Socrata

A really smart 28-year old I know asked me a very specific question. “When is the right age to start a company?”

My answer was that the answer is less about a specific chronological age and more about your personal circumstances, your current risk profile, your preparedness and your idea relative to external conditions. All four of these characteristics are at least intertwined and sometimes in opposition with each other. Let’s look at each of those four characteristics in order.

Personal Circumstances. Are you married or single? Do you have a significant other? Do you have a mortgage? Are you the primary provider for your family? Can you dramatically reduce your standard of living for an extended period? If you aren’t married and are wired the way most entrepreneurs are wired – not requiring external validation of your self-worth, I think that’s a plus. So if you think you might get married within a few years, I’d lean towards starting a company now.  If, on the other hand, you feel that a having a supportive spouse/significant other would help you endure through some of the dark times, then think about waiting. Financially I think it’s easier to degrade your standard of living by bunking with a bunch of roommates and eating Mac ‘n Cheese for a couple of years when you’re single. On the other hand, if you’re married and your spouse has strong earnings, this kind of partnership can be exactly the ticket needed to allow you start your company and go without pay for a while. I’ve started two companies and known hundreds of entrepreneurs and no matter how much you plan to have revenue and start paying yourself “very soon” it always takes longer than you think. I’d plan for 12 to 18 months without a salary. How much money do you have saved both for your own personal cash flow but also to invest in the company? Generally, you earn and therefore can save more as you get older, but you can reduce your personal cash flow more if you’re younger.  Edge: younger (25 to 30)

Risk Profile. The probability that your company will fail is high. I’m not making a subjective opinion of your startup specifically. I’m just saying that statistically, failure is the probable outcome. Failing early is better in my opinion. You’re going to spend some of your savings to start the company and for personal expenses. The earlier you start and fail, the longer you have to recoup those losses. Edge: younger (22 to 26)

Preparedness. This is the characteristic that wreaks havic in figuring out the optimal time to start a company. The more you learn at someone else’s expense, the better, right? The more experience you get, the better you’ll be prepared. If you wait until you’re 35, you’ll be so much smarter and better prepared, right? I think it depends. You learn a lot starting your own company. Someone once told me that he equated it roughly comparable in cost, time and learning to earning an MBA – $100,000, 2 years and lots to learn. While I do think that you’d be better prepared at 30 than 20, how much more prepared you’d be at 35 than 25 depends a lot on what else you might be doing during that period. Let’s say “Jared” is 27 and thinks he’d like to start a company some day. Jared was hired right out of college by a very large company and has excelled ever since. I’d encourage Jared to consider a transitional role at a startup for 2 years before starting a company. Now let’s say “Janet” is 27 and thinks she’d like to start a company. She spent 3 years fresh out of college at a large company then 2 years at a startup. Jane’s is probably a little better prepared than Jared. Now let’s look forward. Is there another role, at a startup in the case of Jared, and either at her existing startup or another one in the case of Janet, that would really allow either to grow professionally and thereby prepare them a little more? Consider delaying starting a company, but keep in mind personal circumstances and risk profile. Also don’t forget that it’s always a hard decision to pull the trigger and start a company. Lots of people start at 26 dreaming of starting a company and all of sudden realize they are 46 and never did it. Edge: a little older (27 to 32)

Your Idea Relative to External Conditions.   Our current economic climate is certainly bad, but by external conditions I actually mean something entirely different. Startup success hinges far more on timing than the people give it credit. If you’re too early, there’s no market yet. If you’re too late, the market will already have dominant companies with strong motivations for protecting what they’ve built. Time it well, however, and there’s lots of demand and not a lot of competition, which allows you to survive and grow in a compressed timeline. Start your company when the ideal timing for your product or service to hit the market is 12 to 24 months out.  If you are lukewarm about your idea and/or have no problems coming up with what seem like viable ideas for new businesses, consider delaying your plan.

So the answer to the oft-asked question of when you should start your company is “it depends” – on your personal circumstances, your risk profile, your preparedness and your idea relative to external conditions. All in all though, I’d err on the side of pulling the trigger earlier than later. After all, the likelihood is that your business is going to end up looking nothing like what you thought it would be, but you’ll learn a lot along the way. Successful entrepreneurs aren’t usually the ones with good ideas. They are the ones who started with a good idea and adapted it to what the market and their customers showed to be an even better idea.

photo credit: Facebook, Inc. For the record, Mark Zuckerberg was 19 when he started Facebook. I was 35 when I started my first company.

In 2002 I wrote a detailed business plan and created the investor presentation deck for MessageRite, my first startup. One of the key slides, or so I thought, was the gratuitous “Exit Strategy” slide. In my slide I described how MessageRite would one day be acquired by one of precisely four companies I cited by name. Investors would enjoy a handsome return at such time as we were snatched up by one of these four companies. While I was incredibly luckly to have accurately named the ultimate acquirer, I now realize how wrong was the advice I heeded to include that slide in the first place.

This time around with blist, I had no such exit strategy slide in the investor presentation deck I created to help tell potential investors learn about our business.

Certainly it can’t be solely attributed to the presence or absence of that exit strategy slide, but the fundraising outcomes were vastly different for my two companies. At MessageRite we effectively struck out raising venture capital. At blist, we were fortunate to have piqued the interest of a handful of quality firms and are now backed by two of the best in Frazier Technology Ventures and Morgenthaler Ventures.

But raising capital in and of itself wasn’t a milestone and it’s dangerous for entrepreneurs to think of it that way. Raising venture capital was a step we elected to take in our plans to grow a viable, enduring company with a great product and happy customers.

And that’s the point of this post and my advice to fellow entrepreneurs. Forget the exit strategy. A great exit will solve itself by building a viable, enduring business with great products and happy customers. Have the courage to omit the slide and also the courage to tell VCs just that. You are building a strong, enduring business which is the best way to ensure that the investors see a healthy return on their investment.

Are you building an enduring company? I’d love to hear about it.

photo credit A-Wix