Startup Therapy Podcast

Episode #8

Ryan Rutan: mm hmm, mm hmm. What if the most life changing financial outcome for a startup isn't a billion dollars but rather 250,000? How exactly does that? 250,000 affect our lives especially early in our careers? Could it potentially fast forward our lives by 10, maybe even 15 years. What risks do we run when we try to bet everything on a massive outcome at the expense of smaller, more likely outcomes. Today on the startup therapy podcast, we're going to talk about how a $250,000 payout might be the most impactful outcome a founder or their team could have. And what advise us. Hello fellow founders. This is Ryan Rutan from startups dot com, joined by my partner Wil Schroder for another episode of the startup therapy podcast. You know, Well everybody talks about starts making money, but you don't hear a lot about the effects of that money with the team after the deal.

Wil Schroter: Yeah. And what bothers me about that. And Ryan, you don't have talked a lot about this in the past is talking about the exit that you'll get to as a founder or among founders but not talking about what you'll do with in this case the money from the exit. It's like only having half the equation, right? If a big point was I wanted to get to this exit, but I'm having no real meaningful discussion about the fruits of that labor sort of, what was the point, right? And

Ryan Rutan: you hear people talk about certain stuff right there? Like, well I'm going to spend more time on things that I'm passionate about. Like, wait a second. Did did you fill your account with passion? Is that why you exited the company? What is that why you were waiting? What you waiting to be passionate? You'd be passionate now the exit is financial. So let's, let's unpack it.

Wil Schroter: It is. And, and, and I think that when people talk about what's a meaningful amount of money, they don't do all the math, right? They say it's gonna be tens of millions or hundreds of millions of dollars. And you know, we talked about this and on some of our, our episodes in the past, he said, does it, are you sure about

Ryan Rutan: that? Do you think that's hubris or do you think that's ego? Do you think that's you think that's like, you know, if I were to say a smaller number, does that make me seem pathetic or less ambitious? Do I have to say a really big number to feel good about myself?

Wil Schroter: I I think that's true. You know, I think there's a lot of value there. Right? I think a lot of people are like, well, it's got to be a huge number. It's gonna be a number so big that I sort of don't have to do the math, right? You know, it's 10, it's 20 it's 50 it's $100 million. I don't need to know to do the math. I just know that's a lot of money and it is, it doesn't

Ryan Rutan: require any defense because nobody's going to go like, Well, you know, it's, you know, 50 million is nice, but right now 50 million is really nice. So nobody's going to argue with you.

Wil Schroter: It's just not necessarily the only number that's impactful, right? Like we get to a point where we forget or don't calculate exactly how much money we need to make a meaningful life choice, right? And I think what happens is we say, Oh, it's got to be a million or 10 million or a billion, right? And that sounds awesome. But if someone were to say, does it Like what happens if you make $250,000 and you scoff right? $250,000. That's nothing Really. Have you made $250,000 in one lump sum check after taxes. It's actually a lot of money, Right? And I I think what, what confuses folks a little bit is they just don't do all the math. They don't see the whole thing through. And I think if we're gonna unpack it, let's figure out exactly how much 250 k or a million or 10 million actually buys you.

Ryan Rutan: Yeah, just go down the laundry list of like, here's what I would do with the money. So what does it look like for you?

Wil Schroter: Well, let's talk about what it looks like in different parts of the world, right? Because I think as soon as we get into $250,000, there's going to be two camps, There's gonna be a camp of some people that are like, are they even literally talking about $200,000? That's all the money in the world because where we're from is all the money. That

Ryan Rutan: is that right? That's that's the product of my country.

Wil Schroter: Right. Right. Uh and then there's this other camp that's going like $250,000. Does't get me an apartment in the shittiest part of town. Like what are you doing,

Ryan Rutan: freelance developer?

