There exists a culture of “burn all your ships” bravado which does not do us favors. Many who “burn ships” have a high-quality backup plan; the perceived necessity of “burning ships” chases away people who do not.
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“What happens if your startup goes bankrupt?” It sucks. Royally. But you do not do not do not backstop its debts with your own money. You spend the last (paid!) month or so of your employment making sure your employees land as best as you can and directing advisors to wind down.
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Then you do whatever comes next, which is possibly a breather (at your option), possibly immediately doing another thing, or possibly getting a job. The direct economic consequences are within normal tolerances for the gainfully employed professional you have been since taking $.
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“Is this different for bootstrappers?” Complicated, but very important to realize that when you sold 10%+ of your future outcomes to professional investors one of the things they were very explicitly buying was 100% of the downside risk.
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It's crazy to me how prevalent the view remains that willingness to burn your family's ability to eat is a good filter on founder quality. Vs severely constraining quality founders
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I swear if I ever start investing seriously I’m going to write an anti-term sheet and use it for marketing differentiation.
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Could you even have modern VCs and investors without the mountains of well intentioned, broken founders? You can calculate YC's suicide:profit ratio.
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I disagree. Having sufficient funding from day 1 to pay yourselves market rate salaries is a luxury of the 1%. Most successful founders I know made tough financial sacrifices... not because they felt guilty using investor money but because they had to to extend their runway.
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The choice usually is between "spend investor money on a market salary" and "have a few more months of runway". I think for most founders, the sane choice is to opt for more runway.
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Whenever I advise and/or invest in companies, I take the position that founders must be paid competitive salaries. That limits their financial risk but also IMO decreases the overall risk of the startup failing (especially for founders with families).
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