As I was clicking on the link, I was thinking "I wonder if it's just another one of those bogus stories about the Kauffman Foundation statistics." Yep.
(Bogus because the surprisingness comes not from the numbers themselves, but from confusing the concepts of entrepreneur and startup founder. The first paragraph is a prime example.)
It’s based on a survey of 549 company founders across a variety of industries (that’s my first mistake, as it turns out entrepreneurs start companies other than Internet software companies — who knew?)
Paul the only people confused between the concepts of entrepreneur and starup founder though are people that think all entrepreneurs are startup founders. :)
I'd say that's a "Valley" focused viewpoint, and it shows a lot about how insular "Valley" thinking can be. I don't think it's a bad thing to be reminded that "Start Ups" are a small sub-segment of the entrepreneurial path.
You seem to be under the misapprehension that I wrote that post. Onstartups is Dharmesh Shah's site. He's the one who says he was confused about the distinction between startup founders and entrepreneurs generally. And incidentally, he's in Boston.
You're calling out the results on the basis of "confusion", when Dharmesh clearly addresses this within the post itself. The article doesn't even contain the word startup at all.
I still fail to see how his very clearly labelled examination of how the average entrepreneur is very different from the average Valley start-up is causing so much confusion.
That's because really, you're a startup until you're established AND your business model becomes predictable.
The Valley wants you to believe you've disqualified yourself once you've found a steady income, even though your business might follow the exact same trajectory as Dropbox once you find the right knobs to turn.
That is such a crock. Even if you attribute the worst possible motives to this mythical "Valley," pure greed, they'd be psyched to invest in you if they thought your future trajectory was going to look like Dropbox no matter how you got to wherever you were. The one thing venture investors are not is ideological.
Now we're speaking past each other. Sorry, I was imprecise. My complaint is that you're describing one business strategy as if it was the defining attribute of a company, and it isn't. 37signals was a consultancy, then it was a product company. Tomorrow it could be a "pg-style" startup, if they decided to pick a product and shoot for the moon.
How can someone start a startup if they have a family to support?
The best plan might be to start a consulting business that you can gradually morph into a startup. This way you always have a source of income. See How to Fund a Startup, especially the section labelled "Consulting."
So what exactly are you saying I'm mistaken about? Can you give me a specific sentence I've written somewhere that you believe is false?
I think that's a misleading cite, for two reasons:
First, this is what you actually have to say about consulting companies:
But isn't the consulting company itself startup? No, not generally. A company has to be more than small and newly founded to be a startup. There are millions of small businesses in America, but only a few thousand are startups.
So, first, whatever it is you actually think about using consulting services as a vector for getting product to market, you explicitly define those companies out of startupdom --- both by answering "no" to the question of whether they're startups, and by supplementing your definition with "small and newly founded".
Second, while you're kind enough to suggest that consulting might be a good way to start a company for those of that have families, the majority of the "consulting" section of the essay you cite consists of warnings about the perils of consulting.
In fact, you're even more explicit in another essay:
This one is real. I wouldn't advise anyone with a family to start a startup. I'm not saying it's a bad idea, just that I don't want to take responsibility for advising it. I'm willing to take responsibility for telling 22 year olds to start startups. So what if they fail? They'll learn a lot, and that job at Microsoft will still be waiting for them if they need it. But I'm not prepared to cross moms.
What you can do, if you have a family and want to start a startup, is start a consulting business you can then gradually turn into a product business. Empirically the chances of pulling that off seem very small. You're never going to produce Google this way. But at least you'll never be without an income."
Or, how about "Ramen profitable", where you say:
Is there a downside to ramen profitability? Probably the biggest danger is that it might turn you into a consulting firm. Startups have to be product companies, in the sense of making a single thing that everyone uses. The defining quality of startups is that they grow fast, and consulting just can't scale the way a product can. [3] But it's pretty easy to make $3000 a month consulting; in fact, that would be a low rate for contract programming. So there could be a temptation to slide into consulting, and telling yourselves you're a ramen profitable startup, when in fact you're not a startup at all.
