Thread by @banglani

So I have a few (rambling) thoughts on "promoting entrepreneurship", triggered by this morning's discussion with @arnav_kumar, @pratikpoddar and @roshandsilva. <thread>

The Indian startup world has a hoary tradition of exhorting people to become entrepreneurs. The classic trope of keynote speeches at startup events is to invoke glory, riches and social service to encourage salaried employees to start companies.

A version of the same argument is used to encourage students to drop out of college and (gasp) even school.

These exhortations are at best useless; at worst, they are dangerous.

The reason entrepreneurship is not more popular is obvious: it is very risky. Quite how risky is not known to many. Let's do some numbers.

We invest in approximately 0.5% of companies that seek funding from us. Another 7.5% end up raising from other investors. Assuming a few deals go unreported, approximately 10% of companies raise outside financing (the actual number is likely lower).

Now in a typical VC portfolio, 20% of investments achieve even a moderate level of success. That is 2% of all companies that seek funding.

Of course, it is possible to bootstrap your way to success, but it happens rarely enough to not meaningfully change this analysis.

So when someone says "90% of startups fail", remind them that they are overestimating their probability of success by 5x. Entrepreneurship is not just "risky" in the abstract - you literally have better odds playing roulette than starting a company.

To use another analogy (sorry!), startup success is a goldmine that is only accessible by jumping off a plane. Most people die, but a few can get fabulously wealthy.

Now how do you convince more people to jump off a plane? In India, we use two arguments:
1. If you survive, you will get a LOT of gold (riches, glory etc.)
2. Look at this guy right here. He jumped off the plane and survived. You can too!

IMO the only real way to encourage entrepreneurship is to provide a safety net. So when you jump off the plane, you may not hit gold, but you will survive.

Safety nets come in many forms:
1. Other people's money: share the pain of a hard landing
2. Social support: if you fail, somebody props you up (the government, your family, your community)
3. Education and employment history: if you fail, you prop yourself up

When we encourage students to drop out of college to start companies, we deny them the only safety net middle-class Indians have. When we encourage fresh graduates to start companies, we deny them the opportunity to build a resume that will help them get back on their feet.

Bill Gates and Mark Zuckerberg could afford to drop out because they came from wealthy families (lawyer and doctor parents). If a 19-year old middle-class Indian has to drop out, we better provide her a safety net. Selling her the virtues of entrepreneurship won't cut it.

What builds a safety net:
- The government providing funds to encourage entrepreneurship
- Angel investors pooling money together to fund startups
- B-schools offering failed entrepreneurs a spot in placements
- Corporates hiring failed entrepreneurs

What doesn't build a safety net:
- Proclaiming at a startup conference that young people need to leave the security of a job/college and "take the plunge"

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