Nice post. The only thing I'd question is the wisdom of quitting your day job too soon. I admittedly don't know too many startups intimately, but the small tech companies I know were built steadily and in little steps under the cover of a day job. Eventually they built momentum and quitting the day job became a necessity rather than a risk. I don't see that as "not believing in what you're doing", I see it as "not being hubristic", or "being practical". As you say, the best idea in the world is just a nice starting point in the direction of success. Great ideas don't feed you or pay you health insurance. Why take a huge risk at precisely the time you have the least resilience to failed risks? Build it in smaller steps to chip away at that risk.
But, like I said, I'm not familiar with a lot of startups. Maybe different kinds of startups have different needs.
davetroy
· 2 months ago
Chris - Investors disagree. It's pretty disheartening to hear a pitch from an entrepreneur who is hedging their bets and not willing to commit to going all in. It's always a sign that the team is weak and not yet formed. And that's not a criticism, but it's a very good sign that the entrepreneur is not ready for investment.
Similarly, investors really disdain entrepreneurs looking to draw a salary from investment capital. The best way to go from the standpoint of attracting investors, if you can swing it, is to build up some savings and then go all in. It shows you are serious, and you probably are.
Investors will want to see their capital spent on advancing the business goals and not going to your personal overhead. They will question why they instead don't invest in the same basic idea with another entrepreneur with less costs and who is more prepared.
Lastly, people are too timid. You will not get rewards without taking risks, and if you have a strong network, your chances of success go way up. Be smart, have good friends, and DO quit the day job!
chrisashworth.org/id/
· 2 months ago
Ah, right. After writing the above, I realized we're talking about different beasts. I'm thinking of self-funded bootstrapping, you're talking about VC-funded bootstrapping. The latter is something I know nothing about; I'm only (moderately) familiar with the former. Now that I see the distinction your advice makes more sense. Something like: Investment money should be used to accomplish something that the labor of the founders can't accomplish alone. (?) In which case, yeah, I can see how it wouldn't make sense to invest that money until the team is devoting their full energy to using it to greatest effect.
davetroy
· 2 months ago
Chris - I am actually coming at it from the perspective of an angel investor, which (believe me) is a far cry from the position of most VC's.
But I believe the advice is sound across the board. Good teams matter for bootstrappers, people taking angel investment, and certainly for people taking VC investment.
Your money could be earning 5-10% in the markets; your entrepreneurial returns should exceed that in the long term, or why do it?
As your first, biggest investor, you should want you to quit your day job as much as any external investor would because it increases chances of success.
Also, there are lots of types of companies. Lifestyle companies offer great personal freedom but will never attract investors. I'm not talking about lifestyle companies here.
jtnt
· 2 months ago
Dave -
I have to tell you, one of the most annoying things to me as an entrepreneur who is bootstrapping his startup, is how all conversations about startups assume the goal is looking good to VCs.
My goal is to build a good business. If this attracts VCs, so be it, but I'm not going to make major strategic decisions about my company based on whether I think it will impress a few people I don't know.
Every week, there are posts that warn about the minuscule percentage of companies that are funded. Right behind each of those posts, are handfuls of posts about how not to pitch VCs and how to get the attention of VCs and how to build a team that will make VCs change their religion and yada yada yada. I'm sure attracting VC money is the wet dream many entrepreneurs have (although, I don't really know why) and this is the stuff that draws their eyeballs to blogs, but the incongruity seems a bit odd, even disingenuous, at times.
IMO, making decisions about your company (at the stage we're talking here) based on what impression you think it will give VCs is probably putting the cart before the horse for the great majority of startups.
To me, the "do I quit my job" question is so personal and so dependent on a variety of variables (family support/siutation, nest egg, personality, etc.) that for someone on the outside to tell someone they should or shouldn't do it and when without a conversation about it is, well, bad advice.
davetroy
· 2 months ago
Nick - notice I never used 'venture capitalist' in my post. Like you, I think the obsession with VCs is silly.
What I did talk about (a lot) is investors, and that includes you. You are your own first investor.
What are you trying to achieve as an entrepreneur? If you want to build a lifestyle company, that's cool and my comments don't apply. Because you'll never be able to sell a lifestyle company (most likely), and you aren't setting yourself up to be a serial entrepreneur. Fine, but a different problem.
If you are growing a company to sell it, and are looking to be a serial entrepreneur, you should always be thinking about investors, whether that's friends and family, angels, VC's, or even a potential acquirer.
Team is paramount if you are talking about investors - any investors, including you. What I am suggesting is that unless you build up your team first, you should NOT quit your day job because you, as your first and biggest investor, are as insane to bet on an incomplete team as any other investor would be.
I am also suggesting that if you have identified your team, and you are really confident about it, it's equally insane for you NOT to quit your day job, because any investor (you especially) should demand 100% of your attention.
It's funny that entrepreneurs often don't think of themselves as investors. They should.
chrisashworth.org/id/
· 2 months ago
I guess my objection boils down to this sentence:
"And yes, many entrepreneurs don’t really believe in what they are doing: if they did, they’d quit their day jobs."
You clarify it in the comments like so:
"What I am suggesting is that unless you build up your team first, you should NOT quit your day job because you, as your first and biggest investor, are as insane to bet on an incomplete team as any other investor would be."
