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3 reasons not to become an entrepreneur

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Why most startups screw up!
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3 reasons not to become an entrepreneur

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With all the hype around entrepreneurship these days,
I think it’s time to give an honest account from the Dark
Side on what it’s really like to run an early stage start-up
company.

With all the hype around entrepreneurship these days,
I think it’s time to give an honest account from the Dark
Side on what it’s really like to run an early stage start-up
company.

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3 reasons not to become an entrepreneur

  1. 1. With all the hype around entrepreneurship these days, I think it’s time to give an honest account from the Dark Side on what it’s really like to run an early stage start-up company. So here are the three reasons why you should NOT quit your day job and become an entrepreneur: The survival rates for start-ups are very bad. Less than half of early stage start-ups survive, the rest go bankrupt. And even among the survivors, very few will actually become one of the successes that you read about in TechCrunch. To put it into perspective: When early stage venture ca- pital funds invest in start-ups (usually only those that already have some traction, otherwise the VCs are not interested), they normally only expect 10% of those to be huge successes. I am sure that you have a business plan that shows that your start-up will be either cash-flow positive or that you will be bought out by a big player within 18-36 months. We have all had those, but the results you plan for never materialize. But even IF your start-up is successful, the process to reaching this stage will be long! And during this process your company will most likely come close to being bankrupt several times. This is the case even for those start-ups that eventually succeed. One example: Dan Eisenhardt co-founded Recon Instru- ments in 2007. It took eight years before the company was sold to Intel - despite the initial business plans es- timating that an exit (or profitability) would be reached in 2-3 years. And during these eight years, there were many situations when the company was in deep trouble and came close to running out of cash. 3 REASONS WHY YOU SHOULDN’T QUIT YOUR JOB TO BECOME AN ENTREPRENEUR! 1. Your start-up will most likely fail! The chances are much higher that your startup will go bust than you will become a millionaire. Are you still interested in starting the company? If so, consider the next point... 2. The process will be hard and long Expect that you will have to work with the company for 7-10 years. Do you have the stamina for that, even when the company is close to being bankrupt and you don’t know if you will get a salary next month? by Nicolaj Hoejer Nielsen
  2. 2. Initially (pre-funding), you will most likely get no pay. Later on, you will of course get a salary, but expect this to be lower than the one you could get in a corporate job. Why? Because investors want you to be motivated by the equity you build in the company and not by your monthly salary, and they want you to spend the company’s money on growing the business and not on your own fat pay check. One example: I graduated with my MBA from a top-tier business school (INSEAD) in 2006. If I had continued my corporate career (or switched to consulting or banking) I would have got a much higher (2-3X) monthly salary than I have got in the start-ups I have been involved in since. And this is true for many of the other entrepreneurs in my network, even those with successful companies (Thor Angelo from Languagewire, Niels Henrik Rasmussen from Secunia, Ivan Sanquist from Unwire, etc). They are all very skilled professionals who could have got a fat pay check in the corporate world that was much higher than the salary they got in their start-ups. But you should do it because you are so passionate about it that you can’t stop doing it - even if you know the above facts that say you would most likely make more money in a normal job. If you are still interested in becoming an entrepreneur, consider the next point... 3. You will get a low pay check! Ok, I get it...so you recommend me not becoming an entrepreneur? No - of course you should become an entrepreneur, if that is was you really dream about! Illustrations by Lise Grastrup by Nicolaj Hoejer Nielsen www.linkedin.com/in/nicolajnielsen Are you willing to work for a low salary for 5-10 years, when you know you could earn double or triple the amount in a normal job?

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