Startup Therapy Podcast

Episode #124

Ryan Rutan: Welcome to today's episode of the startup therapy podcast. This is Ryan Rutan joined as always by Wil Schroder, my friend partner and the founder and Ceo of startups dot com. Well, one of the things that we get really hung up about, um, is how much equity we have in a startup, right? Like whether we're, you know, founding and trying to split equity, we're joining and trying to decide what are, are, are vested, uh, you know, equity will be at some point, but like what's the reality there? Let's, let's talk about what that actually represents, right? Because we get really, really, really hung up on this, not a week goes by where you and I don't have multiple conversations with people who are having some conundrum with how much of something they own. Is that really what they should be thinking about?

Wil Schroter: No, I mean they're so, they're so focused on, like you said, the percentage, they don't realize that Owning 100% of something that's not liquid is the same as owning zero

Ryan Rutan: 1%. Right? And so

Wil Schroter: what we should talk

Ryan Rutan: about. Yeah,

Wil Schroter: right. I think we should talk about the probability of liquidity, right? I think we should talk about, um, let me think about how long it takes to become liquid and time's a factor. You know, I think we should dig into all of everything around why how much you own is probably the thing you should be concerned about least yet. It's the one thing because everybody understands, you know, slices of a pie that everyone gets hung up on and I think it leads to more founders and founding teams, employees, etcetera making really poor decisions Because they're distracted, you know, right and later on you'll find out later on, you'll find out when you had 30% of the company and 10 years later it's worth nothing. That maybe that was the wrong move. Alright. So before we get into this next topic, I just want to let you know what we talk about here is like 1% of the conversation, you know, really, this conversation is going on all day long online at groups dot startups dot com Where Ryan and I pretty much talk endlessly with founders about every one of these topics. So if by the end of this discussion, you like the topic and you want to dig into it a little bit more with Ryan and I just had two groups startups dot com and we'll pick it up from there.

Ryan Rutan: Right? Yeah. It could have been focused on something else like maximizing the value of whatever percentage I own, right. This is probably where your head needs to be at.

Wil Schroter: Well, I mean, let's let's start with the probability factor. Sure. The one thing, it's hard to understand whether or not what we're about to get involved with has a probability of success, right? It's again, and then in that case we're all starting, let's say from from zero, we're all just starting the company for the first time. I mean, some starts are better than others, but generally speaking, none of us knows, right? But if you are evaluating a company to get involved with, right, That's your employee and this, this works the same with founders kind of pitching their story. So I want to make sure that they understand that this isn't just about employees evaluating it, it's about you pitching your story to employees and how they're evaluating it or should be, um, what we're going to look at our two scenarios, scenario A I've got 30% of the company, but we just started today, Right? So no idea what the probability of the outcome is gonna be. Scenario B is. I've got point, Oh, of the company, but we're going public in a year.

Ryan Rutan: Very different outcome.

Wil Schroter: What's missing there isn't, isn't this discussion over how much I own, it's whether or not it'll ever become liquid to begin with? And that's the hang up, you know? Yeah,

Ryan Rutan: that's the point where it actually, the, the equity itself has value, right? And like you said at that very, very early stage, super hard to determine. Super hard to figure out. Um, whether it's ever going to have any value or not. And just because it develops value also doesn't mean that it's going to have liquid value, right? We see this all the time. Right? So we can, you know, the VCS love to tent the fingers and then point and go lifestyle business hahaha. Um, right. Which, okay, there, there is something to that, right? Which is to say that that business is far less likely to have a liquid event where the equity becomes valuable, doesn't mean the business doesn't have value, could be kicking off, you know, 500 K, 700 K. to, to the, to the founder of the founders, um, which we've talked about before is a meaningful amount of money. You don't have to make that much money for very long, um, for to have value, but that's not liquidity within equity, which is where anybody else on the cap table starts to benefit your investors, your employees, Everybody else. So, again, to your point, some of this has to do with the stage at which we're evaluating it. Can we see value in the company or not? What type of value has been created in the company and who's doing the evaluating right? Because it's a very different decision for the founder versus employee to versus employee, 500 versus lead investor versus last investor, Right? So, there's, there's a lot of dynamism in this entire discussion, um, back to your point at that very, very early stage, how much you own of it is almost irrelevant because it's worth almost nothing at that point. Right? Right. We want to, we

