Entrepreneurship is Really Risky, Right?
To be an entrepreneur you need to be bold, the usual thinking goes. Most new businesses fail and even if your venture succeeds, starting it will demand bucket loads of time and determination, so if you're not a confident, resolute risk taker the start-up path isn't for you…right?
When many aspiring business owners confess their entrepreneurial dreams to their loved ones they hear some version of this conventional opinion of entrepreneurship as a career option. "Can't you choose something that's a safer bet," say parents across America. "We're only thinking of your best interest."
Your elders' career conservatism may come from a loving place, but there are at least two experts who feel their opinions, however popular and well intentioned, are misguided. Writing on the HBR Blog Network, Bruce Gibney and Ken Howery, two partners at Founders Fund, argue that this thinking fails to take into account both how risky once "safe" career paths have come and also the outsize possible benefits of the entrepreneurism as an alternative:
Entrepreneurship is not riskier than working at a big bank or law firm, a fact vividly underscored by the de facto nationalization of the banking sector and mass layoffs of the last few years. An especially pungent comparison exists between the classically "safe" job of lawyering versus starting a new enterprise. What could be safer than a career at a century-old white shoe firm (aside from the fact that less than a third make partner)? Lots of things, actually. Few law students even get the chance to buy the losing lottery ticket: the government estimates that 215,417 jobs for attorneys will open between 2008 and 2018 and in the same decade, there will be over 430,000 new legal graduates so only half will get to practice in their chosen field (at substantial opportunity and tuition costs). By contrast, of 5,000 businesses started in 2004, almost 56% were still in business in 2010, despite suffering through a brutal economic downturn….
Another consideration: you can actually make real money with new companies. The actual money entailed in entrepreneurship can dwarf the outcomes from legitimate toil at established businesses. A quarter of first-time venture-backed firms are acquired for at least $50 million or file for an IPO. That's not a guarantee that every early worker makes a fortune, but it suggests the odds are better than we would intuit. And in a world that has structurally shifted to bimodal outcomes, why not shoot for the mode that allows you to build wealth?
And if lower than expected comparative risk and higher than expected financial returns aren't enough to improve opinions of the entrepreneurship, Gibney and Howery add, “people who start or join new companies tend to actually like what they are doing.”
If what this pair of VCs says is true, and entrepreneurship is less risky compared to other paths than is commonly acknowledged, why is our image of the start-up life as only for the brave so inflexible? Perhaps because many of us are still struggling to come to terms with how much conventional careers have changed, how fragmentary and unstable the professional future looks for young people today and how few truly "safe" paths remain. Perhaps it’s not that entrepreneurship has become vastly less risky, but that in a world of lightning fast tech change and global competition, that old standby of "getting a good job" has become vastly more risky.
Do you think the risks of entrepreneurship are often exaggerated?