It's a cultural thing. In Austria, people build multi-generational houses because it's expected that your kids and grandkids will live in the same house. In fact, Austria only has one city with two million residents - the rest live in mostly tiny towns where everyone knows everyone (and if you're a newbie, that's not a good thing). Anyone who opens up a business, names it after their family. In other words, where you come from is important, and ideally you come from a family that's been in this town forever. So, in a world where your heritage is a disproportionately big part of your standing in the society, geographic mobility is not a universally good thing.
I am sure there are parts of the Midwest that work the same way, but that's by and large not how the majority of the US works. Your heritage is refreshingly irrelevant, and therefore you can move freely from one place to another. Most people realize that big cities offer better career opportunities, and also that big cities suck for retirement. So you essentially see the following migration pattern:
1. [some place where you were born]
2. [your college town]
3. [career-related move to a bigger city]
(this part can repeat itself many times)
4. [retirement somewhere warm and/or affordable]
So if you're going to move somewhere in the range of 5+ times, why would you invest in a multi-generational home?
Finally, as an aside, interesting to note the correlation between the geographic and economic mobility: the American Dream may or may not be alive anymore, but I've seen so many kids from my college come from nothing and make a fortune (and shockingly, kids from good families end up as failures, mostly due to some sort of conflict with their family). I think the society in the US has accepted that there's a lot of uncertainty when it comes to predicting a kid's future.
That stuff simply doesn't happen in Austria on that scale - if you're poor, you'll stay poor, and vice versa. So a good family name leads to a good standing in the society, and the loop repeats itself (this is where your residence can also serve as a signal for your wealth to reinforce that loop). Why risk leaving all that and moving to a new city where you'd be starting from scratch?
I would group this together with two other statements I heard that seem logical on the surface but ignore the reality of the market:
"Why raise a seed round of more than $1.3M? If I can't build a business with 1.3M, then it's not a business worth building!"
"What's the problem with [name of a top tier VC fund] being in my seed round? If they actually choose not to do our A round, then it's not a good business to start with!"
The problem with all these statements is that you're looking at this from an overly idealized perspective where things always happen for a reason and there are no oh-shit moments. But the real world is messy and sometimes not rational. Perhaps your VC won't take your A simply because they already did two As that same year, and they are stretched beyond their limits. And perhaps your bigger competitor will sue you and suddenly your $1.3M will no longer be enough (at that point it's too late to raise again).
So going back to your original statement "best startups don't need help attracting access and information" - so you're saying best startups always go from bootstrapped to a high valuation A without any seed checks in between? I mean, even Google took a bunch of seed checks, and it doesn't get more disruptive than two Stanford PhDs building a better search engine with patented IP. By the time all those seed checks, lower-than-otherwise valuation, and various not-super-clean deal terms (was Eric Schmidt really necessary and how much did he cost in cash and equity?) are factored in, the YC route turns out to be net positive even for the best startups with first-time founders. The only exception might be a serial founder with a prior exit and strong VC connections, eg Max Levchin.
The challenge of a random company posting about their experience at YC is the same as what you'll hear about HBS - it's always anecdotal and tied to the personal outcome of the writer. Are there people who spend a shit ton on HBS and don't return that investment soon enough? Sure. Would it make sense to go to HBS? Depending on where you net out, it can be the best or the worst investment you've ever made.
The nice thing about YC is that you're not investing your cash, but equity. If you have the right business/team/timing/execution, then the cost of equity will be high, but you'll do better than you ever expected so it's all good. And if you don't do well, then your equity wasn't worth much to start with, and you essentially got the HBS experience for free without any of the debt.
If the advice at YC was the same as what you get at HBS, we would have plenty of people who know how to scale but not how to start. And no, the art of starting something is neither well researched nor well understood, beyond of what you'll learn at YC. They really have formulated that field better than anyone else, however scientifically (or not) that knowledge was created.
I would love to see where you've seen that. Ramen profitability is one of the most often quoted principles at YC. It's easy to make assumptions and pad them with "from what I've seen," but it's not helpful to other founders.
Are there instances where it makes sense to step on the gas? Of course. Are YC valuations high, leading to large rounds and plenty of liquidity? Yes. And yet, nobody at YC will tell you to scale before you find your PMF.
Remember how everyone predicted a baby boom in 2021 and instead we saw a 8-10% decline in birth rate [1]? It turns out that while people had more time to focus on their families, the financial uncertainty had a greater impact on their family planning decisions. The same thing happened in 2009 - there's a close link between the birth rate and recessions [2]. While I don't doubt that many people will change their jobs to better fit their life styles, I doubt that we'll end up with as big of a dip in total employment due to resignations (jobs will just shift from some companies to others).
I should have added some context for why in my opinion it's important to have an experienced founder when you're an early employee. Remember - based on the framework I presented, the goal is not to optimize for wealth generation - for that you would have stayed at your mega corp. For simplicity, I am assuming that you cannot predict success at this early stage of your career (although clearly some people have phenomenal track records).