Wil Schroter: want to fight for it, right? Because we get all pumped up because, like, oh my God, you know, um, if I, if I only own, you know, 5% more, then this would be a good deal or you know, I'm going back and forth with my co founder and look, there is a time and a place where that discussion is meaningful and you'll be glad you fought for it, so to speak. But again, it's, it

Ryan Rutan: implies

Wil Schroter: that the outcome is a given right, that outcomes always happen and it's just a linear scale as to how much I got,

Ryan Rutan: right, how much I got and how long it took. Right? Exactly, not quite.

Wil Schroter: And it's like, look, um, when you go into something, even when you start your own thing, the probability of liquidity is so incredibly low. I think a lot of founders don't realize this, you know, they, we hear about exits and IPO's and all these things all the time. What we don't realize is we're reading about 0.1% of people who get to that outcome now also say though there's a much larger percentage as far as numbers go of people who do have good outcomes, They're just not headline outcomes. Right?

Ryan Rutan: Right. $100 million dollars outcome.

Wil Schroter: Yeah. Or, or just a profitable company,

Ryan Rutan: right? Where the profitable companies are great by the way, guys, they're great. They're great. Have one. If you don't have one now have one. If it also goes, you know public at some point or gets sold or there's a big liquid event awesome. Um, you know what, one of the keys to having that happen is the profitable company. Right? So maybe just start there. But I do what before, before, before we move on because you've made this point before and I think it's, I think it's valid here. There's this notion around fighting for the equity because it is important. Um, one of the things that you've said in the past that, that I think really hit home is that, that equity, regardless of what it's worth now, does represent 100% of the future value of the company from, from an equity standpoint, right? We talked about this in the context of, you know, as you're thinking about, you know, taking on investors. Um, as you're talking about, you know, how big the employee pool is. You know, well, you know, we need a developer. So let's, let's give 1 40% of the cap table. You don't have to pay one right? It feels okay right now when the equity is valueless. Um, if, and when you do get to that liquid event, you'll feel very, very, very differently about that decision that you made in that time. So I think it is worth noting that yes. Fight for it then. Yes, move on. But, but do remember the fight part because this does represent all that the company can be worth in the future. Um, regardless of which way it goes,

Wil Schroter: I have a friend who was a serial startup guy and he worked at the time, thinking back for like five or six different startups and like name brands startups at the time, right? Um where he got like a decent sliver of equity because he was in the c suite and time after time for some unknown number of reasons. The startup ended up imploding before he ever got his liquid portion of like the most unlucky, you know, guy in that respect. Right? I remember having this discussion with him and I kept saying, um, when you're looking at these anymore, having done this enough times and having enough mrs and, and basically burning about 15 to 16 of the most valuable years of your career, wouldn't all you care about right now is probability, in other words, if you had two options, if I could get 1% you know, at stake in a company that I knew was going to be liquid Or 30% stake, where I had no idea, I'd take the 1% every day of the week because again, back to the probabilities first, let's let's let's we have to compounding probabilities first is the probability that the startup you're working at will ever become liquid. Okay, so that's one the second is that you'll you'll do two of them. The probability that you're going to leave this startup, if it is successful and go to another one and that one is going to be successful too. So it's like winning the lottery twice

Ryan Rutan: what you can, you can put the number of people that's happened to on a single bus, right? Like it's it's that small,

Wil Schroter: right? And so, so we've got this concept and again, this is just, you know, lack of, when I say maturity, I just mean evolution kind of haven't been through our own careers and stuff, we have this idea that what I'll do is I'll work at this startup and then of course sell and, and all of course get liquid. You know, I'll be on the right side of the cap table when that happens, and then then I'll go on the next one and then I'll do it again, of course that'll that'll sell and I'll get liquid again.

Ryan Rutan: Yeah, it's funny people, people start to treat it like investing in the stock market.

