A Less Risky Path to Entrepreneurship in Software Development(almostpolished.com)
almostpolished.com
A Less Risky Path to Entrepreneurship in Software Development
http://www.almostpolished.com/blog/2013/7/2/a-less-riskier-path-to-entrepreneurship-in-software-development
12 comments
So I did the same thing, also unwittingly, with my company. In hindsight, starting my company was completely risk-less. I was keeping my day job, learning a ton, building my personal brand, and had a full salary from revenue when I was ready to transition.
The next company I run, I'll probably be a bit more antsy to get full time since I feel I've also become less risk-averse now that my company is doing well. I've learned a ton on how to make money from SaaS products, and I'm gaining confidence.
The next company I run, I'll probably be a bit more antsy to get full time since I feel I've also become less risk-averse now that my company is doing well. I've learned a ton on how to make money from SaaS products, and I'm gaining confidence.
Although not completely related to the article - the headline triggered a reaction in me:
Why do we need a less risky approach to entrepreneurship in software development? I believe that of all start-up opportunities, software development is already the least risky one. Why? Almost zero unvestment required. Absolutely flexible working ours. All value creation is through your mind work. No external milestones and so on and so on...
The fact that Software development has become synonymous with entrepreneurship is almost ridiculous. Just compare the risks you are taking with that of your mom-and-pop shop around the corner (or the one that was there 30 years ago)...
Why do we need a less risky approach to entrepreneurship in software development? I believe that of all start-up opportunities, software development is already the least risky one. Why? Almost zero unvestment required. Absolutely flexible working ours. All value creation is through your mind work. No external milestones and so on and so on...
The fact that Software development has become synonymous with entrepreneurship is almost ridiculous. Just compare the risks you are taking with that of your mom-and-pop shop around the corner (or the one that was there 30 years ago)...
" Why? Almost zero unvestment required. Absolutely flexible working ours. All value creation is through your mind work. No external milestones and so on and so on..."
Not all costs are monetary.
When you have a family to provide for and responsibilities beyond those to yourself, your threshold for acceptable risk drops much lower.
Not all costs are monetary.
When you have a family to provide for and responsibilities beyond those to yourself, your threshold for acceptable risk drops much lower.
While there's practically zero capital risk, there is a lot of career risk involved if you fail. Many employers avoid failed entrepreneurs like the plague.
I disagree. When reviewing resumes, I'm always impressed when I see candidates starting their own company. It shows ambition, and the will to wear multiple hats... something that startups are always looking for.
Quite the opposite, in my experience.
Any examples? In my experience it's been the complete opposite.
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I would like to see a more wholesome path to financing, especially for the mid-risk businesses that VCs decry as "lifestyle" businesses.
Software is inherently mid- to high-risk. "Low-risk" just doesn't exist in a world where half of all projects fail, and some fail for reasons not due to a lack of merit (but because they were built to a specialized purpose for which there was demand, but the situation changed). So bank loans, which require personal liability are completely out. On the other hand, VCs want to play in the high-risk space where the mean (expected) return is high but the median is failure. That appeals to some people, but it shouldn't be the only game in town.
Right now, there isn't a mainstream funding outlet for the mid-risk businesses oriented toward 10-40% per year growth, even though that's a great space for software engineers, since it approximately matches the acceleration curve of our capability, with hard work.
Software is inherently mid- to high-risk. "Low-risk" just doesn't exist in a world where half of all projects fail, and some fail for reasons not due to a lack of merit (but because they were built to a specialized purpose for which there was demand, but the situation changed). So bank loans, which require personal liability are completely out. On the other hand, VCs want to play in the high-risk space where the mean (expected) return is high but the median is failure. That appeals to some people, but it shouldn't be the only game in town.
Right now, there isn't a mainstream funding outlet for the mid-risk businesses oriented toward 10-40% per year growth, even though that's a great space for software engineers, since it approximately matches the acceleration curve of our capability, with hard work.
>> Software is inherently mid- to high-risk. "Low-risk" just doesn't exist in a world where half of all projects fail
Risk is a function of both the likelihood and consequences of failure. If you can try and fail a hundred times without quitting your job and only take that plunge when it is derisked (by increased information derived from operation) then it is inherently low risk. Sure throwing 100% into a startup from the beginning makes that individual effort more likely to succeed while being much more risky, but nights/weekend projects can evolve to sustainable businesses without increasing your risk profile. This is because the consequences of failure are near zero, and even a failed effort may be "profitable" in the net sense of connections and marketable skills gained.
