I myself started my first business at a time when I had virtually no money in the bank, and my car was literally repossessed one month before my business became profitable. If I had stopped and said "I can't afford this" and just given up and gone to get a job, I would have never seen the success that came later.
Also, you point out particular entrepreneurs who came from rich families. You completely leave out the wide array of entrepreneurs who did not. John Paul DeJoria, for example, was living on a friend's property because he was homeless and had almost no money. He started his business in those circumstances. He's estimated at somewhere in the ballpark of 3 billion net worth presently. There are quite a few stories of people with virtually no money building empires out of the rubble.
While I agree that there are a number of factors that feed into whether a startup is successful or not, I would kindly submit to you that one's attitude towards whether or not it can be accomplished is a very massive part of the picture. It takes focus and determination to get most businesses off the ground. Once you begin listing the reasons you can't accomplish it, you've begun setting up the circumstances such that you won't.
For me (formerly well-paid executive at IT companies in the US, originally from Italy), #2 (plus, some reserve money) was absolutely necessary to convince myself to leave my last job and start a company, last year.
Textbook example of self-selection bias and survivorship bias.
Even if you compiled a list, it would tell you nothing about the number of people who would have started companies had they not been mired in terrible financial circumstances.
https://www.inc.com/minda-zetlin/do-you-need-a-wealthy-backg...
Tech entrepreneurs do not necessarily have to start 'startups' in the HN sense of the word and I know there are plenty on HN who have taken the slower, bootstrapped path without rich friends, lack of debt, or even being based in ideal countries.
1) The world is moving towards remote work. You don't need to be in a rich country with talent. So long as there's good Wi-Fi.
2) If you have debt then you'll have to raise money and take a salary.
3) You don't need to do a friends and family round, or raise at all. We're bootstrapped, never raised a dollar.
4) I've met many entrepreneurs with young children or wanting to start families. Certain startups (eg. SaaS) can have very reliable income once you get your first several customers.
1) Not clear what you call a rich country but Argentina has a lot of entrepreneurs and it is considered an underdeveloped country.
2) Best universities here are free and everyone in the world can study here. The average student study and work at the same time.
3) Lots of bootstrapped companies, limited access to capital.
4) Obviously age and family matter but you don't need to be the first founder who take all the risks. It is possible to join an existing company as a cofounder starting part time if you have critical skills to contribute.
Not saying that starting a company is easy, just saying that the world offers many different perspectives to the same problem.
The number of famous and wildly successful startups outside of the US says otherwise :(
You are not understanding this thread. The discussion was about the difficulties people find starting a company that are mainly connected to economical issues. If you look at the successful companies, the major part had access to capital that eliminates this line of reasoning.
[1] https://www.infobae.com/opinion/2018/04/18/siete-decadas-de-...
I have a mortgage, student debt, and do not know anyone particularly well off, I quit a very stable job, and am in the middle of launching a tech startup.
People get so hung up on privilege these days that they lose sight of the power of merit and strategy. I think it is a dangerous mindset.
1) Australia, but we started it in Canada.
2) Again true, lots of friends opted to buy houses etc, but i felt it was going to limit me so i avoided this form of debt, and thankfully so as servicing it would have probably prevented me from starting the company.
3) Affluent co-founders in my case.
4) I was 24. Just old enough to know enough, young enough to be dumb enough to try + have the freedom to try.
I'd also add a 5th) You need a solid chunk of savings (Ideally a year or two worth). I dropped my income by 76% to work on the startup and saw no increase from pre-startup income for a while thereafter. But 6 years later my salary income (forget the buyout portion of money) was up 1191% from where it was before i left my job.
Rent went up from $1600-$2500 in a couple of years. My mortgage remains almost fixed except for property taxes.
So I think it’s a decent risk. My plan is to moonlight to a minimum delightful product. Once I have validation, and my feet touch the floor, I can quit my job and go
Entrepreneurship I agree is all about managing risk/reward.
You will get an infinitely higher return on reinvesting money in yourself than putting up a deposit to purchase a pile of bricks.
$50k in the bank might give you 5 shots at starting a $100-200-300k a year business.
And many would argue that places with skyrocketing property prices are going to run into significant issues in the future (if they aren't already at breaking point, hi bay area).
You'll realise it's almost always easier to make money from a successful business (no potential constraint on earnings if you solve a large enough problem) than it is working a job (time limited, limited opportunities for promotion based on age or company, etc)
But I agree, not everyone is made to be an entrepreneur.
AAMGF tech behemoths make almost a million per employee, yet the median salary is 15% of that.
Going it along, you could probably build a better product in another niche market and take a bigger cut. It’s a risk/reward bet.
Owning a house also generally means low liquidity (should you want to sell), money going to repairs that you could otherwise just forward to the landlord and the requisite of putting up a deposit (money that can't be invested in say the stock market -- meaning you lose out on yield).
"Citation needed", also, it varies a lot between places.
"Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0."
2,3,4 can be more generalized to be: "have access to sufficient capital to address the opportunity". Which in general I would guess that there are more 45-year olds with access to entrepreneurial capital in some form than there are younger entrepreneurs in the original stipulation of 2,3,4.
You can look even further ahead. Because the past few decades have been so strongly concentrating wealth upwards, one might predict that there will be fewer individuals with the personally owned capital to start businesses so the number and the 'risk level' of ventures to be shifting downward over time. The risk level would go down because the commitments of capital become more committee based the more people need to approve of it - and so you get fewer Elon Musk type investments, and more safe-looking investments in better paperclips (or the next social network ad app...).
