I’ve always thought it weird that there is a perception that risk is front-loaded for startups, i.e. the person(s) who start it take all the risk. In some ways, the risk of starting a company (especially a web startup) is lower than ever:

• there are great grant/tax credit programs like IRAP and SRED
• there are more incubators, angels and providers of small seed funds than ever
• its faster than ever to go from concept to commercialization -> you can have paying customers in < 6 months

It just isn’t as hard as it once was to raise $20-$50k and/or have a company generating a few thousand dollars in revenue to cover the early founder(s) costs. The big “risk” is that your life & business align to this cost structure. Your business needs to be able to run with only 1-3 people at first. Your life – no fancy sports cars, no big mortgage, no massive piles of credit card debt, etc. I’d hypothesize, there is a strong parallel between managing personal finances and being able to start a company.

Another big “de-risker”. You have control as the early founder! Only you can lay yourself off. And you control the culture and lifestyle of the company, i.e. you are a lot less likely to hate your job or get fired for hating your job or leave suddenly or have a heart attack or just generally hate life.

Reward-wise, you have a huge chunk of the reward. Shares, not options. Big founders cut. Maybe no vesting. Dividends. There are a lot of paths for you being well rewarded for the risk you took. On top of that, your experience as a first-time entrepreneur will make the second time around all that much smoother, it’ll be easier to raise money, easier to hire, easier to find business partners, and so on. You can have a career as an entrepreneur.

Now, lets compare that to what is traditionally thought of as the “low-risk” employee, lets say employee #8. Poor employee #8 takes on massive life risk, and often gets very little in reward.

Reward-wise, they get something like .5% of the company, so on a typical $20-$30mm exit they get $100-$150k. Hardly life-changing money. If you are a super-star in the company you may get granted up to 1 or 2% but they’ll be vested over an annoyingly stupid schedule such that you’ll have to be at the company for 6-8 years to “earn” them.

Now compare that to all the risks of being employee #8:

• you are far more likely to get laid off than any of the founding team
• you are far more likely to get laid off than a non-startup job
• you may simply not get paid a few times… missed payroll is no uncommon event
• you probably in fact took a pay cut, or at best, you’ll miss out on bonuses when there are a few tight years
• you will likely work a lot longer hours
• there’s no “fast” trade-off, you’ll need to work there 4-7 years to earn your $100-$150k stock option reward, and you may have given up way more than that in time & salary to get there

So, in summary, its a lot better to start your own company than to be employed by a startup. And in many ways its less-risky and better to start your own company than to “have a job”. And I wish I could make more people take the entrepreneurial leap themselves because its simply not as scary as it seems.