You and I agree that there are only "a few thousand" people in the US in a given year who are "in a position to shoot for an M&A." There are, however, at least 10x those numbers in hopefuls… people who believe that they could do it, even though they never will be able to, and many of those people get funding and end up with nothing to show for it but a few wasted years of life. Meanwhile because of the 522 M&As etc we hear about one just about every day, making it seem so much more likely than it really is.
Let's be clear: It is vanishingly unlikely.
In addition:
"In my experience, both take a roughly similar toll on your life, but a lifestyle business doesn't have the upside to make the whole thing worth it. In a software development industry, a family where both partners are professional can bring in > $250k in salary each year working regular full time jobs, which is a very cushy lifestyle. I see no sense in working 16 hour days for a shot at the same salary."
For a talk I gave at Lessconf a few days ago, I broke down the numbers. Assuming 25% ownership in a startup which reached an $8 million dollar sale (which is much higher than most, as I'm sure you know), that results in less than $2 million post-tax.
I ran the numbers in the talk to demonstrate how much my business, Freckle Time Tracking, a most boring SaaS, would make in the same time period and beyond the 5 & 1/2 years of leisure post-3-year-lock-in. (Assuming a not immoderate spend of $10k/mo and savings of $5k/mo -- remember, if you get lock-in -- and most do -- you will have to work out of the Valley, where everything is expensive.)
My time tracking product alone will bring in significantly more than the buyout after 6 years, nearly triple what an $8 million dollar buyout would over a period of 9 years. And what's more, it keeps earning.
That's just one of the little "lifestyle" businesses my husband & I have going. We don't work 16-hour days. We don't even work 40-hour weeks. We did for about a year, year and a half, but we also took weeks and weeks off in the same time period.
Time tracking, let me repeat. Boring, "saturated," blah blah blah. Time tracking alone will make me us millionaires by the time I'm 30 -- on the side, and better yet, with 100% ownership. :)
And, as I said, we've got other things going as well.
Making an actual business with actual profit is different than what everyone calls a "startup" these days. You don't have to work your ass off. You just have to serve a market which needs serving, and provide more value than you're charging. These are different skill sets than hunting down VC and viral growth. More useful, in the end, and with a higher rate of return for the many instead of a few.
I agree with some of your sentiments, but you'd make a stronger point if you didn't play math games.
You are citing Dow Jones Venturesource exits. First off, they are tracking venture-backed companies. So your denominator in that particular fraction isn't people shooting for M&A someday-- it's a tiny slice of companies that get VC dollars. How many TOTAL VC backed companies exist? 5k? 50k? I honestly have no idea, but comparing it to people getting struck by lightning is just silly.
All that aside, I think this whole argument just shouldn't be happening. I think we're all in agreement that the funded path is higher risk and higher reward.
Speaking of numbers games, you use "median" when we all know that median exit is valueless without information about distribution. Mode is much more valuable. But that data is not available. However, if you pay attention to the publicized acquisitions which happen fairly often, the amounts are most often under $10m.
As for whether my number comparisons make good dialectic sense or not, it doesn't matter. This isn't dialectic, it's rhetoric. It's a tool for thinking about something. There's no point in pretending we're even attempting to approach Absolute Truth here.
As a tool for thinking about something, a contrast of M&As vs lightning strike injuries is quite valuable. Because we all "know" people who have been bought, but very few of us know people who have been injured by lightning. This shows us that we're in a bubble, a slice of unreality, where the availability heuristic skews our deeply felt understanding of likelihood.
Finally, yes. Dow Jones Venturesource tracks only venture-backed companies. Everyone on HN seems to agree that achieving venture funding is not only important for growth, but important for the connections the VC has to people who would buy the startup. Presumably that belief has some grounding in fact. This leads us to the conclusion that an acquisition is more likely when there is VC involved than not.
> Making an actual business with actual profit is different than what everyone calls a "startup" these days. You don't have to work your ass off.
And yet it shouldn't be, because profit-driven tech businesses can still be scalable and have many of the advantages of true "startups". It's still much closer to a "startup" than it is to a brick and mortar operation.
On the flip side, people seeking viral growth probably should not be killing themselves with work either. If you love what you do and you are productive then maybe 60 hours a week is okay, but certainly it's not serving VC interest or anyone else if you're burning out. Personally I think if there were a guaranteed way to use the other 138 hours in a week as personal R&R that would result in an uninterrupted, in-the-zone, 30-hour work week, that would be a good deal for any employer of creatives.
I agree with you that they shouldn't be in conflict. There are only a few outliers (FB) where they truly are, and the chance any one of us has of creating the next one of those are so tiny as to be nonexistent.
When I write about "startups" (with quotes), I am writing a reflection of what most people (at least people who write, talk, and comment) believe. :) Not what I believe ought to be.
Let's be clear: It is vanishingly unlikely.
In addition:
"In my experience, both take a roughly similar toll on your life, but a lifestyle business doesn't have the upside to make the whole thing worth it. In a software development industry, a family where both partners are professional can bring in > $250k in salary each year working regular full time jobs, which is a very cushy lifestyle. I see no sense in working 16 hour days for a shot at the same salary."
For a talk I gave at Lessconf a few days ago, I broke down the numbers. Assuming 25% ownership in a startup which reached an $8 million dollar sale (which is much higher than most, as I'm sure you know), that results in less than $2 million post-tax.
I ran the numbers in the talk to demonstrate how much my business, Freckle Time Tracking, a most boring SaaS, would make in the same time period and beyond the 5 & 1/2 years of leisure post-3-year-lock-in. (Assuming a not immoderate spend of $10k/mo and savings of $5k/mo -- remember, if you get lock-in -- and most do -- you will have to work out of the Valley, where everything is expensive.)
My time tracking product alone will bring in significantly more than the buyout after 6 years, nearly triple what an $8 million dollar buyout would over a period of 9 years. And what's more, it keeps earning.
That's just one of the little "lifestyle" businesses my husband & I have going. We don't work 16-hour days. We don't even work 40-hour weeks. We did for about a year, year and a half, but we also took weeks and weeks off in the same time period.
Time tracking, let me repeat. Boring, "saturated," blah blah blah. Time tracking alone will make me us millionaires by the time I'm 30 -- on the side, and better yet, with 100% ownership. :)
And, as I said, we've got other things going as well.
Making an actual business with actual profit is different than what everyone calls a "startup" these days. You don't have to work your ass off. You just have to serve a market which needs serving, and provide more value than you're charging. These are different skill sets than hunting down VC and viral growth. More useful, in the end, and with a higher rate of return for the many instead of a few.