In talking to hundreds of entrepreneurs over the years, I’ve had the opportunity to hear from people with a number of different backgrounds. One segment that is particularly interesting is executives from mid-to-large companies looking to make the entrepreneurial plunge. They have an idea, maybe a prototype, and they’re out raising money and often have low six figures ready to go from friends and family.

Now, as an executive at a mid-to-large company, they have $150,000 – $300,000/year compensation packages, so naturally, I like to ask the question: how are you going to reduce your lifestyle to handle a startup salary? A startup salary is often 1/4 to 1/2 what they were previously making, assuming they raise a sizable angel round. Too often, it hasn’t crossed their mind just how little salary they’ll get and how they will have to change their lifestyle.

Here are a few thoughts on lifestyle reduction to take the entrepreneurial plunge:

• At the simplest level, the compensation should be no more than the bare minimum to support the existing lifestyle (e.g. save no money each month and cut down on frivolous purchases)
• One approach is to do a flat, round salary like $50k or $100k and keep it simple, regardless of lifestyle
• Another approach is to maintain a salary similar to that from the large company, but to require that the entrepreneur invest 100% of his or her life savings into the company immediately, so that there’s significant skin in the game and alignment of interests

This is one of the most difficult topics for successful people that want to change things up and become an entrepreneur. Society glorifies the middle class lifestyle and many people get trapped by their mortgage, car payments, school loans, and more such that they don’t have the ability to make a career change without a significant lifestyle reduction.

What else? What are your thoughts on the appropriate reduction in lifestyle to take the entrepreneurial plunge?

Recently I was talking to an entrepreneur about a new B2C web-based product he was building. After digging into the idea and business model, he said he was trying to figure out if he should invest more in product development to accelerate the pace. I inquired as to why he wanted to burn more cash and he said that it would help find success or failure faster.

That’s right — it’s important to determine if something isn’t going to work as quickly as possible. Too often, all the focus is finding a successful opportunity, which is the right approach, but usually happens to the exclusion of determining if it’s more appropriate to hang it up. Most ideas will fail, and speed to failure is an important skill, such that there’s energy and stamina to try a new idea.

Hard work, passion, and being blissfully ignorant are great traits for entrepreneurs changing the world. At the same time, it’s important to move fast to find success or failure as quickly as possible.

What else? What are some other thoughts on moving fast to find success or failure?

Recently I heard a new term called dripping cash into a startup. I was talking to an investor who was describing an investment that hadn’t gone as expected. The startup was running out of cash and it came down to the typical predicament: shut it down, put small amounts of money in the company until it turns a corner, or make a big bet and capitalize it for another 18 months.

Here are some challenges with dripping cash into a startup:

• It’s hard to invest for the future when the plug can be pulled at any time
• With each bridge round comes more disillusionment, especially if the valuation keeps getting lowered
• Desperation starts to set in if milestones aren’t being met, creating a more difficult environment

Now, in the ideal scenario, dripping cash into a startup works and things take off. This investor I was talking to prefers to either shut it down or make a big bet to sufficiently capitalize it — he doesn’t like dripping cash into a startup.

What else? What are some other thoughts around dripping cash into a startup?