Research Says Solo Founders Perform Better
growthclub.online
growthclub.online
The thing that has always stopped me from starting a business is the fear of being sued, the fear of failure, and the fear of just breaking even compared to working for a normal company. I also am not very good at sales despite years of trying-- my personality is hardwired towards laying all my cards down on the table immediately.
My question to you is, if you have 2 million, why not continue to work for FAANG or retire semi-frugally to do hobbyist work, when considering that starting a startup involves immense downside risk (getting sued）
I can't discount it entirely, but... for many situations, that's probably a somewhat overblown fear. It's why you get insurance, pay professionals to do legal/paperwork stuff, and get on with your business. Almost anyone can sue for anything, but it probably doesn't happen anywhere near the number of times you might think it does. When you start, you're going to be too small to get sued in the first place. And being sued probably means you have paying customers, so you're already doing something right.
Apparently I'm the exception, but my business was pretty small (under $1M ARR), and one of our investors (which was also our largest client), sued us to pay his convertible note back. The company went bankrupt and after bankruptcy he sued my cofounder and I personally for the note. Still dealing with the whole thing. Every step of the way our other investors and lawyers were caught off guard, because the situation is apparently very rare, however, it still happened.
Having said that, knowing what I know now, I'd prefer to start a business, with all the issues and risks that it might entail, rather than let fear keep me from doing it. It's also been a hell of a learning experience and I'm sure it's all going to help me in the future.
If you've never owned a business and have no relation to me, then probably you'll survive the suit just fine.
But as you can see, OP had a business relationship with the person involved, and though OP probably won the suit in the end, he still had to pay oodles of money to protect himself. And if he lost, well, then there's my point.
Our lawyers and other investors do think this situation is pretty rare, as the guy ended up killing the business that could have given him a better return on his money, and also screwed everyone else involved in the process.
"having investors" is perhaps a different sort of business than other small businesses that start up. many of the smaller businesses (esp software) don't have 'investors' as such, though some have taken out bank loans.
The company concept is a shield. Money is allowed to pass through to you, outside capital is not a tax event and everything you spend is deducted against the much smaller salary you paid yourself. You can have negative AGI, actually have a high compensation, and still get $1,200 checks signed by the President.
Risk is allowed to stay with the company, whether it has anything left to pay to the aggrieved investor or not. This knowledge alone acts as a deterrent to many risks.
You're really overthinking this.
I have a lot of assets to protect.
Beinf grossly irresponsible with your companies' funds is an interesting way of saying "I tried to pay myself without the detailed advice of a skilled accountant and I made an oopsie and now the judge says I need to pay a lawyer ${sum_i_dont_have} to protect a random plantiff from becoming the new owner of my house"
Again, how amazing is your idea and execution and business networking capabilities that you somehow think you are gonna make more than $2.2M in 10 years of work, like you would at Google?
so wrong lol. you seriously have no asset protection because you believe that? better yet, your actual asset protection strategy is having none and a completely misunderstanding the basics?
Literally the top result on google. Why are you insulting me?
That case was from 2001 and decided in 2003 and the world has evolved so much in the last 20 years. The primary validation is the use of these entities. And let's just imagine your two decade old view of the world is correct and also probable, nobody even needs to know you are a single member LLC. When "12 Forest Road LLC" owns your vacation home at that specific address and no further information exists about the LLC to even the state, the person that sues your other company that has outside capital and employees will never name the other LLC in the lawsuit, and if they did it is much more likely that it gets tossed out or at least that other LLC gets removed from the lawsuit.
And your real issue is that you worked too hard for your other assets that you haven't protected. Nobody needs to know your other assets are held by title holding single member LLCs.
> Why are you insulting me?
Can I insult you into actually doing something about it?
Ask yourself, is it more important for you to be right or more important for you to actually make deterrents and even absolute protections?
and let's not forget, you are using all of this as excuses to not even attempt profitable ideas.
first you have to get sued: RARE
then everything has to go wrong: RARE
then it has to make it actually to trial court: RARE
then that one judge has to leverage an "alter ego" statute: RARE
> Additionally, you need a multi member non spousal LLC to even get the protection in the first place.
This is false.
> I have a lot of assets to protect.
