Blinders, There's an intense debate on Twitter Yesterday about which path in the startup is more riskier. A twitter user tweeted that ”Unpopular opinion: being a startup employee is riskier than being a founder.” A twitter VC replied, ”Agree, but neither is that risky.” ”Now investing, that's risky.” This reply garnered various disagreements with her tweet that she had to explain herself So what do you all think is riskier? Startup Founder, Employee, or Investor?
I think they are all risky but with their own exceptions. Being a founder is risky in general, but starting as a side-hustle and then making the jump when money’s being made is less risky. Same thing with being an employee of a startup unless there is real growth potential and money is being made. Investing in a startup is risky again, unless the company is already growing and making profits, then it’s less risky. Bottom line, everything is a risk until it isn’t
They’re all risky in different ways, so I’d assert suited to different people. VC is all about spreading the risk across a whole basket of companies — yes each individual bet is likely to lose (a lot) of money, so risky in a sense. On whole, they’re banking on having at least one home run to cover the rest. Their biggest risk if investing with other people’s money is that the fund fails and they walk away with their mid six figure salary. Employees have way less upside, but have more autonomy in theory. Founders can play the VC game and have worst case still be walking away with six figure salary. I’d rather be a founder, but that’s not really about risk
Thanks!
Dumb debate:- Investor is the only one who loses significant money. If it if a well paying startup, the employee doesn't really loser much other than WLB. And worst case the opportunity cost of having a low pay!
Investor can diversity. Employee can't.
VCs have guaranteed carry fees, they get paid regardless of performance and it takes several years for performance to really show (liquidity events). LPs take more risk than VCs but they’re so rich it’s not really risk.
Financial risk for a non-rich or bootstrapped founder is the same as an employee, worst case you go broke and need to look for a new job. However, risk is only a small part of the equation- the drive, conviction, initiative needed by the founder to create, fund, and lead a successful operation from scratch is far greater than a hire that can hop on for the ride.
Risk/reward ratio is higher for the employee
Absolutely agree. Good take!
From most risky to least risky: employee with expensive options and a 90 day exercise window, angel with less than 500k to invest per year, late stage employee with RSUs, very early employee with cheap early exercise, founder, big VC.
should’ve made this a poll
I agree, I just want to see what others think with a good explanation. All the way, you're correct!