Should I Start A Startup?
This is a big question and there are a lot of variables. We have to break this into smaller questions and check some boxes. There's also this B.S. lie that you have to risk it all and go "all in" to make something work--and that's not true. Let's break down the question "should I start a startup?"
Why do you want to do it?
If this is something you would work on anyway, regardless of whether you were paid or not to do it, it's a hobby.
Example 1:
Let's say you love making things out of wood and you want to build the most perfect Adirondack chair in the world. For you, the thing that gets you the most excited about building this chair is the building. It doesn't matter if it takes you 497 hours to make. It doesn't matter if no one actually ever sits in it. The thing that gets you excited is building the chair.
This is a hobby. Hobbies are work that you love for no other reason than you love the work. You're not doing it because it will make money or will have value to others. The work itself is fulfilling.
Okay, let's move on to another example.
Example 2:
You want to help people who grew up in disadvantaged communities. The thing you build itself doesn't matter. It could be a networking website or a resource fund. You're not occupied with the nuts and bolts of what's under the hood of the project. You're going to do whatever it takes and you're going to learn whatever you need to learn because you're on a mission. You want to help people who grew up in disadvantaged communities and that's that.
This is a passion project. You may be able to make money from this, but it's not going to be much. You may have to do some other work to make sure you can pay rent, but this is all about impact. It's not taking into account how much you love the work or if it's sustainable for you to work on it full-time.
Example 3:
You want to scale up and make a bajillion dollars. You want to buy a Ferrari. You have 5 kids to put through college. You have a dream of retiring at 35 and living out of a van in Morocco. You may even be willing to eat rice and beans and never see a movie for 5 years to lower your expenses so you can save faster.
Who knows? Maybe you love the "mid-century modern" look and know that filling a 3/br 4/ba house with West Elm is expensive. Whatever the outcome, the goal is accumulating resources and fast.
This is a job. You're not trying to change the world or disrupt a market. You're focused on compensation for time and effort. Since this is the primary thing you're after, the type of work and the product itself aren't that exciting to you. The thing that's exciting is seeing your Wealthfront account go up.
Example 4:
You want to be the next Instagram. You want to be the next Apple. You see glossy-white offices and meetings with shareholders. You feel like you're making a ton of money. You're developing products for tons of consumers. Plus, your ego is on fire because everyone loves and respects you for the incredible work you've done.
Let me stop you right there. There are only a few companies that make it here. Your odds are already insanely unlikely. You probably have a better shot at scratching off sequential numbers on your lottery ticket. I don't want to shoot you down, but I need to shoot you down. This is a bad goal.
So, let's recap these examples and organize them.
You're going to be working on a project because it has characteristics in some proportion:
You love the work and what you learn.
You love the compensation.
You love the impact it makes.
Let's be really, really clear about something.
DO NOT expect your job to give you 100% of all 3 of these things. That is too much pressure to put on your day job. This is why we have hobbies and social lives. There is no practical way to get the sum of your emotional, financial, and social needs filled by your job.
If you expect this, you will fail, bang your head against a wall, and feel the pain for a long time--like I did.
If this resonates with you, you may also want to read my post on why you should Stop Searching For Your Dream Job. It doesn't exist.
DO NOT try to go all in on one of these dimensions and sacrifice all the others. You might be able to do this for a little while but it's not sustainable. You might be able to spend 3 years consulting at Deloitte before you realize that you can't take it anymore. The culture or lack of impact accumulated and now you need to adjust.
That's fine. Plenty of people make this part of the plan. If you're planning to switch jobs later, make sure you develop transferrable skills. Martin Yate wrote an amazing book on getting a job called “Knock ‘Em Dead.” It’s definitely a little “get off the couch and go do whatever.” But there are some golden nuggets for you. Here’s a page that breaks from his website that breaks down some of these transferable skills.
Your job here is to tune into the ratio of these things you need. Also, understand that the ratio you need today will absolutely not be the ratio you will need later on in life. It's going to be a lot harder to convince your family to eat rice and beans. When you have more people in your life, you need to consider what they want. They're called stakeholders. That's a fact.
Getting back to our main point, why do you want to do it?
You will need to be really clear about why you want to start a startup. Make no mistake, there will absolutely--100% likely--be times when you want to stop.
I don't mean like when you're running on the track and you're tired and you feel like your body is low on energy. So, you stop and recover and then get back out to the track tomorrow. What I mean by "you're going to want to stop" is that you'll face scenarios that seem impossible to get out of.
For instance, a common one entrepreneurs face early on is not being able to make payroll. It's scary to have checks to write without being sure how you're going to make them happen. Are you (and your co-founders) willing to write personal checks to the company? Are you in that kind of financial position? Are you willing to lay everyone off in that situation?
That's what I mean by scary. It's not for everyone. You will feel scary things like this if you go down this road. It doesn't mean you shouldn't try and it doesn't mean you won't succeed. We just need to be clear and honest about what you're getting yourself into.
I'm not trying to scare you straight. I'm telling you about the things you'll need to have in place to set yourself up for success.
So, let's think about this again. What are you actually trying to achieve? Chances are, there are other options you can choose that aren't as scary and risky as starting a startup. Is what you actually want a hobby or a passion project? Is what you actually need a job? Whatever you decide, you're going to need some combination of these.