Then protect them? Put them in different LLCs, trusts, foundations. To save money you can use a Series LLC which lets you separate liabilities or business lines into different series, about 20 states offer those, and outside the US the concept is called a "Segregated Portfolio Company". Use states where there isn't information about you in the LLC filing. You should basically have nothing in your name. Even better, you should have a negative AGI and be in debt on paper. If someone actually wins a civil lawsuit against you, you can tell them to get in line.
I’m assuming it’s a non FAANG salary (sub 200k), but even then the best numbers I could come up with is about 600-800k over 8 years (the top end only being achievable by aggressively investing every dime).
Regardless, it’s got me thinking if I should pump most of my paycheck into Delta and all the distressed market sectors for the bounce when this all ends.
Note: I'm not including interest/investment income from annual savings, and perhaps that's part of how you made money. Certainly it has been easy to make money buying tech stocks in the last 10 years. But that's not always the case, and even including investment gains I'm having a hard time seeing $2.2M being a typical or easy amount to save from age 21 to 29.
That said, I worked as a lawyer for 7 years, saved a decent amount, paid off my loans, and then started a startup. It was a good path for me, but man I never had $2.2M in the bank, even having worked at a well-known international firm and being on the partner track.
A person saving 100% of their net of taxes and living expenses would have to see a return of well into double digits every year to accumulate $2.2M over 8 years or so, because their base savings rate over that period will be (probably far) less than $1M under optimal circumstances.
It isn’t at all common enough to obviate the need for things like YC.
Which A do you think is being omitted and why?
You can get $150k from a lot of sources these days. The value of the YC network is far beyond that.
I am not sure why people on HN state/claim all sorts of outrageous salaries in the Bay area. It gives a very distorted view of reality and frankly harmful to both employers and employees.
It’s not unreasonable to believe someone could keep their stock for 8 years and have the combined total be worth 2.2M.
A more realistic and cautious way to do a startup (for normal people) would be (see Nassim Taleb's description of Extremistan/Mediocristan for ideas - https://kmci.org/alllifeisproblemsolving/archives/black-swan... and https://www.capitalideasonline.com/wordpress/mediocristan-vs... );
1) Hold down a regular job for a decent period of time and earn as much as you can.
2) Save, Save, Save i.e. no risky investments on a large portion of your income. This is your safety net.
3) Simultaneously, get started working on your ideas/company by yourself or with a close-knit group. Spend no money; only your effort and time.
4) Once you have the whole picture/Prototype/MVP figured out estimate how much it is going to cost you to move ahead. All information is available on the net and hence do your proper research i.e. don't pay any "consultant" for advice. You can also shoot an email and seek advice from people like Paul Graham/Joel Spolsky etc. Remember, "Fortune favours the Brave".
5) As long as it is bearable, spend your or group's money to move ahead. It is important to cut any and all unnecessary expenses at this stage. Spend only what is needed and not a penny more.
6) Once the above is stable, you can now decide on whether you want to quit your day job and spend your whole time on your "New" company. This will be a function of your safety net savings mentioned above.
7) In order to not blow everything on a idea/company which may not pan out, set a threshold on your expenditure dropping below which you will approach others for money (i.e. VC/Angel etc.) or abandon the idea/company and return to being a regular salary man. This is to ensure that you don't end up on the streets.
8) Your are now at the stage where you are proceeding with your own company or have gone back to salaried employment and hopefully working on taking a second crack at entrepreneurship.
Good luck and Godspeed :-)
$225K is a high salary almost anywhere in the states that's not on the coast. It's an absolutely ungodly amount outside of a small number of countries. You're likely to make a third of that in the EU or Asia. Maybe half that in cities with large tech scenes.
Advising someone to save up $2M before they're thirty is like telling someone to be born rich, except that the odds of being born rich are much higher (~40M millionaires in the world vs ~3M programmers in the States, of which the majority make less than $90K a year).
You start a company and go through hell to get $2M in a bank, not the other way around.
I'm not nuanced in the ins and outs of YC, but $150K on fair terms is a sizable amount in almost every reasonable context.
With the market basically doubling over the past 8 years with no inflation, and those returns compounded, it's clear to see how he got to $2m.
This doesn't account for any returns on company stock OP held on to (tech companies have basically doubled the return of the S&P over the past 10 years).
