What Makes a Successful Founder? | Hacker News Reader

What Makes a Successful Founder?

basisset.ventures

109 pointsyarapavan46 comments

What makes a successful founder?

Succeeding.

Reality doesn’t care about VC sentiment, KPIs, offices, number of employees, or any of that stuff. Did you create a machine that extracts more money than it spends while providing more value than it extracts?

That’s all that matters: Do you have a working business?

> Succeeding.

Perfect.

I can't tell you how much luck and right place / time comprises my career as a (middling but largely satisfied) entrepreneur.

I decided that would be my path about a year and half out of college. Six months later I resigned to start a competitor to the company I was with. I was only able to because I found two willing partners and then had the stars align on a project big enough to bootstrap the company.

Businesses I started later (the successful ones) also had a significant timing / luck element.

If that first company didn't materialize? Maybe I would have decided it wasn't worth the effort. And that's a pretty wild thought given how much of my identity is tied up in the successful businesses I've built -- and how much that's shaped my life.

I think the only reasonable prediction to make is the very obvious: You can't succeed if you don't try.

Beyond that there's a massive amount of survivorship bias. There's nothing particularly wrong with that until you start giving unqualified advice to others -- or worse, start believing that advice yourself.

Having a working business is just one way. Many successful people become successful with failing businesses, particularly when venture capital is involved. In fact, you can have many failed businesses, with many bankruptcies even, and still be successful. “Failing up” is a very real thing, and a valid strategy.

Being successful requires you to convince others that society owes you something for who you are. A successful business is just one way to do that.

> Many successful people become successful with failing businesses

I agree, you can be a successful person with a failing business. But can you really be a successful founder without having a successful business?

Sure you can. Many founders of failed businesses do it over and over again. Some even go on to start their own VC firms.

Being a successful founder means making your bosses happy. That means getting a return. That can be monetary, political, etc. Many founders, particularly in the SV area, sell businesses for huge amounts that never made a dime. They sell them at inflated prices and then the acquiring company closes up shop and writes it down or spits them back out for pennies on the dollar. They were never profitable. No value was created.

Modern finance creates an unusual landscape. Charisma, storytelling, persistence… there are all traits that can result in a successful exit.

Put that way, most successful founders are successful at exiting, not building businesses. Those are often related things, but not the same. An exiting founder's team size is proportional to their last funding. But for building a business, they'll go through funny math to tie that to show they won't implode ("no, we're not losing money for every customer, we're aiming for 3yr payback with strong disruption moat and stickiness for net-negative-churn..."). Both kinds can be successful, just a very diff operational mindset.

The more I understood various silicon valley ecosystems (ex in sales/marketing/apps/...: "idea -> sales/marketing/discount/hype/first-to-market-driven sales -> race to acquisition by a monopoly who doesn't need the business to be profitable, to find a bigger investor, someone figures out a magical pivot, or else implode"), the more I see most SF->google/yahoo/fb/BigMonopolyCo acquisitions as likely failed businesses with somewhat burnt customers... and materially successful founders, teams, & especially investors. The numbers can be nuts (including > $1B acquisitions squarely in this camp.) I've learned to bucket advice from such founders as being primarily sensible within insider-y & exit-minded frameworks vs. optimizing for building big, meaningful, and sustainable things. The former solve political fights for monopolies and the latter can move societies, so both create value: To each their own.

Some founders walk away from failed businesses millions of dollars better off. If money is the metric you use, having a successful business isn't strictly necessary.

Uber and WeWork don't seem to be working all that well according to your criterion. But their founders are undoubtedly successful.

There's a gap between the business being successful and the founders being so.

Neumann is successful because he was able to exploit a certain weakness of capitalism that had not been patched.

>Did you create a machine that extracts more money than it spends while providing more value than it extracts?

But that's a KPI and not a very good one.

Whatever you have you'll have your own conditions for accessing the quality of your business.

> and not a very good one.

That’s such a Silicon Valley thing to say. Only there could a profitable business with a useful product be deemed “not very good”.

I didn't say anything remotely like that.

Is the end goal a KPI itself?

In a literal sense, it is, in fact the the ultimate KPI but in a process sense, i wouldn't say it is. I think the end goal, in most but not all instances is profit, which is a reward for enterprise and risk. KPI are checkpoints IN the process. The end goal itself is not part of the process but is a result of the process. Which is why I hesitate to call it a KPI.

Well the making more money than you spend part is pretty critical ...

I’ll grant you that a business does not necessarily have to provide value to do so.

Many companies spend years spending much more money than they make building themselves up, or simply surviving during a downturn.

This is in fact the whole idea of investing in a startup - that they will have more money to spend than they make.

Amazon spent most of its existence spending nearly as much or more money than it made and it is something like the 4th most valuable company in the world.

Yes but didn't Amazon IPO in 1999 and most of the money they've spent into building the company has been actual revenue, not VC or debt money? Seems like that's markedly different from what companies like Uber have been doing in the past decade.

Exactly, reinvesting all the profits into growth is not the same as making no money. Break even has already been achieved by Amazon.

> Amazon spent most of its existence spending nearly as much or more money than it made

Bezos, like many other founders, is allergic to paying taxes.

So that is one of the reasons everything was spent on growth. Essentially he used the public to fund his company.

(He was already a millionaire from working in finance.)

Yes it takes some pain before you’re successful.

Super important to note here that this entire thing is based 100% on the feelings or sentiment of VCs.

