Is entrepreneurship risky?

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at:

Interesting article:

There are two views on entrepreneurship in America: the first (largely feigned), that it is a pure virtue like freedom of speech or religion, and the second (real) attitude that it is largely a game for the na├»ve. Steve Jobs, Mark Zuckerberg, and Michael Dell make fine fodder for commencement speeches, but when parents and career counselors thrust graduates into the job market, the default isn’t entrepreneurship, it’s corporate serfdom. Entrepreneurship is a deviation, an occupation for heroes, heroic for the reasons it can’t be recommended: it’s just too unsafe. But the conventional position is nonsense; building new companies is far more sensible than the practical will admit.

First, 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. Even as venture capitalists predisposed to have faith in new ventures, we were somewhat surprised that entrepreneurship has such favorable odds (the traditional rule of thumb in venture is that 4 out of 5 companies will flounder, although VC-backed tech companies may be somewhat riskier than the entire universe of new companies).

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? Facebook, like Google and others before it, will make an army of millionaires. They won’t be the last to do so.