With all the hype around entrepreneurship these days,
I think it’s time to give an honest account from the Dark
Side on what it’s really like to run an early stage start-up
company.
1. With all the hype around entrepreneurship these days,
I think it’s time to give an honest account from the Dark
Side on what it’s really like to run an early stage start-up
company.
So here are the three reasons why you should NOT quit
your day job and become an entrepreneur:
The survival rates for start-ups are very bad. Less than
half of early stage start-ups survive, the rest go bankrupt.
And even among the survivors, very few will actually
become one of the successes that you read about in
TechCrunch.
To put it into perspective: When early stage venture ca-
pital funds invest in start-ups (usually only those that
already have some traction, otherwise the VCs are not
interested), they normally only expect 10% of those to
be huge successes.
I am sure that you have a business plan that shows that
your start-up will be either cash-flow positive or that you
will be bought out by a big player within 18-36 months.
We have all had those, but the results you plan for never
materialize. But even IF your start-up is successful, the
process to reaching this stage will be long!
And during this process your company will most likely
come close to being bankrupt several times. This is the
case even for those start-ups that eventually succeed.
One example: Dan Eisenhardt co-founded Recon Instru-
ments in 2007. It took eight years before the company
was sold to Intel - despite the initial business plans es-
timating that an exit (or profitability) would be reached
in 2-3 years. And during these eight years, there were
many situations when the company was in deep trouble
and came close to running out of cash.
3 REASONS WHY YOU SHOULDN’T QUIT YOUR JOB TO
BECOME AN ENTREPRENEUR!
1. Your start-up will most likely fail!
The chances are much higher that your
startup will go bust than you will become a
millionaire. Are you still interested in starting
the company?
If so, consider the next point...
2. The process will be hard and long
Expect that you will have to work with the
company for 7-10 years. Do you have the
stamina for that, even when the company
is close to being bankrupt and you don’t
know if you will get a salary next month?
by Nicolaj Hoejer Nielsen
2. Initially (pre-funding), you will most likely get no pay. Later
on, you will of course get a salary, but expect this to be
lower than the one you could get in a corporate job. Why?
Because investors want you to be motivated by the equity
you build in the company and not by your monthly salary,
and they want you to spend the company’s money on
growing the business and not on your own fat pay check.
One example: I graduated with my MBA from a top-tier
business school (INSEAD) in 2006. If I had continued
my corporate career (or switched to consulting or banking)
I would have got a much higher (2-3X) monthly salary
than I have got in the start-ups I have been involved in
since.
And this is true for many of the other entrepreneurs in my
network, even those with successful companies (Thor
Angelo from Languagewire, Niels Henrik Rasmussen
from Secunia, Ivan Sanquist from Unwire, etc). They are
all very skilled professionals who could have got a fat
pay check in the corporate world that was much higher
than the salary they got in their start-ups.
But you should do it because you are so passionate about
it that you can’t stop doing it - even if you know the above
facts that say you would most likely make more money
in a normal job.
If you are still interested in becoming
an entrepreneur, consider the next
point...
3. You will get a low pay check!
Ok, I get it...so you recommend me
not becoming an entrepreneur?
No - of course you should become an
entrepreneur, if that is was you really
dream about!
Illustrations by Lise Grastrup
by Nicolaj Hoejer Nielsen
www.linkedin.com/in/nicolajnielsen
Are you willing to work for a low salary for
5-10 years, when you know you could earn
double or triple the amount in a normal job?