Wil Schroter: It's

Ryan Rutan: not because it's it's it's the opposite because you're talking about one market that is literally designed to create liquidity. I mean there are market makers to to ensure liquidity right on the startup side of things. It's exactly the opposite right there. There is very little liquidity when liquidity comes along, it's a big surprise and and an outstanding and low probability event. Um but I think that people kind of have that mentality. It's like I own this much of this company right back to your point, you know, when, when we think about this, there's two paths, right? The the one where like I'm going to get a larger chunk of equity of something that's less certain, um, or I'm going to get a small piece of something that has an outcome. So like if you're talking to the startup company, you're, you're thinking about joining as a co founder as, as, as employee five or whatever it is. You're like, okay, so what's our next step? And they're like, We're going to give you 30% equity. Okay, what are we going to do next? Customer discovery?

Wil Schroter: Cool.

Ryan Rutan: Right. The value of that equity? Not much. Right? Because you're just beginning versus we're gonna give you half a point in the company. Cool. What's the next thing we're gonna do? We're going public in 12 months, awesome. Right? Like that's a liquid event that's coming. You now know more or less, uh, maybe not exactly what the value of that half percent is going to be, but you know, that half percent will have some value attached to it. Some value that you can actually extract, you can sell that stock if you want to, right? You can't do that in startup land. Right? Which by the way, just, just another point of clarification, I talked to people who think that that's actually possible.

Wil Schroter: What that you could just sell your stock?

Ryan Rutan: Yes. I talked to somebody probably 23 months ago, um, early employee at a startup that was now doing quite well from a profitability standpoint, but this employee realized that the owners really didn't have a strong intention of the type of growth it would take to go liquid. And so he said, so, so how do I sell my stock? And I had to kind of like reach through zoom and put my hand on his shoulder and go, you really can't. And, and, and then I tried to force the box of tissues through zoom as well, but he just had to go find his own right. So I think that there are, there are a lot of misconceptions around what owning equity in in a startup actually means, but I don't want to take us too far off track,

Wil Schroter: right? But, but, but there's again, there's this assumption that whether I'm gonna really going to sell it on, on this phantom stock market or whether I'm gonna sell it, you know, on exit that, that will have some liquid value. And obviously, uh, that's really, really unlikely. But here's the interesting part going back to people getting so hung up on this idea of how much do I have. Yeah. But they also forget is that regardless of how much you have, if you have anything on the day that it sells that it becomes liquid,

Ryan Rutan: it'll probably

Wil Schroter: be life changing. I'll go back to the example of a friend of mine. So he was leaving a company that had done well and he had multiple job offers from multiple companies startups. Uh, and, and because the company had done well, he was being heavily recruited and, and he called me up and he said, Hey, I want to walk through these options with you. And so yeah, let's get into it. And he laid out each one and each of them were funded companies, which just meant that, that they weren't starting from zero

Ryan Rutan: sum sum implied value, Right? Yeah, yeah, exactly.

Wil Schroter: But one of them, which was much further along than the others Was offering him a fraction of a fraction of a fraction of a point, right? Um, so much that and you know how to calculate it. But the difference is they were on track to go public within 18 months. There you go. Right. And I said, that's the one that's,

Ryan Rutan: yeah, that's, that's the horse you bet on. He's like, I

Wil Schroter: was even considering that one, I was like, that's, that's such a bullshit equity stake was, it doesn't matter that one will actually be worth something. And here's the thing.

Ryan Rutan: You have to multiply the two numbers together right? Like the, well there's three numbers, they're actually right. There is the probability, there's the equity that you own and then there's the value of that equity at, at the time that it becomes liquid, right? Those three numbers tell you whether this is a bullshit equity offer or not right? Having a really small percentage of the company that has a liquid outcome that ends up having a ton of value. It means that you can still come out with a lot of money, like facebook minted, I don't know how many millionaires, but it's, it's a lot and I can tell you the vast majority of them owned a percentage that if you just wrote down the percentage and I own this much of facebook would have been laughable. Right? It was like I how many decimal points and you're Your four digits out, right?

Wil Schroter: It doesn't matter. Well, the other thing is, um, what people don't, don't realize is once your liquid, you're also out, you're done. You don't have to work there anymore, right? You can, if you want to write, he did for like another year. But generally speaking, uh, your, your commitment is done right. At which point you can go make more money somewhere else.

Ryan Rutan: Exactly. You are now free to go.

