The Only Good Reason to Launch a Company

People start businesses for any number of reasons, almost all of which are wrong. There is only one right reason, and you already know it.

A question from an aspiring entrepreneur: I am planning to start a business, but to be honest, I wonder if I really would be better off remaining an employee. How much confidence did you have that you were doing the right thing when you launched your business?

So you want to be an entrepreneur?

Don’t do it. That’s my best advice.

At least it’s my best advice without knowing you. And since I don’t know you, I assume that you want to become an entrepreneur for the same reasons as most people. The same wrong reasons. 

Wrong reason number 1: To make money 

Depending on how you count, 95% to 99% of new businesses fail. Even the ones that succeed rarely bring huge financial rewards to their founders. If you’re a generally smart, talented and energetic person (and you probably are, if you’re reading this) and want to maximize your lifetime earnings, starting a company is a very inefficient way of doing it. If you want to maximize your lifetime earnings, get a steady, well-paying job and stick with it.

Here’s the most likely thing that’s going to happen if you start your own company: you’ll work very hard for three to seven years, scrape together just enough money to survive during that time, then close down when you get tired or something in the world changes to make your business model unsustainable. You’ll lose several years of good income and, if you return to work at a big company, be several years behind on your career path. And that’s far from the worst-case scenario.

Sure, there are many notable exceptions–people who started businesses and made loads of money. There’s Bill Gates, Steve Jobs, and Hiroshi Mikatani and, um, Ronald McDonald (not his real name). There are lots of rich entrepreneurs. There are also lots of people who win the lottery. But there are many, many more who don’t. And being an entrepreneur is much harder work than buying a lottery ticket.

In other words, if you think that becoming an entrepreneur is a good way to make money, you’re just bad at math. Side note: you need to be pretty good at math to be a successful entrepreneur, so that’s already two strikes against you.

Wrong reason number 2: To have power

You may think that starting a company and being the CEO is a good way to gain respect and authority. After all, just look at the traditional corporate organizational chart: an orderly pyramid of subordinates extends down from the CEO, perched all the way on top.

Right. But if you’re starting your own company, it doesn’t work that way.

When you’re the CEO of a start-up, it feels like everybody is your boss. All of your employees are your boss. Your customers, your investors, even the media: they’re all your boss. I’ve never worked for so many people as I do at Evernote. Don’t expect fame and prestige either; with very few exceptions the life of an entrepreneur is humble.

Wrong reason number 3: To have more free time

I’ve actually had people tell me that they want to start their own company to get control of their schedule and have more free time. Let’s not spend too many words on this. When you’re the CEO of your own company you do get to have a very flexible schedule: you can work any twenty hours in the day you want. If you’re looking to spend more time with your family, the entrepreneurial path is not recommended.

So there are many wrong reasons to want to be an entrepreneur. I think there’s only one good reason:

Right reason number 1 (and only): to change the world

Of course, you don’t have to be an entrepreneur to change the world. You could be a great artist, or a musician, scientist, or politician. I couldn’t be any of those things because I don’t have the talent. But I still wanted to have an impact–to make the universe notice, if even in a small way, that I’d lived in it. The only way left was to be an entrepreneur. And to try to be a good one.

To find out whether or not you should try as well, perform this simple mental experiment. Imagine you knew, with 100% certainty, that the following would happen if you started your company: You will work on your idea every day for ten years. It will be the hardest work you’ve ever done. And your idea will succeed! Millions of people will use your product and the world will be a slightly better place because of it. However, through a series of complications, you will make absolutely no money in the process. Ten years of back-breaking work, and not a single dollar to show for it. Would you still start the company?

If your answer is, “of course not,” congratulations! You’re a sane and reasonable person and you should stay at your job and avoid the entrepreneurial path.

If your answer is “yes”…

If your answer is “yes,” you’ve got a very difficult road ahead of you. The bad news is, you will almost certainly fail. The good news is, if you aren’t afraid of failure, and you want to start a company for the right reason, there has never been a better time to do it. There are amazing opportunities for entrepreneurs today that never existed before.

So to get back to your question: How much confidence did my co-founders and I have when starting our first business? Not very much. How certain were we that we should do it anyway? 100%. We were ready to fail.

Are you?

Why Indian middle class family does not encourage aspiring entrepreneur

In March 2009, the parents of IIT Delhi alumnus Deepinder Goyal, 29, were perplexed to see their son working from home. After a few days, they began to worry. Their “worst fears” were confirmed when Goyal disclosed that he had quit his cushy job at consulting firm Bain & Co to set up a foodie website—Foodiebay.com. His parents were worried and advised Goyal to return to a “job.” But the company he founded, now called Zomato.com, received $2.3 million (about Rs 12.3 crore) in funding in 2011, broke even with estimated revenue of more than Rs 3.5 crore in 2012, and has even expanded to west Asia and Europe. “They are extremely happy and proud now,” says Goyal.

Like Goyal, almost every aspiring businessman finds the leap to entrepreneurship brings with it difficulties that are not just economic. The fear of rebuke or rejection from family and friends is in most cases their first challenge. “Resistance from families to risk is one of the three biggest inhibitors to entrepreneurship in India, the other two being capital and awareness,” says Sanjay Anandaram, a venture partner with Seedfund and an active mentor to young entrepreneurs.

When IIT Roorkee alumnus and founder of proper ty portal CommonFloor.com Sumit Jain, 28, wanted to launch his own venture in the third year of his engineering course, his father, who owned a hardware business in Meerut, vehemently opposed the idea. “I was restrained by the family, which called me ‘confused’ and told me to study,” says Jain.

Such resistance stems from deep-rooted cultural mores, according to sociologist MD Usha Devi, a professor at the Institute for Social and Economic Change in Bangalore. “We suffer from a dependency syndrome in India, of working for someone than creating jobs. Even the students in colleges are taught to become employees and never employers,” she says.

Although thwarted by family on his first attempt, Jain, who worked at Oracle for a year after graduating, quit his job to chase his dream. He rented office space in Bangalore and cofounded a realty portal, CommonFloor.com with two friends. In five years the company has grown from three employees to 250, has won funding from Accel India and Tiger Global, and is aiming for revenue of $25 million in 2014.

It is the promise of such growth that is encouraging entrepreneurs to push back. Ankur Singla, a graduate from one of India’s leading law schools did not tell his parents that he had quit a prestigious job at a London law firm to explore a startup idea. Once he had a plan in place he returned home to set up Akosha, an online forum for consumer redressal that now works with over 300 companies and has resolved 1.3 lakh complaints.

But for every Singla or Jain who break out of the mould there are many who fail to make the leap. “Children who have nothing to fall back upon often prefer secure jobs,” says Isec’s Usha Devi. Not only at home, entrepreneurs are black-listed in the marriage market too, where they are mostly regarded as ‘unstable.’

“Entrepreneurs who wish to get married are told to go get a job,” says Delhibased Ajay Pal Singh, 26, who quit a job at STMicroelectronics to start HealthAssist.in, a provider of wellness plans to large companies. For the past few months, Singh has been trying to instill faith in his fiancee’s father about his business model. His company recently won funding of about $40,000 (Rs 22 lakh) from the government of Chile’s startup programme. “Things are better in the family after the funding,” says Singh, who is still unmarried.