How do you do it?
Okay, you've decided you're in. You're too obsessed. You can't sleep at night. You're still not sure if it's the right thing or if it'll work but you can't NOT do it. You have to try. You have to check this box off your list or you'll never forgive yourself. So, how do you do it?
Guess what? Before we get into this, we actually need to break this down into a smaller question, again. I know, it's a lot but stick with me.
We need to distinguish if what you're doing will classify you as a freelance or an entrepreneur.
A freelancer is someone who trades time for dollars. This is someone who may be filling job orders or may be doing more "white collar" strategy or consulting work. Either way, you have a job, you get it done. It doesn't matter if you're the world's most renowned expert. You're getting paid for your work.
An entrepreneur is someone who builds an asset that produces value. It should keep producing value even after they've let go of the handlebars. They built the company and can sell it. They built the database and consultants pay to use it. They built the website and employers pay them to post jobs on it. They are getting paid by the thing they built (the asset). The asset becomes big enough that the entrepreneur can walk away. Plus, when they walk away, the whole thing doesn't crumble. Entrepreneurs build things bigger than themselves.
If you want a more detailed description of this see Seth Godin's Startup School. I've stolen quite a few concepts from this useful podcast.
Okay, now let's talk about how you start a startup.
There are a few ways I know and I've seen. This isn't an exhaustive list and I'm not prescribing that you try only one of these methods. A hybrid method is likely what you'll end up with. This is just a list of "knowns" to get you started.
The Runway
This method requires you to save up money (or receive a significant windfall). Having cash affords you the ability to quit your job and work completely on your project without other distractions. You can lower your expenses (rice and beans, no movies and all that) to increase your runway, or you can save up more money. If you're able, you can also bring in investor money but that has a new set of variables and risks.
Pros:
Fewer distractions.
You have a deadline.
Cons:
You may take the whole runway when you don't need to.
You may put your partner or family in a difficult financial position if you don't take off.
You may convince yourself to go past your runway because you've invested so much already. (See: Sunk Cost Fallacy. If you're a human and you have a brain, this applies to you.)
This works best if you have already outlined what success looks like at the end of your runway. If you can define it now, you'll avoid the temptation to keep going past your runway if you're not gonna make it. If you have a partner or a family who are invested in your success (or impacted by your failure) you need to get them on board with this, or any, plan. There is no room for negotiation, here.
The Runway method works if you can outline a very clear plan that explicitly states:
"If I get to $X in spending" or "if I work on this for 8 months and I don't have X customers" I will quit.
Define your terms for quitting, now! It will be harder later when you've invested your time and money into building this thing. You will absolutely convince yourself to keep working past your deadline.
The Night & Weekend Warrior
I think you get this one already. You have a job that allows you to maintain your lifestyle and you work nights and weekends on your project.
Pros:
Less risk if when things break (they will).
Pressures you to work with less time.
Cons:
There's no deadline so you could drag this on and on.
It is insanely exhausting and you won't know how long you can last.
It will reduce family and social time.
This is a good strategy for "bootstrapping" your startup if you think it's not going to take that long to get running. You may also like this option if you just want to test a small, limited scope project. If you have a deadline or a fixed list of parameters, this approach can work well. Just don't let it drag on. Burning the candle at both ends means you will be stealing time from your calendar. This time will come from areas like "social life" and "sleep." Make no mistake that this is a sacrifice that you won't be able to keep up.
The farthest I've gone using this method is running 5 x 100hr/weeks in a row. By the end, I was making silly mistakes that ended up costing me more time to fix. This is not a long term strategy.
The Freelance and Build
This is similar to the Night & Weekend Warrior. The difference is that instead of having a steady job, you're freelancing. It's the hardest of the three but it can give you some key benefits.
Pros:
You have more flexibility with your schedule.
Pressures you to work with less time.
Cons:
You have to spend non-billable hours generating new clients.
You're burning the candle at both ends.
You're at the mercy of the freelance market.
Do not attempt this if you're starting out your freelancing business, too. Remember, you don't just get new work, you're a freelancer, you have to work to get new clients. Then you can bill those clients for your time. This means you have billable and non-billable hours. Time spent generating leads is non-billable. Time spent on the project is billable.
You're also competing with every other freelancer out there who is working 60hrs/week. Freelancing 20hrs/week so you can fit in time for your project puts you at a huge disadvantage. You're setting yourself up for failure.
This works best if you have already been a freelancer and have a client base that continues to come back to you. Having a client base means you have clients who regularly come to you for work. You don't spend much of your time convincing new clients you're trustworthy. You've already done that work and there's plenty of paid projects to go around.
This also works better if your clients are already used to paying you a lot of money. If they pay you enough so that you can reduce your time with them and you can still pay rent, you're in a great position. This means you can spend more time on you project and maintain your expenses.
This is not a formula
Okay, those are just three ways you might execute. This isn't prescriptive and you may end up doing some combination of these. If you have other thoughts or ideas on this, please post them in the comments.
My goal is for this to be a resources for people to continue coming back to. My goal is to make this document so useful that when someone asks you "how'd you do it?" You'll know that the best thing to do is send them to this post.
I hope this helps. If you know someone else in your life who needs to read this, please share it with them.
What else do you feel is missing from this article? Let me know in the comments and I'll make this more robust!