Money - lots of money, $1M basically just gives you the freedom to tinker on your own time - basically gives you the ability to hire other people to do the actual work of serving customers. If you want a successful startup, you need to know which customers, what work, and how it should be done, in a way that nobody else has figured out yet. An employee is not going to figure it out for you; if they could do that, they'd be off starting their own business. If your competitive advantage is that you have more money than everyone else, you will still fail; people who lack money are unaware of just how much money is floating around in capital markets and how little that differentiates you. Conversely, if you do have a unique insight into an untapped market that's more profitable than any existing way of doing things, financiers will be falling over each other to give you money and take a slice of those profits.
In my experience, the key reagents to a successful startup are information, insight, timing, luck, connections, and technical skills, in that order. This is largely reiterating the thesis of the article - "market matters most" - but in terms where it's the entrepreneur's job to find an untapped market, at precisely the moment in time when it's ready to be tapped.
I think few people truly believe money guarantees success and that's rarely claimed from my experience. There are plenty of other factors that need to be met to start a successful business, but if you have money, those other factors can be focused on more intensely and you'll be less hamstringed on factors like timing and time to market, innovation/added value, network effects/marketing, and so on.
You're working at a disadvantage in most other aspects needed for a successful business if you don't have a certain baseline of capital to work from. Often times more capital infusion beyond that baseline can help. There are certain problems addressed by startups that throwing money at no longer helps and you can reach diminishing returns. That's a nice problem to have.
To your point, money can buy you a Monte Carlo (or MCMC for 'better') approach to market exploration for your businesses products/services. You can try, fail, and adapt.
For many without piles of money, starting a business can afford only one failure (if they're that lucky) in their lifetime. No retries with refinements.
Since then, for about 5 years I did full time corporate work while they failed maybe two dozen businesses. The nice part is that out of those failures, two companies took roots and basically now they’re a lot wealthier than their parents and they long since paid of all the money they lost during those years.
While the rest of us need to get funding from experienced investors who vet our plan first. In a system where there are investors looking for people to invest in, this approach is bound to succeed more.
On the other hand, having the money and luxuries may eliminate the so much needed evolutionary pressure on a personal level. On the company level, there's also the trap of creating a "charity business" that is not profitable, but that's if you really have loads of cash to blow / VC-funding yourself.
Please don't interpret this message as "if I was rich, I would be successful". I just think it's harder and takes more time and more sacrifice when you have to work for a living, but creating a successful company is hard either way and requires full attention.
"just"? Seems like you identified it as a main factor just like the parent. It's like the difference between necessary and sufficient but put in terms of probability instead: it significantly increases the chances that it's even possible to make an attempt. It's clearly not sufficient though, as you both point out though.
I started my first startup with $30K, saved up from 2 years of working at someone else's startup. That bought me a year and a half of tinkering time and 4 shots at goal. It'd cost more now, particularly with Bay Area prices (I was in Boston), but we're talking about $100K, not $1M.
If you want to make an attempt, go work for a FAANG or one of the recently-public tech companies for 2 years, live like a grad student, and bank the difference. Then work for somebody else's startup for a year to see what life outside a big corp is like, then you should have 2-3 years saved up if you haven't increased your living expenses. If you can't get a job at a FAANG, unicorn, or one of the other leading companies in your field, you're probably not ready (in terms of knowledge and technical skills) to found a startup. Once you do you're looking at ~$200K/year in total comp, which saves up really fast if you're still living like peers who make $60-70K/year.
that's an overstatement right there. real life evidence points otherwise. lots of companies are founded on the humble crud stacks - php, django, rails etc where the founders or engineers hardly knew what they were doing.
however yeah, I agree having runway by cutting expenses buys you a lot of time to tinker around.
Work in a company with more than 50 people. Spend your time learning who are the two people that bring 80% of value to the business. Join those two when they go off to start their own business, which they choose to do because they are grossly underpaid at their current company relative to their impact.
If I can land a job at faang why would I quit after two years to start a one person startup myself with $100,000 capital live horribility for 2 years at a faang and probably 2 more years trying to live off of that 100,000.
It sounds naive. If I want my startup to succeed I can't wait two years to basically bootstrap the business. If I'm at a faang why not wait a little longer and leave with someone else and get millions in seed money?
