Confessions of a Middle-Class Founder(nymag.com)
nymag.com
Confessions of a Middle-Class Founder
https://nymag.com/intelligencer/article/venture-capital-backed-startup-founder-confessions.html
69 comments
While it does sound this particular author was just interested in a cash grab, the author and you are both recognizing the stark reality facing many aspiring founders: the choice often boils down to taking a high-stakes gamble with venture capital or settling for the security of a 9-5 job.
The current financing landscape offers limited options for those aiming to establish lifestyle businesses in unpredictable markets. One can either secure a small business loan for a conventional business model or take a leap of faith with venture capital—unless, of course, they have the personal wealth to shoulder the financial risk.
Edit: While the reasons behind the absence of such financing are clear, it is perfectly valid to feel disheartened by the situation.
The current financing landscape offers limited options for those aiming to establish lifestyle businesses in unpredictable markets. One can either secure a small business loan for a conventional business model or take a leap of faith with venture capital—unless, of course, they have the personal wealth to shoulder the financial risk.
Edit: While the reasons behind the absence of such financing are clear, it is perfectly valid to feel disheartened by the situation.
The third way is to add sweat equity and build a business slowly around your normal 9-5.
There is just as much downside to this route, it’s also risky, you take time away from hobbies and relationships, and even if you’re successful there’s a period where you will basically just have two full time jobs.
That said, I did it this way, and I know a lot of others that have, and I was able to see it through. Timeline:
2012 - hired as a senior engineer at a tech company
2014 - founded my startup Cronitor with a friend. Launched after 3 months of weekend hacking.
2015 - promoted to eng manager in my day job
2017 - promoted to senior manager
2019 - promoted to director
2020 - left job as director
2023 - still working on Cronitor, still growing, we have grown roughly 5x since I left my day job.
There is just as much downside to this route, it’s also risky, you take time away from hobbies and relationships, and even if you’re successful there’s a period where you will basically just have two full time jobs.
That said, I did it this way, and I know a lot of others that have, and I was able to see it through. Timeline:
2012 - hired as a senior engineer at a tech company
2014 - founded my startup Cronitor with a friend. Launched after 3 months of weekend hacking.
2015 - promoted to eng manager in my day job
2017 - promoted to senior manager
2019 - promoted to director
2020 - left job as director
2023 - still working on Cronitor, still growing, we have grown roughly 5x since I left my day job.
This path is also fraught with legal risk, depending on your "normal 9-5" employer. If it's a FAANG or other large tech company, most of them (at least the ones I've worked for) lay claim to every single IP you create while working there, on or off the clock, using your own equipment or theirs. It doesn't matter whether or not they legally can--you are unlikely to be able to afford a legal defense against them.
No its not. Just dont sign any rediculous IP assignment documents. These are illegal in a lot of states now anyway.
Yeah you need to be aware of what contracts you have signed. In my case, the day we launched on HN in 2014 I notified my VP (via email), highlighted how this work is not related to the company at all, and I only worked on it at home with my own equipment. I asked him to release any IP claims and he replied in minutes and said it looks great and that I’m free to pursue it.
And that was the end of it.
I would not let fear of legal reprisal stop me from starting.
And that was the end of it.
I would not let fear of legal reprisal stop me from starting.
California has pretty friendly laws on this. Unless your startup is directly competing with your employer, or you work on it at work, they have very little ground to stand on. As in "within the realm of someone representing themselves"-type deal.
You're presumably referring to California Civil Code §2870 [1].
When I had a side project going on and asked my California attorney if this was enough to protect me from my BigCo employer, she said something like, "No. If they want to stop you they'll just drown you in legal procedures that you can't afford to pay. That you're right isn't really that relevant."
[1] https://casetext.com/statute/california-codes/california-lab...
When I had a side project going on and asked my California attorney if this was enough to protect me from my BigCo employer, she said something like, "No. If they want to stop you they'll just drown you in legal procedures that you can't afford to pay. That you're right isn't really that relevant."
[1] https://casetext.com/statute/california-codes/california-lab...
Definitely a risk - just not one I rate too high if there is no overlap in the business.
Except when you are at a faang almost anything can be seen as competition. It is quite miraculous that the Crontic founders employer was this lax!