Risk is a function of both the likelihood and consequences of failure. If you can try and fail a hundred times without quitting your job and only take that plunge when it is derisked (by increased information derived from operation) then it is inherently low risk. Sure throwing 100% into a startup from the beginning makes that individual effort more likely to succeed while being much more risky, but nights/weekend projects can evolve to sustainable businesses without increasing your risk profile. This is because the consequences of failure are near zero, and even a failed effort may be "profitable" in the net sense of connections and marketable skills gained.
>>Risk is a function of both the likelihood and consequences of failure.
Only in a mathematical argument. Failures are difficult to deal with personally, especially if you have to deal with them repeatedly without any sign of success around. The typical result is frustration gradually turning into a form of burnout and depression.
Only in a mathematical argument. Failures are difficult to deal with personally, especially if you have to deal with them repeatedly without any sign of success around. The typical result is frustration gradually turning into a form of burnout and depression.
You describe just another consequence of failure and your example therefore still fit the original statement about risk and consequence of failure.
While the consequences you describe can be seen as quite severe, the risk of them is, in my opinion and experience, a lot lower than the risk of failure alone. The chance of failing AND consequently falling into burnout or, less likely, depression, seems rather small to me.
While the consequences you describe can be seen as quite severe, the risk of them is, in my opinion and experience, a lot lower than the risk of failure alone. The chance of failing AND consequently falling into burnout or, less likely, depression, seems rather small to me.
I hate to be that guy but...if your justification/explanation for taking or not taking risk involves more words than numbers, you don't understand risk. References to popular science books scores double points. You're merely tricking yourself into thinking that you do so you can feel better when it goes to shit.
You must, must, must, do a) the research, and b) the math. Everything else is fluff.
You must, must, must, do a) the research, and b) the math. Everything else is fluff.
I hate taking risks, but wanted entrepreneurship badly, I have kids/family, do not care about fast growth. My less risky path was:
- Save 12 months of personal expenses/ regular salary before starting. Anyone in software can do it.
- nothing to lose if it fails after 12 months, just a nice line on my resume, lots of lessons learned, I can monetize later.
- my main goal was to keep a 12 months money window ahead of me, everything I bring in helps me extend that window for another month, hopefully every month.
- It helped me to plan long term, not to be in a rush, not to be afraid quoting higher prices, not feeling a gun on my head, sleep at night, stay married, see my kids.
- Going strong after 5 years.
- I think fewer people should raise money, give up equity, and more should start less risky businesses in software.
- Go outside the Valley, try to disconnect from the "startup" myth, and embrace the small business one. Be happy, and rich.
Entrepreneurship is the least risky thing to do, when you have done so much in your field from the bottom up that it becomes your best option. At that point at a salaried job you'd risk earning little, learning less, being a subject to a bad manager, wasting too much productive time in bureaucracy, or sinking to irrelevance.
I started building for the web at 13, had a freelance business for 5years, paid for college by building fundraising videos for another 4, did non-profit for a year part time, UX consulting for two, front-end architecture at large scale sites for two more, product management with a lot of financial and metrics success in a senior role for a big brand for the last two years, and spent some time at a VC (by age 28). At that point nothing else made sense but building the start-up I've always wanted to use (for about $1000 in legal and server fees beyond my personal time).
I started building for the web at 13, had a freelance business for 5years, paid for college by building fundraising videos for another 4, did non-profit for a year part time, UX consulting for two, front-end architecture at large scale sites for two more, product management with a lot of financial and metrics success in a senior role for a big brand for the last two years, and spent some time at a VC (by age 28). At that point nothing else made sense but building the start-up I've always wanted to use (for about $1000 in legal and server fees beyond my personal time).
I like the idea, but it was very simple: choose the right point on the spectrum of startup vs. skill building. This could have been expanded on much better.
1) Startups vs. skill building aren't always independent. This could be discussed.
2) Examples/stories of points on the spectrum should be discussed.
3) The pros and cons of different points on the spectrum should have been discussed.