Wil Schroter: The difference between him and everyone else that took all those other jobs he was being offered is he actually has money in the bank now. He has something to show for that year and a half in, in the year thereafter. Right. What we keep doing again because I think we're really misled by startup success is we keep saying, well, I'll just, I'll just bank on this one. And I put, you know, two years, three years, five years, whatever. And it doesn't work out for any number of reasons. And then I go to the next one and then I go to the next one and I'm sure there's some founders listening going, yeah, okay. I did actually do this quite a few times and I bet you don't have Jack shipped to show for it, right? That's what ends up happening is if you can't get something to that liquidity level, you just wind up like, like my other friend who has said went to five different startups, which are all venture funded startups and he had a C level position and at the end of like 16 years had $0 to show for it, right?

Ryan Rutan: In terms of liquid outcome. I mean hopefully there was some salary along the way, but there are easier ways to make money than started popping, especially if he was doing this. And, and often they, we do see this scenario right, where you're taking less than what your market salary would be in return for that equity stake, right? You're, you're hedging that bet you're saying, okay, yeah, they're going to pay me less than I could earn somewhere else. But this thing's gonna, you know, hand me a check someday. Okay, That one didn't, So this one's going to hand me a check someday. Okay, That one didn't. So this one's gonna hand me right? And that this, this, this serial behavior repeats. Um, and look, we're not trying to start people or talk people out of starting companies were quite the opposite. Like we want lots of people start companies, we just want you to go into this with a clear understanding of what the value of this thing that tends to be such a critical focal point. Um, and, and like, like, well we've seen companies blow up early stage over cap table arguments, right? At a point where at a point where the cap table was valueless, right? And it came down to just arguing over something that didn't have any value at that time, right? And who knows? Maybe it would have gone on to have some value. We'll never know.

Wil Schroter: Well, I think, I think part of that with a cap table that a lot of people, you know, don't comprehend is when I raise money often the money that I raise has a preference attached to it. And the preference for those for folks that don't understand that means, uh, if somebody gives me $10 million, If I sell the company, they get their 10 million first without any respect to how much of the company they they and then they get their percentage right? And that, you know, depending on how much you sell for that may or may not be material. But boy, you start seeing companies that raise $50, million dollars or more. Yeah, all of that is sitting on a preference. Um, it makes getting an outcome that makes my percentage worth anything really,

Ryan Rutan: really, really difficult. Yeah. And there's no conversation to be had at that point. Right. The founder can't go, well, I would prefer, it doesn't happen, right? Not allowed at that point. It is what it is, right? You own what you own and the preferences are there. Um, and sometimes those things compound. And I've actually, we, we help founders unwind this with some frequency around like the deal mechanics like is this actually a good offer for me or not based on these compounding preferences? Right? Like so the early money and is treated differently than, than, you know, the series A, the series B, the series C. And sometimes it's quite hard for them to actually do the math and figure out like, okay, what really will be left over by the time all of the preferences are settled by the time, you know, we, the pro riders are handled like what's actually left and for for whom because it can get complicated and got complicated really quick

Wil Schroter: for sure. For sure. And I think when folks are raising one of the things they got hung up on, I think this is kind of the opposite side of it is they say, okay now I've raised and I've only got three points left in the company. Mm hmm. Yes. But if all of that effort led to the higher probability that you'll be liquid at all, then three points was actually your best bet because three stick with something that's liquid is better than 30% of something that's not, you know, by the way, I just want to mention, if what we're talking about today sounds like the kind of discussion you wish you were having more often, you actually can, you know, we're online all day everyday working through exactly these types

Ryan Rutan: of topics with founders,

Wil Schroter: just like you. So any question you would have, or maybe some problem you just want to work through, we're here and we love this stuff and we're easy to find, you know, head over to groups dot startups dot com and let's just start talking

