Author Topic: Choose "5 years to FI" vs. "Swing for fences with Startup"  (Read 4144 times)

MrMetalMoney

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Mustachians - I solicit your experience and guidance on an existential topic.

Micro-background: 42 years old, wife, two kids, one in college already, the other in middle school. Worked at a startup the last few years, though I was not a founder and had limited equity. In other words, not "fuck you" money. Was acquired by small-cap last year, cashed out my options, proceeds went to mortgage pay-down and index funds in taxable account, since 401k was already maxed out. I remain there as a well-paid employee.

Current financial situation: no cc debt, no car loans, just monthly living expenses and mortgage. College funding for kids to go to state schools is on track. 401k maxed out, don't qualify for IRA. Mortgage contributions accelerated for payoff by 2020.

All sounds cool, right? Except I'm professionally falling far short of my ambition. I want professional independence - I want to map my own roadmap. I won't go into it further rather than to say I have entrepreneurial ambitions, and based on my expertise, experience, and network in my field, I have actionable opportunities right now.

I prefer not to think about targeting early retirement, but instead like the term FI, and if I may, coin another: PI - professional independence. Meaning I can do what the fuck I want in my career. I could form a startup, I could form a consulting practice, I could take a year off to experiment and build something in stealth mode... whatever.

Dilemma: My company will likely give me a new position and a raise. I have a stock grant that vests over 3 years. The stock grant could pay off my mortgage by itself. I'll be $1M net worth by late 2018 if I stay. at age 45, I could then claim PI and have enough fuck-you funding to do what I want without worrying about cash flow.

Or, I could leave now, hussle my own consulting gigs for cash flow while building some new technology for a year, either bootstrapping it with some pilot customers or getting funded. In this scenario my income will likely be short of where I'm at now, at least for a few years. The upside however, is limitless. I could be worth 7 or 8 figures some day before age 50. I really am that good. :) (no, really).  But there's no guarantee, of course. Importantly, aside from net worth, this is my passion.

So should I sit tight for a 3 years collecting my nice fat paycheck and stock grant and shore up my independence, or do I swing for the fences NOW, while I'm young, at the top of my game, and the market I'm in is ripe?

WWMMMD?

Thanks!


NearlyThere

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #1 on: May 17, 2015, 06:42:59 AM »
I'm an entrepreneur myself, so I'll always ask "Whats the worst that could happen?" and if you can live with the absolute worst, then do it. I don't know anything about your own ability to create a start up, but I do know its very a very different experience when you're calling all the shots.

I probably won't need to start another business in my life as I'm a couple of years from FI, nor would I want to as the past 6 years have seen massive sacrifices (and benefits). Its tough work, but if you are willing and able, do it.

forummm

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #2 on: May 17, 2015, 06:51:31 AM »
If you were FI today, would you rather retire or start a new business?

vivek440

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #3 on: May 17, 2015, 07:08:47 AM »
Go where your heart lies and your passion! If you will follow your passion, there is no reason why you will not do well! Worst case scenario - On following your passion, still if you don't do *so* well, at least you will enjoy the journey! Go for it!!!

fa

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #4 on: May 17, 2015, 07:30:42 AM »
I think the answer lies in your question.  Your OP talks about being essentially professionally unfulfilled.  Yes you could take the sure route and be financially set but professionally falling short.  I read in your post that this is not really about finances.  It is about taking an opportunity to show yourself and others how much more you can do.

On the downside, starting up a company is typically very time consuming.  You have one child in middle school.  By the time your new company is on a roll, your child will probably be out of the house.  Precious years will be lost forever.  Then there is the financial risk.  What if your start up does not do as well as you think?  Investors typically want your personal guarantee before putting in money.  Are you willing to sacrifice your family's financial security to pursue your professional dream?

Givne that you will be FI in only 3 years, I would pick that.  But I think that you may not ever be happy if you don't start your own company.  This is about something different than money.  The money is just to keep score.  Best of luck!

Roland of Gilead

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #5 on: May 17, 2015, 08:18:01 AM »
Most startups fail.  The media only covers the few that succeed.

That being said, consulting and contracting can make you some big bucks.  My wife was pulling in $200/hr as a software engineer consultant but had to do some serious traveling.

forummm

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #6 on: May 17, 2015, 09:16:03 AM »
If you were FI today, would you rather retire or start a new business?

If you would just retire, then maybe pushing through for the next 5 years and for sure getting to retirement is the way to go. And after you were FI you could do whatever you wanted (including a new business if that's of interest). Pushing forward is almost certainly the quickest way to FI. Even if you were one of the very few with a startup that lasted for the 5 years, you probably wouldn't be much richer in the 5 years than if you just pushed forwards.

If you would start a new business, then maybe that's telling you something. You could still just get to FI and start the business without having to be distracted by consulting or being at all worried about money. But maybe the enjoyment of it would be worth it to you in the short term. Most likely your business will fail, no matter how great you personally are. So after you got through failing, you would still have X more years to being FI (X may be higher or lower depending on what your personal finances did while you were plowing your time into the business).

vivek440

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #7 on: May 17, 2015, 10:28:12 AM »
Most likely your business will fail, no matter how great you personally are.

