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Build a Business, Not an Exit Strategy

melanie.io

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Re: Build a Business, Not an Exit Strategy

#51

Post by paraschopra »

pg wrote: post #38

The critical mistake here is a misunderstanding of how probability works. If we know that x% of startups succeed, that doesn't mean that each group of founders starting a startup have x% chance of succeeding. Some people are orders of magnitude more likely to succeed than others. For those it's a good idea to start a startup. For the rest (a much larger group) it's a bad idea.

There does seem to be some flaw in this argument. Within those people who have orders of magnitude higher probability of succeeding, how do you differentiate? My general point is the it is impossible to assign a probability to an individual's success (since there is only one data point). So for calculating probability, you will have to aggregate many individuals and see how many of them become successful. The OP's understanding of probability is entirely accurate if we talk about general set of people who are starting companies (assuming figures quoted are accurate).

Of course, within a set you can create many more subsets but that doesn't mean original set is wrong.

Re: Build a Business, Not an Exit Strategy

#53

Post by radicalbyte »

dmor wrote: post #36
melanie_io wrote: post #32

Earlier quoted context omitted.

So, profitable business, totally bootstrapped, growing at 20% a month. I guess you could call that "taking it easy." If you think my argument is not well-reasoned, then you should refute it, not just insult me. Lastly, and I don't think the crowd on HN really gets this, I was using the absolute most conservative assumptions possible to prove my argument. Which is, 'even just working 30 hours a week, you still have a…

The problem with your argument it that it rests on a false premise, that you should start the calculation of a $100M exit with the 1% chance you will raise funding. You should actually be multiplying this by the chance that you'll have a 100M exit. And I think far fewer bootstrapped companies have that outcome than VC funded companies. FWIW I don't think being VC funding is success, but adding fuel can certainly help…

The funny thing is that the value provided by YC style funding isn't in the funding itself. It's in the network provided by the VC (and to a lesser extent the marketing).

This is best reason to enter YC with an established (but small) company: to turn your small "life style" size business into something with a very large reach.

I'm sure that the latest batch of YC companies would agree with my reasoning. You give YC a fraction of a small pie to greatly increase the chances of your plan to turn it into a big pie.

My 2-5 year plan: build a $2 - $5m business (and the core team) in Europe around an idea that has the potential* to be a $500m+ business in America: then give YC a slice in exchange for their advice.

* What I'm working on has massive niche in a sector far away from the web. So we can build the idea, business and tech out away from the prying eyes of the incumbents. Now most of the incumbents will have trouble competing with us (different strategy), with one massive exception. If they knew about the niche we knew about, they would fill it (the niche along can support several $100m + companies).

Re: Build a Business, Not an Exit Strategy

#54

Post by Negitivefrags »

TallboyOne wrote: post #50
Negitivefrags wrote: post #48

Earlier quoted context omitted.

There is no misunderstanding of how probability works here. 100% of people who start businesses believe they can succeed, otherwise they wouldn't start one. Clearly given that such a high percentage of businesses fail, you are not qualified to judge your own chance at success. Therefore the only time you can know that your percentage chance is higher than the average is when you have a 3rd party that is skilled at ev…

I'm no mathematician, or even close, but I don't believe only a person's beliefs translate to their real-world chances of success. A lot has to do with your work ethic, motivation, ability to work long hours, focus, upbringing etc. I also don't think 100% of people who start businesses believe they can succeed. I'm sure a large percantage are trying to wing it and hope they get lucky.

I'm not saying that a person's belief translates to their success. In fact I'm saying just the opposite. I would imagine most people starting a business think that their chances are higher than the average person because they are special in some way.

The article is effectively saying "Statistically you are probably not special, so you may want to reconsider taking the risk".

Re: Build a Business, Not an Exit Strategy

#56

Post by thecosas »

Why don't we strive to have "dent in the universe" mean "make the world a little better" rather than whatever the heck we want it to mean?

Sure, be excited about tech, but be more excited about the possibilities it opens for the people using it.