Wil Schroter: Yeah, exactly. Right. And so I think before we get to the topic, let's me, we talked about like kind of our backgrounds, respectively, Ryan like you and I and kind of like, you know what we've seen in and and and how our worldview came came together. So like from your estimation, I know you've lived in different parts of the world etcetera. Like what did 250 K get you in the places you've been

Ryan Rutan: Sure and and boy has the mileage varied depending on where I am. So the most expensive location I have lived in personally for an extended period time. I've been in some very expensive city, short term, most expensive place I lived long term was a tiny little island in the mediterranean called Cyprus which suffered from two problems for me personally, which is that it's an island, which is great don't get me wrong, but everything is more expensive on an island. Everything is shipped in, right? So prices are already jacked. Number two. The time I moved there they had the strongest currency in the world. It was something like and I'm not going to get this. Exactly. It was like 2.52 dollars to the cypriot pound. And so I was paying out the nose for everything because I was still earning in dollars. And so it was, it was crazy expensive. Everything was it was everything was at a premium since then. I've lived in, you know, places like the midwest, you know we we both have domiciled in uh in columbus Ohio where it's quite a reasonable place to live. I'm currently in florida where it's pretty similar. Housing is the, is the sort of the one outlier. You can definitely spend a lot more in a house here, right? Depending on where you are, you can also spend a lot less, you know, we want to be near the water. So a little bit more expensive but well worth it in the trade off for me. We're getting ready to do our Guatemalan adventure where we're going to maintain our house here. We're also going to be spending time down there probably most of next year and it goes a lot further down there a lot further now you can like anywhere. You can find ways to spend it and make it disappear really quickly. But it will go significantly further. And I think this is a really kind of interesting and important distinction as you get to a point where this becomes available to you. It's not just about the money, it's about what happened to get your business to that point. I think this is a great time if you do get to your $250,000 event or your 100 $50,000 event or your million dollar event, a great time to kind of rethink like where am I in life? What do I actually want to do with this? And where should I be to make that happen? So I think that talking about geography is a really important part of this.

Wil Schroter: Yeah. And and I want to level set. So when, when folks listen to what we're talking about, like I said, they don't automatically jump to either one of those camps. Were trying to point that, you know, we've got a little bit of a worldview. Uh you know, I've been mostly in the U. S. Myself. I grew up on the east coast in Connecticut, I have a home in columbus Ohio. Um but I also live in Beverly Hills. Right? And so if you want to talk about dramatic Deltas in cost, I mean I can kind of see my house in Columbus is 10% of the cost of my house in Beverly hills. I mean it's not even remotely close. Right. Um

Ryan Rutan: just years worth of mortgage and one month's worth of.

Wil Schroter: So, so when we're talking about how far 250 K gets you, I just want to point out that, you know, we're, we really are trying to kind of look across the entire gamut of where folks situations are. And so again, just caveat your mileage may vary, but Bear with us on this one, because I think, I think the points are going to be just as valid. So, so all those caveats aside, uh, you know, let's let's let's dig into just a little bit about this kind of what 250K. Does for you particularly early in your career.

Ryan Rutan: Yeah, I think that I think that's another important distinction. So geography caveats included, win, this happens for you and what you've kind of accomplished financially. Prayer to this happening has a huge bearing on on exactly what kind of event.

Wil Schroter: And so with that I'll share a bit of a personal story. So Early in my career I was fortunate enough to make a little bit of cash when I was 22 years old. So you know, pretty early in my career. And with that money I went out and I bought an extremely modest house I bought a car I bought, I paid off my student loan debt. I bought all the furniture from my house, all within roughly the same year. Right. It was, it was a fun year, right? Well considering the year prior, I was $100,000 in personal debt, like it was a dramatic swing. It's a big swing. But this really interesting thing happened, you know, I'm sitting in my house and I've made endless trips to freaking bed bath and beyond, you know, if there's time and all of a sudden the next month comes and all the stuff that I was normally spending money on, whether I was trying to, you know, furnish the house, whether I was trying to put money down on a car, whether I was trying to buy the house, it was all taken care of. Yeah. And what was interesting

Ryan Rutan: evolving payments, some of them just disappear.

Wil Schroter: It was, it was amazing, right? And all of a sudden, you know, I kind of get my next paycheck and I'm like, boy, all of the places that this money was going to go, no longer has a reason to go there And it had this amazing effect where I was like, wait a minute, I'm only 22 For the next 10-15 years. I had planned on taking all of the extra cash that I could possibly save and let's face, it when you're young, you don't save much cash and put it toward getting some furniture like, you know, getting a couch or trying to get a car or trying to some furniture that

Ryan Rutan: look like they belong in the same house. Oh my God.