Ryan Rutan: what we hear people talk about more often you, you used the word probability there and let's stick on that because that's what you should actually be optimizing. For me, we did an entire podcast on this very concept of optimized for the, the probability of an outcome versus the size. But what you will typically hear people say, right, this is this like the age old justification for giving up equity in a company, right? Well, I'd rather own 10% of something that's worth X than 100% of something that's worth nothing. Of course you would write. Of course you would, but at the time they take on the money, what they're thinking about is that that money is going to change the outcome size by more than what they're putting up in equity, I e, I give up 50% of my company, but I'm going to sell it for four X. So I'm two X better than I was. Right? If I did the math right? And I did um versus if I take on this money and I own half as much of the company, I am twice as likely to sell it all, meaning that I'm actually gonna make the same amount of money as if I took on the equity or not. But the probability that I sell is two X. That's the important part. So what you said there was super, super, super important. But I think you can get easily misconstrued and glossed over because we hear this all the time. Right? Well, I'd rather own 2% of something that's worth. Yeah. Okay fine. Yes. That that that math works too. But that's not really what you're optimizing for because it's not really worth anything until that liquid event. So taking on the capital should be pointed towards the likelihood that that event occurs in the future, right? Yes. The size of the outcome is important. Yes. What you own at that moment is important. You need to do that math too. But what you said was the most critical piece of all of this, which is that it should change the likelihood of whether you sell or not. If it doesn't then really really think about what you're actually doing in that moment.

Wil Schroter: You know the other thing that people don't consider is that taking on capitol um doesn't necessarily increase your probability. I mean ideally it does, right? But it definitely decreases your optionality.

Ryan Rutan: It increases the probability that you need to sell, it sort of forces that outcome.

Wil Schroter: But but if what you wind up building is a is a $5 million business that generates, let's say 1,250,000 in profit. That would have been a great outcome probability standpoint, you would have been in an outstanding position, but now you've you've raised money and distributions aren't an option. And now you're in a situation where you actually have reduced your probability based on the capital raise, it happens all the time. Right now that said, um obviously none of us has a crystal ball, none of us can say, oh well, you know, if I if I take this percentage in this company, then it's an absolute, you know, given what we're really saying is number one, if you do have the option of of comparing probabilities, always go with probabilities over percentages. Sure. The second the second is, there's there's really no way since, you know, you know, whether something can be probable to to know where it's gonna go. However, if you do find yourself in a situation We're on a train that actually does have some probability hold onto that train in Ryan, you know, we go through this ourselves, we're about almost 10 years into Uh And we've built a real business, right? We've got an eight figure businesses profitable. It's debt free. Um, and we know it's worth something. We don't know how much, right? We don't know what our probability of this exit or that exodus. Nobody does. Right? But we know it's worth something, Right? So the, the way we look at the business is we're not going anywhere until we figure out, you know how to maximize this outcome, because for us, I'm using myself included jumping ship and going somewhere else. Doesn't make any sense. In my case, if I said, I'm just gonna go start a new business, right? You know, I don't start up dot com, but I'm also going to start this new business and I'm like, funk that, right? I

Ryan Rutan: would hit you over the head and you would find yourself locked in a room. But

Wil Schroter: I'm like, look, I'm not taking any chances, right? I know this is a winner. How big of a winner time will tell. But no way if for other founders, when they have something that's winning this, I see a lot, um, where they've got a winner, but they say to themselves, it's a winner. But you know, I think this new idea over here might be more of a winner.

Ryan Rutan: So that other pastures greener grass. Yeah. Always shiny ball syndrome grass is greener, right? Like this will be, you know, they, they saw somebody else who took something similar public faster or whatever it is. Maybe they're just a little bit burnout and they can justify like I'd rather go do this. Yeah. And and this isn't something that we see sometimes, like sadly this is something that we see a lot of right, you know, one of the things that, that I talk about people a lot in the context of marketing is false negatives. Um, and right, which is to say that like you haven't made a sufficient investment in money time or the right resources to bring a channel to life in a way that you get that return that you're looking for, right that, but but you're you're you're you're not at the point where you can actually make that determination and so you you bow out of a channel before you should have and we see people bow out of startups before they should have. And in this case the really sad thing is a lot of the false negatives in these cases are completely manufactured. These these these 111 sided handshakes these internal, you know, only one voice in the head conversations that we have with ourselves that lead us to these conclusions. And luckily a lot of founders come to us with these questions and we were sort of like walk them through it and say like, well let's let's unpack why you're actually thinking about making this change and why you think the probability of starting from zero with something that has no inherent value versus something you've been working on for three or 40 years, that has cash flow, has a team has a road map right now is the probability of an exit certain, no, is the probability of an exit even clear? No, but you are certainly farther down that train track than you are with saying drop the hand grenade into this one and jump to that one. Right? So yeah, that's a point well made well.