And that's pretty much all I'm getting at--the point that quitting your day job is not about how much you believe in your idea. Quitting your day job because you believe you've got a really fab idea would only serve to demonstrate you have no idea where the value of a company comes from. People have really fab ideas all the time. Fab ideas aren't worth anything on their own. I reckon we don't disagree on this, but the way you phrased it in the original post seems vulnerable to misinterpretation on this important point. It's not enough to believe really hard: you've got to back it up with something. You argue that the only fundamental thing you need to back it up with is a team. I might quibble and say it wouldn't hurt to back it up with some cold hard shippable code too. (Although I do put priority of the team over the code.) But either way the point is: quit your day job, sure, but don't do it for the wrong reasons, and go in with both eyes open.
davetroy
· 2 months ago
Chris, I agree that you shouldn't quit your job just to pursue your idea. You should quit your job when you have a team lined up to pursue your idea, even if that team is only you (and you are sufficient to prosecute it).
The key idea is that you should see yourself as your first investor, and you should behave like one. If you believe you have aligned the right team resources, then there's no reason to wait in pursuing it.
You and all investors should see not quitting your job the same way: as a sign that you're not quite ready to move forward and probably need more or different team members.
All Comments
But, like I said, I'm not familiar with a lot of startups. Maybe different kinds of startups have different needs.
Similarly, investors really disdain entrepreneurs looking to draw a salary from investment capital. The best way to go from the standpoint of attracting investors, if you can swing it, is to build up some savings and then go all in. It shows you are serious, and you probably are.
Investors will want to see their capital spent on advancing the business goals and not going to your personal overhead. They will question why they instead don't invest in the same basic idea with another entrepreneur with less costs and who is more prepared.
Lastly, people are too timid. You will not get rewards without taking risks, and if you have a strong network, your chances of success go way up. Be smart, have good friends, and DO quit the day job!
But I believe the advice is sound across the board. Good teams matter for bootstrappers, people taking angel investment, and certainly for people taking VC investment.
Your money could be earning 5-10% in the markets; your entrepreneurial returns should exceed that in the long term, or why do it?
As your first, biggest investor, you should want you to quit your day job as much as any external investor would because it increases chances of success.
Also, there are lots of types of companies. Lifestyle companies offer great personal freedom but will never attract investors. I'm not talking about lifestyle companies here.
I have to tell you, one of the most annoying things to me as an entrepreneur who is bootstrapping his startup, is how all conversations about startups assume the goal is looking good to VCs.
My goal is to build a good business. If this attracts VCs, so be it, but I'm not going to make major strategic decisions about my company based on whether I think it will impress a few people I don't know.
Every week, there are posts that warn about the minuscule percentage of companies that are funded. Right behind each of those posts, are handfuls of posts about how not to pitch VCs and how to get the attention of VCs and how to build a team that will make VCs change their religion and yada yada yada. I'm sure attracting VC money is the wet dream many entrepreneurs have (although, I don't really know why) and this is the stuff that draws their eyeballs to blogs, but the incongruity seems a bit odd, even disingenuous, at times.
IMO, making decisions about your company (at the stage we're talking here) based on what impression you think it will give VCs is probably putting the cart before the horse for the great majority of startups.
To me, the "do I quit my job" question is so personal and so dependent on a variety of variables (family support/siutation, nest egg, personality, etc.) that for someone on the outside to tell someone they should or shouldn't do it and when without a conversation about it is, well, bad advice.
What I did talk about (a lot) is investors, and that includes you. You are your own first investor.
What are you trying to achieve as an entrepreneur? If you want to build a lifestyle company, that's cool and my comments don't apply. Because you'll never be able to sell a lifestyle company (most likely), and you aren't setting yourself up to be a serial entrepreneur. Fine, but a different problem.
If you are growing a company to sell it, and are looking to be a serial entrepreneur, you should always be thinking about investors, whether that's friends and family, angels, VC's, or even a potential acquirer.
Team is paramount if you are talking about investors - any investors, including you. What I am suggesting is that unless you build up your team first, you should NOT quit your day job because you, as your first and biggest investor, are as insane to bet on an incomplete team as any other investor would be.
I am also suggesting that if you have identified your team, and you are really confident about it, it's equally insane for you NOT to quit your day job, because any investor (you especially) should demand 100% of your attention.
It's funny that entrepreneurs often don't think of themselves as investors. They should.
"And yes, many entrepreneurs don’t really believe in what they are doing: if they did, they’d quit their day jobs."
You clarify it in the comments like so:
"What I am suggesting is that unless you build up your team first, you should NOT quit your day job because you, as your first and biggest investor, are as insane to bet on an incomplete team as any other investor would be."
And that's pretty much all I'm getting at--the point that quitting your day job is not about how much you believe in your idea. Quitting your day job because you believe you've got a really fab idea would only serve to demonstrate you have no idea where the value of a company comes from. People have really fab ideas all the time. Fab ideas aren't worth anything on their own. I reckon we don't disagree on this, but the way you phrased it in the original post seems vulnerable to misinterpretation on this important point. It's not enough to believe really hard: you've got to back it up with something. You argue that the only fundamental thing you need to back it up with is a team. I might quibble and say it wouldn't hurt to back it up with some cold hard shippable code too. (Although I do put priority of the team over the code.) But either way the point is: quit your day job, sure, but don't do it for the wrong reasons, and go in with both eyes open.
The key idea is that you should see yourself as your first investor, and you should behave like one. If you believe you have aligned the right team resources, then there's no reason to wait in pursuing it.
You and all investors should see not quitting your job the same way: as a sign that you're not quite ready to move forward and probably need more or different team members.