The Entrepreneurs Dilemma - Founders Discount vs Fun Fun Fun

Seems to be a surfeit of posts on the Joys of Failure in Entrepreneurship....first GigaOm, commenting on posts by a US VC and a successful Website owner (HotorNot). Vecosys asked about attitude to failure in the UK, and here in Germany.

Well, might as well weigh in with my 2p worth as I am working on my 2nd $ million...my first is now a few pieces of paper worth more than the shares .

I blogged a few months ago that the Founders Discount (what entrepreneurs lose on average by starting up rather than a being a corporate number) is tangible - everyone on your gig - your VC's, employees etc - do better than you. It is a very tangible $30k on average less than doing the same job for someone else.

The entrepreneur is also the only one in the game with all their eggs in that one basket - your backers are playing the odds with a portfolio (and scraping your share every time the odds trip you up), your employees can move far faster (out) than you can, and the market is ever fickle.

So, in order to drive Entrepreneurship the benefits have to be greater than these costs. I think in the US there are 2 major benefits vs the UK:

1. UK vs US law - Bankruptcy means different things, the risks of failure in the UK are higher

In the UK, bankruptcy law is primarily about letting the creditors get their hands on the company assets first (after the Insolvency Practitioners have had their fill, of course). In the US, total bankruptcy - Chapter 7 - has a less onerous "halfway house" - Chapter 11 - that is more concerned about keeping a company (and its officers) viable by allowing it to shake off creditors etc. Hence the dip in and out by large US corporates every so often (the US airlines seem to take it in turn to go through it, for example).

2. The Financial Risk / Reward tradeoff for Entrepreneurs is better in the USA

It is my empirical observation (i.e. based on my own experience and people I know) that it is in general easier to get something new and interesting and risky funded, and with more money, in the US than the UK. And if you hit paydirt - Skype excluded - the rewards are usually higher in the USA. In addition I believe there is much less onerous bureaucracy in the US for small companies, and I understand you can write more off to expenses there as well, thus reducing the cost side for entrepreneurs. (And UK take note - countries like Ireland are giving major benefits to entrepreneurial startups now)

Simply put, I think the higher probability of success x higher reward if successful x lower probability of serious problems if you fail yields a more viable "story" in the US, and I think this impacts the social status of entrepreneurs, and thus the perceived lower stigma (ie lower risks) of failure.

But this is surely not enough...I think Entrepreneurs everywhere basically do it for Fun, Fun, Fun

Doing your own thing is Fun, and if - as in the US - the Risk / Reward is not too onerous, then why not?

Also, I think in the US there is more Recognition for entrepreneurs - media attention (even the deadpool) contributes to this, there are famous Role Models - and this means recognition, validation and status, which is also part of the Fun. And the (mainly Silicon Valley) ecosystem recycles, regenerates and reproduces their succesful model year in year out. Older entrepreneurs pump their cash, memes and genes back into the system.

And speaking of reproduction, a higher probability of more reward plus a greater amount of status makes you more sexy - thus fulfilling that fundamental Maslowian driver of human activity - and Fun - too

(An aside there - I understand that in the USA a bankrupt will in general find it easier to keep other Maslowian basics like house, goods and chattels after bankruptcy too)