Whether you could replicate OP's experience over the next 10 years, is debatable.
If I was running another startup and I could join YC for $0 in return for 7% I'd still seriously consider it.
If you distribute your $2.2M over 8 years and gross it up with 35% withhold and minimal living expense like $30k/year you'd have to average over $400k/year.
This post is simply a lie?
Fwiw I think top value from an accelerator whether YC, 500, First Round or EF is about a customer network that makes it easy to bootstrap b2b, not about the cash at all really.
> 150k is a joke to anyone with a decent job.
Your income is an outlier in the US and an extreme outlier in the rest of the world. Your perception of what "a decent job" pays, the value of $150k, and the chance most people have to obtain this kind of money is massively skewed.
Once you have saved that amount of money your only going to be a 'few' more years from hitting some version of FIRE.
You've grown accustomed to a certain lifestyle and friend group that will be hard to walk away from.
You've lost skills having worked with some internal tech stack your entire career and don't know how to do anything.
Skills you learn at your FAANG equivalent job don't transfer over to entrepreneurship its just a different domain.
You've never actually 'worked hard' and it's just going to seem plain silly to quit your 250k+ job to work all the time when the chances of success are low.
People who get into entrepreneurship generally can't stand their jobs and have ideas running through their head all the time to the point where going to the job is pure torture.
Why not work at a FAANG equivalent company for long enough to give you 2-3 years of runway and then take the plunge? The longer you wait the less likely you are to do it.
> You've grown accustomed to a certain lifestyle and friend group that will be hard to walk away from.
> You've lost skills having worked with some internal tech stack your entire career and don't know how to do anything.
> Skills you learn at your FAANG equivalent job don't transfer over to entrepreneurship its just a different domain.
> You've never actually 'worked hard' and it's just going to seem plain silly to quit your 250k+ job to work all the time when the chances of success are low.
Can confirm all of the above (except lifestyle inflation, I watch that carefully). At this point, it really does make more sense to grind for a few more years, go have a nice FIRE and then maybe work on something on your own just for fun. So, essentially, golden handcuffs all the way.
Nevertheless, some people will do it better at 29 than at 22, and others will excel at another age. We're all different.
When the time comes for you, if it ever does, you'll know.
As you grow older, the number of friends who can afford to take financial risks reduces because they will have components such as family and kids to factor in.
It’s sad that such gospels exist to make lives more difficult than it already is for founders who are 35+.
But I also think lot of pitch decks witha team slide contain parttimers but just don't tell the VC.
> A stratified sample of 65,326 Kickstarter project creators was surveyed via email.
Actually I look at this positively. Most kickstarters offer actual tangible products and not software, and I think going solo and actually making profit (though small) is a pretty insightful result.
And in general the quality of projects on Kickstarter in aggregate is....utter garbage. I'm sorry but there's no nice way to put it despite some quality projects/companies coming out of Kickstarter.
That is, if you're genuinely good at building things, you're going to build your thing quickly. There's nobody to drag you down, no slow backend guy blocking you from implementing the frontend or vice versa. Or maybe you find out it was you doing the blocking all along, which is also handy to know.
So if you're faster than your co-founder, you'll feel that as slowing you down. But the real question is whether you'd be faster at that task than them.
E.g. if you rock the backend, and are forever waiting for the frontend to catch up, you'll feel slowed down. But that's only true if you're also faster at the frontend work than your co-founder, and able to maintain that speed while doing both frontend and backend.
There's a point at which having someone else do half the work makes the thing go faster even if they're not as fast as you.
What would be the point of reference to know that you are 'blocking' when you are alone?
If you remove all blockers from your path and still remain blocked, it's a good indication that you shouldn't ever place yourself in a position where people are going to notice.
My question after reading this article is, do these solo founders manage to grow their business as large as founding-teams? How many solo founder businesses cross the $50M revenue mark?
And others talk about how they could not achieve that in their wildest dreams, and consider $80/hr "good".
I was recently contacted about a contract proposal, in the USA, and they were offering $50/hr for some quite advanced cryptography work for a BigCorp end customer. I turned it down but it's good to get an idea of the market rate.
Rate expectation seems to vary a great deal depending on which geography and network-bubble people are in.