Instead, the goal is to learn the best practices (lean startup, hiring above your weight, shipping early, doing things that don't scale, etc), meet the right people (colleagues and investors), and also very importantly, learn how to build the right culture (this is a far more complicated issue than most first-time founders realize - hence the need for someone with ideally some historical perspective).
I agree. I didn't want to make too much of a point of that, because if you filtered just for founders with prior exits, you might have a hard time scoring early opportunities with them (they usually have plenty of people to fill the first 20-50 jobs). But yes - joining Square the day it was announced that Jack Dorsey started another startup would have been a no-brainer for that career path (same with Max Levchin's Affirm and many other examples).
The predominant sentiment in the comments is that equity is worthless, which very well may be a fair statement. It would also explain why relatively few people decide to start companies, let alone do it back to back several times after getting burned over and over again. But those same people will then argue that founders should not get 10x more equity than employees [0] (which, for the record, may or may not be justified, but you can't argue that founders would be better off keeping their jobs at mega corps, and also at the same time criticize their upside).
My personal take on this is:
- Stay at the mega corp if you're exclusively optimizing for wealth generation. I don't know if I would recommend pursuing the Skunkworks opportunities, since they are by definition not core to the business and your contributions won't produce a lot of profit for the company for a long time. It's unlikely that the company will remunerate you more than someone who's paying all the bills. After all, this career path is all about maximizing your risk-adjusted likelihood of wealth generation.
- Start your own startup if the journey matters to you. Important caveat: you will get better at this over time, so if it made sense to you to start your first company, it will make even more sense to stick to this career path and do it over and over again. Don't invest your own money, and hope for the best but expect each company to fail. Be ok with earning sub-market salary, and treasure the upside of being your own boss. This approach works best if you're able to raise pre-product seed financing, which brings me to the next point...
- Before you start your own company, be an early employee at a startup that's run by a serial (and ideally successful) entrepreneur. You will get the worst of both worlds - not enough salary and not enough equity - but you will dramatically improve the odds of success when you start your own company (and will also improve the chances of raising a pre-product seed round). Don't do it otherwise.
What I wouldn't do: keep a job at the mega corp, and work on new ideas nights and weekends. This may seem like having your cake and eating it too, but it works far less frequently than you would expect (you end up sucking at your job and at your startup, not to mention that your work-life balance is possibly worse than in any other scenario). Again, the alternative would have been to be an early employee and learn first-hand about entrepreneurship.
This is helpful for understanding why management consulting gets a bad name, and I am not pushing back on that. The parent comment I responded to was making the claim that executives who hire such consultants are incompetent, and I think we both agree that this is not about their competency.
It's easy to be critical of executives. A naive narrative could sound like this: "Bob was hired to turn the company around, and 3 months later the company is still bleeding money. Bob sucks." But it's important to understand the two difficult tasks that Bob is facing:
1) Identify all mistakes made by the previous management and come up with a plan to correct them.
2) Get buy-in for your plan and execute it.
It might appear that 1) is harder than 2). But it turns out that the company's interests are not always aligned with each and every individual in the company, and implementing change always results in winners and losers. Getting the buy in from losers can understandably be quite hard. And then you also have the winners who sympathize with the losers and don't realize that they will also lose their jobs if the plan is not implemented.
When you're running a startup, a CEO can single-handedly turn things around. In a larger corporation, a CEO is going to rely on a chain of command to get things done. When you factor in the misaligned incentives or loyalty for people who are at risk of losing their jobs, it's easy to see how information channels can stop working and neither 1) nor 2) can be accomplished successfully.
I agree that brining in a 3rd party like McKinsey feels like a lazy shortcut to addressing the fundamental organizational challenges, but the more I see, the more I am starting to understand the upside of that option.
I am sure there are parts of the Midwest that work the same way, but that's by and large not how the majority of the US works. Your heritage is refreshingly irrelevant, and therefore you can move freely from one place to another. Most people realize that big cities offer better career opportunities, and also that big cities suck for retirement. So you essentially see the following migration pattern:
1. [some place where you were born]
2. [your college town]
3. [career-related move to a bigger city]
(this part can repeat itself many times)
4. [retirement somewhere warm and/or affordable]
So if you're going to move somewhere in the range of 5+ times, why would you invest in a multi-generational home?
Finally, as an aside, interesting to note the correlation between the geographic and economic mobility: the American Dream may or may not be alive anymore, but I've seen so many kids from my college come from nothing and make a fortune (and shockingly, kids from good families end up as failures, mostly due to some sort of conflict with their family). I think the society in the US has accepted that there's a lot of uncertainty when it comes to predicting a kid's future.
That stuff simply doesn't happen in Austria on that scale - if you're poor, you'll stay poor, and vice versa. So a good family name leads to a good standing in the society, and the loop repeats itself (this is where your residence can also serve as a signal for your wealth to reinforce that loop). Why risk leaving all that and moving to a new city where you'd be starting from scratch?