In a service business, sweat equity is an awesome tool, not just for paying yourself, but also for paying your early employees.
One of the biggest obstacles you face when bootstrapping is that you need employees to grow your revenue, but you need revenue in order to pay your employees. It's a chicken-and-the-egg problem, which sweat equity can help to solve, at least to a limited degree: grant some sweat equity that vests over 5 to 10 years as a form of deferred compensation, then hope that your new employee / business partner boosts the value of your remaining equity in that time-frame by some multiple that is much larger than than the value of the equity you are giving up today. Then everybody wins.
I have found this approach very successful in my own business. It also increases the likelihood that when you want to retire some day that your own employees might be able and interested in buying you out, which means that you won't have to shop your medium sized businesses to private equity groups or search funds in 20 or 30 years when you want to get out of the game.
Part of building a middle class is not pulling up the ladder after you, which means you need to aim to enrich others -- specifically others who are not already wealthy -- alongside yourself.
One of the biggest obstacles you face when bootstrapping is that you need employees to grow your revenue, but you need revenue in order to pay your employees. It's a chicken-and-the-egg problem, which sweat equity can help to solve, at least to a limited degree: grant some sweat equity that vests over 5 to 10 years as a form of deferred compensation, then hope that your new employee / business partner boosts the value of your remaining equity in that time-frame by some multiple that is much larger than than the value of the equity you are giving up today. Then everybody wins.
I have found this approach very successful in my own business. It also increases the likelihood that when you want to retire some day that your own employees might be able and interested in buying you out, which means that you won't have to shop your medium sized businesses to private equity groups or search funds in 20 or 30 years when you want to get out of the game.
Part of building a middle class is not pulling up the ladder after you, which means you need to aim to enrich others -- specifically others who are not already wealthy -- alongside yourself.
There are actually two ways to bootstrap a business: huge savings, or small personal burn rate. I bootstrapped in my 20s without any significant financial support. Yes that was painful, but worth the effort
> One can either secure a small business loan ... unless, of course, they have the personal wealth to shoulder the financial risk
> One can either secure a small business loan ... unless, of course, they have the personal wealth to shoulder the financial risk
> The current financing landscape offers limited options for those aiming to establish lifestyle businesses in unpredictable markets.
Which isn't due to anyone's prejudice or greed, it's just math.
If a bank or fund is going to invest in something with merely lifestyle returns, it has to be extremely low-risk, like a corner pizza shop in a neighborhood without a pizza shop. High-risk and low returns is not something any sane outsider would ever invest in.
If something is high risk, it had better have a potentially high return to compensate.
Which isn't due to anyone's prejudice or greed, it's just math.
If a bank or fund is going to invest in something with merely lifestyle returns, it has to be extremely low-risk, like a corner pizza shop in a neighborhood without a pizza shop. High-risk and low returns is not something any sane outsider would ever invest in.
If something is high risk, it had better have a potentially high return to compensate.
You're buying into the false dichotomy. A lifestyle business isn't organic growth. It's sitting on a beach pulling in $20k/mo for your Gmail plugin, or getting to buy lots of cool cameras which you love, paid for by your camera-based Youtube channel. There's a whole world of businesses that exists between unicorns and lifestyles.
Also it's a false dichotomy mainly pushed on you by venture funds to encourage you to play in their world.
Bootstrapped tech startups have such low costs and labor as to make other traditional small-business owners jaws hang on the floor in envy.
Unicorn money is a distraction that's keeping everyone's eye off the ball and deluding people into ignoring the power in their fingertips.
Bootstrapped tech startups have such low costs and labor as to make other traditional small-business owners jaws hang on the floor in envy.
Unicorn money is a distraction that's keeping everyone's eye off the ball and deluding people into ignoring the power in their fingertips.
The low cost base also means it’s really hard to compete against. A lot of VC money is aimed at monopolizing a niche and extracting long term above average returns out of it. Having a lifestyle company operating in their niche destroys that as a possibility and means they’ll never be able to get the returns they want.
Which is an interesting perspective if you're considering a lifestyle business. Can you build a small but meaningful competitor and draft off all the treasure some VC is plowing into r&d and marketing?