Hahaha, I wish I could tell my clients that's a fairly reasonable rate! The only situation where that's fairly reasonable is when you're contracting with MegaCorp Inc...
As a solo founder I've been told many times by VCs that they will invest in solo founders but then when you look at their portfolio it tells a misleading story. Most of their solo founders are previous founders or rockstars e.g. someone like Justin Kan.
That's a lot more achievable. 10X your revenues, then automate everything so that it ticks along in the background with hardly any input.
It gets very good after a while.
I've long suspected the cofounder thing was really to be able to divide and conquer. To have a spare founder when one inevitably quits. To play them against each other.
Call it experience.
I'm always warning founders that investors are not on your side. They're not your friends, they're not there to help you succeed. They're there to make money. If destroying your life will make them more money, they won't hesitate or even feel bad about it.
- A solo, bootstrapped B2B SaaS
- A bootstrapped B2B2C SaaS with one co-founder
- A VC-funded B2B SaaS with two co-founders
My solo project is the one I work on least. This is likely because nobody is holding me accountable for it, other than when I get the occasional email from someone who wants to use the product and they need x feature (which I haven't yet bothered to implement).
In my experience, I've done far better owning a fraction of something than 100% of nothing.
Not doubting your word, but it seems like if you've got 3 cofounders distributed across 2 companies that's going to create a lot more "fires" for you or at least generalized urgency.
The point I'm trying to make is that I don't think people should base their actions on what this research supposedly shows. To be honest, I also think this "research" is pretty thin. Not that the authors haven't worked hard on it, but there's a pretty obvious effect of Survivorship Bias in this study. The authors allude to this in their outline of the method used in the paper.
> Data on founding teams and longitudinal data on nascent firm performance is notoriously difficult to collect … In many cases, team data are gathered based public records, which creates a left censoring problem as operational status implies a degree of success in itself …. We address this problem by using data from a unique survey of formal companies that raised money via Kickstarter projects, allowing us to observe the founding conditions and performance of firms.
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> might not be an entirely typical case
I don't think there are many "typical" cases. I'm not even sure what a typical case would be. Company founders are usually atypical people. I think that's what usually leads them to finding gaps in markets.
The best course of action — in my opinion — is learn to introspect as objectively and as honestly as you can, or otherwise try to solicit unbiased external critical feedback (which is harder than it sounds!) and then take a course of action based on your own individual situation.
1. The two bootstrapped projects predate the VC-funded one.
2. The VC-funded project is the only one I work full-time at. Three businesses doesn't mean three full-time working weeks squashed into the space of one calendar week. The original motivation for going all-in on my own projects was that as an employee/contractor, it doesn't matter how many business processes you optimise — your expected number of working hours per week remains constant. I wanted to scale my own time, which is worth more to me than the sacrifices I've had to make along the way. It's not for everyone.
I still have my day job as a software engineer, so I won't be running out of money any time soon. My employer reduced my hours by 20% and I'm working from home because of covid, giving me more time to focus on side projects. My product (https://expose.sh) is basically complete and unlikely to change in a massive way.
For now I'm just starting to get good at social media ads. After work I set up some campaigns, then review the results the next day and tweak them.
Like @beaconstudio below mentioned it could be used to test webhooks. Other uses are testing local sites on mobile devices, like I just did to give the mobile experience of expose.sh a revamp. Its faster than running adb, rooting your phone or connecting a cable and doing mobile debugging.
There are other tools, although expose.sh is focused purely on http/https and not other protocols, this makes the syntax a bit easier as you don't have to specify a protocol, just a port i.e. "expose 80" instead of "ngrok http 80" (using ngrok as an example).
Have become of mind it's better to go as far as you can as a solo-founder and only bring in major stakeholders when you're desperate because there's too much work.
As the proverb says (paraphrasing) - if you want to go fast go alone, if you want to go far take people with you.
That does not necessarily mean get a cofounder - but even solo founders will need a mentor, chairman or some form of outlet for their thoughts and problems. Otherwise it's a lonely existence and when times are hard it very quickly becomes overwhelming for most people.
They lost me here. Founders take a significantly lower salary, anything else is typically a rounding error.
That just flies against (my) common sense.