Is it OK to Want to Make Money? Slaying Some Silicon Valley Myths

Posted on Dec 6, 2010 | 59 comments

Is it OK to Want to Make Money? Slaying Some Silicon Valley Myths

This past October I was invited by Steve Blank to speak at Stanford for their Enterprise Thought Leader (ETL) series.  The topic I chose to speak about was “lessons on starting a company” but I created the sub-title in class “a Silicon Valley heresy” since my goal was to slay many of the myths I believe exist right in the heart of Silicon Valley!

The truth is that I love Stanford, Palo Alto and the Bay Area in general.  I grew up in NorCal and I formerly lived in Palo Alto.  But I think that the “group think” that can sometimes form there creates a sense that there is but one way to skin a cat.  Myths such as “real companies raise venture capital,”  “you’re selling out if you sell your company for JUST $15 million,” or “companies need two co-founders” need closer examination.  I disagree with all three of these.

In the presentation I also discussed why the fail fast mantra needs to fail, fast, why financial models still matter, why the lean startup movement needs to be careful about changing the definition of the adjective “lean” and why Silicon Valley could learn a thing or two about branding from Madison Avenue.

The awesome thing about this presentation is that Stanford took the time to slice up the content and add titles to each section so that each topic is clearly labeled and anywhere between 2-5 minutes long (the whole video is 57 minutes).  If you’re an entrepreneur (or just interested in the topic or love watching a bit of controversy) I highly recommend checking out the The “sliced up” version, which here (if you click on the video image embedded above it will show the whole video).  You can download the deck here.

Lessons on starting a company

The group discussion was led by Tina Seelig who asked some very direct and well prepared questions during the session.  Afterward, I came and spoke to her (and Steve’s) class on entrepreneurship.  She opened the Q&A session with her class by saying, “Mark, you talked a lot about money in your presentation. Most Silicon Valley legends seem to say ‘it’s not about the money – it’s about changing the world or solving a problem’ that they had.”  Gulp.

It was actually a great question and I thought she asked more insightful and thought-provoking questions than I’m used to.  Actually, it was a wonderful chance to slay another dragon.  The only people who don’t care about money are the people who have plenty of it at which point it’s easy to be “above it all.”  Or as the excellent Micah Baldwin says in this must read blog post, “it all changes when the founder drives a Porsche.”

I get that some people who are in their 20’s also care less about making money.  But then a few funny things happen to you: You get married, you have kids, your parents get older and need access to health care, you buy a house, etc.  Basically, financial pressures percolate and become real.

I hadn’t given much thought to the topic in the way that she asked it so I had to ad lib my answer.  Did I care about money?  Do I care about money?  Should you care about money?  Is it OKAY to want money?  I pondered out loud.

Yes.  People do care about money, up to a point.  Many of you would have heard of Maslow’s Hierarchy of Needs, which highlight how as humans we need our most basic needs solved first in order to be happy such as food, clothing, shelter, safety, etc.  In the version in my head, most of us as entrepreneurs have the most basic life needs already met but when we start our first company (or maybe our second or third) we may not have gotten the basic amount of money to feel financial security out of the way.

Clearly different people have different motivations but I believe the majority of entrepreneurs would love to make this initial money (I call it “feed the family money”) to get it out of the way.  Just knowing that you have enough money to make you feel comfortable (however much that is) is enough for most great entrepreneurs to focus on what really makes us happy: building a company, building great products, taking on the establishment, bucking the rules, leaving a footprint on society and in some small way trying to “make a difference in the world.”

Oh, and as I said in November at a speech at Columbia, another big motivator is simply having the chance to tell all the naysayers to Eff Off when we become successful.

There.  I said it.  It’s not so bad to want a small pile of money.  Many of the people I hear preach, “it should never be about the money,” or “founders should never take money off the table” make those arguments from the convenient confines of their posh Atherton homes having lost touch with what it feels like to share a small apartment in The Mission.

I for one am very pro in seeing founders make this initial pot of money so that our incentives can be aligned.  It is not a gift, the founders need to earn it.  But as I’ve expressed in my two posts on the topic – The Entrepreneur’s Thesis & Should Founders be Allowed to Take Money off the Table – and if you haven’t read these I’d encourage you to check them out.

Or to quote somebody who thinks a lot about what makes people happy, Gretchen Rubin of the Happiness Project wrote in this blog post:

“money can’t buy happiness, but it sure can buy lots of things that contribute mightily to happiness.”

True, that.  And it’s OK to say it out loud.

And once you’ve made your initial coin, get back to work.  But this time on your own set of rules.  You now have something bigger to play for.  And you’ve solved for Maslow’s unwritten rule, “keep thy wife or husband happy and all else in life is easier.”

  • micah

    great post and thanks for the link!