Wil Schroter: Yeah. And and all I could think was, you know, every month figure, you know, if I had a typical job at that age I was I was an internet founder said kind of disproportionate cash. Uh but if I had a regular job maybe I'd save a few $100 per month, you know, for the first few years I'm so consumptive, you need literally everything right? And after student loan bills and everything else like that, I wouldn't have much left over. So the way I saw it was For the next 10 to 15 years, every extra dollar that I have is going to wind up going to one of the few places. It's going to go towards buying a house, it's going to go toward a car, it's going to go towards debt. In my case it was mostly student loan and credit card debt and it's going to go towards furnishing house something nobody ever talks about, but it's just like endless torrent of trying to get your house, you know, finally up to speed. But all of a sudden like magic wand style, all of those things were taken care of and all of a sudden now every dollar that I got in was actual investable slash disposable income for the rest of my life. Yeah. Right. Yeah. It

Ryan Rutan: puts you in a completely different plane in terms of your thinking, your stability, your risk tolerance, all sorts of stuff changes at that point.

Wil Schroter: And here's what was the most interesting part about it in my case it was less than $100,000. It was less than $100,000 in a one time lump sum payment to forever change the trajectory of my life, yep. Right Now if someone had told me when I was starting a company that one day you might get $100,000 in a lump sum payment, like it doesn't make sound like a lot of money at all until you actually get it right. And so you know

Ryan Rutan: when that balance goes from, you know, I know I've got $1200 in my account and I know where three times that much needs to go to, I've got $100,000 in my account. It's life changing, right? It is psychologically practically um emotionally everything changes at that point,

Wil Schroter: right? And so it's not just, you know, we talk about the founders getting a payout but it's not just the founders, it's also the psychology of the team members, the employees getting a pay out. We're like, well my steaks only worth this much. I only make 250 K. Is like, have you ever made 250 K. Like it's actually changes everything. Yeah it does. Yeah. So so let's let's break it down, let's say that uh for 250 K. And let's just for argument's sake say it's post tax money versus pretax money, let's talk about what it buys you first. And most common thing I would argue is going to be down payment on a house.

Ryan Rutan: Yeah, I think that's a it's a it's a good one. It's a big one and it's a milestone that most people have already set,

Wil Schroter: Correent. And especially if you're early in your career, it's probably, you know, your first house median home in the us is around $200,000. Uh but let's say we were buying a $500,000 house again in some parts of the country that don't even exist right? But for the most part and certainly outside the us that you know that's not uncommon. So let's say we're putting 20% down on a $500,000 house. That puts us at $100,000 of our 250 K. Right? Probably the biggest single swing we would make. But that's in some parts of the country, like in columbus Ohio that's a hell of a lot of house. And by the way columbus is like most cities in in the US, yep. Next thing we want to we want to put a car in the driveway. I wouldn't recommend this. And as a guy who started swat police dot com to get you in and out of car leases, I would never recommend paying full price for a car and cash. But let's say you wanted to you know you want this dream of not having a car payment and you want to roll in style, you wanted to get a BMW let's say like a three series. BMW. Right and you paid 40 K. In cash for it. Okay terrible idea by the way by all means don't do that. But let's just imagine you did right now you've got a brand new house and you've got your three series. BMW that you're showing off right now you got to furnish the house. Now As you know Ryan like there's a lot of ways to go about furnishing your house but I'm going to argue that you could probably get started for around $60,000 in cash right that at

Ryan Rutan: least I think on a $500,000 house in columbus Ohio based on the size that I'm picturing that does the job, does the job nicely. And it'll look like you actually meant to buy all the

Wil Schroter: furniture you'd be replacing all of your IKEa right or or adding some more but regardless now you got about 50 K. Left right And with 50 K. I'm going to argue that a lot of people could probably clear out some important balances. I'm talking about student loan balances, credit card balances etcetera right enough. That you could probably clear all of your debt. If not make a substantial uh cut into your debt And all of that would total 250 k. Right now your mileage once again may vary, but let's just unpack for a second what that just did for you. Right? Um First off half that money went to things that you actually have equity in, Right? So you you put $100,000 in your house, it's not gone, you still have the equity in the house. So that money isn't totally gone.

