at 22, so what? If you try to start a startup right out of college and it tanks, you’ll end up at 23 broke and a lot smarter. Which, if you think about it, is roughly what you hope to get from a graduate program.

Even if your startup does tank, you won’t harm your prospects with employers. To make sure I asked some friends who work for big companies. I asked managers at Yahoo, Google, Amazon, Cisco and Microsoft how they’d feel about two candidates, both 24, with equal ability, one who’d tried to start a startup that tanked, and another who’d spent the two years since college working as a developer at a big company. Every one responded that they’d prefer the guy who’d tried to start his own company. Zod Nazem, who’s in charge of engineering at Yahoo, said:
I actually put more value on the guy with the failed startup. And you can quote me!
So there you have it. Want to get hired by Yahoo? Start your own company.

The Man is the Customer

If even big employers think highly of young hackers who start companies, why don’t more do it? Why are undergrads so conservative? I think it’s because they’ve spent so much time in institutions.

The first twenty years of everyone’s life consists of being piped from one institution to another. You probably didn’t have much choice about the secondary schools you went to. And after high school it was probably understood that you were supposed to go to college. You may have had a few different colleges to choose between, but they were probably pretty similar. So by this point you’ve been riding on a subway line for twenty years, and the next stop seems to be a job.

Actually college is where the line ends. Superficially, going to work for a company may feel like just the next in a series of institutions, but underneath, everything is different. The end of school is the fulcrum of your life, the point where you go from net consumer to net producer.

The other big change is that now, you’re steering. You can go anywhere you want. So it may be worth standing back and understanding what’s going on, instead of just doing the default thing.

All through college, and probably long before that, most undergrads have been thinking about what employers want. But what really matters is what customers want, because they’re the ones who give employers the money to pay you.

So instead of thinking about what employers want, you’re probably better off thinking directly about what users want. To the extent there’s any difference between the two, you can even use that to your advantage if you start a company of your own. For example, big companies like docile conformists. But this is merely an artifact of their bigness, not something customers need.

Grad School

I didn’t consciously realize all this when I was graduating from college– partly because I went straight to grad school. Grad school can be a pretty good deal, even if you think of one day starting a startup. You can start one when you’re done, or even pull the ripcord part way through, like the founders of Yahoo and Google.

Grad school makes a good launch pad for startups, because you’re collected together with a lot of smart people, and you have bigger chunks of time to work on your own projects than an undergrad or corporate employee would. As long as you have a fairly tolerant advisor, you can take your time developing an idea before turning it into a company. David Filo and Jerry Yang started the Yahoo directory in February 1994 and were getting a million hits a day by the fall, but they didn’t actually drop out of grad school and start a company till March 1995.

You could also try the startup first, and if it doesn’t work, then go to grad school. When startups tank they usually do it fairly quickly. Within a year you’ll know if you’re wasting your time.

If it fails, that is. If it succeeds, you may have to delay grad school a little longer. But you’ll have a much more enjoyable life once there than you would on a regular grad student stipend.

There’s a lot of food for thought in this article. I recommend you go and read more.

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