    Ive always said I want to have enough money so I no longer care about money. I dont need private jets, I just need to know that the next call isnt from a creditor.

    I will say, that I do know that money isnt a motivator for me. I look at it more like a scoreboard, where when you are in the business of building businesses, the only indication of success is the accumulation or creation of wealth.

  • Jack Dempsey

    Great post, yet again. Really pumping out a volume of awesome stuff these days!

    I've been quoting you a bunch lately, and smiled as I got to explain to someone what FYM was :-) so glad to see yet another example of a slayed myth. I know I feel the need for that initial chunk, and will be MUCH more easily focused on building whatever comes after it.

  • msuster

    agree. not a motivator for me, either. but i think we can both agree that “feed the family money” is what makes it less of a motivator – especially when life gets more complicated.

  • Justyn Howard

    Mark – would love to hear (read) the dialogue/notes that go with the sausage factory slide?

  • msuster

    the “initial chunk” changes everything and allows you to make whatever choices you want in life.

  • Julian A Waters

    “Just knowing (I) have enough… to focus on what really makes (me) happy: building a company, building great products, taking on the establishment, bucking the rules, leaving a footprint on society and in some small way trying to “make a difference in the world.”

    Sums up what life's about now better than I've been able to say it myself. Brilliant!

  • msuster

    Watch that bit of the video. It's all there in the Stanford speech.

  • giffc

    I look at money as both a scoreboard for success and freedom to take risks and chase big things (especially since I do have a family). So it *is* a motivator, but not in and of itself.

  • Alex Murphy

    Money doesn't buy happiness, and the things you buy with money can help … but there is even a bigger reason for money …

    Think about what Bill Gates is able to do because he has “B”illions of dollars. His foundation is trying to eradicate Malaria from the Globe. That takes CASH! And lots of it.

    If you are able to create extreme wealth, do so. Then go do things that will change the world. Just be a good person while you are doing part 1.

  • danieltty

    Hi I may be off topic here .. but I would like to know whether to become a successful entrepreneur in IT you have to be the one who can work out the technical ideas on your oen, like Google founders on their search algorithm?

    I mean, is it enough that you have a novel idea but are unable to produce the prototype on your own (so that you need to hire some programmers, instead of working on it straight away together with your also technically equipped friends)?

  • Mark Essel

    That last line covers my feelings on wealth. No matter how “independent” I want to be financially, my number one priority is making sure my wife enjoys my company.

    A small dream, to be eccentric and wealthy. I'm more than halfway there.

  • Seth Bindernagel

    great slide deck to add to a set of reminders about starting a business…like this one:

    and, on the money topic, it may also pay to ask someone who started off poor and had to make their way through life/school/whatever somehow. the answer can be a lot different. i think the key is to try to make money without destroying someone (everyone) else's world.

  • Seth Bindernagel

    i could soften the word “destroying” a bit with the word “harming”.

  • jptucker

    Ayn Rand called – she wants her objectivist philosophy back :).

    Money is a powerful motivator, certainly not the only one though. I think the motivational power of money is more or less a bell curve – low when you're young (used to eating Ramen noodles and joining clubs for the free pizza), high in mid-life (to keep the wife and kids happy), then low again when you're older.

    I would love to see a study (probably already exists) on how money motivates different demographics, as this would have some tangible implications for the entrepreneur, with a variety of cash/non-cash compensation options at their disposal, looking to hire both new and experienced resources.

  • Dave W Baldwin

    Congratulations regarding the slicing up of the presentation! That really means something.

  • Willis F Jackson III

    I really strongly agree with the idea that it is ok to talk about this stuff. I want to make and build something that has a lasting and beneficial impact on people, but my wife wants to own a house and raise a family. I think anything that puts those two things together is something worth talking about in the open.

  • GlennLEU

    There's a great quote that goes something like, “Money doesn't buy happiness is something poor people tell themselves to keep from going crazy”. Yeah, money in and of itself doesn't buy happiness, but it sure can help.

    Because it's so easy nowadays to start a business, one or two programmers can make just about anything, and so easy to grow a business with sites like http://facebook.getmorepopular… there's no excuse for any intelligent and capable people to not be working on some side project.

    And yes micah, you don't need private jets, but there's nothing wrong with trying to attain that as a goal.

  • msuster

    While I agree with you, I tend to avoid the “scoreboard” argument because what I've learned the most about getting the “feed the family” money behind me is that people who put up serious numbers on the board financially always have people who made more. People who are motivated by the “scoreboard” are never happy. They're always working their way up the score board trying to get to the next level. People who pursue money for this reason seem to never truly be happy.

  • Rhatta

    A really cool and quick presentation by Dan Pink on the topic can be viewed at…. He describes a study that set out to determine the role money plays in motivating us. Bottom line, it does (but to a point). Once money isn't an issue, people and performance are motivated by purpose, impact and autonomy. I think this aligns with everything you've written… but in a much cooler format (sorry).

