Entrepreneurs have a reputation for being a bunch of risk takers, but startup insiders note that risk tolerance is highly context dependent. It's a whole lot easier to take a leap when you know there's a net there to catch you.
Massive student debt is turning entrepreneurship into a risk too many young people just can't afford to take, founder Jenny Poon argued in an impassioned tweetstorm recently.
It's Way Easier to Take Risks if You're Rich.
When prompted by Andreessen Horowitz VC Andrew Chen to share a controversial opinion about startups recently, one executive answered, "you are far most likely to be successful if daddy is rich." Another veteran startup employee opined, "founders are actually risk averse and not these risk-loving crazy people."
VC Hunter Walk made a similar point in response to the flap about whether Forbes was insane to label Kylie Jenner a "self-made" billionaire. It's not just Jenner, Walk pointed out. A lot more entrepreneurs got a bigger leg up in life than they like to discuss. Very few are completely "self-made."
Together these comments suggest that it's a heck of a lot easier to take risks when you have a cushion of wealth and education to fall back on. Not everyone has that kind of cushion, and as Poon, the founder of incubator Co+Hoots pointed out, the sky-high cost of college is making it way harder for those who start out with less to take the kind of leap founding a business demands.
The Education, Financial Freedom Catch-22
Here's how Poon kicked off her Tweetstorm.
Student loan debt in America is crippling. When you have no ability to take risks bec/ you are buried in debt you will have no flexibility for forward economic mobility. Debt is what takes you backwards. If this could be solved, it would solve so many other problems. ..(1/11)-- jenny poon (@poondingo) October 29, 2019
In further tweets, as well as a fascinating follow-up audio essay she made for the Kauffman Foundation, Poon tells the story of how she worked her way from cutting vegetables at her family's Chinese restaurant to founding her business. A few lucky breaks (and incredible hard work from both her and her refugee parents) enabled her to avoid massive student loans that would have crippled her ability to become an entrepreneur.
"Being debt-free is the ONLY reason I was able to: Start a business in 2009 and not make any money for three months as I learned how to be a business owner; A year later I started another business that required capital. I cash funded that second business. That is now CO+HOOTS," she writes.
"What my parents gave me was freedom. Freedom to make mistakes, take risks and build a future that works for me. Being debt-free meant I could build a profitable business that grew steadily without sacrificing social impact. It simply meant, I had more money to test wild ideas," she continues.
Allowing the cost of college to rise so high means that fewer and fewer young people--especially young people from disadvantaged backgrounds--emerge into adulthood able to take risks. That's terrible both for them and the country, Poon says. No one should be forced to choose between basic financial security and a decent education, because you need both to start a business.
"Without [education and financial freedom] we'll never get ahead. These are the foundational elements for individuals to be successful. And in today's world it's harder than ever to have education without financial freedom or have financial freedom with education, and one without the other is simply crippling our country," she concludes.
Do you agree with her?