If you don't mind being relatively unheard of and only want to make enough money to be independent, then it actually isn't very hard to bootstrap a business. It does take time, effort, and a lot of mistake making, but it's like learning anything of value. I think it makes you a stronger and more independent person all around.<p>Even though this article attempts to deliver a dose of reality, it focuses on VC backed companies which is a completely different field. VC backed startups tend to do highly risky things in an effort to increase traction and valuation as quickly as possible. Most notably, spend a lot of investor money in pursuit of those things without having any real revenue. The odds of failure skyrocket.<p>I've seen a lot of commenters go on about survivorship bias. I believe that the real problem isn't being considered: the absolutely batshit advice and business building strategy that comes out of the world of venture capital and tech accelerators.
This is a great article on two standpoints - it provides important high-level "abstract" advice to new founders without sounding like Sam Altman (more on that later). Secondly, it criticizes the general human tendency to look for examples of success, read biographies, watch interviews and think mimic those traits in themselves thinking that they've won the ticket to silicon valley lottery. I'd like to quote Richard Feynman, "... for nature cannot be fooled." and the world is an insanely complex place with a number of external factors that founders have no control over. Doesn't mean we should all give up on starting a company, but it should be humbling to learn this and internalize it.<p>Every single advice that Sam Altman gives has survivorship bias written all over it. I have never learned anything remotely useful from his vague generic articles and speeches. I'd rather watch Drew Hudson's startup pitch or read about Chad Rigetti and his quantum computer venture. Or maybe learn how Instacart managed to photograph every single grocery store item by literally going to the store and buying everything. Sam Altman's interviews are fantastic and I thank him for that but I think he should stop marketing himself as a startup guru of some kind. Each situation is unique and my personal opinion is that particular qualities such as leadership, convincing abilities, and charisma cannot be learned. It can only surface as a result of how one thinks and acts. This is why leadership courses are bullshit.
But the world as whole, doesn't accept Luck. Not middle or even top management. Those who do, are actually founders, Bill Gate and Steve Jobs both talk about how lucky they are. I mentioned Luck in most of my interview and not a single one likes it. The older I am, the more I became aware how many of my success or wins , are not really because I am ten times better then others, yes it may have played a part, but there are lots of moving parts, and I am only a small part of it. In essence, I got lucky. There is no way, a human, or even machine could calculate what is going to happen next. The possibilities and probabilities are endless.
Such a nice article. But I have to note that the linked (2013) piece is even better: <a href="https://youarenotsosmart.com/2013/05/23/survivorship-bias/" rel="nofollow">https://youarenotsosmart.com/2013/05/23/survivorship-bias/</a>
The massive amount of failed startups is caused by people who think this is a fun popular way to make money out of thin air.<p>If you're level-headed and sensible, you can do your analysis, make a business plan and figure out if your idea is marketable or not. Then, there's the business-doing portion, which is extremely complex, different from your technical work, and will make or break your company. But that only works if you have a financially viable, novel idea.
Unless you intend to scam bad investors, you can't have a startup without real innovation, period.<p>The startups were meant to be a way for experts in some field to materialize an (actually) innovative idea with economic potential, and generally an idea that doesn't require absurd amounts of capital.
This could be done in a typical corporate environment, but when the innovation originates from a single individual, the startup model allows him/her to better protect his interests and grow his business faster.<p>When running a startup became a trend (in many areas of Europe it did, I don't know about the Americas) there was a huge influx of people with no technical expertise, all of whom simple wanted to be a startup owner for the sake of it, with no plans or targets, just to be managers. These people fail over and over, sucking up EU and local government resources with them, and dragging the name of real startups in mud. Many of them are just the kids of wealthy individuals with connections. They leverage these connections to get investments and loans and waste 100s of thousands to millions on repeated failed attempts to materialize some retarded idea, like solar freaking highways or the 10,000th taxi hailing application on the market.<p>Survivorship bias is bad, but this situation would persist even without it.
To me survivorship bias is looking at someone who made it. Assigning some charateristics to that person. i.e. Hard working, motivated etc etc.<p>But, forgetting that lot's of people who didn't make it also had those charateristics.<p>Then you have to factor in luck. 2 Entrepreneurs with the same work ethic and idea but one gets lucky. The difference in money generated can be huge.
I think you should stay in school. I know it’s harder t justify in America where it’s really expensive, but the benefits can be immense if you use your time in the educational institutions correct. It’s really the most secure path to a meaningful life if you’re willing to work hard at bettering yourself.<p>That being said I think the article stumbles a little. Where there 1000 Steve Jobs and Wozes working on a personal computer at the time? Where there 1000 people working on an global online payment system when Musk was building PayPal?<p>I think timing is important, but I don’t think luck makes that much of a difference. You don’t obtain connections by being lucky, for instance, you obtain them because you want them and work hard at it.
I've worked in a lot of coworking spaces where inevitably someone starts a group to talk about the harsh realities of starting a business. It sounds like Gambler's Anonymous.<p>Surprised to hear only 70% fail. Those odds actually sound pretty good. I've made enough in the startup world to pay the bills for a decade, but probably below my market rate at a big tech co.<p>I don't regret a thing. Each time I get a bit further into the wealth creation game. But I also wouldn't recommend it to anyone, and actively work on dissuading new founders from trying.
