Entrepreneurs, does it help to be desperate?

Yes, it matters.

An entrepreneur friend of mine sold his first company during the dot com years and made a mountain of cash in the deal. He then went on a spending spree (trying to build new, ultimately unsuccessful companies) that very nearly bankrupted him.

With his savings dwindling and the looming prospect of having to go back to work for someone else, he locked himself in the basement (so to speak) and, in a last-ditch effort, built a profitable company in a few months time. AND, here's the part that gets me, he made this product successful, nearly single-handedly in a market that was already crowded with competitors.

He tells me now that its harder for him to have success in business (5 failed in the last 2 years), primarily because there is no real sense of urgency to drive him to succeed anymore, what with the checks still rolling in. This is despite the fact that he is amazingly talented, both in software development and in business development.

Since meeting him and learning his story, I have been looking for ways to make myself as determined/desperate as he was when he built his company.

This is the kind of faulty reasoning that might be caused by looking at anecdotes (e.g. the exceptional story of Richard Branson) and assuming that a single anecdote tells you something about the world, when actually you are ignoring the other 1,000,000 over-extended, Richard Branson-wannabees who went broke and never had books written about them.

If you read his autobiography, you'll see how much encouragement his parents gave Branson. Infact they even mortgaged their house a second time to pay for his first publication "Student".

This is a guy who has been told all his life that he can do whatever he puts his mind to.

So when he's backed up against a wall, he doesnt see the wall. He just keeps trying till he succeeds.

If you dont have this kind of mindset then I think desperation will kill you.

Essentially (IMHO) you have to put yourself in a position where you have the time and emotional strength to devote to a startup.

For me, this is to have a day job and work during the weekends and during the nighttime.

I used play a lot of sports and go out a lot. I just stopped doing that and put more time into my startup when I realised

A - "If I dont do this I'll ALWAYS be working for someone else". (That really really really scares me.)

B- Worse "I never put in a SERIOUS EFFORT to start my own company".

Just imagining myself thinking these thoughts when I'm 40 is a HUGE motivating factor.

Its the equivalent of the Samurai contemplating their death. "Your going to be 40 in 10 years. Now what are you going to do tonite?"

Like Joel said, this is largely a product of variance.

Imagine a million monkeys in a coin flipping tournament where only the monkeys that flip heads move forward. Eventually there will be a handfull of uber-successful coin flipping monkeys. You could say, "Wow, look how talented they are" but you'd be overlooking the fact that their success a product of chance.

Luck, I'm sure, was not the only thing--he's no doubt talented. But even if you're flipping a coin that falls 4:1 on heads, you still need to be incredibly lucky never to hit tails in the long run.

The poker players among you know this all too well ;)

Also, the greater the chances you take the greater the payoff. He's taken a lot of huge chances and has been lucky enough to come out ahead... way ahead. I've read that VCs like to choose riskier companies for this very reason--I think Matt Maroon, PG, and others have written about this. Good if you're a VC, maybe not as much if you're the one they're gambling on.

As someone who wasn't especially successful at business in an eight-year run, I'd say that desperation mostly hurt me. Worry destroys my ability to work, so unless I can convince myself that my life isn't tanking, it's really hard to actually get anything done. Having a stable job has done wonders for my productivity. :)

It may help gamblers like Richard Branson, but I think few technology startup founders are that type of person. Most technology startup founders would find this kind of pressure a distraction.

Maybe desperation inspires dealmakers, but distracts makers.

One of the things to keep in mind is the kind of leverage Branson employs and how he uses it to reduce his own capital investments in the businesses. If the businesses go belly up, the damage to Brason's wealth for his Virgin start ups are actually quite minimal.

Virgin Atlantic was started with virtually no capital up front, the outlay was small -- something like $500K with a low-cost lease on one airplane.

There are a few other businessmen who take a similar approach. Sam Zell is probably one of the most famous, his Tribune buyout was largely regarded as a failure but even so, the actual impact to his own personal wealth was minimal.

Deal structure is really key in these situations.