Ryan Rutan: Yeah.

Wil Schroter: Exactly. Absolutely. Wouldn't recommend putting all your cash into a car. But if you did it's going to depreciate but there is some asset there. Right? So you've got a call, it may be 100 and 30 K. Of of of equity if you will 100 in your house and 30 and you're quickly depreciating. BMW. And this is suggesting that you're spending all the money and you have no savings left over. Anything else like that. Not recommending that. Just pointing out that you could. Right, also pointing out that that once you did all these things you got house, you got car, you got furniture. All the stuff that was totally consumptive for the next 10-15 years of your life. Now you have all this net income. Right. Right. I mean that's the part that people don't think about, right. He said, well if I bought everything when I get my next paycheck and I have no bills to pay, so to speak. I've got a mortgage to service. But I don't have any um any of your debt to service, etcetera, what you can start doing with that extra cash like heaven forbid saving. And we're investing,

Ryan Rutan: right? And at a much higher rate, right? This significant acceleration at that point.

Wil Schroter: Yeah, absolutely. And, and, and by all means, you know, keep a little bit of cash cushion in the bank, But that's on 250 k. And again, we're not talking about salaries here, we're talking about actual payouts. You know, either the company is sold or you sell off a portion of the company. Remember a lot of founders take money off the table by selling off a portion of the company, not all of the company or the company gets, gets bought and you're still working there, right? But, but you know, now you're taking your, your equity payment off the table. All of those things are incredibly life changing. However, once you've done that, right, like, like once you've bought the house, bought the car and bought all the furniture and all of these things, if you make money on top of that, that's what I'd kinda call next level money, right? Because let's say, let's use a number of, let's say use maybe a million, right? If you had $1 million dollars that you could take off the table, which again, People here are companies sold like the founder made $1 million. That doesn't sound like a lot. Do, do you ever make $1 million? So much money? Right? And what that tends to do, assuming you don't just add zeros to all of those down payments and getting in cars you just bought.

Ryan Rutan: That's a common outcome. Yeah.

Wil Schroter: Yeah. But but it creates a cash cushion, right? And it starts to give you this this nest egg that most importantly again, let's, let's assume for a minute, you know, you've got that million dollars and you know, you've used maybe a couple 100,000 to buy some of things you're talking about And you've got a call it $700,000 plus left. You can't live off, you know, live off the the investment on that unless you did Bitcoin for a second.

Ryan Rutan: But

Wil Schroter: yeah, but what you can do is probably solve nearly any cash problem you're going to run into for the rest of your life right? Like Ryan think about that like, like what problems could exist. That's $700,000 couldn't solve. You know what I mean? Short of just

Ryan Rutan: Something I've always wanted to be 6-foot 6

Wil Schroter: lots of luck to that. But you know what I mean? Like with hundreds of thousands of dollars in the bank, there aren't a lot of problems you can run into that. You can't have that nest egg to cover. But I don't think that's the way people think, right, they don't think about it in tears as in the 250 K tier advances me 10 to 15 years of my life financially because of all the things I was going to otherwise save for now covered, yep, the million dollars or whatever that next level is beyond the cost it takes to buy your first things that starts to give me the optionality to fix every problem that I'm going to have for the rest of my life, right? Who gets to say that?

Ryan Rutan: Not very many people unfortunately,

Wil Schroter: right. And if you're one of the few people in history that's ever been given that luxury, why wouldn't you want to do everything possible to to optimize for that outcome? Sure.

