JWZ: you don't need to sleep under your desk to succeed in a startup, but if you do, it'll make your VCs plenty rich


34 Responses to “JWZ: you don't need to sleep under your desk to succeed in a startup, but if you do, it'll make your VCs plenty rich”

  1. nixiebunny says:

    It’s not all that different from the Fox News watching poor who believe that they’ll be rich one day, so they support everything that the rich people tell them to support, like denying themselves affordable health care and giving up welfare before raising taxes on the multijillionaires.

    The difference is that the VC victims are ostensibly more intelligent. 

    • Matt Fitzgerald says:

      Don’t mean to rain on your parade, but given that the democrats in congress are just as rich as the republicans, everyone is obeying some rich person and fooling themselves into believing said rich person has the best intentions for them.

      Occupy Congress. Wall Street has created a hell of a lot more wealth for a hell of a lot more people than congress.

      • hymenopterid says:

        “Occupy Congress. Wall Street has created a hell of a lot more wealth for a hell of a lot more people than congress.”

        And how much wealth have the people created for wall street?
        That’s like calling an employer a job creator while ignoring the effort of the employee to go out and find a job in the first place.  Does it not take two to tango?  Oh yeah it’s your job to educate and market yourself but I’m the job creator because I have a need for you.

        Does my employer expect me to believe they hired me out of the goodness of their hearts?  No, they hired me to fill a need and if that need should cease to exist then they will fire me.  If I fail to fill the need adequately they will fire me.

        But will the republicans call them a “job destroyer” when they lay me off?  No, because its just good business.  Just like hiring people is good business.  So lets stop beatifying employers for simply acting in their own best interests.

        Capitalism is a force of nature, not a moral philosophy.  Attributing benevolence to it is tantamount to sun worship. 

      • tyger11 says:

        It’s not about how rich you are, but whether you also try to prevent anyone else from getting rich or pushing everyone else to become poor. There are plenty of rich people who aren’t out to control the lives of everyone who isn’t rich. The rest of them are Republican. While not all rich Republicans are like that, the rich that ARE like that – are probably all Republicans.

      • regeya says:

        Bizarre logic; there are corrupt Democrats, and Democrats pushed for healthcare reform, so it’s wrong to want things like healthcare reform.

        So, since there are corrupt Republicans, can we cut out all this saber rattling about Iran?

  2. Lobster says:

    “The only good VC is a dead VC.” – Full Metal Jacket

  3. PaulDavisTheFirst says:

    Echoing JWZ’s comments: as the 2nd employee at amazon, I made a “pretty penny” from my one year stint with the company. Way more than I could have possibly be said to have “earned” in fact. But compare what I made with the compensation given to the first couple of external board members recruited after the company started trading. For showing up to some board meetings, adding their personal “brand” to the company, and helping with a few decisions: at least 10x larger, and depending on the information one uses, maybe 100x more than I received. And they got their stock options up front, none of the usual periodic vesting.

    Am I sour about it? Not particularly – I did well enough. But it seems incredibly hard to justify in any pareto optimal sense, or even just via straightforward elementary school morality. At least the VC’s who got onto the board actually put (other people’s) cash into the company, which is more than can be said for many board members of newly established but functional companies, but even they risked almost nothing of their own in order to participate in the handout(s).

    • Henry Pootel says:

      Paul I think you’re mentioning an important distinction here – people who bring just their names to the game versus people who bring their checkbooks to the game.  People who bring their checkbooks SHOULD get something for it – because without them, the startup might not have started.  

      • PaulDavisTheFirst says:

        Amazon was started without VC money, as were most startups. At some point, a startup has to decide whether to go the VC route or not. VC money is usually key to survival, not starting.

        If the VC guys bought their own checkbooks to the game, I’d be all for them getting a big fat personal back in return. But in fact, they bring somebody else’s checkbook, and expect a decent size chunk of the return as if it was their own.

  4. dano39 says:

    I’ve been working on my own social network, and early on I presented it to a few VC’s. I could not believe what they offered me! I won’t go into specifics, but it was the closest thing to being financially raped that I’ve ever experienced! Needless to say, I am going it on my own and moving along quite well!

