Collection: Mohnish Pabrai - #19 'Startup Secrets'



Today I'd like to share two interrelated thoughts with you. First is some perspectives on startups and the second is some thoughts and adding some amazing richness to your lives.

So let's start with startups. So every year in the United States, there are more than a million new businesses that get started and of these million new businesses less than 1,000 are ventured backed.

Venture backed startups represent less than 1/10 of 1% of all startups. They are an anomaly that can safely be ignored. In fact, most of those people whose names never did something so stupid as to write a formal business plan or spend their time chasing venture capitalist. You do not need money or VC to get a business off the ground.

How can that be? How can you get a business off the ground with no money?

Well, I like to call it "The Secret." Let me share the secret with you. Let the secret be your edge. So you likely have a nice job which delivers a hefty paycheck with some regularity. And that job requires you to work 40 hours a week.

But there are 168 hours in a week. And even after you take up time – take off time – for eating and sleeping and commuting. You still at least another 40 or 50 hours during which you could do a second job. And that second job can be your startup. And that is what I did in 1990 when I was 25 years old.

I have no money in the bank. I used to work on my startup for 1 or 2 hours in the morning before I went to work and after I came back from work until midnight again worked on my startup. I was single, I spent all my weekends working on my startup. Give me long uninterrupted hours. I used to eat a Subway sandwich everyday for dinner, life was great. And anytime I had a client meeting, I used to take a day off as a vacation day and go meet the client.

And after 10 months of doing this, I had my first two clients and I resigned. And my boss he took it in good stride, he tried to get me to stay which I turned down.And then he offered that I could come back anytime after my business failed.

And I would get significantly more money and I'd have my same position back. And so I thought well, this is fantastic because if things don't work out, I don't need to look for another job. I can just come back here I'm making more money. What a country?

I have to admit I had two venture capitalists who backed me to the tune of $70,000. I loved my two VC. They never took any board seats. They never try to give me any advice on how to run my business. They did not even take an equity stake in my company. My two VC were called Visa and MasterCard. (Laughter)

And about a year after I quit my job. I met a wonderful banker who set me up with a low-cost line of credit and I said goodbye to my two VC. And about four years after that we were recognized as an Inc 500 company. One of the 500 fastest-growing businesses in the United States.

And that is the secret, you can walk and chew gum at the same time. And if your business does not compete with your employer. You can keep your full-time job and get your business off the ground. The fatal mistake is to quit – try to live off your savings and spend your time chasing VC.

The way I went about it, I had no pressure. It did not matter, if it took 3 months or 6 months or 18 months to get the business off the ground. The cash was coming in, the rent was current, life was good.



[YAPSS Takeaway]

1. Don't quit your job until your second job provide more than enough cashflow for your living.