(Same essay: "it's OK to do a little consulting work at first".)
But whatever! Whether you hold consulting companies in equal esteem with shoot-the-moon product startups is beside my point, which is simply that I don't think think it's reasonable to classify companies principally by whether they are small and recently-founded. Have you ever seen 37signals offices? They're a startup.
I don't understand what you're trying to establish with these quotes. I agree with them all, but I don't have the slightest idea what "aha! see?" point you're trying to establish.
Please, please, just explain what statement of mine you're cleverly refuting here.
I don't know of any. The problem is not with the Kauffman foundation study's data, as far as I know. The problem is all these articles that describe the data as surprising, when most of the surprise is due to confusing startups with small companies generally.
I am not sure I am hot on the startup vs small company distinction, because there exist so many examples of cross-overs. First, there are a lot of tech "startups" (meeting pg's definition) that have preferred to stay small, becoming "lifestyle businesses" as the pejorative term has it (no, it is not my preferred term!). I bet I can think of many that started out as startups, but would not meet pg's definition of startup anymore; there may even be a few YC-backed companies in that list. The opposite also occurs and has occurred, a non-scalable-model based small business morphing into a scalable company.
At some level, all taxonomies break down, but startup vs small business taxonomy isn't very strong to begin with.
By the time I went to reply you took out my favorite quip of what you wrote—"That's the kind of line a politician would say."
The article was about entrepreneurs. It was not about your idea of startups. Your comment was defending a concept not present in the article.
I've never liked the word "startup". Ontologically it means that something's begun. I don't feel comfortable assigning more meaning to the word than that, though the connotations have been assigned.
The article was about entrepreneurs. It was not about your idea of startups.
Imagine an article on a web site about the NFL that began "When you think of a football player, you probably imagine someone six foot five who weighs 250 pounds. But a new study shows the average football player is actually four foot eight and weights 80 pounds." Because the average football player is actually a little league player.
So yes, the study described in the article is about founders of small businesses rather than startups (in what you call my sense, meaning the generally accepted sense of the word). But what makes it misleading is that it appears on a site about startups, begins by talking about examples of startups, and then claims it's surprising that people starting small businesses have different characteristics. It's not surprising at all that the average person opening a gas station or starting his own landscaping company is 40.
This is a more effective explanation. It will be interesting to see how stats evolve for "IT startups".
On one hand, we have loads of unemployed well educated young people right now that can afford to risk their time. These may be more likely to seek seed capital? Go big or go home models?
On the other, we have loads of seasoned industry vets with stable lives and cash in the bank to make a go of a new IT business. These may be more likely to start with one or two paying clients? Steady growth models?
That's a good example and shows the crux of the problem. In your example, the article should have said "the average NFL player", which offers a clear category of football player. The term "startup" is not as clearly delineated as "NFL player", hence the confusion.
Now, I will at least know what pg is referencing. I still won't know what other commenters mean by a 'startup' unless they are synced up on this too. I wonder how you can fix that?
Semantics on the word "startup": In my view to qualify as a startup the idea or business process must be novel in some way. Otherwise it is simply "self-started" as you mentioned.
I personally call "startup" a company at the stage when it attracts venture capital funding (i.e. high-risk investments). Palm, Inc. at the stage of developing and releasing Pre fits into this category (and I bet the people in the Pre departments were working like in typical startup).
The respondents' businesses probably attract low-risk bank credits instead (i.e. the money entrepreneur must pay back at some point). This makes things different. Those businesses are probably into retail, or consulting, or something similar; the potential leverage is lower there. And these are not the sort of businesses that get most of the attention on HN.
Club Penguin was a tech startup that sold for mid-nine figures without raising any VC. Mahalo actually seems more like a plumbing company than a tech start up in a weird way, but has raised VC from top tier firms.
The big distinction is building a business that can make you money while you sleep. something that can scale beyond the hours you work vs. being constrained by billable hours or their equivalent.