Ryan Rutan: Sure. But let's let's talk about taking it stepwise because I think that I think that there's still going to be some sense of people, I can still hear people out there scoffing at the at the 250 K. And I can still, I can still hear it right there like, yeah, just like I want to aspire to something more and and and we're saying the same thing like sure. Aspire to something more and I think we've said this before, but like you know what always comes before a million 250 K. Like you're gonna pass that point whether you, whether you take it in liquid cash or not, you went past that mark at some point. And so I think that, you know, you've talked about in terms of base hits versus home runs and you know, wanting to make sure that these bets pay off exponentially. But let's, let's do talk about the fact that these exponential outcomes are truly far less likely. We're not saying they're not going to happen, but statistically they are a lot less likely to happen. And I think this is where the power of this discussion really comes in to say that like, look guys, Not that it's easy to get a $250,000 payout, but it is a lot more likely than the million dollar payout. And it's not a bad thing, right? And incidentally, if you can make that happen, getting to the million dollar payout and beyond becomes a lot easier because it takes off a lot of the pressures, right? Like you said, you can solve a lot of problems for yourself. Your ongoing cash needs become significantly less because you've removed a lot of the typical payments or reduce them at least. So that your cash flow is that much, that much easier. That much better. You can start to invest more in the business and do and in yourself. So I think that that's a really important point for people to understand that it's a lot easier to hit That 250 k. Mark and it's also life changing, right?

Wil Schroter: It is. And, and look, when, when people talk about, hey, you know, I want to have a big exit. That's wonderful, right? And the truth is you don't get to pick your exit, it's not quite that simple. It's like, well I'm only selling if it's, you know, 10 million or more dude, like the probability that you as a founder will ever even get to have that discussion with somebody is so unlikely to begin with That. You don't get to say it's got to be 10 million, it's got to be a billion, etc. If you're fortunate, I won't say lucky entrepreneurs are fortunate, never lucky if you're fortunate enough to ever build a business to the point where you can even have that discussion to create a liquidity event for your company, How are you?

Ryan Rutan: Right? Best

Wil Schroter: thing ever, Right. But there's, there's no version where we can have this, this kind of, this, this cockiness that says, well my business has to be at least this big for an exit. It's done

Ryan Rutan: with robust.

Wil Schroter: Yeah, it does not work that way. However, the only place and I think Ryan, you're saying that's the only place that we get into trouble is when we say it has to be giant, that anything smaller than giant isn't meaningful by all means, if you can make it giant make a giant dude, right? But don't write off any other outcome because if you don't know where that money is going to go, that you're increasing your risk profile to get to, you're making a shitty decision

Ryan Rutan: You are, and you're also treating it as if it's a binary decision as if if I take it, this isn't let's make a deal, right? This isn't if I take the 250K. I have to walk off the game show. This is get to a really good outcome for yourself, change your life, change your stability, change your mindset and then keep moving forward, right? This is and should be a milestone that is helpful on your way to bigger outcomes.

Wil Schroter: Absolute. Yeah. The point is, this doesn't have to be your last hurrah, right? If you're 25 years old and you sell a business and you're able to put $250,000 in your bank account. Let's just play that out for a second. Number one, you're one of a fraction of 1% of people that will ever have that luxury. So to even think for a second like that, that's not a big enough number. That's a horrible way to consider it, right? Number two, you're 25 years old, right? You your career hasn't even started yet. I can't

Ryan Rutan: Even remember 25.

Wil Schroter: Yeah, I know it seems like a million years ago, but but but when you are 25, you think that's like, well damn, I've been working for five solid years and you know, I've been at this forever, right? It was just you lose a little perspective. I was there. I had the same the same issue with perspective. So I get it. But The truth is you have another 40 years to go do amazing things right? The fact that you've got to win this early take it and celebrate like crazy because few people ever get that right. Another part of it, you know when, when you're thinking about why this is important, especially early in your career, is what you talked about Ryan all of a sudden you can take risks that your peers can't take. You already have a house, right? You don't have to worry that this risk is gonna is gonna have you going broke and you can't afford to ever have a house, right? You have all the things that everyone else is hoping their risk would get to.

Ryan Rutan: Okay, so we get the $250,000 can be life changing. I think we, we kind of agree on that, hopefully ever. But it's listening and starting to agree that that would be a great outcome. Even the million dollar marker, it can fundamentally change life. So Why is everybody so caught up with these, these astronomical numbers like $10 million dollars or more

Wil Schroter: right? Everybody thinks I need to make enough money and they kind of run this rough calculation that I'll never have to work again. I need, I need to make enough money in one lump sum so that the interest I'm making, I can live off that like a king making at least as much money that I'm making as I'm making now,

Ryan Rutan: hang on a second, so I'm going to work really hard to drive an outcome so that I can be bored for the rest of my

Wil Schroter: life. We should probably talk about that too, right? I always make the joke that anybody who was ambitious enough to get to a point where they could make money that they'd never have to work again wasn't the kind of person that would never want to work again, right? Yeah.

