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The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

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Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#41

Post by jules »

InclinedPlane wrote: post #39
jules wrote: post #36

Earlier quoted context omitted.

If strategy A is buying lottery tickets at $5 and strategy B is buying the lottery tickets at $10, A is twice as good off. It doesn't matter that the earnings are dominated by one single winning lottery ticket; strategy A is always twice as good as strategy B. So getting terms that are twice as good for a VC will double their expected earnings. Sure, if you just consider the winning ticket, it doesn't matter whether…

You're still not getting it. It doesn't matter how much of the lottery winnings you get, the only thing that matters is winning the lottery or not. 20% of DuckDuckGo is a rounding error compared to 10%, 5%, or even 1% of google.

I'm not getting it because the reasoning is not sound. Your reasoning is basically "the numbers are BIG! so a factor of 2x doesn't matter". If you can get your lottery tickets for half price, you can buy twice as many lottery tickets, and double your chances. Equivalently, getting 1% of Google or 5% of Google is a 5x difference, which is huge. That could easily mean the difference between a net profit or net loss for an investor over all his investments.

If you really believe that the terms don't matter, then I'm sure lots of YC startups are happy to take money from you at terms that are 5x better than what YC offers.

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#42

Post by wellboy »

pbreit wrote: post #4

Wadhwa must be taken with very large grains of salt as he is relentlessly pushing an agenda which is probably not completely accurate. How are they defining entrepreneur here? Including dry cleaning shops and law practices? And are they having the kind of success as Zuckerberg, Gates, Jobs, Page/Brin, Yang/Filo, Omidyar, Musk, and on and and on and on?

Yes, I think the percentage of under 30y old entrepreneurs outweighs who do highly scalable startups outweighs the over 30y olds by far.

A billion dollar company after 10y of being in business is not impressive. If you have some money to start with that's easy. The art is to make a billion dollar company with no in itial funding and within 1 year. Talk about resourceful.

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#43

Post by wellboy »

dustingetz wrote: post #13

killer quote: "Ideas come from need; understanding of need comes from experience; and experience comes with age."

I'd rather say experience in corporate correlates negative with the ability to innovate. Who do you think is gonna create the next billion dollar company, someone with 20y experience in IT or an crazy student who thinks he can take over the world.

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#44

Post by johnrob »

jules wrote: post #41
InclinedPlane wrote: post #39

Earlier quoted context omitted.

You're still not getting it. It doesn't matter how much of the lottery winnings you get, the only thing that matters is winning the lottery or not. 20% of DuckDuckGo is a rounding error compared to 10%, 5%, or even 1% of google.

I'm not getting it because the reasoning is not sound. Your reasoning is basically "the numbers are BIG! so a factor of 2x doesn't matter". If you can get your lottery tickets for half price, you can buy twice as many lottery tickets, and double your chances. Equivalently, getting 1% of Google or 5% of Google is a 5x difference, which is huge. That could easily mean the difference between a net profit or net loss for…

Lottery tickets are a good example in this case. By definition, strategy A and B cannot both be winners (there is only one winning ticket). So the only thing that will set either apart is if one of the two strategies has the winning ticket. The price per ticket is only relevant if neither has the winner, in which case you're comparing who had bigger losses.

The reason I like the lottery example is that two venture capital firms don't have matching portfolios (if they did, then valuation would matter for relative performance). In reality, when you compare firm A vs firm B it's the performance of the startups that determines the winner (not the amount of equity owned).

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#45

Post by SteveGerencser »

jeremyjh wrote: post #19
DavidAdams wrote: post #15

I can't speak to "over 50," but I can speak to "over 40." I founded my first software startup in 1995 while I was still an undergraduate. I had the good fortune of timing it so that after a year and a half of toil and obscurity we hit the wave of the dotcom boom, and I was able to establish myself as a proven serial entrepreneur and have been able to found a series of moderately successful tech companies over the yea…

I think you and analyst74 make some good points here. It doesn't surprise me at all that VCs are happy to invest in a start-up with founders who have experience like yourself. At your age - that is going to be expected. If you were 42 and spent the last 20 years working in Big Corp - even if you did impressive work - I'm sceptical you'd be on an even-footing with a 25 year old who spent 3 years at Zynga.

"If you were 42 and spent the last 20 years working in Big Corp - even if you did impressive work - I'm sceptical you'd be on an even-footing with a 25 year old who spent 3 years at Zynga."

I've worked with more than a few mid-20 somethings that stepped out on their own only to immediately drive their company in to the ground because they a) didn't understand "business" (profit) and b) assumed the 'old people' around them didn't understand the new economy.

This isn't to say that there are not outstanding young business owners out there, but to assume that 20 years of work experience provides no, or little, benefit when it comes to running a start-up is short sighted at best.

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#46

Post by jules »

johnrob wrote: post #44
jules wrote: post #41

Earlier quoted context omitted.

