Founding a funded startup which doesn’t work out largely does not and should not irreversibly damage the founders’ finances. We should stop implying this is routine and stop valorizing courses of action which increase likelihood of it happening, like not taking salary.
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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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This idea also keeps many people from taking any chances at all such as experimenting with freelancing. There’s no such thing as a great experiment. There is only great success or failure
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Are you mostly against this practice because you think in the long run it means only those with a financial safety net attempt founding a startup, or due to asymmetric/unfair risk-reward that investors receive? These are both valid points I've never thought of.
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Is there no merit to the virtue-signaling of taking a pay cut to signal "I really am trying to do everything for my startup to succeed"? It seems without this practice, there is room for abuse to raise money just to have a cushy job with no real intentions of doing anything.
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I think it’s a matter of culture: US is more like Go big or go home, grow or die quickly (by receiving inordinate amounts of funding early), etc. which has pros and cons. Europeans are more likely to go step by step, which again has pros and cons.
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