    • Bevatron Repairman says:

      For every VC that wants 90% of your company for $200K, there are lots and lots of doctors and dentists and plumbers and retired firefighters in your circle who would be willing to put in $5K for 1% of a good idea and they’ll not wait around to f*** you out of your last 10% if the money gets good.  It’s harder to line up that kind of money, but it’s the only kind of money worth having.

  5. Josiah White says:

    Is there a lot of equity in crates?

  6. Greekster says:

    This reminds me of Copeland’s Microserfs. Such a great book on this very idea. 

  7. Doran says:

    In the aisle of a supermarket yesterday I overheard a conversation between two store managers, and a kid who stocks the shelf. Apparently the kid had declined a request from one of the managers to come into work on what was the kid’s day off. That manager told how, when he used to stock shelves, he would drop everything when his manager asked. “Once I even cut my vacation short.” The other manager told the kid that coming in on his day off would “distinguish” him from other employees.

    So yea, it’s not just VC firms who are looking for increased productivity from workers.

    • regeya says:

      I could tell a few stories about that, and some of them are as a retail clerk, in the 90s.  The REAL kicker is that I would be called in because someone else just decided to not show up for work, or was too hung over to work.  Gratitude?  Nah, that’s usually when I caught the most hell.  Nothing like being shit on for going the extra mile.

  8. flyoverland says:

    My deal with the VC’s was about 80-20. By the time we cashed out, they made 8X more than me. The reason is they only give you enough to get you to a milestone, not to the door. There are always times when you need more money and that new money dilutes you even more. I felt so bent over after doing the deal that I made up “cubes” (those lucite trophies with the prospectus that bankers love to put on their desks after completing a deal) out of vaseline jars. I peeled off the label an imposed a mini-prospectus. It made me feel better. Like the Amazon guy, I can’t complain too loudly, I retired at 50 with more money than I ever expected. 

    My VC told me the odds of doing what I did, even with the benefit of a top five sector  VC firm were astronomical. They see dozens of deals a week. Meet with only a few. Have second meetings with even fewer and at the end of the year, only really do about ten deals. They figure a third will tank quickly. Three will make a lot of money and their job is to try to move the middle four into the black or kill them quickly. I made the cut. Made the top three and even for a long time was the biggest deal they ever did. 

    VC’s do bring a brand of discipline most entrepreneurs are missing. Your odds of surviving with a VC are better. When the guy handed me the check he told me “we usually find an entrepreneur who has stayed too long or an incompetent COO. You have to let me decide which one we have here.” Fortunately, they thought the COO was more of a salesman and got rid of him and let me stay to work 90 hour weeks. If you do a VC deal, plan on spending hours a day on the phone with them for the first six months. Only after they get comfortable will you ever go days without hearing from them. They do bring a lot of contacts. However, today, you better be way past the A round of financing before you even bother calling them. The “venture” part of their name is being slowly diluted by their reluctance to take risks. Today, they want as close to a sure thing as possible. It was an experience. We left on good terms after they sold out after the IPO but fell out a few years ago over a disagreement on another deal. I knew their tricks. With a bigger wallet, I was less willing to bend over as far as I did when I was poor. 

    • Spocko says:

      Great story. I’ve worked with dozens of tech start ups. I also worked directly with some VCs. I was at a meeting where they talked about “rolling up” (aka shutting down) 19 of the 21 investments in a portfolio of companies. One was good, one was marginal and they were going to try and get it over the line. The other 19 were toast. I had worked with two of those “toast” companies and knew how hard they worked. 44 employees laid off. “Good luck next time!”   Now of course they actually weren’t paid nothing, but they didn’t hit the jackpot either. That company also had some older employees who were hoping they wouldn’t have to go out looking for a job again as an “old man” (aka over 40).

      What struck me was just how dispassionate the VCs were with shutting down the companies. “It’s just business.”  But for the employees and founders it was their lives.

  9. Aloisius says:

    I’m not sure how to feel about this post. While JWZ always seemed like a nice guy and I’m impressed with his accomplishments, as far as I know, he’s not a startup founder and hasn’t worked for one for well over a decade. He’s responding to Michael Arrington who, last I checked, was a tech writer turned angel investor, not a venture capitalist.

