Don’t Plan to Get Rich from Your Startup

Getting rich shouldn’t be your goal when launching a startup.

Thousands of people who are better developers than you, are better at evaluating markets, and better at marketing software have built products and still work for a living.

There is a chance that your startup will provide riches beyond your wildest dreams. A slightly better chance than buying a lottery ticket.

And while it’s true that you might get lucky your first time, “luck” is not a plan.

During his presentation at the Business of Software conference in 2009, Dharmesh Shah said “For your first startup, maximize your odds of a modest outcome.”

Have you ever considered aiming for a modest outcome?

This approach gives you time to learn the ropes. There are hundreds of things to learn your first time at the plate. That learning curve coupled with a big market and big competition is very likely to crush your chance of success.

Your first time at the plate you already have one things stacked against you: lack of experience. Don’t stack the complexity of a big market/big competition as well.

Maximize your odds of a modest outcome by choosing a niche market. It’s not as sexy as conquering the world with the next brilliant consumer-focused social media network microblog app, but your chance of a modest outcome is 10x…perhaps 100x greater.

Start your startup. Learn the ropes.

Then, whether you succeed or fail, you can swing for the fences. That second time you may just make it.

(Since several have asked…this is one of the reasons my upcoming book about starting a startup is titled Start Small, Stay Small)

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4 comments ↓

#1 Azeem on 06.10.10 at 5:33 pm

This is a good article. I think you could also work at a startup or two as a very early employee, get a lot of comparable experience, and THEN start your “grand” company.

I actually think this is not a bad alternative, because it also mitigates your risk, but maximizes your learning if you are in a team with strong entrepreneurs/investors (versus going at it alone for the first time, regardless of whether it’s a more modest opportunity or not).

I also have friends (and myself included), that like to experiment and build for fun, while working @ a startup; I think all of this combines to yield great experience, before venturing off for your “big idea”.

#2 JP on 06.11.10 at 1:52 pm

If you are motivated by money in general, you will lose. See Dan Pink’s TED talk: http://blog.ted.com/2009/08/the_surprising.php and Simon Sinek’s TED talk: http://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action.html

#3 Allan Rennebo Jepsen on 06.12.10 at 4:31 am

To some extend this is right on the money. You should always plan for a small success but if you are not open (and maybe even prepared) for a big success you will never exceed your plan. In my mind it is all about being ready for change and embrase it instead of fearing it

#4 K. Srikrishna on 06.16.10 at 12:45 am

as @jp commented above, Purpose matters. Money is an outcome of a job well done and with luck, a lot of money can also be an outcome. But the job well done (or as you state well learnt) is the first milestone.

I know many people would have flinched the first time they heard “modest outcome” – as though we are saying do a mediocre job. To them we can say have realistic goals – be clear about what constitutes success, and build small wins on top of which you can build bigger ones. So building a team, shipping a product, getting a 100 customers to pay for it and servicing and keeping them happy are all lessons well learnt in your first time around. And as with FogCreek and other examples your modest 1st success and your hitting for the fences could still be in the same company in different phases.

thanks for another good post.