You do not have to be free of debt. Your monthly debt payments have to be reasonable, something you can pay as part of routine monthly bills.
You absolutely do not need affluent friends or family. That's the least of all requirements anyone needs to start a tech company. First of all, it often doesn't take much capital to get started with tech companies these days. Second, your premise precludes someone having even a modest amount of savings (your theoretical person must be from a rich country, but they must have no money saved despite working a cushy job, odd combination).
You do not have to be a particular age. You're assuming everyone has children or a big mortgage. Birth rates in the developed world are at all-time lows, a lot of people are forgoing children or pushing it off until much later. You don't need a big mortgage, you can rent; most of the US does not look like NYC, SF, LA, Seattle in terms of cost of living.
You most certainly do not need to own a home. Multiple of your points put the theoretical person into that position.
> Looking at the most popular entrepreneurs in the world
Popularity is a pretty terrible reference point (why would that matter?). There's this group:
Larry Ellison grew up in a very broken home, his family didn't have much money. Paul Allen comes from an entirely ordinary middle-class background. Michael Dell's success required no special setup for what he did other than his own effort (assembling & selling custom PCs out of his bedroom, paid for out of his own savings), he grew up in an upper-middle class family. Elon Musk boot-strapped everything he did after moving to Canada, lived poorly and on a shoe-string budget after moving to the US. Jensen Huang of nVidia, was a first generation immigrant from Taiwan, with the deck stacked against him if anything; got his first degree from Oregon State University. Mark Cuban, who is more famous than Spiegel, grew up in an entirely middle-class background in Pittsburgh, and entirely boot-strapped his first success (MicroSolutions), which then paid for him to found Broadcast.com. Mark Andreessen grew up in farm country in both Iowa and a tiny town of 2,000 people in Wisconsin, his family had no special financial position. Ev Williams grew up on a farm in Nebraska, his family had no special financial position. Jack Dorsey grew up in a middle-class family in St. Louis, his family had no special financial position.
Maybe in the next 10-15 years we can convince high schoolers that if they spent their free time programming they could be capable of creating a revenue generating asset at 18.
The combined power of a nation of kids that could create rails SaaS sites or reusable 3D models would be an awesome sight to behold. It's a skill they would keep and even pass on.
Tech is largely new, and we really haven't bothered to teach it yet.
There is actually a very good reason, namely that acquiring knowledge, skills, wisdom, etc. is at odds with acquiring assessment signals. The only way to become a good entrepreneur is to basically become unemployable.
I would disagree that the only way to become a good entrepreneur is to become unemployable. The best way is, as you say, to have knowledge and skill to create a useful product. Then, having a market that allows you to easily get paid for your work helps.
I mentioned high school specifically because I know that I would have loved something interesting to work on. It's a perfect time to work on skills rather than assessment signals. Lots of kids don't even bother with the assessment signals...
Sure. Once you've actually created a product that's useful, or at least impressive from a technical and/or design perspective, then you're easily employable at that point. But for most people there is still going to be a several year gap between when they start focusing on acquiring those skills and when they've actually built something impressive enough to function as its own signal.
When you run out of mortgage money, your home is seized and sold, you will piss away tens of thousands of dollars of equity in foreclosure, realtor, and legal fees. Hundreds of thousands of dollars if you're in a down market, and you go underwater. You'll get to enjoy a ruined credit score... And, on top of that, all the other problems that you face when you can't pay rent.
I'd much rather be locked into a $1000/month rent for 30 years, then a $1000/month interest-mortgage for 30 years.
If you want an induction hob, a good mattress, proper ventilation system so the windows don’t have condensation and something other than paper thin walls, you are pretty much out of luck in the UK. On the other hand if you are fitting out your own place, upgrading to better quality items like this doesn’t really cost that much more (e.g. £200 for an induction hob vs £100 for a ceramic hob).
Suppose you bought a house for $300k, paid down $100k of it and sold for $600k. You’d be walking away with a decent amount of cash. In rental when you get kicked out, you get nothing.
Renting is paying someone else’s mortgage. If you know you’re gonna stay in one place for a long time, and the market is stable or booming, buying always makes sense.
You're comparing two different scenarios.
Also not born in a first-world country (though immigrated to one at a very young age).
Also nobody funded me until much later in my life, by which time I was already a millionaire.
1)Be born in a country that's rich with local talent that you can hire. Or have the ability to move to such a country.
2)Be free of debt, either from student loans or mortgage
3)Have affluent friends or families(the paper rightly notes that most early funding comes from friends and family) - so affluent that they are willing to invest in something they know will possibly fail, as most startups do.
4)Be the right age - if you're starting a family or paying off a mortgage, it would be completely irrational to abandon a stable job.
When you consider all this, there are perhaps a few hundred thousand people for whom it would be wise to become an entrepreneur - and by this I don't mean a local store, but with ambitions to scale up.
All these factors could explain the charecteristics: Immigrants from Asia and Europe tend to be richer than the average population there much more educated. They are young and largely free of undergraduate debt. Similarly, people who grow up in affluent families(relative to the median family) probably already have seed money, fall-back options and security that failure doesn't mean homelessness. Not everyone has that luxury.
Looking at the most popular entrepreneurs in the world - Bill Gates, Zuckerberg and Spiegel all grew up in very rich homes, while Jobs grew up right in the heart of Silicon Valley. Kalncik lived 3 years without a salary and moved into his parents house for a long time.