It is a relief to see this view reflected.<p>In an efficient market for business talent, VC should not exist. They could be seen as in effect talent arbitrageurs. Something about business culture over a certain size creates a massive inefficiency where someone with the level of skill required to build a successful product is not snapped up by existing firms.<p>Personally, I like anyone who takes an arbitrageurs view because to me betting against bullshit is a costly signal of outlier intelligence.<p>However, viewed this way, it's not about kids in hoodies. College dropouts were useful because the key signal (ivy certificate) that gets them picked up by a firm that would smother their productivity, had been suppressed. That they were selected for the school in the first place was a great negative filter as well, so betting on the remainder is practically a no-brainer.<p>Given the exponential distribution of returns, from a statistical perspective, there isn't much value in explanations for failure because it's by far the most probable outcome anyway. e.g. who cares why startups fail, %90+ of them necessarily must, and merely avoiding a subset of failure scenarios is not equivalent to success. In that environment, there is only one necessary condition for 80th+ percentile talent to maintain: survival.<p>Being the person who climbs up that return curve means surviving the twin perils running out of runway, and of being snapped up by a firm for a job you were originally more suited to anyway. This second peril is the other major attrition factor that prevents people from benefiting from survivor bias.<p>The business of VCs who throw money at geeks in hoodies is to mitigate the former and get exposure to that overlooked subset of the latter. Given the remaining members of that sample, the people who also selected out of being snapped up for jobs will be necessarily over represented - and on that very steep curve. I think this explains why investors like colorful founder stories, because they are (consciously or not) looking for how the founders 1-stddev+ talent signal might have been suppressed.<p>Good news is: the confluence of a) an exponential distribution of success and returns, b) the guaranteed competitor attrition from failures, and c) the further guaranteed competitor attrition from the job market - survivor bias may be less of a bug, and rather, a feature.
Are start uppers copying how Carmack started to do software? I don't understand why there is so much need for raising money when all you need is a roof and a computer to do this job.<p>I know that not everyone is talented like carmack, but sometimes I wonder if money is not spoiling and troubling the IT sector.<p>So in fact a startup might think it failed because it doesn't have enough money or because investors don't want to raise funds, but the reality is that software is so cheap to make, I really don't understand the world of investing in IT.
Survivorship bias is a problem in science, too, IIRC. Eg, "I looked for evidence that eating onions causes cancer and found nothing" doesn't get published, but the "successful" study does. I remember hearing of efforts to make researchers state their intended research up front and publish the result either way.<p>Similarly, shouldn't business schools should be eager to do studies following new businesses, bootstrapped and funded, and analyzing their success or failure? YC and bootstrapping communities could provide a lot of interviews if they wanted to.<p>(This seems obvious and has probably been done.)
I would like to see an analysis of startups that passed two years of age. That sounds to me like enough time to learn how it feels and learn and experience most of the issues in running a small business, and not enough time that it's "wasted".<p>If it turns out that 70% of 3 or 4 year old startups fail, <i>then</i> I'd say it's a seriously bad tradeoff.
There's always this perverse focus on <i>who is making this thing</i>, when there should be a focus on <i>who is buying this thing</i>.<p>Seems like the number one indicator of success in many of these businesses is <i>when people actually purchase or use the product</i>.
"In the same vein, a stunning proportion of partners at VC firms graduated from a handful of tony universities, as if the seal on a person’s diploma were what indicated investing abilities. (Granted, the incidence of leveraged social connections and postgraduate degrees may amplify that trend.)"<p>Or it could be that these "tony schools" are primarily designed to select for hyper-ambitious people with high IQs. Crazy, I know.
I guess there's some survivorship bias for startups if we define startups as companies that take VC funding and intend to grow really fast, but those are less than 0.5% of all companies. The fact is that people with domain expertise, financial discipline, and a real product or service manage to do quite well in business and the success rate is much higher (I believe around 50%).
Now my question is, in all of those success cases, what was more important, luck or work and dedication? Because if someone wins the lottery, it doesn't matter if they bought 100 tickets every day. Luck would still be the main factor of the success. Would also be the same for these companies like Facebook and Google?
You should be able to 'afford' to fail? If you can't afford to fail then the risks are possibly too high.<p>It will likely set you back decades, destroy your finances and credit, possibly impact your family life if you have one or further the possibility of starting one and take a serious toll on your health.
I wonder if there are any stats around probability of success (measured by not going bankrupt) at different levels of revenue?<p>For instance, what percentage of companies that are able to reach $5k monthly recurring revenue go under then the same metric at $10k, $20k, etc etc<p>Anybody seen anything like that or have an idea?
"How I won The Lottery" (joke tech talk) <a href="https://www.youtube.com/watch?v=l_F9jxsfGCw" rel="nofollow">https://www.youtube.com/watch?v=l_F9jxsfGCw</a>
The real problem is that 100K and some advice sets up the vast majority for failure right out of the gate. Also weeds out the flakes, so there's that, too.