Is starting a company genuinely as risky as it feels, or is the realistic downside much milder than perceived?

Paul Graham · published May 2005

It is not a mistake to attempt something with a 90% chance of failure if you can afford the risk, and failing at 22 costs little.

Failing at 40 with a family to support is serious, but failing at 23 leaves you broke and a lot smarter — roughly what you hope to get from a graduate program.

Scope: conditional on being able to afford the risk; young founders without dependents

source Hiring is Obsolete

Paul Graham · published Mar 2007 · hedged

Even founders whose startups fail rarely have a terrible experience, and almost none wish they had taken a regular job instead.

Of the first eight startups, the failed founders moved on unharmed; even the worst case, Kiko, ended happy and went on to a new startup.

Scope: based on YC's first batch of eight startups

source Why to Not Not Start a Startup

Paul Graham · published Mar 2007

Your startup will probably fail, and expecting that is a good way to approach the experience.

Hope for the best but expect the worst: the worst case is at least interesting and the best case makes you rich.

source Why to Not Not Start a Startup

Marc Lore · published Jul 12, 2021

The risk of quitting a job to start a company is much smaller than it appears, because marketable people can usually return to equally good or better corporate jobs, so the real risk is just the money burned while away.

Most people asking for this advice are highly marketable and entrepreneurial experience makes them more hireable, so the downside is a calculable amount of burned capital and time.

Scope: applies to people who are marketable / could get good corporate jobs

5:40 20VC: Jet.com's Marc Lore on How To Assess Human Potential and "The Resume Test", Why Chief People Officer Should be One of Your First Hires and Why We Need a New Type of Venture Capital

Sam Corcos · published Dec 11, 2023

Starting a company only feels risky; the realistic downside is mild embarrassment, not catastrophe

Over time he's realized how many things that look risky on paper aren't, and the worst case of a failed company is trivial compared to real worst outcomes

8:37 20VC: Why Founders Should Take as Many VC Meetings as Possible, Should Founders Meet Associates, How to Get Intros to the Best VCs, How To Extract the Most Value From Your Investors, Why Post IPO Operators Are the Best Angels with Sam Corcos @ Levels

Sam Corcos · published Dec 11, 2023

Big swings are far less risky than people expect, and failing at one teaches you more than taking the safe path of a job at Google or McKinsey

Even in failure the learning from an ambitious attempt exceeds what the easy path provides

47:11 20VC: Why Founders Should Take as Many VC Meetings as Possible, Should Founders Meet Associates, How to Get Intros to the Best VCs, How To Extract the Most Value From Your Investors, Why Post IPO Operators Are the Best Angels with Sam Corcos @ Levels

Paul Graham · published May 2005 · hedged

The intimidation barrier to starting a startup is set slightly too high: some people who could succeed as founders instead get absorbed into big companies.

A filter is useful to screen out the uncommitted, but the balance of power has shifted toward the young and only the most ambitious undergrads even consider founding.

source Hiring is Obsolete

Paul Graham · published May 2005

Riskier career moves such as starting a startup pay better on average because so few people are willing to attempt them, leaving less competition than the prizes would suggest.

Extreme choices are so frightening that most people won't even try, so demand for them is low; and while about 9 in 10 startups fail, the successful one pays founders more than ten times an ordinary job.

Scope: 'on average' in the expected-value sense, not the typical outcome

source Hiring is Obsolete

Paul Graham · published Nov 2005

People overvalue stability—especially young people, who need it least—so merely deciding to start a startup gets you halfway there.

The uncertainty of startups frightens away almost everyone, so most potential competitors never show up.

source How to Fund a Startup

Paul Graham · published May 2005

A failed startup does not harm your prospects with employers; big-company managers prefer a candidate who tried a startup that tanked over one who spent two years as a corporate developer.

He asked managers at Yahoo, Google, Amazon, Cisco and Microsoft to compare two equally able 24-year-olds, and every one preferred the failed founder.

Scope: based on informal polling of friends who are managers

source Hiring is Obsolete

Paul Graham · published Mar 2007

In America, a failed startup carries no stigma with employers or investors, provided you made a serious effort.

Managers he asked at big companies all said they'd prefer to hire a failed founder over someone who'd spent that time at a big company; in America companies are disposable.

Scope: in the US, unlike reportedly Europe; so long as failure wasn't from laziness or incurable stupidity

source Why to Not Not Start a Startup

Paul Graham · published Jul 2009

What keeps most people from starting startups is not financial risk or long hours but the fear of bearing so much responsibility, so anything that lifts that moral weight greatly improves survival odds.

Plenty of 25 year olds save nothing anyway and plenty of people work equally long hours in regular jobs; the moral weight is what actually makes startups hard, and reaching ramen profitability flips the default from dying to surviving.

source Fear of moral responsibility not financial risk or hours is the real barrier to founding

Paul Graham · published Sep 2001

The two things that keep hackers from starting startups — ignorance of business and fear of competition — are illusory barriers, like electrified fences with no current.

There are only two things you need to know about business: build something users love and make more than you spend; get those right and you're ahead of most startups, and you can figure out the rest as you go.

source Ignorance of business and fear of competition are illusory barriers like an unplugged electric fence

Paul Graham · published Oct 2008 · hedged

The downside risk of a failed startup is much lower for hackers than for people in sales or marketing, because good hackers can always get some kind of job.

In sales and marketing it can take months to find a new job in a bad economy, but hackers are more liquid in the labor market.

source Hackers face lower downside risk than salespeople since they remain employable after failure