1) Startups vs. skill building aren't always independent. This could be discussed.
2) Examples/stories of points on the spectrum should be discussed.
3) The pros and cons of different points on the spectrum should have been discussed.
I'm confused what the point of this is - is it that if your startup fails you have something to fall back on with a 'real' job? Makes it sound you can become a developer and magically your startup has much more of a chance to become spectacular - which is of course bunk.
How does codepen make money? Was it generating revenue in the first 5 months before the leap. I really want to do a similar move. I would really like to know more about this strategy
PRO accounts:
http://codepen.io/pro
http://codepen.io/pro
Nice counterweight to that mythologized cowboism propagated by blogosphere.
OT: Is it just me, or are Squarespace sites flaking out on Chrome today?
One of the things that people need to understand is that there are various kinds of failure. Some ruin your life; others are mild annoyances whose negative consequences are paid back by what is learned. It's really important to know the difference before forming an opinion on failure (i.e. "fail fast") that is supposed to apply to everyone in all circumstances. What are the effects of the failure?
Losing a job is not a big deal, usually. Layoffs and business failures happen. Closing your venture because it didn't work out doesn't always ruin your life. But if you took out $80,000 in credit card loans, or took on personal liability to get a bank loan, or had a vindictive investor who decided to ruin your reputation, welcome to Fuckedville.
There are a lot of young people out there right now who are far too willing to risk their careers, reputations, resumes, and savings opportunities on terrible prospects and in business with some really unethical people. The fact is that if you don't gain a certain credibility quickly, you're going to be screwed. If you don't look out for your career and really think through what happens in the case of failure, you could very easily end up at a bad end. I've lost close to $200,000 on bad startups, but at least I always made sure that I kept learning and building skills, no matter what. Now that I'm older, having kept my skills sharp is starting to pay major dividends.
We have these obscenely privileged people, who are so well-connected as to be tied in with what's essentially a private welfare system, who go out there and preach about how failure is no big deal and everyone should risk everything all the time, knowing that they're Stanford grads with partners at six different VC firms in their cell phones. That's not realistic; and people who don't have the social resources to take extreme risks (i.e. the 99%) shouldn't be decried as cowards because they do less risky things like, you know, take regular jobs.
Losing a job is not a big deal, usually. Layoffs and business failures happen. Closing your venture because it didn't work out doesn't always ruin your life. But if you took out $80,000 in credit card loans, or took on personal liability to get a bank loan, or had a vindictive investor who decided to ruin your reputation, welcome to Fuckedville.
There are a lot of young people out there right now who are far too willing to risk their careers, reputations, resumes, and savings opportunities on terrible prospects and in business with some really unethical people. The fact is that if you don't gain a certain credibility quickly, you're going to be screwed. If you don't look out for your career and really think through what happens in the case of failure, you could very easily end up at a bad end. I've lost close to $200,000 on bad startups, but at least I always made sure that I kept learning and building skills, no matter what. Now that I'm older, having kept my skills sharp is starting to pay major dividends.
We have these obscenely privileged people, who are so well-connected as to be tied in with what's essentially a private welfare system, who go out there and preach about how failure is no big deal and everyone should risk everything all the time, knowing that they're Stanford grads with partners at six different VC firms in their cell phones. That's not realistic; and people who don't have the social resources to take extreme risks (i.e. the 99%) shouldn't be decried as cowards because they do less risky things like, you know, take regular jobs.
What kind of "ruin your life" failure do you think people on HN are at risk of undertaking? It strikes me that such levels of failure are very rare, at least among the set who even knows about HN in the first place.
A lot of these startups are pretty ugly when they let people go. Banks and hedge funds and large companies lay people off, but they're honest about it. They say, "we had to cut jobs", and they usually pay a decent severance. Many of these startups make those look like performance-based firings in order to save face. Needless to say, that practice creates a lot of ugly behavior on all sides, and you don't want that stuff to follow you.
A "for cause" firing (which invariably comes with no severance, and can have reputation effects, because for those words to come up on a reference check is devastating) can really fuck up your career. Also, there are a lot of venture capitalists out there who have no problem breaking with common decency and doing a "back channel" reference check.
