Starting VS Joining

Thursday, August 12, 2010

Starting VS Joining

Charlie O’Donnell wrote a post yesterday entitled Changing The Wrong Ratio. He makes many points across the post that tie together well, but I want to pull out one that has been banging around my head for the past week: When there are already so many great startups going on, why are so many hackers strongly inclined to start their own company instead of joining a startup that already has some momentum and/or funding? David Tisch deserves big credit for setting my hamster wheel in motion on this topic last week.

To start, let’s get an important assumption out of the way: Now, more than ever, hackers are inclined to start their own company instead of working for someone else’s startup. If you don’t believe that’s true, then voice your dissent in the comments or forever hold your peace because for the rest of this post I’m going to assume you agree with me here. My evidence is strictly anecdotal (aka non-existent), but it feels very true, particularly in line with the explosion of seed cap funds/funding.

Charlie’s absolutely right that a startup’s biggest challenge is recruiting, so that’s why this question of Start VS Join is so important. As more entrepreneurial effort/HR fragments across a wider number of startups, a vacuum of talent forms, which sucks the oxygen out of the room for all startups.

So, why would a hacker rather work on their own startup than join a hot, growing startup? Some hypotheses:

Equity alignment: a 1% piece of a hot, rapidly growing startup is a generous grant for a great hacker, but feels flimsy when compared to owning 60% or more of your own idea (after bringing on some other founders). You only have to be 1/60th as valuable as super-hot-startup to talk yourself into this logic, which isn’t a great argument, but definitely plays into people’s thought processes.
Be your own boss: it’s not easy to work for someone else. For it to work out at all, you have to really respect your boss, and even then, having someone you report to at the end of the day can rarely ever compare to being your own boss. Following your passion everyday instead of following others’ orders is very alluring.
Making your dent in the world: someone else’s startup is likely not going to give you the same satisfaction of creating an impact when compared to working on your own idea. With the exception of arbitrage businesses, startup have visions of making a dent in the world beyond just making money. Unless you’re 100% behind super-hot-startup’s vision, you’ll feel more motivated to shape the world using your own idea more than someone else’s. It’s so much more satisfying to scratch your own itch: especially when the need your company solves is also originally your own need.
The allure of being in charge: many people aspire to run the big show. I think this common urge is part of the reason TV shows like The Apprentice, Undercover Boss and Shark Tank have success — don’t forget Who’s the Boss and Charles in Charge ;). But seriously, we live in a culture that, rightfully, values leaders, and so starting your own company is a fast way to rise up to the top, even if in the beginning you’re the leader of a company of one.
De-risked (historically speaking): starting a company is crazy risky and very likely to fail. But, failure today is cheaper than ever because startups are so capital efficient in the very early stages. The causes of capital efficiency in early stage web services have been outlined many times before, so I won’t rehash them here. The key is you can now fail and iterate more quickly and cheaply than ever before, so the negative reasons against starting your own company have been reduced further than before.

I’ve met many entrepreneurs that are in love with the idea of running a company, and I think a number of the motivations I outlined above are part of their thoughts. I really appreciate their passion, but coincidentally, these people don’t often overlap with the set of entrepreneurs that impress me the most. The entrepreneurs that impress me the most are the ones that are completely rabid about solving a need, and they happen to be starting a business because it’s the most direct way to do so. When the going gets tough in a startup (as it always does), the people who love the idea of starting a business don’t love it as much, but the people who have an insatiable urge to solve a need are unflappable in the face of adversity.

I’m sure I’m missing other motivations to start a company, so please correct me. I don’t think having a plethora of startups is necessarily a bad thing overall, and I’ve argued before that there’s no such thing as too much seed capital for new ideas. But, I am concerned about a talent shortage for existing startups, and I hope that teams who share very similar visions can find ways to work together, perhaps even merge as they grow, so in the end we can build the lasting digital skyscrapers of tomorrow.

(PS: I can’t believe I just pounded this out on an iPhone keyboard. Next time I blog away from a comp, I’m just going to reblog that crazy job-quitting whiteboard girl and call it a day. Apologies for all the typos. )