Thursday, May 5, 2011

Risk and Inexperience

In most of the discussions about startups, it is commonly mentioned that the special rewards belong to those who take huge risks by investing and working full-time for no money. Most founders see this as a rite of passage, and justification for them to get the bulk of the winnings and credit.

The general idea is that you’re not taking significant risks unless you’ve put your life on hold, mortgage your house and thrown all of your savings into a project that basically has a 1 in 10 chance of success. It’s an all or nothing deal. You either win, or you end up broke, divorced and living on the streets. VCs also feel that without this type of commitment, you’re liable to bail early.

Honestly, that’s about as whacked as it gets.

The first flaw in this delusion is that many of the people playing in startups have significant cash holdings. They can go for a year or two without salary, and in doing so it won’t mean eating “cat food” for retirement. From that perspective, it really reeks of a rich person’s game to keep out those pesky ‘commoners’. If they don’t need to work for a while, then the risk is minimal.

But also for many of the successful startups in the past, the founders were young, had little commitments and could easily recover if things floundered. It wasn’t an all or nothing deal, it was just a diversion in life. At worst case they could live with their parents for a while again. Failure wasn’t going to cripple them. Their risks were comparatively low.

However for an experienced technical person, the risks are huge even if they are getting a salary. When I fell out of one startup, it took years to get stable again. And it didn’t come without a lot of pain, I basically had to fall back several huge notches in my career and start over. Before I left, I had foolishly assumed that the experience would pay for itself, but that turns out to be true if and only if you win. If you win, everybody loves you. If you lose, we’ll lets just say your phone isn’t ringing off the hook. It’s a pretty nasty face plant.

Risk then is relative to where you are in life, and what you really have to lose. If you’re thinking about forming a startup then you need to think about losing. It’s the most likely scenario. You don’t have to dwell on it, or use it to prevent you from trying, but deliberately wearing blinders just seems, well, foolhardy. Often startups don’t work, so if you really want to play, it may take quite a few before you are finally successful. Believing in an idea does not require willfully ignoring reality.

A good software developer is good not just because they can write code to do something. They’re good because they can write code that anticipates the chaos of the world, and then survives long enough to do something. They're good because they can communicate that to others, and send the herd off in a single direction. That understanding only solidifies with experience; it’s not something they can teach you in school. That experience is vital in being able to get something up and running. If a company goes forth without that experience, success is just an accident. If someone is serious about setting up a new company, then they should be serious about partnering with someone who knows what they are doing. Software is too complicated to just ‘wing it’ these days, and it gets worse every year, not better. The heady days of garage computing have been over for a long time now.

The thing is, that development skill set is also applicable in the real world. If you can arrange things so they don’t fail on a computer, then it would seem pretty crazy to ignore that understanding and dive into a startup head-first without first assuring that the costs of failure are mitigated in some way. Experience ages you (literally) and along the way you’ve picked up dependencies. A wife, a mortgage, kids, etc. Things that you can’t ignore. Because of that, failure becomes rapidly worse than a face plant. Worse than a few years without pay. Worse than losing some disposable income. Even if you get a salary, you’re putting up a huge chunk of your life and your career. Failing fast is nice, but it often takes years before the dust has finally settled. Early promise fades into autumn blues.  

A good, experienced developer wouldn’t release code that has a 1 in 10 chance of working, that's worse odds than Russian roulette. So why would he, or she, be interested in an all or nothing game with those same odds?

Basically, the types of people that would make a good technical founder are the types that have been around long enough to not want the position. We’ll unless they are already rich of course, and if they are, hmmm, what’s their risk again? Is it any wonder that so many startups fail ...