They forgot “random dumb luck” as a character trait. Point your clown car toward what you hope is a gold mine. The character trait of dumb luck then takes over.

VCs are biased to see genius where there is dumb luck because the people without luck fail before they have a chance to be recognized for whatever other random assortment of traits they have.

It'd be interesting to see a real study of how much randomness plays a role in success. What if it is the majority? Humans want causality, and want to believe they can influence everything, but it might be far from the truth.

The "Talent vs Luck" model is such a study, and it shows that indeed randomness is the deciding factor. Sure, it's a toy model -akin to a thought experiment- but the result is an emergent property of very simple principles, like most models in mainstream economics.

https://www.businessinsider.com.au/this-study-shows-talent-i...

That photo of a poker table is quite apt. Even if you play sensibly, if you're sitting with a bunch of people who aren't, there's a fair chance one of them will hit the card he needs and beat you.

In the economy this can also happen. Consider that you might make a bet on some business because you have done good research (your estimate of the future is what it actually averages to) and it shows the business will do well. A load of random people will have varying degrees of correctness of analysis that will give them too optimistic or pessimistic estimates. The future itself is also affected by noise, and business conditions may change.

You're going to end up seeing a bunch of winners who were too optimistic about some business, but the winds changed and they won bigtime.

The starting point on distributions of talent vs success really nails it.

The best solution for randomness is to try multiple times. Unfortunately humans only have one life to live and limited capital. This is why rich kids more often end up founding successful companies - they were able to try again after their first failure(s).

For a more rational analysis on the correlation between personal traits and success in a meritocracy, the "Talent vs Luck" model provides some eye-opening results.

https://www.businessinsider.com.au/this-study-shows-talent-i...

The thing I dislike most about attributing success to mostly luck is that luck is almost always defined as "good luck", but there is bad luck too. Often talented, hard working people are better at maximizing the effects of good luck and minimizing the effects of bad luck. So it is not luck (good or bad), it is not talent, it is not hard work, it is all of the above.

The model in the paper accounts for that, having both "good luck" events that double the guy's income on a successful "talent" check, and "bad luck" events that unconditionally halve income.

The different runs show that luck weights a lot more than talent in the final outcome, thought there are strategies that alleviate this problem.

I think, there is another factor - endurance. Luck does not come instantly, one needs to survive few lows before reaching high.

Good observation. The toy model in the paper has some obvious limits, for example it also doesn't account for accumulated capital allowing to "create your own luck" nor exploit successful events more easily.

However, neither accounting for endurance nor wealth changes the fact that luck is a main determinant of final success. Those with early luck will not need endurance to survive, and those with the longer overall run of lucky events will come on top of those with fewer lucky events.

As this is true random, I don't think endurance or even number of tries would make any difference. It's like saying continuously trying the same number at the lottery would finally give you the jackpot. That is not mathematically true, unless you try an infinite number of times.

Second lottery ticket doubles your win chance. Very true mathematically, just the probability is terribly small in general.

While I am working on my (hardware) idea, I see, that this is a marathon, not sprint. And with amount of development job done potential clients or partners take me more seriously I reach every milestone. So increasing win chance is also possible.

Sure, but is continuing on the same thing a second lottery ticket? Or is it a new lottery althogether?

I would say one idea is the same lottery, just different round. Of course, the things change a bit after every client interview or after each technical failure (parts not available anymore). But if I continue this year, in autumn luck might be very close. Something like buying 1/10 of all tickets. I bought first ticket in 2018, then wasted a year in between with hopeless e-commerce project.

I'm not sure why you'd have a 1/10 of the tickets. A lottery is any random event that can happen to you or the company. Not the whole startup. What we are saying here (and Turing also explained in the other comment) is that a series of random events can give you a huge benefit, leaving competition far behind. You make the lottery spin at each of these events. Random lotteries are independent in their probabilities. So you cannot artificially increase your probability to win.

In a meritocratic competition like the one in the experiment, each miss puts you behind in comparison with those that got lucky.

And if a success provides exponencial growth, any failure to win the lottery places you far behind the luckiest winners very fast.

That’s why I am trying to ignore as much as I can the fact, that don’t getting lucky ticket immediately makes me a loser. Because many of these lucky tickets aren’t in the reality that fair. A guy’s dad know another guy and voila, it’s funded! Or mom just buys one a property in really expensive city while you balance full time job and development in the evening to start your own something. Best success stories I know were not fair as an ideal lottery should be.

Or, you could try supporting the policies described in the article that increase the probability of talented people reaching their full potential.

True.

I found the article interesting in the classification of founders that VC's see. Going from that step to making a judgement call on the desirability of characteristics seems slightly far fetched.

This is made quite clear at the end, and makes sense. They are doing this exercise for themselves and are sharing with others.

Our job as a seed stage investor is to look for brilliant entrepreneurs when their success is not yet obvious.

Yes, I find no statistical validity in this study. For example, how is the age/success relationship influenced by the fact that VCs mainly fund a certain age group?

Does anyone know what font they use?

From the page source:

- https://assets.website-files.com/5df429c735688c48b505775b/cs...

- https://assets.website-files.com/5df429c735688c48b505775b/5d...

Looks like Trade Gothic and Roboto Mono

- https://www.fonts.com/font/linotype/trade-gothic

- https://en.wikipedia.org/wiki/Roboto

The only relevant question.

Thanks!

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