In my niece they spend all their money on playing dirty with being cozy with govt and basically none on r&d. Eventually I’ll be able to beat them in price and product quality but for now I make a living on being the low cost alternative.
> Having a lifestyle company operating in their niche destroys that as a possibility
Can you give an example of how that destroys what they're doing?
Can you give an example of how that destroys what they're doing?
I don't think it's pushed really. Certainly not on me.
It can be as simple as where the business is located.
Perhaps the useful definition of a lifestyle business is one where explicitly part of business's purpose is to achieve personal non-business goals for one or more people involved. They can be tiny or fairly large, though at some point the distinction probably loses meaning.
Like the difference between a "startup" and a "new business" they can be useful distinctions but are often used sloppily.
Perhaps the useful definition of a lifestyle business is one where explicitly part of business's purpose is to achieve personal non-business goals for one or more people involved. They can be tiny or fairly large, though at some point the distinction probably loses meaning.
Like the difference between a "startup" and a "new business" they can be useful distinctions but are often used sloppily.
> From this bit (and honestly the whole first half of the article) it sounds this guy just wanted to gamble on the lottery instead of run a business.
Isn't that the norm for the last decade or two of tech startups?
(Not being glib here. I really think that's the recognized norm, not a big secret.)
Isn't that the norm for the last decade or two of tech startups?
(Not being glib here. I really think that's the recognized norm, not a big secret.)
To be fair, I'm sure most of us have read Paul Graham's essays, including some of the early ones where he kind of breezily talks about "solving the money problem". That's what that guy wanted to do too. Maybe he was even inspired by PG.
I would argue that all businesses are lifestyle businesses. Dreaming of a lifestyle that involves 10 houses and a yacht? Become a VC, or join a company backed by one and hope it becomes a unicorn. Astronomical wealth and power are a LIFESTYLE, the same way that dreaming of a modest home, work that you love, and time to spend on meaningful relationships is a lifestyle.
Just try to avoid judging the lifestyles of others.
Just try to avoid judging the lifestyles of others.
When trying to make money out of a company became something to be ashamed? I don't get your comment.
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What's the point of making a business that serves people, if we're not legally allowed to automate it? People can be served in a higher fashion than they are.
There are too many artificial constrictions, forcing businesses to be hobbled to the slowest performer.
Ditch the labour requirement and half the world's economy can be automated from dawn to dusk.
Good conscience is wasted on business.
There are too many artificial constrictions, forcing businesses to be hobbled to the slowest performer.
Ditch the labour requirement and half the world's economy can be automated from dawn to dusk.
Good conscience is wasted on business.
> more of those icky "lifestyle people"
Running business is already hard as is, don't make it harder for yourself with artificial constraints. Especially not for the reason that it is better for the world unless you want to run charity.
Running business is already hard as is, don't make it harder for yourself with artificial constraints. Especially not for the reason that it is better for the world unless you want to run charity.
Gamblers are more honest, they take risks with their own money.
>instead of run a business
Running a business is a gamble, always
Running a business is a gamble, always
The tech version of a successful small to medium business, like maybe a regional restaurant group or car dealership. Seems good to me, both for the owners and the broader culture. These owners are the group that keeps the country stable and common sense alive. We can't all have big exits but lots of people can generate enough value to satisfy customers and make a comfortable living with skin the game of society.
To me the picture perfect software company that meets this archetype is McNeel (who made and maintain Rhino3D). A comparatively niche market NURBs design tool for artists, engineers, and industrial designers. Been in business over 20 years. Constantly improving the software. Everyone treated fairly and making honest and competitive wages. I wish there were far more companies like this than there are.
Bear, Things, and AnyList are software apps I use that are small businesses and provide tremendous value for me.
Restaurant group and car dealership owners are what’s keeping common sense alive?
Actually pretty honest and probably relatable to many. It's interesting to see the shift from the "if you build it, they will come" to the highly refined startup culture now.
It was inevitable and now there's a bunch of startups around finding someone who has found PMF but not yet executed to capture the market and then copying them with the hope of out-executing them.
A few YC companies even clone your website to chase the same market.
It's total shark time out here.
