But if you do want to start a company and have a high chance of becoming modestly rich, there is no shame in working on a niche problem that doesn't require piles of capital. If you grind away long enough, you can have a slowly growing, profitable business that makes you very comfortable.
But that hints at an interesting problem. 250k is angle and seed, not traditional VCs. And there seems to be so much desperate money out there in the current "no interest for your bank account" times that there simply aren't enough small businesses like that strategy to work. Hence VCs, hyper growth, and, ultimately, things like SoftBank.
Whether that is healthy is everyone's guess.
Your numbers don't work unless you can get 10x returns on 3 out of 10 investments (which seems unlikely).
https://techcrunch.com/2017/06/01/the-meeting-that-showed-me...
Edit: And how far is that $250k going to stretch on salaries, especially over a few years!
You cannot have it both ways, and why would you even need a huge lump of cash for a business that is already sustainable? Traditional loans are a much safer source of funding for that.
But that's a unicorn. You don't find a unicorn, you stumble upon it one day and miss the opportunity because you can't rationalize the fact that you actually saw a mythical creature.
I worked for a startup that got funded in that ballpark. There were seven of us. We sat at a couple folding tables at an incubator for six months or so, and used a vacant space (no power, no heat) to build and test our hardware. We eventually moved into a bigger incubator with more office and lab space, then our own office.
We weren't in SF. Location matters less every day, and you have to make sure the higher costs associated with various locations make sense. It's pretty amazing where you can find a machine shop that can make prototypes for you if you need it. Cloud service providers will give startups $10k/mo or so in free time to start with to get you hooked, so you need very little infrastructure.
It is possible to run for a while without a huge initial round if you've already confirmed there's a market, have built relationships with potential customers, and have a team who understands what they're getting into, and is motivated to delivering the first few milestones, whatever they are.
Does the biggest compensation package even attract the best talent? Or does it just attract the obsessively competitive to burn out in style?
1. A start up would start with fewer people and less money. It would most likely be started by people who can live cheaply and/or people who have money from other sources like work or family. Founders typically don’t make anything early, but once the revenue starts rolling in, they can pay themselves and others.
2. Assuming you are referring to a business making 2.5mm, that’s plenty for a smaller team (e.g., 5). Not everyone will be a high-paid tech professional, and the founders will probably be the highest paid folks in sales and tech (at least in this structure). If you’ve got 2-3 founders growing a non-VC tech business making 2.5mm a year, and they can’t make it work, they’ve got big structural issues that they need to address.
3. Outside of the Bay Area or NYC, 10 people on 2.5 mm would be very doable.
Venture funded startups may prove to have been a temporary kind of business made possible by the technological frontier of first the personal computer and then the internet.
If a new computing platform comes along the VC model will keep chugging, because you've gotta plant that flag as fast as possible.
I see the diminishing value of working for startups as a sign of the maturity of the internet. Rather than try to swim against the current, it's probably better to find a new shoreline. And inventing that new platform is a very hard problem.
- I recently heard of a company offering a publicly announced 4 day workweek and being able to recruit very good talent. I am not sure if Big Tech can make it a public policy.
- You can point out that there is a much smaller need to be politically correct. For example, it is extremely un-PC to be openly supporting Trump in big tech today, and anyone who says otherwise is just lying to you. I know someone very closely who works in one of the big tech companies and I can tell you that he is wrapped in a very strange bubble. For example, he was 100% convinced that Trump will be impeached and booted out of office before his term completed. Now he has stopped talking about the impeachment altogether. It is actually hilarious.
- the "cult" problem. Sooner or later, everyone who defends their big tech job will be referred to as acting like a cult member [1]. I am not sure how a small company can run into the cult problem.
[1] Like this person:
"Remember, what Facebook is doing has never been done before. There are going to be mistakes."
> Another solution to this problem is to think about startups that can become quite successful with less than ten people. As compensation packages from the giant tech companies continue to increase, I suspect this will become a trend.
As cash comp at big public companies grow and the future value of startup options plummet, we need to start thinking about different ways to start businesses, and this feels like the right solution to me. Starting a company with 10 competent people that I enjoy being around and targeting $5-10mm in revenue sounds perfect. Maybe $10mm isn't reasonable, but even if we hit 1/4th of that amount, it's still plenty to support a small company.