Wil Schroter: And then the steak every time is thinking that we'll just keep making hits right? The last one was a hit and that didn't seem that hard in the grand scheme of things. So the next one is gonna be a hit. Not likely. We are all one hit wonders in this business. Um, and I think, you know, kind of the reset factor when we think about, hey, let's go start something new or hey let's jump ship etcetera. Is how much time does that cost me? Right. Because what we're missing is like, let's say for us, Ryan you and I've been working this business for almost 10 years. That's a long time. However, However, in that 10 years we created something of value, That same 10 years could have gone by just as easily. I've done it and created something of no value. Right. Um, the, the assumption was whatever we were about to do in the last 10 years was going to create value. Now we're only evaluating whether this was enough value. Right? Broken argument. Then we say, well I don't think this will be a big enough exit. So I'm gonna go restart and go do it again, dumbest argument in the world, right? People do it all the time myself included. And, and, and the assumption is, well, if that one was successful, obviously the next one's gonna be successful, of course it was given right

Ryan Rutan: because it's really yeah, yeah,

Wil Schroter: yeah, yeah, yeah. It rarely is. And then on top of that, well, what ends up happening is we give up what we had bird in the hand, right? Let it fail. I see this all the time and then we latch onto something that has almost not no probability, but low probability because it's a restart. And what we get killed on in that process is time we wind up burning 357 years in the new thing at the cost of the thing that was bird in hand and wind up with not only the loss of, you know, potential upside, but the time we can't replace and I think that's the part people are missing. Yeah,

Ryan Rutan: yeah. And and, and, and again it happens a lot, right? And it happens for a lot of reasons and I'm sympathetic to all of them. Um, you know, we desperately want these outcomes right? We work ourselves to the bone for these outcomes and it can be very, very easy, especially in a moment of vulnerability where we're already kind of burnt out and like something else comes along and it's like, you know, again, lots and lots of reasons, I think one of them is that you're about to then go back to the stages that you've just been through, whereas you're staring a lot of uncertainty in the face with the current startup. Yeah, but it's like, but I kind of know how to do all the things that lead up to this point. So I can go be successful at those things in the new start up and get it to this same stage, right? So that'll feel good. I can kind of go back to my comfort zone. I don't know, maybe it's like coming out of triple A ball and ended up in the pro leagues and, and, and you know, your, your batting average drops in half. I don't know, I don't know much about baseball,

Wil Schroter: but,

Ryan Rutan: but I think there's a thing called triple A and I know there's a thing called batting average. So it's like we maybe we, you know, we have this feeling that like maybe I should just go back to that league that I'm more comfortable playing in, right? I feel like I can be a more successful leader at that earlier stage and that feels good. I don't think objectively that's what they're thinking about. I don't think that they're talking about, but I get the sense in talking to founders that a lot of them are feeling that I want to go back to where I felt effective right now. I'm at that place where I don't know how to go to the next level.

Wil Schroter: Guess what

Ryan Rutan: nobody does, right? It's a secret for everyone. Every time you have to figure it out, you have to fight through it. But rather than do that, I see a lot of people, it's like those cars that used to sell in the airport where like when it hits the wall, it rolls over backwards and it just goes the other direction. We see founders do this all the time, right? Well, can't pass the wall. So I'll just go this way, the trade off and the cost of that decision and the, the time factor, the probability factor, all of those things are, are massive. Uh, like you said, like if we were to decide to just do something different tomorrow, we would walk away and, and, and the value wouldn't hang right? It's not like it's, it's created. So then it stays and it's just there, it's not like it's equity that we've built in the home that we can transfer to a new startup, right? It's like you, It's like you gave away your house and took on another 30 year mortgage and started over again without getting anything for it. You'd never do that, right? You'd be like, that sounds dumb. It's the same thing guys, right? You wouldn't give away the value in an asset simply to start over with a new mortgage. But that's exactly what you're doing when you decide to trade startups.

