The Startup Riches Myth: Sell Your Company For Multi-Millions And Still Not Be A Millionaire


As I head off on my 12 month journey to build into a online advertisement exchange in the personal finance space, I remind myself about the long shot chance of success. I’ve always wanted to be an entrepreneur since middle school, and finally after 20+ years here’s my chance.

There’s an idyllic notion that once you’ve sold your company for multi-millions of dollars you’re filthy rich and never have to work again. I admittedly have this automatic mindset whenever I meet someone who said they sold their company to one of the tech giants. Even if they are still living in a one bedroom apartment with their wife years after the sale, I just think they are being frugal.

By also believing everybody makes 10X more than the value of their car based on my 1/10th rule for car buying I’m able to keep motivation high to work harder since even a Toyota Corolla driver is clearing $200,000 a year nowadays. The goal is to give into the illusion of wealth in order to eradicate self-entitlement.

There is startup fever here in the San Francisco Bay Area partly because of all the stories we hear about 1,000 bagger returns in companies such as Google, Facebook, Instagram, Twitter, Tumblr, AirBnB and more. Sure beats investing in stodgy dividend stocks doesn’t it? Real estate is on fire and it seems like everybody in their 20s and 30s are tech millionaires. Given we have a culture of stealth wealth in San Francisco where you can’t tell a rich person from a poor graduate student, the possibility is real that your unassuming neighbor is rolling in the benjies.

The fact of the matter is that the vast majority of startup founders never make it past year three and even less sell for multi-millions of dollars. Even if a founder sells her company for $30 million dollars to Apple, she probably could have done better working a day job all those years instead, with much less stress! (Related: Joining A Startup Will Probably Make You Poorer Than Richer)

In this article I’ll share with you a very insightful conversation I had with a man who ended up selling his company for tens of millions of dollars circa 2010 three years after business school (Should I Get An MBA?). You’d think as a 30-something year old, he’d just be kicking back on his own private island somewhere blogging right? Not so at all. But before we go through this fella’s example, let’s go through one of my favorite business assumptions first.


When Is The Best Time To Start A Business? When You Are Young, Broke, And Naive

Young Siberian KittiesSince I was 12 I’ve always wanted to be an entrepreneur. I was surrounded by kids whose parents started beverage companies (e.g. Yeoh’s) or launched wonderful resorts (e.g. Pulau Tenggol) while living in Kuala Lumpur, Malaysia. They lived in nice homes and drove fancy cars. I was smitten. Yet even when I was given a clear opportunity to go to China for a startup opportunity in 1999, I couldn’t say “yes” because I was scared and received an offer from a bulge bracket firm in NYC. Nobody turns down Goldman Sachs right out of college so I toiled in the finance world for the next 13 years.

I’ve always wondered what my life would be like if I took the entrepreneurial path instead. My Mandarin would be excellent, that I know at the very least. Maybe I would have been prescient and bought as much property in Beijing as possible before prices rocketed through the roof. Maybe I would be thrice divorced with multiple children given the rules of business engagement are quite different out East. Who knows, but it’s always fun to pontificate.

By the age of 35 I decided I had enough of working for someone. Although I was scared of leaving the comforts of a handsome income, I also knew I’d regret not finally giving entrepreneurship a go in my 30s. Unlike being a nubile 22 year old, I was an industry veteran in finance with an MBA and a large financial safety net thanks to all those years of savings. What was there to lose except for everything?

Major props goes to those who start businesses after becoming a parent. If I ever become a father I think I’d be so focused on not messing parenthood up that I’d leave little-to-no time for entrepreneurship. As a result, my chances of making it as an entrepreneur would be slim-to-none. I’m a very focused individual who is unwilling to fail due to a lack of effort.

As soon as I left Corporate America, I began writing twice as much on Financial Samurai. I created a brandable product on how to negotiate a severance package within the first four months of being free. Coincidence or not, as soon as the book launched traffic more than doubled every month since. Although income from the book is still only a measly $1,000-$1,500 a month on average, total online income streams grew to the point where it’s now greater than my current passive income streams. I think I’m dreaming most of the time.


The TOPMOM Program: Single Mothers Can Make The Best Employees

The TOP MOM Program The following is a guest post by freelance illustrator, designer, and writer Colleen Kong-Savage. There’s nobody more adept at getting things done like a single mother and I’m very pleased to read her point of view.

American society doesn’t think very highly of mothers. Only five nations in the whole big fat world do not have a national law mandating paid maternity: Liberia, Lesotho, Papua New Guinea, Swaziland, and the United States.

After seven months of tossing my cover letters and résumé into a black void, my boyfriend took a look at my cover letters. “Why do you mention that you’re a mother?!” he commented, wondering at my naiveté. I have been freelancing here and there as a graphic artist, and my sentence had been, “Now that my eight-year-old is in school, I am ready to take on more work.” I wanted to let prospective employers know what I’ve been up to the past eight years since I can’t list “parenting” under work experience. Another friend said, “You don’t want to say you’re a mother because employers wonder how often they will have to accommodate your child care situation.”

