Should I or Shouldn’t I? (start a business)

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Editor’s noteJames Altucher is an investor, programmer, author, and entrepreneur. He is Managing Director of Formula Capital and has written 6 books on investing. His latest book is I Was Blind But Now I See. You can follow him@jaltucher.

I cried the first day I was an enterpreneur. I left my great job at HBO to full time become CEO of the business I was running on the side. I suddenly went from working 30-40 minutes a day to working 22 hours a day.

The first day I was there fulltime, I got the word: the $900,000 I thought the Wu-Tang Clan was going to pay us to do websites was out the window. Maybe it was never there. Ugh. And then Tupac’s manager laughed me out of his office. I was a failure on day one. I cried over a slice of pizza. It was salty. When I was leaving HBO my boss there told me, “be careful, once you leave here nobody will  return your calls anymore.” And he was right. I suddenly had to enter a world of failure, flexibility beyond anything I had encountered, bribery, psychology, and the depths of human despair that I didn’t know existed.

In other words: the real world.

Here’s what I hated about being an entrepreneur: human beings. Most of them suck. Most customers lie to you, for instance. Every customer has the bait-and switch technique: ” if you deliver this to us at this cheap price then, BELIEVE ME, there is a lot more business where that came from.”  And that’s before they start asking for bribes. In one form or other, 80% of customers ask for a bribe.

Investors are no good either. “We’re going to add a lot of strategic value.” That’s a euphemism for: when things are going bad we are going to do a down round, ratchet you out of all your shares through dilution, and probably kick you out and bring in a real senior manager. Who will eventually implode the company. Thanks.

Employees are no good either. For one thing, they sleep with each other. And you have to keep track of it. W is sleeping with X. M is sleeping with Z. It’s like a messed up chart on a white board. Yeah, yeah, there are rules and laws for all this sort of thing. But the bottom line is: if I’m going to keep W from going into an alcoholic frenzy where he disappears for days at a time instead of working on the American Express project then I’m the one who takes the heat. But at the same time, W is happy this second because he’s having sex with X. I mean, who wouldn’t be?

My competition.  I was once running a company where I built websites for other Fortune 100 companies. I had a competitor, Interactive 8. The CEO kept calling me one time but I never returned his call. Two things: I was busy. And I’m horrible at returning calls. It was hard enough for me as a kid calling a girl and asking her out on a date. Now I have to call the CEO of my competitor? Who invented this phone thing anyway.

So one time, though, we ran into each other on the street. And he told me a story. It was like a parable and he was jesus. He told me about the CEO of Toys R Us. He called the CEO of Toys R Us and left a message. Within an hour the CEO was calling him back from his private jet. “Good CEOs return calls,” Bill told me. Go F yourself.

Acquirers. My first company got bought by a company doing a rollup. I stayed a year. By the time I left, the writing was on the wall. Junior high school students were learning how to make websites. You could no longer charge one million dollars to do a website.

(PS. This is no joke. One time I called a competitor of mine, Avalanche (later acquired by Razorfish) and, as an experiment in being annoying,  I said I wanted a two page website done for my wedding. They said, “uhh, we usually don’t do those”. But I persisted. I said I had to have this website done but I didn’t know how to do something called “H-T-M-L”.  They said ok, “but our starting prices are around a million dollars for something like that.”

So like I said, the writing was on the wall. And it wasn’t pretty writing. It was like bad graffiti. We’re not talking Banksy here. We’re talking how when I was three years old and wrote curse words all over my neighbor’s windows and then went home after she caught me and called my parents and my dad beat me silly.

So I stayed a year and tried to leave. The chairman of the company called me into his office. He said, “When you acquire a company, it’s the closest legal thing to slavery we still have in this country and I can prosecute you to the fullest extent because of that.” Really? Go F yourself also.