Wil Schroter: I do see people kind of in a similar situation that we're in with with with with an important caveat. We have, we know what the market value of our company is. I mean we are called by pe firms like every three days, um, asking if we want to do some sort of exit deal. We don't, by the way, stop calling us. Um, but, but, uh, but the difference is like we've hit a point, an inflection point where we know there's value, right? Um, either as an ongoing enterprise or sale, what have you? A lot of founders are a lot of folks in a team that's not where they're at right there. Like, hey, I'm 5 to 7 years into this thing. I don't really know if this thing has got any liquid value, right? You know, maybe it's something that we're still trying to get product market fit, right? It happens all the time. Maybe it's something where we raised a long time ago and now we're kind of ghost ship status. I don't know where that's gonna go right again, But those are, these are probabilities. What I would also say is that if you have no line of sight on probability probability of exit, but you know that you've got seven years deep in this thing. I'm just making up a number and maybe seven to go. That's a problem, right? Because now you're on the other side of the probability problem where you're like, huh? If I stick around really, there's there's no more guarantee that this is gonna work than if I went to go do something else at that point, the maths pretty much suggests take your pick. Like like either way you go has honestly similarly shitty probability. Um but but at the moment you get line of sight on liquidity, hold on right to the best that you can doesn't mean it will always happen. But but back to our assumption, jumping and starting over just starts that whole timer again. And and Ryan, one of the things that were I think you and I are more conscious of than ever is you only have so many years at peak earning potential right to be able to take these kinds of gambles etcetera. You don't have that many options to let it all ride right. In your twenties, you started to write in your thirties you get a few more shots by the time you get in your forties and beyond the cost of making these errant decisions. Using bad math becomes exponential and in many cases irreversible. And I think that I think that's a part that folks aren't quite understanding. Yeah. That that time curve

Ryan Rutan: really starts to work against you at some point right? Like, you know, not to be morbid, but we're all working on a finite timeline. Um we don't know exactly what that finite timeline is. Um but we do know just from averages, you know, you can you can sort of look at that earnings curve. Um and there there is a peak points, right? And if you're on your 3rd, 4th or fifth startup chances are you're in that period where you can, and should, if you're trying to maximize earnings maximize revenue, maximize salary or whatever, that's the time at which you're going to do it, right? And so that that absolutely has to be factored into that. You know, you took me back in time um with something you said a few minutes ago, which was was around that, that you're at seven years in and now you have some line of sight on understanding like you're like, look, we're still looking for product market fit, we're still trying to do some of these things that are that are essentially aligned with what would be a fairly early stage startup, meaning that I've got at least another seven years to figure out whether these probabilities change much. Um and it took me back to an episode that we did called, you know, I probably slaughter the name, but it was something on the lines of how to know when to fold the tents, right? And and we went through some of the calculus on how you figure out whether this is the time to do this or not. And there's a lot baked into that, right. It was well beyond just the probabilities. It's how you're feeling about it. You know, there was a very emotional episode um, as well, but um, the probability absolutely gets factored into that, right? If you're no more certain seven years in then you were a year or two in definitely time to really be thinking about this and probably time to be getting some serious outside perspective on it from other founders because, you know, it's either something that you're just refusing to see, um, or unwilling to admit at that point about the business. Right? And so seek some advice, seek some help, get some perspective. Um, because if you're no more certain seven years in, then you are from, you know, day one or year one, um, that's kind of an issue,

Wil Schroter: right? It's a real problem. Uh Look, I think if, if what we're considering here is that all that really matters. Like I said, we isn't the percentage, it's the probability at all. I think time is a factor. I think the situation is a factor, like I said, you know, where you might be in the cap table or whether or not, if this thing does become liquid, it never matters to you. But if I had five decisions to make every single time I'm going to rank them backward by which one is the highest probability of outcome in the shortest period of time net of everything else. I don't care how much I owe. Alright, so that was fun. But let's actually keep this conversation going. You've heard what we think about this, but you know, Ryan and I would really like to hear what you think and we're online like all day long, pretty much talking about every startup topic you could think of from fundraising, the customer acquisition to just really had to get all of this crazy startup stuff out of your head. And there's tons of other founders just like you, they're weighing in on these topics so you'll get a chance to just hang out and meet some really smart founders were also super, super easy to find. You head over to groups dot startups dot com and let Ryan and I hear what's on your mind. Let's get to know each other a little bit and let's just start having more of these conversations

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