Why do you say so?

forummm

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #8 on: May 17, 2015, 10:38:52 AM »
Most likely your business will fail, no matter how great you personally are.

Why do you say so?

Something like 80% of small businesses fail in the first year. And many more fail in the next 5. Starting a new business is really hard, even if you have a great idea and a great work ethic. The numbers could be different for tech startups. They might actually be worse though, since the barrier to entry is so low (just need yourself, an idea, and a computer).

Rubic

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #9 on: May 17, 2015, 11:42:25 AM »
Dilemma: My company will likely give me a new position and a raise. I have a stock grant that vests over 3 years. The stock grant could pay off my mortgage by itself. I'll be $1M net worth by late 2018 if I stay. at age 45, I could then claim PI and have enough fuck-you funding to do what I want without worrying about cash flow.

Or, I could leave now, hussle my own consulting gigs for cash flow while building some new technology for a year, either bootstrapping it with some pilot customers or getting funded. In this scenario my income will likely be short of where I'm at now, at least for a few years. The upside however, is limitless. I could be worth 7 or 8 figures some day before age 50. I really am that good. :) (no, really).  But there's no guarantee, of course. Importantly, aside from net worth, this is my passion.

So should I sit tight for a 3 years collecting my nice fat paycheck and stock grant and shore up my independence, or do I swing for the fences NOW, while I'm young, at the top of my game, and the market I'm in is ripe?

I was in a similar position as you are at about the same age.  It's a tough decision, but since I've spent most of my life as an entrepreneur, I opted for swinging for the fences.

It's been a wild ride and I've built some fabulous products, but you have to know what you're getting into.  Aside from reduced cashflow -- sometimes negative cashflow -- you've got to be prepared for this commitment to swallow up any semblance of a normal life.  You've already been through a startup company, so you know what it will be like, but it's a lot different when you begin in your 40's compared to your 20's or 30's.  The risk of burnout is high and you won't physically recover from the stress and long hours the way you did when you were younger.

If you stick around another 3 years, you can take an indefinite sabbatical (I once worked briefly as an intern in silicon valley startup to catch up with new technlogy) and possibly form a new startup, directing younger talent to build up a successful business.  The downtime between your current gig and future one could help recharge your batteries.

But I understand the desire to strike out on your own.  Just be aware that it will probably take its toll on you over the next few years in ways you don't anticipate now.

Best wishes.

MrMetalMoney

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #10 on: May 18, 2015, 04:14:43 AM »
Wow, great replies. As several of you inferred, my preference is of course the entrepreneurial route, and it is in fact what I'd be doing if money were not an issue at all.

forummm is right about the failure rate of small businesses, but I sense that the failure rate of the entrepreneur him/herself is much lower. You should be able to have more than one chances at bat. My idea is that waiting to take that first swing is the what affects my lifetime chances the most.

You guys picked up on why this is not such an easy decision. I'm no stranger to hard work - I worked tirelessly at my last startup because we were all shooting for a $1B valuation. Many nights and weekends with my laptop prototyping new features, debugging problems, but along the way I think I found a good formula for balancing work/life. I spent plenty of time with my kids by taking advantage of telecommuting. I relaxed by exercising, so I'm in really good physical shape. Really the key was to not spend too many junk hours watching television or shit like that. There's no question in my mind that it will be easier now with kids aged 19 and 12 than it was when they were 9 and 2. I'm simply not driving all around town bringing them places all the time. Baseball, soccer, dance, karate, music lessons... we've simplified.

But alas, I wasn't a founder, didn't have the $1M+ exit I was working for, so here I am. Older, wiser, just a tad richer.

The sabbatical is a very, very interesting idea that hadn't occurred to me.

rubic, could you elaborate on how you pitched this idea to your employer?

consulting and contracting can make you some big bucks.  My wife was pulling in $200/hr as a software engineer consultant but had to do some serious traveling.

I know. I did it 10 years ago, and in retrospect I would have netted far more over the last 10 years if I just kept doing that rather than joining the startup.

Investors typically want your personal guarantee before putting in money.  Are you willing to sacrifice your family's financial security to pursue your professional dream?

Givne that you will be FI in only 3 years, I would pick that.  But I think that you may not ever be happy if you don't start your own company.  This is about something different than money.  The money is just to keep score.  Best of luck!

I won't be taking investment until there are customers. And no, I'm not comfortable sacrificing anything about my family's financial security. butlike anything in life, I am comfortable putting a portion of it at some risk in order to enjoy a payoff.

Rubic

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Re: Choose "5 years to FI" vs. "Swing for fences with Startup"
« Reply #11 on: May 18, 2015, 06:50:20 AM »
rubic, could you elaborate on how you pitched this idea to your employer?

By that time I'd already cashed out, so there was no idea to pitch.