That's one risk. There's more variance in startups, so the good outcomes are a lot better, but the bad outcomes are really nasty. I know people who've had ex-employers throw frivolous lawsuits at them, just to be vindictive, years after the fact. That kind of nonsense doesn't happen nearly as much in big companies.
More relevantly, a lot of these startups don't do much for a person's career, as there's a lot of junk work to go around that you won't learn much from. If you get into your 30s and 40s and haven't worked on a couple of serious, meaty projects-- and a lot of people haven't-- then you start facing the age discrimination issues. I think those are probably mild for people with legitimate work experience, but the people who did lots of low-yield grunt work "because it was needed" and without appreciation are just screwed. You have to manage your career, and if the work available isn't benefitting your long-term employability, move after 12 months. But... that gets me to another risk: the job-hopper stigma. It's pretty typical in the VC-funded startup world to have more than one job per year, but it looks really bad if you want to go to back to traditional companies, and you might not slide back in on the best terms.
Unfortunately, the reality in careerist America is that age matters a lot, so you have a lot less time than you think you've got. It shouldn't matter, because what really matters is how much time one has left, and a lot of us will live into our 90s (or later, if the most optimistic people are correct) and be sharp until the end. However, the sad truth is that age does matter, and you have to manage your career pretty aggressively to avoid looking like an underachiever amid the harsh age-grading of hyper-optimistic tech companies.
A "for cause" firing (which invariably comes with no severance, and can have reputation effects, because for those words to come up on a reference check is devastating) can really fuck up your career. Also, there are a lot of venture capitalists out there who have no problem breaking with common decency and doing a "back channel" reference check.
That's one risk. There's more variance in startups, so the good outcomes are a lot better, but the bad outcomes are really nasty. I know people who've had ex-employers throw frivolous lawsuits at them, just to be vindictive, years after the fact. That kind of nonsense doesn't happen nearly as much in big companies.
More relevantly, a lot of these startups don't do much for a person's career, as there's a lot of junk work to go around that you won't learn much from. If you get into your 30s and 40s and haven't worked on a couple of serious, meaty projects-- and a lot of people haven't-- then you start facing the age discrimination issues. I think those are probably mild for people with legitimate work experience, but the people who did lots of low-yield grunt work "because it was needed" and without appreciation are just screwed. You have to manage your career, and if the work available isn't benefitting your long-term employability, move after 12 months. But... that gets me to another risk: the job-hopper stigma. It's pretty typical in the VC-funded startup world to have more than one job per year, but it looks really bad if you want to go to back to traditional companies, and you might not slide back in on the best terms.
Unfortunately, the reality in careerist America is that age matters a lot, so you have a lot less time than you think you've got. It shouldn't matter, because what really matters is how much time one has left, and a lot of us will live into our 90s (or later, if the most optimistic people are correct) and be sharp until the end. However, the sad truth is that age does matter, and you have to manage your career pretty aggressively to avoid looking like an underachiever amid the harsh age-grading of hyper-optimistic tech companies.
Your post is so correct, that I'm running short of words of praise for it.
The problem isn't just in the US. I'm from India, and the situation you describe matches the very situation we have here.
One thing that really pisses me off totally, is the industry seems to classify people into two separate categories. First, the kind of people who become managers quickly are automatically considered good. Its almost like if you are coding after 5 years into the industry, you are 'stuck'. That's how its described.
Second, is the kind of people you describe as in having worked for technically meaty projects before say 30. Unfortunately such work is exceedingly rare to find. I would be glad if you can write an essay on how to be finding such work. It would help me and nearly everyone else a lot.
The problem isn't just in the US. I'm from India, and the situation you describe matches the very situation we have here.
One thing that really pisses me off totally, is the industry seems to classify people into two separate categories. First, the kind of people who become managers quickly are automatically considered good. Its almost like if you are coding after 5 years into the industry, you are 'stuck'. That's how its described.
Second, is the kind of people you describe as in having worked for technically meaty projects before say 30. Unfortunately such work is exceedingly rare to find. I would be glad if you can write an essay on how to be finding such work. It would help me and nearly everyone else a lot.
Employee -> Contractor -> Your own agency and contractors -> Your own agency and employees -> Entrepreneurial ventures.
For example Joel Spolsky and others went through this. Sometimes you can skip steps if you have the connections beforehand.