It was inevitable and now there's a bunch of startups around finding someone who has found PMF but not yet executed to capture the market and then copying them with the hope of out-executing them.
A few YC companies even clone your website to chase the same market.
It's total shark time out here.
Article could be summed up by "Comparison is the thief of joy."
The guy has built a successful, profitable company, with satisfied customers and a culture he claims to be proud of. And yet the whole article is him carping.
The guy has built a successful, profitable company, with satisfied customers and a culture he claims to be proud of. And yet the whole article is him carping.
Honestly it sounds like this person was a success. Their company is growing and sounds profitable, their customers are happy, and they have a working product. They avoided the "megafunds" and the strings attached to them, and still managed to pay themselves a salary.
It's not a smashing unicorn success but it's definitely a success.
It's not a smashing unicorn success but it's definitely a success.
Seriously - they built the company on their terms, have a happy customer base, and don't have a host of Vultures screeching "grow grow grow" in their ear all day.
Not every company needs to grow to a 10,000x investment ROI for investors. Let people build companies that serve their local niches, and if it grows organically past that, great. If it doesn't, but the business is healthy, great!
There's a local restaurant chain in South Florida where I live that serves an upscale demographic. They have no outside investors but they've grown from 1 location to roughly 23 in under a decade. Their locations are always full and according to a friend of mine who knows the owner, their cash flow is absurd and the business itself is incredibly profitable. I'm sure the owner has had offers to take the brand to other locales like LA or NYC, but is quite comfortable where he is. There's nothing wrong with that!
And we as a society need to celebrate large business that scale, but also be able to celebrate when someone builds a great healthy business that serves a niche, and is happy serving that niche without needing to constantly grow just to satisfy investors who by and large aren't part of the communities the business serves. It's OK to build a successful local business!!! Not everything needs to hit hyperscale to be considered a success!
Not every company needs to grow to a 10,000x investment ROI for investors. Let people build companies that serve their local niches, and if it grows organically past that, great. If it doesn't, but the business is healthy, great!
There's a local restaurant chain in South Florida where I live that serves an upscale demographic. They have no outside investors but they've grown from 1 location to roughly 23 in under a decade. Their locations are always full and according to a friend of mine who knows the owner, their cash flow is absurd and the business itself is incredibly profitable. I'm sure the owner has had offers to take the brand to other locales like LA or NYC, but is quite comfortable where he is. There's nothing wrong with that!
And we as a society need to celebrate large business that scale, but also be able to celebrate when someone builds a great healthy business that serves a niche, and is happy serving that niche without needing to constantly grow just to satisfy investors who by and large aren't part of the communities the business serves. It's OK to build a successful local business!!! Not everything needs to hit hyperscale to be considered a success!
We don't need to celebrate the large businesses, the reward for that is money.
Will their definition of success remain static? The danger is that the target number and company size could keep increasing in a sort of hedonic treadmill. I'm still a believer that after a certain, not so big, amount of money, earning more money makes little difference and could even make your life worse. That's at least what I noticed in my own life progression and the life of my friends. Maybe this amount isn't 70K/year as it is often repeated, but it's certainly not 1M/year.
$6 million in personal wealth is middle class? Woof!
$6 million x 4% safe withdrawal rate = $240,000 a year. It's enough for comfort, but it's still considered a middle-class income in the more expensive parts of the country.
https://finance.yahoo.com/news/takes-middle-class-americas-l...
https://finance.yahoo.com/news/takes-middle-class-americas-l...
> but it's still considered a middle-class income in the more expensive parts of the country.
Middle class is explicitly not about passive income. If you are living off "safe withdrawal rate", you are wealthy, almost tautologically.
In extreme versions (e.g. some of the FIRE folks) you may be living some version of a "middle class lifestyle", but that's not the same thing. It fundamentally changes the options and opportunities you have.
Middle class is explicitly not about passive income. If you are living off "safe withdrawal rate", you are wealthy, almost tautologically.
In extreme versions (e.g. some of the FIRE folks) you may be living some version of a "middle class lifestyle", but that's not the same thing. It fundamentally changes the options and opportunities you have.
Wait what? I never said anything about retiring on 6 million. Anyone who can make 6 million in the first place could most certainly make $240,000 a year in a lower stress job for the rest of their life while sitting on an incredible fortune that continues to generate wealth over time at 5% interest.