Re: Build a Business, Not an Exit Strategy

#57

Post by acgourley »

Negitivefrags wrote: post #48
pg wrote: post #38

The critical mistake here is a misunderstanding of how probability works. If we know that x% of startups succeed, that doesn't mean that each group of founders starting a startup have x% chance of succeeding. Some people are orders of magnitude more likely to succeed than others. For those it's a good idea to start a startup. For the rest (a much larger group) it's a bad idea.

There is no misunderstanding of how probability works here. 100% of people who start businesses believe they can succeed, otherwise they wouldn't start one. Clearly given that such a high percentage of businesses fail, you are not qualified to judge your own chance at success. Therefore the only time you can know that your percentage chance is higher than the average is when you have a 3rd party that is skilled at ev…

That's rational. Good luck getting any founder to think that way.

Re: Build a Business, Not an Exit Strategy

#58

Post by Negitivefrags »

acgourley wrote: post #57
Negitivefrags wrote: post #48

Earlier quoted context omitted.

There is no misunderstanding of how probability works here. 100% of people who start businesses believe they can succeed, otherwise they wouldn't start one. Clearly given that such a high percentage of businesses fail, you are not qualified to judge your own chance at success. Therefore the only time you can know that your percentage chance is higher than the average is when you have a 3rd party that is skilled at ev…

That's rational. Good luck getting any founder to think that way.

Well I'm a founder myself and I absolutely did think that we were special and had a much higher chance to succeed than the average person.

Unfortunately at this point it's impossible to know if we were just lucky noobs or actually had some idea what we were doing.

Re: Build a Business, Not an Exit Strategy

#59

Post by lusr »

Negitivefrags wrote: post #48
pg wrote: post #38

The critical mistake here is a misunderstanding of how probability works. If we know that x% of startups succeed, that doesn't mean that each group of founders starting a startup have x% chance of succeeding. Some people are orders of magnitude more likely to succeed than others. For those it's a good idea to start a startup. For the rest (a much larger group) it's a bad idea.

There is no misunderstanding of how probability works here. 100% of people who start businesses believe they can succeed, otherwise they wouldn't start one. Clearly given that such a high percentage of businesses fail, you are not qualified to judge your own chance at success. Therefore the only time you can know that your percentage chance is higher than the average is when you have a 3rd party that is skilled at ev…

What you said is true if you're young and you don't have much data to assess yourself with, but even if you're not pg and don't have a model of success well backed with data, the fact is that if you're 30 or 40 years old there are plenty of objective third parties you will have encountered throughout life who have assessed you for free.

For example, if you've been through a demanding course of tertiary education and performed better than average that says something. Indeed any endeavour that required a fair amount of intelligence, skill, and commitment where you came out above average says something: starting other businesses and having done better than average comes to mind.

In addition to the flaw pg pointed out, the second mistake the article's analysis makes is to ignore the number of opportunities you have; it seems to assume you have a single opportunity. In reality, you can make some less than optimal choices in life and still sometimes do just as fine in the end.

If you're young I don't see what's wrong with gambling a bit: if you're 20 and have zero data about how well you will perform, I believe it's still completely rational to aim high. If you don't get the $100 million exit by 25, you can reconsider your options. After 5 years of aiming high you'll have more than enough data to assess whether it's time to change your aim or to keep going.

Re: Build a Business, Not an Exit Strategy

#60

Post by jasonkester »

dmor wrote: post #11

It seems like each week or so we have an existential crisis on HN by an author who has realized the "go big or go home" mindset/lifestyle might not work for them. There is a HUGE fallacy in all this expected value rationalization for building a lifestyle business. You are going to DIE someday. You don't have unlimited time, and I'd rather take crazy bets toward building something risky and radical than be comfortable…

"Settling" for several hundred thousand dollars a year on a handful of hours of work per week? That doesn't sound like very many people's definition of the word.

"Settling" is usually used to describe accepting a somewhat bad situation because you know you're never going to find one that's better. The situation you describe above would be the fantasy of pretty much every human being on the planet.

"Why I solved my financial situation for good and retired at 19". Find me anybody apart from yourself who thinks there's no upside to that.

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