  • msuster

    It's OK to make lots of money. I just think that people who pursue “money for the sake of money” as a competition seem to seldom be happy.

  • msuster

    No, you don't have to be able to do it on your own.

  • msuster

    My point exactly summed up more succinctly. It's why people in their early 20's often care less than people in their late 20's / early 30's.

  • Troy D

    Totally a motivator initially to make sure the family is comfortable. There is really some unneeded stress from that. You have enough to worry about to not stress that your house could get foreclosed on.

    But once the basics are taken care of consistently, some of us are all about winning.

    Getting that extra user. Getting that happy customer feedback. It makes no sense why it motivates us, but that's what we're hunting for. Of course getting that extra dollar could also be a motivator, but all things that relate to winning start becoming equivalent. Just pick one to compete.

    Me –

  • Rhatta

    Seth, did you go to St.Ed's?

  • Rhatta
  • giffc

    Ah yes — connotation is so important isn't it — I meant a scoreboard for myself. But in general I think I'm more driven by ego, internal competitiveness, and freedom. I happen to live in a town surrounded by hedge fund and banker types (great schools!). If I was affected by “keeping up with the joneses”, I'd go nuts. 😉

  • Cindy Gallop

    I regularly have to encourage the female entrepreneurs and startup founders I mentor and advise to want to make money, and to not feel it's something you shouldn't be open about or not be seen to want to do.

    Separate from the fact that investors want to know that you are ferociously focused on making sure they get returns, for women entrepreneurs, we don't get taken seriously until we get taken seriously financially.

    It's when women-founded startups raise the same kind of initial funding rounds as Twitter and Foursquare; grow, succeed and exit big; and when we can point to female tech billionaires up there with Steve Jobs & Mark Zuckerberg & Larry & Sergey (as opposed to women entering the Vanity Fair 100 Most Influential People list earliest at number 23 w Lady GaGa :) that more women will be inspired to believe they can do it too, more men will be inspired to believe that women can do it too, and the playing field will be more even.

  • danieltty

    Thanks for the reply.
    But I mean the person just has the idea but no skill at all to even start to work on it..

  • Seth Bindernagel

    Yeah, '95. Your brother is Ben Hatta, right? I am sure you know, but Ed's just won the football title.

  • leehower

    Great post Mark. Agree with nearly all of it, especially the dynamic of “feed the family” money enabling entrepreneurs to be more agile risk-takers.

    I generally don't subscribe to the “it's not about the money” mantra, but the one area I do believe it's true is in those extraordinarily rare entrepreneurs who build very large transformational companies. Yes some of them are motivated largely by financial gain as an end to itself or as a way to keep score (e.g. Larry Ellison). I don't mean that disparagingly… there's nothing immoral or inherently wrong with being motivated by wealth creation.

    But there is some selection bias at work… most tech entrepreneurs who've built transformational businesses could have or would have “stopped” once they attained fantastic wealth, if that was their primary motivation. Mark Zuckerberg was a billionaire quite awhile back. Clearly what propels him and others like him (Jeff Bezos, Sergey Brin & Larry Page, et al) to continue building is an opportunity to transform an industry, have very large scale consumer influence, or other non-monetary factors.

  • Rafael Neaime

    What is the average salary for startup founders?

  • Michael Yap

    Very interesting. I'm actually very keen to get your viewpoints on some of the things that jumped out at me from Micah's post. Having been on both sides of the fence (as an engineer working with a startup and an entrepreneur working on one now), I think the “feed the family money” needs to apply to both ends of the spectrum.

    So all in all, if we draw the parallelism between both threads of thought, it sound to me in this instance like the porche driving founder might be the one in the posh Atherton home having lost touch of his engineering staff's reality sharing an apartment in the mission. I suppose our obligations to the people who work for us is a different subject really, but food for thought.

  • Mike Su

    “Oh please Lemon, money can't buy happiness. It IS happiness”
    – Jack Donaghy

  • Matt Cameron

    caused unnecessary angst during a time of low resources.

    2) You don't have the distraction of worrying about ensuring your family has the necessities – You can pursue your business/personal pleasures without worry about opportunity cost.

    Therefore, at this stage of my life I have a reserve buffer that will never be crossed because I understand how distracting a lack of resources can be.

    Having money doesn't guarantee happiness, but if you live in a modern society and conform to the norms, not having it almost certainly will reduce your enjoyment of life. In closing, I will tip my hat to our Buddhist friends that could lecture me for hours on how wrong I am :-)

  • Rohan

    Very nice one. I actually think 50-50 partnership in general is a bad idea! Always seem to cause trouble!