This person has effectively "won" at life and is far outside of middle class.
This person has effectively "won" at life and is far outside of middle class.
You guys. Median income in the USA is about 76k per year (according to https://dqydj.com/average-median-top-household-income-percen...). 230k will quite literally put you in the top 10% of income earners in the USA, and probably much higher elsewhere.
Sure and 76K will put you in the top 1% in sub-Saharan Africa.
I think you are missing the point. In most of the US, there simply aren't enough opportunities to make 6M. To make 6M in the first place, you have to be in a high CoL place like SFBA or NYC. Or at least that was the case until very recently.
And once you put roots down in a high CoL place and have a total wealth of 6M, it is much harder to uproot and move somewhere else. Barring maybe a few who came from low CoL areas and still have roots and connections there.
I think you are missing the point. In most of the US, there simply aren't enough opportunities to make 6M. To make 6M in the first place, you have to be in a high CoL place like SFBA or NYC. Or at least that was the case until very recently.
And once you put roots down in a high CoL place and have a total wealth of 6M, it is much harder to uproot and move somewhere else. Barring maybe a few who came from low CoL areas and still have roots and connections there.
I don't think they are missing the point, really - the average income in NYC is still "only" about 100k.
Choosing to live in more expensive parts of the city and for 2.5 times that may open up lots of opportunities, and that's all good. You just are just butting up against the realm where calling yourself middle class becomes silly. People have a weird psychological affinity to self-identifying this way, but "I know a bunch of people who make 10x what I make", isn't really a good argument for it. Having a few million in assets definitely puts you out of the running, which is where you are likely to end up if you have this sort of salary for a while and aren't stupid with it.
Choosing to live in more expensive parts of the city and for 2.5 times that may open up lots of opportunities, and that's all good. You just are just butting up against the realm where calling yourself middle class becomes silly. People have a weird psychological affinity to self-identifying this way, but "I know a bunch of people who make 10x what I make", isn't really a good argument for it. Having a few million in assets definitely puts you out of the running, which is where you are likely to end up if you have this sort of salary for a while and aren't stupid with it.
If you don't have to work, you aren't middle class.
I think the 6million is aspirational.
I think the 6million is aspirational.
As painful as it is for some people to hear this - yes, $6 million in personal wealth is middle class.
If you have to work a 9-5 for somebody else to survive then you're working class, not middle class.
If you have to work a 9-5 for somebody else to survive then you're working class, not middle class.
That is not the traditional definition of middle class in the United States.
The traditional American dream was a middle class life: stable career, single income family, house in the suburbs and a nice pension check when you retire.
Fair to point out that that is a bygone era and maybe you do need $6 mill now, but maybe we need a different name than “middle class” to describe it.
The traditional American dream was a middle class life: stable career, single income family, house in the suburbs and a nice pension check when you retire.
Fair to point out that that is a bygone era and maybe you do need $6 mill now, but maybe we need a different name than “middle class” to describe it.
That is the original meaning of the term middle class - a class that does not need to sell its labor to a boss to survive but who is also not part of the idle rich crowd.
In pre-revolution France, yes.
But not in the United States.
But not in the United States.
We're rapidly approaching the pre-revolution France when it comes to income inequality and political division.
Regretfully I would have to agree.
Fabulously written.
Greater social context would be useful. It’s hard to accurately imagine lifestyles denoted simply by “middle” or “upper-middle” class. They are effectively meaningless terms.
Especially in the US, those are nearly meaningless terms. People from the 1% to 80% call themselves "middle class".
All self-described "middle class" status tells us is they're not homeless, and also capable of easily recalling how many homes they own.
All self-described "middle class" status tells us is they're not homeless, and also capable of easily recalling how many homes they own.
We're in a funny state because calling oneself 'rich' or 'upper class' sounds like bragging even if it is more accurate. If some 6-figure-earner went around calling themselves 'rich' most people would roll their eyes. 'Upper-class' is not much better because 'class' is still a loaded term. Does 'upper-class' mean 'has more money' or 'knows what fork to use'
So everyone uses 'middle class' unless they own a jet or an island. It's the safe choice.