What amazes me is that in relatively short lists of things on internet I often see duplicates. May this be lists of jokes, arguments even photos. Copies are usually close to each other, often on the same mid sized page. Is there something in creators psyche that causes having a blind spot on such duplicates?
Example from this article:
4. More than half (51.9 percent) of respondents were the first in their families to launch a business.
11. Entrepreneurship doesn’t always run in the family. More than half (51.9 percent) of respondents were the first in their families to launch a business.
That's not the point. I am not talking about lack of originality. I am talking about failure to notice duplication in short list of supposedly interesting content published by oneself.
The reason is plain and simple: when you build a list for an audience, it needs to have many bullet points. So you are tempted to use the same fact twice with a slightly different take.
"2 things you didn't know about entrepreneurs" sounds less interesting/professional/worth reading that "10 things".
The only thing on this list that surprised me is that someone would actually think the common entrepreneur is "pretty young, living the red beans and rice lifestyle and working 80+ hours a week and sleeping under their desk".
Up where I'm from, entrepreneurs are typically middle aged, financially stable, and breaking ground on their new business because they've been working toward it their whole lives.
I work with entrepreneurs daily in my consulting business, and it's extremely rare, outside of real estate agents, for me to work with someone under 30 to 40 years of age, with a family, who just started their business.
Why do all these blogs constantly think that all "entrepreneurs" == "startup". Get out of your box!
>Entrepreneurship doesn’t always run in the family. More than half (51.9 percent) of respondents were the first in their families to launch a business.
the converse of this is more surprising. The ball-park null hypothesis is that only 0.29% (290 for every 100,000 individuals) should come from family with history of entrepreneurs - but observed figure is ~50%. From this one should conclude that entrepreneurship does run in families.
I also found this interesting. My father has run his own business full time for 20 years, and did it part time before that. I think that's a big reason I started my own business ~2000, though it certainly was not a startup as we think of the term. A lot of the reluctance to do a startup is simply fear of the unknown, or thinking there's some "secret sauce" that one doesn't know. Like most things in life that don't have a prospect of being immediately fatal, often the best advice is "Just do it"
"Fear of the unknown" - very well said. In fact, there are some communities (sindhis, marwaris, parsis in India for example) where the culture of entrepreneurship has been handed down through generations. Like getting a job is a way of life and not "unknown" in common families, entrepreneurship is not an "unknown" in families of these communities.
Would also like to point out that culture driven entrepreneurship may be slightly of a different kind than we are acquainted with (startups/VCs/business plans etc.). These people may have for example started with being a taxi driver and grown to be the owner of travel company.
Some of the things the commenters find surprising really aren't. For instance that starting a business when married is risky. If anything I think its exactly the opposite. My wife started her first (non-tech!) business about a year after we were married and a large part of the reason is that if she had done it while single, she would not have had health insurance. She's now on her second business venture.
A single data point to be sure, but it does lend credence to the idea that losing health insurance is a significant factor in people not quitting their jobs to go out on their own.
11. Entrepreneurship doesn’t always run in the family. More than half (51.9 percent) of respondents were the first in their families to launch a business.
This may be partly due to the fact that if your parents own a business, you're much more likely to work for them or inherit the business (than if they don't). Your parents or some other family member owning a company just gives you an extra option that might make starting your own business seem less attractive.
It's the author's own fault. He/she starts off with "(think Facebook, Twitter, Google, etc.)", then proceeds directly to show the survey reflects a variety of industries. There are vastly different considerations for real world business versus Internet based ones, and that affects the profiles of founders for them. (e.g. PlaySpan.com founder was age 10!)
They count, and it is an interesting report when viewed through a macroeconomic lens, but a guy who starts a plumbing company or a screen printing shop is in a different situation than a couple Stanford PhD's working on a highly scalable business. The former is extremely valuable, but just not what people who frequent this site think of when they think of starting a company.
(Bogus because the surprisingness comes not from the numbers themselves, but from confusing the concepts of entrepreneur and startup founder. The first paragraph is a prime example.)