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The ROI on being an entrepreneur vs. an employee

marcbarros.com

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Re: The ROI on being an entrepreneur vs. an employee

#91

Post by robryk »

saalweachter wrote: post #51
sopooneo wrote: post #23

A little over halfway through the author mentions a billion dollar sale netting each of three founders only $300,000. Am I misunderstanding, or is that a mistake?

Expected value is the key phrase. So 0.00006% of the time you start a billion dollar company and take home $300MM. 67% of the time you fail and take home $0. The rest of the time you fall somewhere in between, and so your expected value is $300,000. Divide that into an average of 4 years and your expected value is $75,000. So if you're perfectly rational, you should be willing to work as an employee with no equity fo…

If you're optimizing for the expected value. One can also optimize for the greatest chance to have more than X$ for some X.

Re: The ROI on being an entrepreneur vs. an employee

#92

Post by ermintrude »

Zelphyr wrote: post #16

Through Founder Institute I've spoken with several successful entrepreneurs (reasonably wealthy with at least one successful exit) about this issue and nearly all of them said if your goal is simply to make money you're better off getting a job. However, if you want to build something that you own, are passionate about, and are comfortable with the possibility of not having much money for many years then being an ent…

I picked up "The Founder's Dilemmas" and the first chapter tries to talk you out of starting a business by telling you that your business will probably fail, and you'd probably end up wealthier working for other people.

It's good to remember, after the hype surrounding large exits, that the chances of creating a similarly valuable company are incredibly small. So yeah, if you're in it for the money it's probably not worth it.

Re: The ROI on being an entrepreneur vs. an employee

#93

Post by ido »

001sky wrote: post #90
sillysaurus3 wrote: post #57

Earlier quoted context omitted.

It's about how much pg netted from Viaweb, isn't it?

in what year? Multiply 1990's money by 3x...for $ today.

More like 1.45x: http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=10%2C000%2C000....

Re: The ROI on being an entrepreneur vs. an employee

#94

Post by sopooneo »

saalweachter wrote: post #51
sopooneo wrote: post #23

A little over halfway through the author mentions a billion dollar sale netting each of three founders only $300,000. Am I misunderstanding, or is that a mistake?

Expected value is the key phrase. So 0.00006% of the time you start a billion dollar company and take home $300MM. 67% of the time you fail and take home $0. The rest of the time you fall somewhere in between, and so your expected value is $300,000. Divide that into an average of 4 years and your expected value is $75,000. So if you're perfectly rational, you should be willing to work as an employee with no equity fo…

Okay, thanks. I hadn't realized he was talking expected value at that point, but your figures clear it up.

Re: The ROI on being an entrepreneur vs. an employee

#95

Post by saalweachter »

robryk wrote: post #91
saalweachter wrote: post #51

Earlier quoted context omitted.

Expected value is the key phrase. So 0.00006% of the time you start a billion dollar company and take home $300MM. 67% of the time you fail and take home $0. The rest of the time you fall somewhere in between, and so your expected value is $300,000. Divide that into an average of 4 years and your expected value is $75,000. So if you're perfectly rational, you should be willing to work as an employee with no equity fo…

If you're optimizing for the expected value. One can also optimize for the greatest chance to have more than X$ for some X.

If your goal is to make at least $100MM, and your chance of founding a billion dollar company is 0.00006%, then you should go buy a thousand lottery tickets the next time the powerball is up in the hundred millions. Your odds will be higher and you'll find out the next day you lost.

Re: The ROI on being an entrepreneur vs. an employee

#96

Post by nostrademons »

smm2000 wrote: post #72
nostrademons wrote: post #29

Earlier quoted context omitted.

I know quite a few employees with over $1M in assets. Unless you're a relatively close personal friend, there's basically zero reason for someone who earned over $1M in non-public transactions (notably salary) to tell you about it, though.

There is zero reason to tell close personal friend that you have more than $1M in assets unless your friend have comparable assets. People are jealous and telling somebody that you have much higher salary (especially if are in the same industry) or you have a lot of assets is the sure way to destroy friendship.

Well, there are other ways to infer it if you hang out with someone on a regular basis, eg. if they say "I'll just work for another 5 years and retire", or if they own 3 homes in the Bay Area and aren't complaining about mortgage payments, or if you do an anonymous net-worth survey among many of your friends and see that some of the top rows are over $1M.

Re: The ROI on being an entrepreneur vs. an employee

#98

Post by acconrad »

rdl wrote: post #19

A VC funded company, assuming you are capable of raising a seed round, can generally pay sfba founders 50-120k for full time work pretty soon after (founding, or people going full-time). Those same people are generally forgoing 100-200k jobs. The equity value of a founder's shares is an order of magnitude higher than an early hire, or two orders higher than a late A or B round hire, and 3-4 orders higher than a pre I…

How is being a consultant tax-optimized?

Re: The ROI on being an entrepreneur vs. an employee

#99

Post by nasalgoat »

hotpockets wrote: post #76
adventured wrote: post #36

Earlier quoted context omitted.

I've never met a person that could save 50% of their income that wasn't making $250k+. If you're living in California and making $125,000 per year at a job, you're paying $33,000 in income taxes alone. Your 50% savings rate would be $62,500 - after taxes you have $92,000, so the person can live off of $30,000 per year. Rent alone can easily run $1,500 to $2,500 per month. This is an impossible scenario without even g…

Its ridiculously easy to live off about $20,000. You don't even have to try very hard. Source: any graduate student.

As a 40-something person, I couldn't possibly live in the rathole I lived in when I was 20-something.

Re: The ROI on being an entrepreneur vs. an employee

#100

Post by hotpockets »

phlyingpenguin wrote: post #79
hotpockets wrote: post #76

Earlier quoted context omitted.

Its ridiculously easy to live off about $20,000. You don't even have to try very hard. Source: any graduate student.

As a successfully graduated grad student, I disagree. It is possible, but not at all easy, healthy or sustainable.

I've never seen anyone fail at it?
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