Dec 27 2007 by Brad

Will A Talented Entrepreneur Make $1m From His Startup?

Q: In your experience, what are the chances a talented entrepreneur will make $1M from his startup? (And no, I don’t mean making $150K/year for 6 years and 8 months. 🙂

A: (Brad): I have no clue as it depends on many different inputs as to be an impossible question to answer simply (e.g. you need to know a lot more to determine anything that resembles an accurate analysis of the potential outcome.  However, this is a thought provoking question which I’ll answer a different way then intended. 

If the goal of a talented entrepreneur is to make $1m from a startup, he should consider getting a job that makes $150k / year for 6 years and 8 months. Whenever I meet an entrepreneur that is focused on a specific economic outcome, I lower his chance of success because I think he’s focused on the wrong thing.  By definition, an entrepreneur should be striving for a significant economic payoff.  Yet the economic uncertainty of entrepreneurship is so high and the range of outcomes so broad that an entrepreneur just has to believe that if he nails it, good financial things will happen.

The direct tradeoff between a specific financial outcome ($1m) and a salary over time ($150k * 6.667 years) doesn’t really capture the essence of the financial trade in entrepreneurship.  In a success case, the $1m could turn into $10m, $100m, or even more.  Or $0.  The $150k * 6.667 is still going to be $1m.  Which would you rather have ?  (a) 0 < x < $100m+ or (b) $1m < x < $2m?  If (a) you are an entrepreneur.  If (b) you should stick with your day job.