So everyone uses 'middle class' unless they own a jet or an island. It's the safe choice.
> Does 'upper-class' mean 'has more money' or 'knows what fork to use'
It means 'derives their income from capital', just as the working class 'derives their income from labour'.
The middle class walk both lines, seeing some of their income come from capital, and some from labour.
Realistically, most people talking about class probably are middle class.
It means 'derives their income from capital', just as the working class 'derives their income from labour'.
The middle class walk both lines, seeing some of their income come from capital, and some from labour.
Realistically, most people talking about class probably are middle class.
IMO, the Marxist definition is a good one. Do you work for your money, or do you get most of your income through the leverage of your capital?
Thus you end up with four categories: Those that cannot meet their needs, the poor, those that meet their needs exclusively through wages with no significant capital, the lower-middle class, those that need to work to make ends meet but can offset some of that through the leverage of some amount of capital, a spectrum of the middle to upper-middle class, until you reach the upper class/rich/bourgeois, where their needs can be met exclusively through the leveraging of capital.
Thus you end up with four categories: Those that cannot meet their needs, the poor, those that meet their needs exclusively through wages with no significant capital, the lower-middle class, those that need to work to make ends meet but can offset some of that through the leverage of some amount of capital, a spectrum of the middle to upper-middle class, until you reach the upper class/rich/bourgeois, where their needs can be met exclusively through the leveraging of capital.
Terminologically, both the middle and upper classes in the Marxist framework are bourgeois, the middle (mixed capital/labor dependent )being the petit bourgeoisie and the upper (pure capital dependent) being the haut bourgeoisie.
While true, in Marx's time there wasn't nearly the level of mass involvement in capital investment as there is today. When Marx talks about the petite bourgeoisie, he's talking about shopkeepers who own their shops, farmers who own their farms, etc.
The guy who works a 9-5 but invests some of their paycheck in publicly traded stocks has a lot more class interest in common with all the other wage workers than they do with a small business owner.
The guy who works a 9-5 but invests some of their paycheck in publicly traded stocks has a lot more class interest in common with all the other wage workers than they do with a small business owner.
> The guy who works a 9-5 but invests some of their paycheck in publicly traded stocks has a lot more class interest in common with all the other wage workers than they do with a small business owner.
Sure, and they'd still be proletarians, even if, in many cases -- and this will often be characterized as "middle class" or even "upper middle class" depending largely on income in American discussions -- part of the proletarian intelligentsia. There's also a wider array, now -- though its still a small share of the population -- of patterns of economic participation that involve loosely balanced (in the sense that both are important, if not equal, contributors) labor (either wage-labor for another or labor applied to your own capital in one way or another) and capital dependence, and which are still petit bourgeois, and which is still the distinct middle class between the proletarian and the haut bourgeois, not the false middle-income workers "middle class" invented to divide the class dependent on wage-labor.
Sure, and they'd still be proletarians, even if, in many cases -- and this will often be characterized as "middle class" or even "upper middle class" depending largely on income in American discussions -- part of the proletarian intelligentsia. There's also a wider array, now -- though its still a small share of the population -- of patterns of economic participation that involve loosely balanced (in the sense that both are important, if not equal, contributors) labor (either wage-labor for another or labor applied to your own capital in one way or another) and capital dependence, and which are still petit bourgeois, and which is still the distinct middle class between the proletarian and the haut bourgeois, not the false middle-income workers "middle class" invented to divide the class dependent on wage-labor.
I liked the story, but I'm not sure what the moral is. I don't think running a company is really what people mean by "lifestyle business". I also think the author seems just as disappointed to not be rich just as many of us are disappointed to be employees that never experienced an exit either.
From this bit (and honestly the whole first half of the article) it sounds this guy just wanted to gamble on the lottery instead of being a businessman. You could replace this guy's bio with that of a professional poker player and not change many words. Did he even want to run a business, or did he just want to spin the wheel for a low-probability chance to turn as little time as possible into as much money as possible? I know this is heresy on a site hosted by a VC firm, but the world needs fewer of these "entrepreneurs" and their gambles and more of those icky "lifestyle people" and their actual businesses that serve people.