.00006% Chance of Building a Billion Dollar Company

Every Sunday I look forward to receiving the Startup Management Newsletter which is one of my favorite blog aggregators.  This week in particular they included a blog that really caught my attention titled There’s a .00006% Chance of Building a Billion Dollar Company: How This Man Did It.  

A couple of quotes stand out in the article, the first being:

“Why would you undertake any activity where you get your ass kicked every day, don’t get paid enough, and suffer through years of misery only to maybe find a problem worth solving?”

I think this hits on a very key topic that is sometimes overlooked in starting a new company.  We hear all about the glory of the big company exits like Facebook but we forget about all the failures along the way.  I agree with Friedberg in that you really have to “want” to start your own company, it’s not something you just “do” to make a living as he clearly articulates in this next quote:

“There’s a 0.00006% chance of building a company that will grow to be worth more than a billion dollars. Even if you do raise money and sell a company or take it public, your median time to doing that is probably 49 months. Assuming there are three founders, your median expected payoff would be $300,000 each — that’s the equivalent of $73,000 a year. And the probability of making nothing is 67%. So if your motivation for doing a startup is financial reward, you’re better off going to Google, a hedge fund, choosing a career with stable income potential.”

There are clearly much easier and safer ways to make more money than starting a new company.  That’s probably why many executives don’t leave their nice comfortable jobs to take a chance on starting their own company.

I love how he closes it out by saying it’s all about innovation.  It’s a great post and definitely worth the 10 minutes to read through it.