Ryan Rutan: It sounds like to me,

Wil Schroter: like my dad was a carpenter, right? He worked his ass off. He was so sore all the time every day. He never wanted to work again, right? You know, like, like, like he looked at work as absolute hell, but he never wanted to do again. And if he never had to pick up a hammer ever again, he would be the happiest guy alive, right? That makes sense to me, right? I get it. But a lot of the folks, particularly founders built something that they were passionate about now. It's probably run them through the wringer, right? They all probably in a year vacation minimum, right? But that's not the same as saying I never want to work again, right? It's saying I need a fucking break a little bit different.

Ryan Rutan: I think your dad probably said the same thing or it wasn't that I never want to do anything again. He's like, I certainly don't ever want to see another hammer again. But there's probably a lot of other things I would like to work on, right? Maybe change what you're doing, but it's not, it's not just a binary. Like now I stop,

Wil Schroter: right? And look a big part of what we're implying if we're not altogether saying it is, I want to wake up in the morning and do what I want to do, not what I have to do, right? It's not that I don't want to work, it's that I don't want to work because I have to I don't want to feel unsafe. And I think that at its core we all want to feel safe, right? So when we're talking about that, that $10 million 100 million dollar number, we're not necessarily saying I have to have the yacht, I have to have the big house. We're saying I want to unquestionably go to bed at night and just feel safe. Yeah.

Ryan Rutan: And I think that's it. It's not that we even need a break necessarily because I would like to think that the vast majority of founders and entrepreneurs are already doing part of what you just talked about, which is to wake up and get to do something they want to do every day, right? Not something they have to do. Hopefully that's the state of mind that they're in. Of course that changes over time and and certainly the longer something takes to get to a point where you can ease off the gas a little bit can wear you out. But I'd like to think that the vast majority are in that situation. And so I think your point around security is absolutely on the mark and that's really what people are striving for is be able to say that like at this point I'm unassailable, I've achieved enough that I'm immune to most of the life circumstances that could otherwise unsettle me

Wil Schroter: right? And I think they overshoot the mark in order to get that feeling right, Right? And, and so so let me go back to my million dollar number. Just compare the two At $1 million, assuming you spend a few $100,000 to kind of get settled in life. The remaining amount of cash you have again, if you invest it reasonably isn't going to be, I'm set for life. I never have to work again. It's going to be, I'm set for life. I never have to worry again. Yeah Right. And I've

Ryan Rutan: got enough of a cushion that it's very unlikely a curve ball is going to take me out of the game,

Wil Schroter: right? And if we were to put it on a scale of safe nous that probably gets you to 80% safety, right? Like in other words, the remaining 20% just something like, hey, I just don't feel like working, but I don't have enough active income or passive income to uh, to make that happen. Yeah. But dude, 80% is pretty far. Most people never get past 0% right there in a negative part of that, right?

Ryan Rutan: You're still the point where you have to work your money can't solely do the work for you had $1 million, but it completely changes the context in which you're working,

Wil Schroter: correct. And I think what happens is as we set our expectations, especially if we said hard expectations, meaning it has to be this or nothing and we start to make decisions on what startup we want to go work for or how we want to raise capital or all these other decisions where we've got this big number in mind, remember every time we move up the scale and what we want that outcome to be or what we're not willing to accept. You know, less than we exponentially increase our probability that it will never happen, Right? So if 250 k in a single payout puts you in the 1% of people that ever get a payout? 10 million probably puts you in the 1% of that 1%. Is that really all you'll accept? Are are you saying I would rather not be able to, you know, get the 250 K and by my house and buy my furniture etcetera or get to a million and never have to worry about a big problem again, I'd rather rule those out because the only answer I can, I can hear is that I have to never work again. That's yourself crazy. To me. It

Ryan Rutan: is, well, it is crazy. And again, going back to this notion that they're not binary, those are not mutually exclusive outcomes unless you start to only aim for the big outcomes. And then I think you, you also, in addition to exponentially reducing your likelihood of hitting that outcome, you're also reducing the likelihood of hitting the smaller outcomes because you're not gonna be thinking about them, you're not going to be open to those opportunities when they come along, it's going to change your thinking in such a way that those opportunities don't avail themselves to you. And so you're really setting yourself up for both the short and long term disappointment when you could have just been happy the whole time.