  • S Jain

    I think money should always be part. Everybody wants to change the world in his or her own way. But money decides what exactly can change. So if the enterprenuer is not enthusiastic about money, he or she might think their idea is changing the world but in most situations it will not. Enterprenuer can go and do all charity with the money earned but the society in which we live in has devised a very unique way of terming what institution is successful or not and that is how much money it has got. Even the Non profit organisations need money to run and if you are starting a start up unless its backed by some huge foundation it better be motivated to earn money else it will close down soon.

  • Kylepearson

    This might be a weird question, but Mark would you say you are representative of the VC community or an outlier as far as your investment thesis and advice goes? I read you, Fred, and Lindzon a lot, so I'm trying to get a feel if you guys are representative of VCs or more outgoing and willing to share than most.

  • msuster

    Agreed. FYI – the largest return in our last fund (the best performing fund in the US for the year 2000) was from a company (Ulta) run by a female entrepreneur.

  • msuster

    I don't think our arguments are at odds. My view is that for many people it's not about the money (other than Larry Ellison, Marc Benioff, Rupert Murdoch, etc.) but about something bigger. But I believe this is only true for most people after they've earned their minimum nut.

  • msuster

    no average. depends on stage, location, type of company, amount of funds raised, age, experience, equity, etc. HBS publishes this stuff in an openly available survey.

  • msuster

    In my second company I was offered “feed the family” money to NOT sell. I opted to sell the company in part so that everybody on the team could earn their first big pay out. I don't think that to this day they even knew about the offer I got. In short, I agree with you.

  • msuster

    Ah, if only we all had Buddhist training and zen minds! I like the idea of a “buffer”

  • Michael from Bay Area

    Are you crazy? Every card-carrying VC knows – without an iota of doubt, no doubt whatsoever, clear as day – that:
    “companies need two co-founders”.

    They know this to be the gospel truth even though they have absolutely no data to support this whatsoever.

    Having questioned this gospel truth of VC community, I wouldn't be surprised if your VC membership card is revoked permanently.

    What heresy is this? What blasphemy! Have you no faith, sir?

  • msuster

    more willing to share than most. doesn't make them all bad – just different levels of comfort publicly sharing things.

  • msuster

    LOL. I have this argument frequently, my good sir. I shall go on being a rogue.

  • Michael from Bay Area

    LOL. You know what happens to “rogues”, right?

    Well, if the mutual fund industry is any indication – the answer is:
    Higher returns than industry average.

    I hope you're okay with such “punishment”! Best wishes.

  • philsugar

    Well said.

    If you have enough money you are debt free (with the house and cars you had when you were in debt), have college money saved up, and a retirement nest egg and are happy with that you can focus on things other than money.

    However, if you keep a scorecard, or want to buy the private jet, etc, etc…money actually comes a bigger problem than it was before. That because somebody will always unfairly have more and you can never get enough because there is always the next thing….

    Some of the happiest people I know just love their normal 9to5 job and some of the most miserable are ones that make more money in a year than I aspire to make in a lifetime.

  • Richard Fawal

    Thanks Mark.

    As an older 1st-time entrepreneur who's put my family's future at serious risk by following a crazy dream to change the world, it's nice to hear someone tell me that wanting to make them (and myself) comfortable is an OK goal. It strengthens my argument to potential investors that yes, if they invest, some of their money will indeed go paying me a reasonable salary, because I'm a much better CEO when I'm not stressing about paying my family's bills each month.

    The truth is, the success of my company depends mightily on the happiness of my family. If they're unhappy, I'm unhappy. And if I'm unhappy, I can't effectively inspire my team. If the team isn't inspired, we're all wasting our time.

  • Geekette

    Shoot, I've always wondered why those “it's not about the money” or “money's the root of all evil” types never respond to calls to unload all that dirty money.

    Needless to say, I never deny the importance of money. To those who say otherwise, I say bollocks, I wanna make money not art.

  • OSU_Matt

    Another great post (almost should stop typing this in every comment to you, people might think we're related or you're paying me… 😉 ) but honestly love the insights.

    I'm from the Columbus, Ohio area and the largest problem I see is almost the opposite. Not that people wouldn't like to make lots of money, but tons of life-style entrepreneurs here. Not the same talent environment as in the Valley (or maybe even LA for that matter), but I fundamentally think the idea of “singles” vs. grand slams is largest reason Columbus might not be a huge start-up hub in the future. TONS of great people here and lots of interesting public-private initiative geared at building the eco-system but frankly few bad ass people who have had $50M+ exits and almost fewer who talk about that. I'm curious your thoughts on this situation. Also, at 22 I feel one of the traps I fall into is that I don't seriously consider starting a company or working for another start-up (full-time this is) unless I see a viable $100m+ market in future. Is this somewhat wise, or will it keep me from ever “getting in the game”. Thanks so much for your thoughts!