We hear all these heroic stories about people who quit their jobs and build a billion-dollar company as if all you need to do is quit or drop out of school to succeed. What we don’t hear about is the thousands of people who fail to make that dream a reality.
Even though there are benefits to working full-time on our dream from day one, there are countless downsides to it such as depression, financial loss, losing self-confidence, loss of opportunity, loss of health benefits, increasing the retirement age, and more. No person in the right mind should just quit their job to start something from zero. Being let go is a different story. There are many success stories about people who were laid off and were forced to make it on their own. But again, those are exceptions. In reality, it’s incredibly hard to start your own profitable and scalable company.
Because there are many opportunities for early-stage investments these days, Angel investors and Venture Capitalists tend to hold off on investing before they see some serious traction and revenue. Angels like to see up to a few thousand dollars of recurring revenue per month before even considering an investment.
Since you should have a working prototype and some revenue before raising any money, I think that you should do at least one of the following:
- Build your MVP yourself
- You can code
- You are an expert in a no-code platform
- Form a team that can build the MVP for you
- You are a product manager
- You are a function manager
- You have extensive management experience
If you cannot do at least one of the above, it is not the right time for you to start your entrepreneurship journey. The hyped culture of entrepreneurship and hustle causes overexcitement, too much drama, and hardship in people who are not mentally, financially, and physically ready to take on this journey.
This hyping and excitement is often advertised by Venture Capital firms and investors who are looking to increase their deal flow. After all, they are looking to invest in the companies and founders who survive this brutal journey. They need to glorify this journey otherwise no one will opt-in. Their livelihood depends on it. It is up to us, the entrepreneur, who take the right path and do the right thing.
The entrepreneurship journey is like crossing the ocean with a small ship. On that ship, there’s a ton of stocks and optimism, but the stocks can only be cashed on the other side. The bigger the ship is and the more equipment it has, the more likely you can make it on the other side. But a big boat needs money. A lot of money. Sometimes, small boats make it across the ocean, but they are incredibly rare and we don’t hear about the ones who get lost in the ocean.
Should we get on this journey, we need to make sure that we have everything we need. Our millions of stocks mean nothing to others. Most of the time, they are just worthless pieces of paper. It happens very rarely that these papers are worth something let alone multiples of the original investment. You should be able to sell some of those stocks in advance and it is hard to do so. You are selling a dream. Selling a car can be challenging sometimes let alone selling a dream.
Don’t feel bad if it takes you more effort to raise money. I think that most people will have to work much harder than what’s heard on podcasts or shown on social media. Again, investors like to advertise their successful companies to attract more entrepreneurs and create more leads. By doing that they may create the illusion that building a company is easy. After all, if they’ve made it, so can you. Even though it’s great to have that self-confidence, it takes more than just our abilities to succeed. Even the most successful entrepreneurs had to get lucky and have the right team and investments to cross the ocean.
I’m not trying to discourage you from pursuing entrepreneurship, but we need to know the risks and requirements before setting sail.
How can we minimize those risks?
By keeping our day jobs and experimenting until we find something tangible. I am exactly doing that with IdeaCooker. I don’t claim that IdeaCooker will definitely be a billion-dollar company, but it has a ton of potential and I have been able to demonstrate that. But even that is not enough to secure investments. As I mentioned before most investors like to see thousands of dollars in MRR (Monthly recurring revenue) before they invest. Some investors may be OK with earlier stages. But the further the company is from revenue and growth, the harder it would be to raise money.
At this stage, the ability of founders to sell is absolutely important. I cannot emphasize that enough. Founders must be able to sell even before they have a product. Unfortunately, this requirement has caused large -allegedly- fraud cases such as Theranos, Nikola, and others. Sometimes incredible abilities to sell a non-existing product fools investors. I hope that if an investor is reading this post, they respect the honesty and authenticity of engineers. Engineers and product people often lack the ability to sell the dream. And that’s how we have a semi-broken system. We have salespeople who can market and sell air and engineers who can’t sell their fully finished products.
I come from a science and engineering background and I can tell you what I do to mitigate my risk. I build a tiny boat that can cross the bay and I try to demonstrate that to the investors. If I can demonstrate that I can navigate well, they might give me some money to build a bigger boat and buy some navigation equipment. It is a time-consuming and step-by-step process. I don’t quit my full-time job to go on this journey because it is utterly stupid especially for someone who has bills to pay. Maybe it’s not such a big deal for a 22-year-old who just graduated college. But if investors want to see more mature people get into entrepreneurship and build useful products, they should appreciate the fact that their entrepreneurs are not making reckless decisions. Taking reckless risks should be a red flag to investors.
There was a time that investors liked to see people mortgage their house and go all-in. Even though a reckless act like this signals to the investors that you’re all-in with your vision, it also shows that you can burn the company to the ground by making reckless decisions.
So, in my opinion, a good investor should understand that in the early days of the company, you can work on the product during nights and weekends and only jump full-time when your company is venture-backed or even better it is profitable.
So, in my opinion, the best time to quit your job and set sail is when you can pay yourself and build the company that you love at the same time and if an investor does not agree with you, they are not the right investor for you. I’m sure you can find investors who are more reasonable and understand the situation better.
Good luck with whatever you’re building or doing.