Money: Starting a business requires money. Spending it out of your own checkbook. Getting from your family. Then your friends. Then pitching VCs. Then, on occasion, losing it for everyone, including yourself. That’s so unpleasant. What if you were about to have a kid? What if your friends or family were about to have kids? What if the VC killed himself when he found out. Money is a hard thing to earn, to keep, to love, and easy to spend and lose. I’m sorry to everyone, particularly my kids.

Here’s what I liked about it:

-          Employees:  When I was younger I used to call my parents once every few days and tell them all about whatever job I was in. I’d be proud if my boss said something good to me. I’d feel good about my accomplishments.  I wanted all ofmy employees to be able to call their parents at the end of each day and tell them how great their day was, how much they were learning, how much room for advancement there was, how their bosses were thinking of their futures. If you lay out for your employees the future they have in front of them, even if it means they eventually go and start another business, then they will ultimately kill for you.

-          Customers: I loved doing a good job. I liked delivering a project and the client saying, “this is amazing.” There’s a trick to doing this. And most startups do not pay attention to this trick although it is critically important. Do everything you said you were going to do. And then do ONE MORE THING. Anything. One extra button, one new feature, one thing that surprises. In every business I ever started I would do this. Believe it or not, even for my fund of hedge funds. With every single investor, I’d try to find them a girlfriend, with investors who were having down months I’d call them and try to cheer them up (as long as it wasn’t my fault!). These investors became like family.

-          Acquirers. I loved acquirers. They give you money. I’m still close friends with everyone who has ever bought a company of mine, incuding the guy I mentioned above who talked about slavery. If someone gives me money, I stay loyal forever. I’ve seen many examples of people screw over their acquirers. But loyalty is one of the most important attributes you can have in a short life. And loyalty has many benefits that will occur over and over again. Try it and you will see. But it takes time.

-          The network. When you run a business you ultimately meet many people. I can tell you over the course of being an entrepreneur now for about 17 years that the network increases in value exponentially. And it never goes away. No matter how many times I’ve disappeared. Or not returned phone calls. Or have been lying in the gutter with a needle sticking out of my elbow, the network always returns to pick me up. The key is: never speak badly about anyone. Even the people above who I said “Go F yourself” know that I’m kidding and are still parts of my network. I know too many people who ignore this critical rule: never speak or even think badly about someone else. Eventually, if you do, it will have negative consequences.

-          Money. When you create something that has value, that people use, where the employees are happy coming to work every day, where the clients are singing your praises, where investors are beating your door down and you don’t want to even take their money, where acquirers are calling every day, where business or site usage, or customers are increasing every day. It feels good. And that goodness is compensated. You either make more money from your company or your company gets sold and you make money. It might mean you are a slave for a little bit for the new company. But your kids have a better chance of not being homeless. This is a good thing.

Perhaps the most important thing: the myth of corporate job safety is over. You will ALWAYS make more money hustling your own way if you have the ability to bounce back from the non-stop failures along the way. No Fortune 500 company will care for you the way you will care for yourself.

One more point: if you are leaving a corporate job  to become an EMPLOYEE at a startup you need to do even more due diligence than if you were considering investing cash into a startup. You are investing YOUR LIFE into the startup. So at the very least, check the boxes on the below, quit your job, and then get down on your knees and pray to whatever god you subscribe to:

  •           Talk to clients. Are they happy?
  •           What’s the backgrounds of the heads of sales?
  •           Has the CEO built andsold a business before and taken care of his employees in the process? (this won’t get you into the next Facebook and Google but it will save you a lot of grief overall)
  •           Does the company have at least 1 year’s cash.
  •           What are plans for future rounds of fundraising?
  •           Who are the current investors on board? Do they have deep pockets to keep funding the company?
  •           Is the company squarely positioned in what you feel is a strong demographic trend?
  •           Has the company proven its flexibility (i.e. has it already had a chance to learn from its mistakes)

See also, The  100 Rules for Being a Great Entrepreneur

There are pros and there are cons to starting a business. The good news is: you learn from all the cons as much as you learn from all the pros. And maybe one of these days I’ll get it all just right because I’m never going to stop.