Are you kidding me?? What is up with this bias against mothers? Don’t American employers realize that all those required skills that they list in their help-wanted postings on Craigslist and LinkedIn have been honed to a lethally fine point as the primary caregiver of a new human being? It’s the TOPMOM program: Training Of Professionals, Multidisciplined Officials, & Managers.


The First Million Might Be The Easiest: How To Become A Millionaire By Age 30

Balandra Bay, Mexico VacationGrowing up in a middle class household made me strong. My parents always drove beaters and frowned upon ordering anything other than water when we went out to eat. I knew my parents were not rich because their incomes were in the public domain as foreign service officers. As a result, I made a conscience choice in high school not to attend one of the two private colleges that had accepted me in order to save us money.

We were by no means poor. We just pulled up to parties in a paintless 1976 Nissan Datsun alongside Audis, Mercedes, and BMWs for the four years we lived in Kuala Lumpur, Malaysia between 1986-1990. I was quite mortified as a kid I’ve got to admit. I knew nothing of expensive shoes because I had none except for my wealthier friend’s hand-me-down Jordans that were two sizes too large. I couldn’t even afford a camera or a Nintendo game system. We led comfortable lives, but didn’t have more than we needed.

I was always curious about my wealthier friends. Many of their parents were business owners so one day I told my father, I too wanted to be a businessman. By the time I was 13 I was hooked on every single episode of “The Lifestyles Of The Rich & Famous,” narrated by Robin Leech. A million dollar house and a $40,000 sports car. What a life! I thought to myself in the 8th grade. Might as well give it a go. That’s when I started really hitting the books.

How Do Hedge Funds Make So Much Money? An Inside Look At The Best Business Model In The World

888 Park Ave - Hedge Fund HQElephant hedge fund managers make $100 million a year CEOs look like mendicants. Guys like David Tepper from Appaloosa, George Soros from Soros, Ray Dalio from Bridgewaters Associates, and James Simons from Renaissance Technologies have all pulled in $1 billion+ paydays for one year’s worth of work before. Is there any wonder why some of the brightest minds want to rush into the hedge fund industry after getting their MBAs or PhDs in mathematics? Saving the world will just have to wait.

The reality of the hedge fund industry is that performance has been piss poor for a while now. Just take a look at the Hedge Fund ETF, HDG as one financial benchmark to gauge performance. The index is up a paltry 2% as of July 2013 while the S&P500 is up over 17%. To pay a 2% management fee and 20% of profits to underperform the broader index by 15% is a travesty. Investors need to demand better.

We only hear about the great hedge fund success stories and the spectacular failures like Long Term Capital Management and nothing in between. Much like in the startup business, most hedge funds fail because they are unable to outperform the markets over a three year period to raise enough capital to make a worthwhile profit. The industry is seeing fee compression given returns have been so poor. That said, all it takes is one or two years of hitting it out of the ballpark to make your mega-millions and retire.

I firmly believe the hedge fund industry has the best business model in finance, if not the world today. Those in the software industry might argue otherwise!


A List Of Career Limiting Moves To Blow Up Your Future

Sleeping on the job.You career is probably your number one money maker. If you blow up your career, you will likely blow up your finances. If you blow up your finances, you will become a bitter person who decides to hate other people for their success. If you hate other people for their success, you’ll happily vote to raise taxes on people who already pay the most taxes without having to pay more yourself. If you become a hypocrite, sooner or later everybody will become like you because nobody will bother working hard anymore. Once we’re all living the good life, then maybe we can conquer new countries to make their citizens do our bidding. Great job!

The first time I heard of CLM (Career Limiting Moves) was during my first year of work out of college. I went down to the basement level to get some coffee for my senior co-workers. Given I had to get eight orders, I figured I might as well get a haircut next door while I waited. Unfortunately, the barber cut my sides a little too tight and my luscious locks turned into military buzz cut spikes. When I got back to my desk, everybody started making fun of me.

“You trying out for the military Sam?”

“How was your vacation?” (Given I was gone for about 25 minutes)

“Sonic boom!” (In reference to Guile from Street Fighter)

“Where’s Sam and what did you do with my grande mocha?”

It’s customary to get ribbings on the trading floor of a major investment bank so I took it like a man. Then out of nowhere, I thought of the best comeback lines when a senior VP started giving me more shit.

“I hope you like your coffee. I figure if it grows on company time, might as well cut it on company time!” BOOM! The senior VP wasn’t too amused. Welcome to my first Career Limiting Move! Luckily I escaped to San Francisco the following year for a new opportunity.

Now that you understand the importance of doing well in your career, let me share with you a list of career limiting moves you should not make.