I've seen startups run by children of very wealthy people that failed because they didn't fundamentally understand the value of the dollar, or what reasonable spending should look like during lean startup times.
I've seen the repeated loans of a million dollars, and believe it or not, a million doesn't go very far in startup world. If you don't have revenue to offset your burn, you'll be in endless raise land.
This can only go on for so long, regardless of your family's money situation.
Conversely, I've seen several startups succed that were run by folks who did the obligatory teenage time working a counter at McDonald's (or equivalent). Part of their success was their ability understand and control costs, especially their lifestyle while in early stages.
I've run into many people who want to get into entrepreneurship but are unable to because their lifestyle bills are so high, they'd require a salary level that no reasonable investor is willing to pay during founding.
People way overestimate how much contacts help.
We've had meeting with all types of influential people in our industry who were friends or relatives of a founder and they just haven't been that helpful.
Our most valuable contacts are people we met along the way, because they really believe in the product. And that means so much more than oh your the son of an ex coworker and you have a startup you want to tell me about during lunch.
Bottleneck is that the market moves on in the time you spend pivoting, and eventually your inside information about what's hot and what's worth building gets stale, along with your technical skills. I know a number of other entrepreneur/retirees in the same boat - 5+ years working on various ideas, often after having a previous exit - and it never seems to result in a big company.
My startup is growing 5% every week for last 6 months and it took me 3 years to get here. If my bank account was bigger I could have done it in an year. and because I am bootstrapped I am losing my amazing tech team to highly funded companies that can give them 3x salary and stock options
What about buy an existing startup vs bootstraping?
Lots of people don't realize learning to read the market is also a separate skill that can't be learned through working for a company. It takes time and a few failures to wise up.
I moved to Sydney, Australia about 9 years ago. This city is VERY clqiey. For Sydneysiders, it's all about what school you went to and who you know.
But if you're a foreigner, you kinda automatically hack the system, because they don't know anything about the school or people where you're from. It doesn't even come up in conversation that I didn't go to University, like they automatically assume I went somewhere, and that they can't qualify me anyway.
This isn't a way to hack the early dollars of a rich parent who can payroll a start-up, but you may be surprised how you can get into the "right places" and meet the right people.
At the same time, if you've got the attitude that says everyone else has benefits that I don't have, you'll get that in return. Same if you just go looking for "connections" I suspect.
Rich kids are not starting good startups. They're not coming from mega mansions driving ferraris. Their parents are professionals, they live in what look like 'normal homes', like 'TV homes'. Usually stable family environments.
They didn't have to worry about stuff and if they got into an Ivy League school they were surely going to go.
If they got into trouble, the risk was dampened.
So 'privileged' but not 'spoiled rich'.
Basically - enough money for the 'good things' that money can get you, while avoiding the 'negative' stuff.
Most founders did not use their parents millions to get the business going.
But good point. Many of these articles seem to take things like money and contacts for granted.
It's clear that people who have more personal runway get more chances at trying to find the right market.
Jan Koum of Whatsapp (Ukrainian immigrant, came to U.S. with nothing, was on food stamps as a teenager).
Brian Chesky of AirBnB (child of social workers, attended RISD).
Sergey Brin of Google (parents were professors, but emigrated from the Soviet Union with nothing. Attended University of Maryland).
Marc Andreesen of Netscape, Loudcloud, Ning, and a16z (parents worked for Land's End and a seed company, grew up in cornfields of Iowa, attended UIUC).
Also, add Chad Hurley co-founder of YouTube to the list:
(Public school in rural red county Pennsylvania, Indiana University of Pennsylvania for college)
"As a child he was homeschooled by his mother, took sailing lessons,[7] and had an intense interest in electronics and engineering.[3][8] He took community college courses at Golden West College and Long Beach City College[5] beginning at the age of 14 or 15, and started attending courses at California State University, Long Beach[1] in 2010.[6] He wrote and served as online editor for the university's student-run newspaper, Daily 49er.[9]
During his childhood and teenage years, Luckey experimented with a variety of complex electronics projects including railguns, Tesla coils, and lasers, with some of these projects resulting in serious injuries.[1] He built a PC gaming "rig" worth tens of thousands of U.S. dollars[8] with an elaborate six-monitor setup.[10] His desire to immerse himself in computer-generated worlds led to an obsession with virtual reality (VR)."