Over a year or two, millions of people begin using it. Then a gigantic tech company swoops in to acquire it for a billion dollars. Or the startup holds out for a few years and then gets acquired for tens of billions, as was the case with LinkedIn. Either way, the founders and early employees become multi-millionaires, a hundred times over.
Such stories have become part of entrepreneurial lore, and many of us can't help getting a little starry-eyed over the possibilities.
Unicorns are rare
The reality is that your startup only has a 1.28 percent chance of becoming a unicorn. And unicorn status can be as fleeting as the mythical creatures themselves; earlier this year a British tech startup called Powa Technologies went from being worth $2.7 billion to bankruptcy over the course of a few months.
The vast majority of startups require far more time and labor, and don't net particularly impressive financial results. On average, entrepreneurs work longer hours, experience greater stress, and earn 35 percent less over ten years than those who work for someone else. Only about one-third of owner-operated businesses earn more than $10,000 of profit annually, while the median profit for owner-operated firms is $39,000.
Unfortunately, there's an excellent chance that a unicorn may not be in your or my futures. In reality we may be barely scraping our way into the middle class.
Practically speaking, it makes sense not to start a new venture with the expectation that you will create a unicorn. Even more significantly, business experts--academics, investors, and long-time practitioners--agree that entrepreneurs motivated primarily by money do not tend to succeed.
Don't do it for the money
A staff member at the Stanford Graduate School of Business told me she could easily spot students who were drawn to the supposed glitz of entrepreneurship but had no idea what it entailed. "They wanted to be fed. They wanted someone else to give them all the answers," she explained. "Sometimes they wouldn't even bring a pen and paper when they came in."
Those of us who have been on the path of entrepreneurship know what it actually requires: hard work, unwavering faith, grit, perseverance, and sacrifice. It involves taking personal and professional risks, and making thorny decisions. It necessitates every bit of time, effort, and financial investment that can be spared.
Someone waiting to be handed a multi-million dollar check isn't going to be able to withstand such challenges. But someone who is passionate and believes wholeheartedly in what he or she is doing knows all the hard work and sacrifice are worth it--no matter what the financial outcome.
One Silicon Valley venture capitalist goes out of his way to unearth the driving motivations of prospective investees. He refuses to fund those motivated by money or fame.
Instead, he only invests in entrepreneurs who want to change the world in a meaningful way and want to accomplish something outside of themselves. They are the ones that will have the best chance of succeeding through the long, difficult path ahead.
In the business classic The Art of the Start, investor and former Apple chief evangelist Guy Kawasaki writes, "The best reason to start an organization is to make meaning--to create a product or service that makes the world a better place."
For entrepreneurs who truly make their mark, money is a resource that helps them strive for their goals, but it's not the goal itself.
Entrepreneurs gain something else priceless
An early retirement may not be in the cards for most of us. But there's one thing that we in the startup world can celebrate: entrepreneurs tend to have significantly higher rates of job satisfaction and overall happiness than the average American employee.
And that, we can all agree, is priceless.
Your startup likely won't be the next LinkedIn, WhatsApp, or Snapchat. But that's okay. Come a billion-dollar valuation, bankruptcy, or something in between, the true prize is the opportunity to do what we love and to find contentment in that work.
Data source: The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By, by Scott A. Shane