If you live in the Bay Area like me, you hear the word startup constantly. If you don’t work for one, chances are at least a few of your friends do. In my case, my brother-in-law and at least ten of my friends work at startups. Most of them aren’t that thrilled about the hours they’re putting in or the pay they’re getting, but they are living the Silicon Valley dream. If you haven’t seen the HBO show aptly titled Silicon Valley, I highly recommend it. The show is frickin’ hilarious!
If you want to start a business so you can eventually go IPO and make mega millions, or are just curious about what it’s like, you’re probably wondering how the whole process works. Unfortunately, the road to IPO riches is not an easy one. It takes a good idea, a great team, consistent execution, and plenty of capital to survive until reaching product market fit.
How Does Startup Funding Work? Idea To IPO
The following is a great infographic about how startup funding works from idea to IPO.
There’s startup fever here in San Francisco, with some 200+ private companies valued at more than $1 billion today. The biggest problem with the private market is that the public market hasn’t been kind to recently listed public companies like Square, Box, Etsy, Fitbit, and GoPro. Therefore, private companies are staying private longer to the dismay of employees and early investors looking to cash out.
Forget The IPO And Build A Lifestyle Business Instead
Although building any successful business is tough, creating a company from nothing to IPO is practically impossible for nearly all of us. Instead, I recommend those of you reading to start a lifestyle business instead. Making $100 – $1,000 a month after a year is very common online due to the ability to build your brand, sell your own product, sell someone else’s product, earn advertising revenue and find consulting clients.
Building Untemplater over the years gave me the confidence to negotiate a severance package in 2015 so I could be free to do whatever I want. It’s been a year since I left, and I couldn’t be happier because of the autonomy I get from being my own boss. Even if I made 50% less than what I was making from my day job, I’d still be much happier because I’ve saved aggressively over the years.
The internet is the great equalizer for anybody with enough drive and initiative to take control of their own lives. I recommend everyone start their own website while you have a day job. Use your time in the evenings and on the weekends so there is no risk. Don’t start thinking about quitting your job to go full-time entrepreneur until after you’ve begun to generate some momentum. It took me about five years of running my website until I decided to break free, so it’s definitely not an instant process.
You Can Alway Scale Up
Once you build a lifestyle business, there’s no reason why you can’t scale your business even larger with freelancers, employees, and funding if you want to. But I bet you will discover that a lifestyle business is the ultimate means to an end: a better life without the complications of employees and other people to report to.
“I have a thousand bosses,” I heard a CEO of a publicly listed company say once. That doesn’t sound like fun at all. I’d rather only have one boss: me. 🙂
Your idea of building the lifestyle business is definitely more my style. With a good product or stream of content, it can certainly be done.
I love lifestyle over startup/IPO business. Perhaps in my 20s I could have strived to build an IPO worthy business, but I’m happy with a lifestyle biz.
Financial Slacker says
I know the allure of a large payout draws many people into startups. And while it does happen, I have to believe the odds are not in your favor.
I spent many years acquiring small businesses for $1 million to $5 million. They weren’t sexy and didn’t get any attention, but the owners were able to build something of value, self-funding and paying themselves a decent living along the way.
There’s different paths you can take, just try to keep perspective and work hard.
The startup dream certainly has a lot of allure, but in reality for every startup that makes it huge, there are many that don’t. Plus, to really cash in the timing needs to be right if you’re relying on an IPO. There are so many new companies with new products that I would feel a pressure to do it before its too late.
Your idea of building the lifestyle business is definitely more my style. With a good product or stream of content, it can certainly be done. The best part is that you are in control. While it may not lead to a flashy IPO, there is still a lot of upside!
Financial Samurai says
Oh man, I’d totally rather have only one boss.
So many startup employees and co-founders don’t realize they get diluted like heck once they get to IPO. So many investor convenants in place which protect the investor, not so much the common equity shareholder.
A lifestyle business is the ultimate b/c what’s the point of having a lot of money? To have an awesome lifestyle so you can be free to do whatever you please! If your ego isn’t ridiculous, then there’s no need to try and be a CEO of a big company and stuff. It’ll cause more headache.