What being willing to be poor actually costs

Sean Parker’s career reads like a list of the decade’s internet companies. He co-founded Napster in 1999, while still a teenager, and saw it shut down by the courts. He co-founded Plaxo, the contact-updating service, and was pushed out by its investors. He became the first president of Facebook in 2004, is now a partner at the venture firm Founders Fund, and put money and time into the music service Spotify. Between those companies there were long stretches with little income and uncertain prospects.

The practical meaning of the line is simple. Building a company takes longer than any founder expects, and for most of that time the company cannot pay its founders what they would earn elsewhere. A founder who needs a market salary will either run out of patience or take money on bad terms to get it. One who can live on little, sharing an apartment, cutting costs and skipping the new car, can wait for the product to work and can say no to an investor or an acquirer offering the wrong deal. That freedom is worth a great deal in the early years.

The willingness also works as a filter. People who start companies mainly to get rich tend to leave when the money is slow to come. People who are willing to be poor for a while usually care about the work, which is what carries a company through the dull middle years.

The line glosses over who can afford it. Being poor in your early twenties with no dependents and a family who would catch you if things went badly is a very different thing from being poor at forty with children and a mortgage. For the first founder, a few lean years are an adventure. For the second, they are a serious risk to other people’s lives. Advice to embrace poverty, coming from someone for whom it ended long ago, is easier to give than to take.

Willingness to be poor is also different from willingness to borrow. A founder who lives on savings or a small salary loses only time and comfort. One who runs up personal debt to keep a company going is betting money that will still be owed if the company fails, and the tolerance Parker describes does not cover that.

A founder can make the willingness safer by deciding in advance how poor, and for how long. A founder who knows the amount of savings set aside, the date by which the company must pay a salary and the point at which to stop can accept the hardship with open eyes. Without those limits, willingness turns into drift.