Wil Schroter: You know, I had a buddy of mine about a year or so ago come to me and really, really talented guy and he was considering a couple different companies that he wanted to go to. One of the companies was within one year of going public, right? It was a well known tech company, it was within one year of going public. The others were all, um, earlier stage companies, they happened to all the venture funded companies with some top tier Vcs. So there were some pretty interesting opportunities. And he said to me, he's like, I'm considering the one where it's, it's a guarantee that my, my equity will get liquid because they're going to go public, but I don't get that much equity. You know, I'm on the tail end of this deal or these other deals were obviously, I don't know what the outcome could be, but I absolutely think it would be a home run if it works. And I, and my advice to him was dude, take the money. I mean if you were to accompany and you can optimize for the probability that you'll actually get paid, take that job. Right. Incidently, he did. He's just finishing his beautiful new house in the lake, right? And he says to me, he's like, that's probably the right move. Guess what? Those other companies I would have taken the job for aren't around anymore, right?

Ryan Rutan: And guess what? 25,000 more have taken their place. And those Moonshot opportunities will always be there. Now he has that cushion the stability, this different risk tolerance and not just a tolerance from, from a psychological standpoint because you can always just think risky, but being at that level where you have this, this risk tolerance and risk protection that he now has, he can play the game completely differently.

Wil Schroter: It's funny, you should say game because what I was gonna say is, you know, as you know, I'm an avid video gamer and in video games, there's a concept of a game save point, right? You know, you're playing the game and you're trying to get to a game save point, so you never have to go backward, right?

Ryan Rutan: I don't want to repeat this. I don't want to repeat this. I don't want to repeat this.

Wil Schroter: Get to a game save point in life. Right? My friend, what I was suggesting him said, man, get to a game save point, right? Take that one year where the company is going to go public, take that money by your house. Now you're at a game save point, you're at a point in life where you can keep playing the game going forward, but for once you never have to go backward. Yeah. You

Ryan Rutan: got a backstop at that

Wil Schroter: point. Exactly. And I don't think people get that right. I don't think founders because because again, we've all been brainwashed that it's this all or nothing kind of grand slam mentality and it's a dangerous mentality because the that narrative needs a little bit of sobriety to it.

Ryan Rutan: Oh, for sure. So let's talk about that. Then let's let's dig into setting your expectations and kind of metering those against reality.

Wil Schroter: Right? And and so, so here's the first gate I would use on expectations. There is a 99% chance you're going to come up with nothing at all. You know, there's no version of this, this, this, this slide ruler where you say, well I'm going to add a little bit more risk and because I want a little bit more money, like it's a game show, right? It doesn't work like that

Ryan Rutan: or you're prudential account. Yeah.

Wil Schroter: Exactly. Right. Right. You have, you have a 99% chance that you're getting nothing out of this right Now, if you happen to wind up in the 1% category where there's some sort of outcome, the slider goes way exponential, right? If you can even get to the point where you ever sell something At the bottom of that 1% slider are the people who will sell for anything. You know, they get $50,000 off the table at the top of the slider is the guy that got billion. Plus there's like five guys at the top of that slider at any given year. Right?

Ryan Rutan: So it's a very oddly shaped

Wil Schroter: pyramid. Exactly, right? Like to think that you're going to just choose to be at the top because you really wanted it not gonna happen. Right? And so, so when we're setting our expectations, the first expectation has to be, I don't get to automatically assume that I'm going to make any money at all. I have to say if I even get to that threshold where I can sell something where I can cash out even then the more I tried to make a decision that I'm going to go for more, go for more, go for more. I exponentially increase my risk, that I would get nothing at all.