    I agree with Arrington that startups require blood, sweat and tears, especially if you’re a founder. There are going to be times that nearly break you. I don’t care if you got your money from a VC or friends and family. If you’re starting any company, be it a bakery or a tech startup, you will be sacrificing part of your life. If you’re going to do it, it has to be for more than just the money.

    Where I disagree with Arrington is that you have to be stoic about it. I have started four companies, three of which were venture backed. The idea that you can’t vent your frustrations sometimes is complete B.S. The people who don’t have an outlet, crack.

    That said, if you have a venture capitalist or angel investor telling you that everyone in your company should be working all hours and sleeping under their desks as a course of business, you’ve picked your investors poorly. While a startup does require an offering from time to time, it should not be a permanent state. An investor who is with you for the long haul should understand that. Sadly, there are more than a few investors who are just interested in flipping companies. Avoid them like the plague.

  10. Daen de Leon says:

    And this is why I’m happy not to be working for a software company any more.  I work in cancer diagnostics; we’ve been going for three years (I’ve been here for two) and we have a commercial product which has been generating (increasing) revenue now for a year.  No-one had to sleep under a desk, the VCs include KPCB, Versant and TPG, and I expect our founders are going to make a lot of money in the IPO.  Why is it different for life science startups?  I don’t know, but I’m glad it is.

  11. Pretty refreshing to hear this perspective from somebody who’s “been there”.  

    Anybody who’s believe that a VC’s job is hard is foolish.  Their job is to find hard-working, desperate individuals looking for startup capital.  Lifting a finger, aside from writing checks, is not in their scope of work.

    • Bad Tux says:

      In my experience the better VC’s bring a bit more than that to the table. They bring a *lot* of contacts to the table and can be key in helping you get those early reference sales that are key to getting over the first hump in making sales (the one that goes, “does their product really work?”). 

      On the other hand, as JWZ says, if a VC says 80 hour weeks are what engineers should work in a startup, the VC is saying it for his own benefit, not for the engineers’ benefit.

  12. GawainLavers says:

    The one good thing about my startup experience is that none of the VCs made any money either…

  13. MrEricSir says:

    How is this news at all?  If you go to a Vulture Capitalist, you know what you’re getting into. And if you don’t, it’s hard to feel sorry for you.

    • EH says:

      Ah, a real charmer. What if it isn’t “me” going to the VC?

      Thanks for not feeling sorry for anyone, though. Wouldn’t want to spend any of that emotional profit you’ve obviously saved up.

  14. Kozmund says:

    This was the absolute best thing to read right before a 9PM video conference with investors. I’m serious, because JWZ is right. It’s great if you love it.

  15. lavardera says:

    different 1%.

    same shit.

  16. I’m one of those workers that sleeps at my desk, and has made millions for the startups I work for. I’ve also put in 120-hour weeks, foregone vacations and family time, and dealt with a substandard salaries in the hopes of owning a tiny piece of the company. When the companies eventually shut down, or move to another city, my prize, if I am lucky, is qualifying for unemployment benefits. A couple places didn’t even bother with severance.

    One of these days I’ll learn my lesson. In the meantime, I gotta gbtw.

  17. bjacques says:

    I had to check my calendar there for a minute, because it sounded like 1998 and I thought I was reading Netslaves. But the two flat screens and the iPhone on my desk tell me it’s still the future, as do the slight pot belly and the grey hairs, alas.

    Anybody 12 years on who falls for that guff has no excuse, because now they can compare the number of people who bought into it to the number who cashed in on it.

    Thank the Kindly Ones of global capitalism that I only sweated a few months in a European dotcom that went pear-shaped and I landed a good steady gig that I still have (knock on wood). The stock options thing never caught on here (they’re still taxed every year that you hold them) before it all went up in a puff of ones and zeroes. It didn’t help either that the big dotcom “success” story was a woman who founded an ISP and cashed in big while her employees didn’t, because she’d sold her shares months in advance and the buyer dumped them all on IPO day.

    Anyway, this is the Great Recession. You don’t need appeals to machismo to get people to work harder and suck it up. The guy sent down by Mitch and Murray will suffice.

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