Startup Reasons: Lifestyle, FU Money, or Legacy

With all the talk about founder equity ownership at time of IPO, it’s important to address three common entrepreneur reasons for starting a company: lifestyle, FU money, or legacy. There’s no right or wrong reason and some of these reasons overlap. With entrepreneurs that continually focus on more and more rounds of VC money, they are generally focused on building the biggest company possible, often to leave a legacy.

I know of a local entrepreneur that started and built a nice VC-backed company up to eight million in revenue. The investors decided to sell the business, and consummated a deal for $23 million dollars. Sounds great right? Well, the entrepreneur walked away with his piece of the deal amounting to $250,000. Raising money early in the process, and swinging for the fences, resulted in so much dilution and liquidity preferences that he had roughly 1% of the result. While it wasn’t his ideal outcome, he knew what he wanted to do and he went for it: he wanted to leave a legacy.

Here are three common reasons entrepreneurs start companies:

  • Lifestyle – Some people have the desire to create their own environment, hours, and culture
  • FU Money – Some people want to get rich and not have to report to anyone again
  • Legacy – Some people want to build a large, sustainable company that their grandkids can see

Reasons for starting a company vary wildly. Over time, patterns start to emerge and entrepreneurs typically have one of these three reasons.

What else? What are some other reasons besides lifestyle, FU money, or legacy to start a company?

8 thoughts on “Startup Reasons: Lifestyle, FU Money, or Legacy

  1. A legacy? Really? Someone buys an $8million company for $23million, and it establishes a legacy? Don’t buy it. Rounding error.

  2. I would also add to the list that there are some people that for whatever reason are not overly employable so start a business. This might be because of specific skills or lack of that are attractive to the employment market, attitude or even regrettably in the world we live in, age. These people can quite often turn to running their own businesses and are frequently successful where perhaps they might not have been so successful in employment.

  3. FU Money – not to prevent from ever having to report to anyone else, but perhaps to provide your family a better lifestyle.

    FU – proving your doubters wrong.

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