I'm not getting it because the reasoning is not sound. Your reasoning is basically "the numbers are BIG! so a factor of 2x doesn't matter". If you can get your lottery tickets for half price, you can buy twice as many lottery tickets, and double your chances. Equivalently, getting 1% of Google or 5% of Google is a 5x difference, which is huge. That could easily mean the difference between a net profit or net loss for…

Lottery tickets are a good example in this case. By definition, strategy A and B cannot both be winners (there is only one winning ticket). So the only thing that will set either apart is if one of the two strategies has the winning ticket. The price per ticket is only relevant if neither has the winner, in which case you're comparing who had bigger losses. The reason I like the lottery example is that two venture ca…

Yes, in the end the VC with the winner is going to win, but that's beside the point even if there is a single winner in the world (which in reality is obviously not true, there are not dozens but hundreds of huge ROI winners). The point is that you don't know the winner beforehand. A VC who is getting 2*x% equity for $y is expected to perform twice as good as one that is getting x% for $y. The arguments that are being made here are incredibly vague. I'd love to see an argument based on solid logic why valuation doesn't matter much. I'm sure PG is right, but I'd like to understand why.

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#47

Post by johnrob »

jules wrote: post #46
johnrob wrote: post #44

Earlier quoted context omitted.

Lottery tickets are a good example in this case. By definition, strategy A and B cannot both be winners (there is only one winning ticket). So the only thing that will set either apart is if one of the two strategies has the winning ticket. The price per ticket is only relevant if neither has the winner, in which case you're comparing who had bigger losses. The reason I like the lottery example is that two venture ca…

Yes, in the end the VC with the winner is going to win, but that's beside the point even if there is a single winner in the world (which in reality is obviously not true, there are not dozens but hundreds of huge ROI winners). The point is that you don't know the winner beforehand. A VC who is getting 2*x% equity for $y is expected to perform twice as good as one that is getting x% for $y. The arguments that are bein…

The point of this whole debate is this: VC return = equity * performance. Optimizing for the former is much less leveraged than the latter, since performance can vary by 10000x. If asking for better terms means you lose out on any deals then doing so is probably not in the firm's best interest.

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#48

Post by james1071 »

jules wrote: post #36
InclinedPlane wrote: post #34

Earlier quoted context omitted.

The point pg is making is that it's not an averages game, it's a lottery game. Say there are two different people playing the lottery. Every day they buy a number of tickets. Person A buys tickets in a pool along with someone else. Person B buys tickets on their own. Thus, if Person A wins the lottery they'll have to split their winnings, whereas Person B gets to keep it all. OK, so who ends up being better off? The…

If strategy A is buying lottery tickets at $5 and strategy B is buying the lottery tickets at $10, A is twice as good off. It doesn't matter that the earnings are dominated by one single winning lottery ticket; strategy A is always twice as good as strategy B. So getting terms that are twice as good for a VC will double their expected earnings. Sure, if you just consider the winning ticket, it doesn't matter whether…

Getting terms that are twice as good only works if no one rejects your offer.

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#49

Post by ecuzzillo »

jules wrote: post #46
johnrob wrote: post #44

Earlier quoted context omitted.

Lottery tickets are a good example in this case. By definition, strategy A and B cannot both be winners (there is only one winning ticket). So the only thing that will set either apart is if one of the two strategies has the winning ticket. The price per ticket is only relevant if neither has the winner, in which case you're comparing who had bigger losses. The reason I like the lottery example is that two venture ca…

Yes, in the end the VC with the winner is going to win, but that's beside the point even if there is a single winner in the world (which in reality is obviously not true, there are not dozens but hundreds of huge ROI winners). The point is that you don't know the winner beforehand. A VC who is getting 2*x% equity for $y is expected to perform twice as good as one that is getting x% for $y. The arguments that are bein…

Trying to maximize your share of individual deals causes you to lose the best deals. This is because a) the best deals are often expensive, and b) maximizing your share empirically causes people to consider you a dick, and people with reputations for being dicks don't get chosen by the best startups.

Re: The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25

#50

Post by pmarca »

jules wrote: post #41
InclinedPlane wrote: post #39

Earlier quoted context omitted.

You're still not getting it. It doesn't matter how much of the lottery winnings you get, the only thing that matters is winning the lottery or not. 20% of DuckDuckGo is a rounding error compared to 10%, 5%, or even 1% of google.

I'm not getting it because the reasoning is not sound. Your reasoning is basically "the numbers are BIG! so a factor of 2x doesn't matter". If you can get your lottery tickets for half price, you can buy twice as many lottery tickets, and double your chances. Equivalently, getting 1% of Google or 5% of Google is a 5x difference, which is huge. That could easily mean the difference between a net profit or net loss for…

As it turns out, the numbers are BIG! so a factor of 2x doesn't matter. This is literally how it works. The only thing that matters in venture capital is being in the small number of companies (15 out of about 4,000 per year) that generate 97%+ of the returns. Those can pay off 1,000 to 1. Fiddling around on terms or bargain shopping or refusing to pay up for quality all reduce your odds of being in the winners, which kills your chances of winning as a VC.
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