I think the source of the author's confusion is the mixed bag that comes along with desperation. On one hand desperation can incentivise you to act and spur you to try things you probably wouldn't have, but which may turn out brilliantly. On the other hand I think it can pressure you to the point of making unwise decisions or possibly folding altogether. I don't think it's desperation which helps as much as it is taking risks or doing something to change your situation, but one doesn't need to be desperate for that. As far as the success of Richard Branson's ventures it reminds me of Donald Trump saying he always found it easier to raise money for larger more ambitious projects than smaller ones, so there may again be some correlation favoring higher risk taking - at least if you have nothing really to lose. I would never advise over extending or self-inflicted monetary desperation.

Desperation makes you paint awesome paintings. And desperation makes you cut your own ear.

Really desperation is like cocaine. Will give you a short term boost to get things done. But is dangerous.

There are other better and safer tools of motivation out there.

Determination matters.

If desperation is how you get it, fine. PG will tell you that you need to be hungry, but it's just one of the ways to get determination (also one such way that makes you more likely to be seek YC funding).

Here is my take on it (from personal experience with a couple of failed products):

Desperation forces you to concentrate on short-term goals rather than long-term growth. When you are always worried about where you are going to get your next paycheck, you have a different mindset.

In the end, I want a company that will allow me to never have to work for another company again (which I am working on now..at the same time as my FT job).

I suppose, if you are just looking to pump something out in a few months to get purchased by a larger company, it may work.

I've worked as an ER/Trauma/Critical Care nurse for 15 years, and, the first thing I teach young ER nurses is this: The first pulse that you check when you walk into a Code Blue is your own pulse.

Translation: You can't do shit for a patient when you're panic stricken. Panic is normal in life/death situations, but when you need to routinely function in those situations, you have to learn to deal with the stress and adrenalin.

So, with some experience, training, and conscious effort to push back the panic, an ER nurse can channel the rush of adrenalin into a zen/flow experience. Time slows to a crawl, you notice anything and everything, and you move like the wind.

But, you can't exist in those panic/flow states all the time. You have to learn how to come down and burn up the extra adrenalin. When people don't learn how to deal with those situations they end up with Post Traumatic Stress Disorder.

The stress of building startups feels very similar. As PG says, the default for a startup is to die. As a founder, I fight for the life of my startup each day. And, I'm still learning how to channel all that adrenalin effectively.

Two words: survivorship bias.

I doubt the world even knows enough about Richard Branson's personal subjective world and internal wiring to know if "desperation" is even the right descriptor. (I certainly don't.) Whether that kind of pressure motivates or demoralizes a particular person depends in part on the person. In my own case, I am very risk averse and only take risks when that is the conservative answer. My oldest son loves it when we have some crisis because he knows I will rise to the occasion and find some creative solution I would never try if a more conservative option were viable. I hate, hate, hate it and feel tortured by such situations. But I am trying to make my peace with it because it is obvious that some of my best ideas come out of gambles made when there was no sure thing available. Other people seem to perceive me as combative, risk-taking, and so on. I don't. I see myself as forced into such choices at gun-point and someone who would far prefer to NOT have to make such choices.

Another thought: If you are dramatically more competent than almost everyone you meet at some things, no one can realistically tell you what you can or cannot do. You have probably been told a jillion times "you can't do that!" when you already had done it. I know I tend to find my limits by falling on my face because failure is the only sure measure of what I genuinely cannot do. I have been told so many times that I could not do something when, in fact, I absolutely could do it that I just can't take the word of other people concerning what is a reasonable goal. I also loathe this aspect of my life. This is not how I want it to be. But it would be insane to behave more "conservatively" when there is a mountain of evidence showing that what other people believe is "impossible" is often just difficult for me but not impossible. This gives other people a certain perception about me reminiscent of what I am hearing about Richard Branson but the public feedback I get about how people see me is very different from my own view of myself. So just because outsiders look at Branson and view his life as lived in a "desperate" state does not mean that is how he experienced it.

PS -- My computer is back from the shop. Woot! :)