Ryan Rutan: Well the funny thing about going for broke is that's usually where you end

Wil Schroter: up, that's exactly where you've lined up, right? And so for me when I try to sit down with, with my, my friends who are founders and, and I gotta tell you like all over the map, I've got friends who've, who've made $50,000 and they're the happiest people in the world. I've got friends in the past year that have made hundreds of millions of dollars. They're pissed about it, right? Which is why we'll have a whole other podcast about that, right? But, but but my point is in either case their outcome was directly tied to their expectation. In other words, not the outcome of financially, I mean how they felt about it, right? Oh yeah. If if everyone tells you, you have to be making hundreds of millions or you're a failure, then you're going to feel like a failure. If none of your friends have ever seen $50,000 as far as they're concerned, you're a billionaire.

Ryan Rutan: Yeah, that's exactly it.

Wil Schroter: Which which leads me to my last point that I just want to make and I it, it goes in the form of kind of Anyone who says $250,000 or any other amount isn't a lot of money probably doesn't have it, right? And I see this in startup forums, uh, and I see, you know, hey, an exit. Oh, that wasn't a big exit, you know, they only sold for a few million dollars. And what's funny is consistently who I rarely hear make that criticism are the people who actually have sold for that much money or have sold for more money, Right? It's so easy to say, Oh, that was a tiny outcome. Og I only made 250,

Ryan Rutan: I would have waited it out.

Wil Schroter: Yeah. You know, and I always think to myself, man, If someone gave you a briefcase with $250,000 in cash in it, you wouldn't be pushing it back. You know, your attitude wouldn't be, Oh, that's just not a lot of money. I'm not interested in that kind of money.

Ryan Rutan: Don't you have a weekend bag?

Wil Schroter: Exactly, You'd be the happiest person alive, right? And so with good

Ryan Rutan: reason. Yeah, yeah.

Wil Schroter: You know, I've, I've got again, a couple of founder friends over the past year remember having uh, lunch with one of them and he's like, yeah, you know, we, we sold for 25 million and I only took about 10 million off the table. And I was like, what? Only took 10 million? Like, I mean, he trust me, it was life changing for him. He's a great guy, right? And he genuinely appreciated everything that it did for him, so I don't want to make him sound undeserving. He absolutely earned it and he was appreciated.

Ryan Rutan: Well, let's talk about why he said that he said that because he expected everybody else To think that he should say that right. It wasn't about how he felt about the outcome, it was about how he thought he should feel about the outcome in everybody else's eyes, right? Like well it was only 10 million, right? I've got to say that because well it was only 10 million because somebody else sold a completely different company somewhere else under completely different circumstances and got a different outcome like so

Wil Schroter: what Yeah, yeah, exactly, you know, and and and I'm sitting down with him just like dude, you never need to work again, like not in a meaningful way like you have enough money, not even just like a live off the interest thing, I mean you have so much money that you could take a decade off, right and not work right? And and to his credit, he did understand that, but within the circle you know of his influence and other folks, he got the sense that that that wasn't a big enough number. God does that kiss me off, I probably spent the entire lunch telling him why that was so much money and then hopefully sticking with the check,

Ryan Rutan: let's hope so

Wil Schroter: yeah, but seriously, I mean if you are so fortunate in this life to get to that exit one time and I don't care if it's 50 K 250 k 25 million, there is no shame in that game, right, any entrepreneur and the founder Ryan, that you and I ever meet that has ever had the good fortune to be in that 1% of people that ever sees that outcome, man high fives all around, right? You are the man slash woman and and so I think that the, the narrative around how income is kind of calibrated and what those outcomes look like need to be very, very, very different.

Ryan Rutan: Well, that's going to do it for this episode of the startup therapy podcast. But in the meantime, if you love what we're doing, head over to itunes and subscribe and comment if you want to contact us directly, we're not hard to reach, email us at therapy at startups dot com will and I respond to every email that comes in, Please don't be shy. What we learned today is a tiny fraction of the help that you can get from startups dot com. Whether you need to learn how a startup gets built to find a mentor or raise capital to find new customers or if you just need to connect with founders who are dealing with the same shit you are, you'll find it on startups dot com with all that said, let's get back to building our startups. This is Ryan, Rutan for my partner Wil Schroder and the entire startups dot com community saying goodbye for now. Friends

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