Should you quit your job to start a startup?
You have a job, an idea and a customer who signed a letter of intent. Here is what trying would cost you, how long your savings would last, and how good your odds need to be for it to pay off.
What trying costs, and what it takes to pay off
- Income you give up
- €116,000
- Per year
- €58,000
- Your savings last
- 26 months
If it turns into a paid contract, this customer alone is €5,000 of monthly revenue. That is in the range where we invest at pre-seed.
The chance you need for it to pay off
| Company sold for | Your share then | Pays off if the chance beats |
|---|---|---|
| €10.0M | €2.5M | 1 in 21 |
| €50.0M | €12.5M | 1 in 107 |
| €250.0M | €62.5M | 1 in 538 |
| €1.0B | €250.0M | 1 in 2,155 |
Your share at the exit: 25.0% of the company, after dilution. Before tax, and ignoring the salary you would earn as a founder once the company grows.
For comparison: what usually happens
- 60% of startups fail between pre-seed and Series A.
- 35% of failed startups died because there was no real market need. A customer's letter of intent is early evidence against that.
- 16% of seed-funded companies raise a Series A within two years (Carta).
- 1.8% of seed investments become unicorns, and 1.3% reach $100 million of revenue.
Averages across all startups. A founder with a paying customer, a strong co-founder and a market they know starts well ahead of them.
How to read the result
The income you give up is the gap between what the job pays and what you would pay yourself, multiplied by the years you would try. If the startup does not work, you go back to a similar job, so the real cost is those years of lower pay, not your whole career.
The break-even chance turns that cost into odds. With the default numbers, trying costs about €116,000. Your share of a €50,000,000 sale would be €12,500,000, so founding pays off on average if such an exit has a better than 1 in 107 chance. Most people find that bar lower than they expected for a small exit and much higher for a unicorn.
The model leaves out what money cannot easily measure: what you learn, the network you build, and what not trying would feel like in five years. It also leaves out the founder salary you would pay yourself once the company has raised a round.
Before you hand in your notice
- Turn the letter of intent into a paid pilot. A customer who pays, even a small amount, is worth far more than one who intends to. It is also what most pre-seed investors ask for.
- Check your contract. Look at the non-compete, intellectual property and side-project clauses before you build anything that overlaps with your employer's business.
- Know your runway. Plan for the round to take six months longer than you hope.
- Find a second customer. One letter of intent can be a favour; two from strangers is a pattern.
Once the company is running, the burn rate calculator shows your runway, your odds of raising the next round and what a round would look like.
Frequently asked questions
Should I quit my job to start a startup?
Not on an idea alone. A customer who signs a letter of intent is a better signal, and a customer who pays for a pilot is better still. Quit when you know how long your savings last, when you have a co-founder or know you can do it alone, and when you have tested the idea as far as evenings and weekends allow.
What is a letter of intent from a customer?
A short, usually non-binding document in which a company says it intends to buy your product on stated terms once it works. It shows real demand, but it is not revenue. Investors value it more when it names a price, a start date and a person who signs contracts.
Is a letter of intent enough to raise money?
For most pre-seed investors, no. They want to see paying customers. A letter of intent helps you get to a paid pilot, and a paid pilot helps you raise. We invest after first revenue, and paid pilots with named customers count.
How much does starting a startup cost me?
The main cost is the income you give up: the gap between your salary and what you pay yourself, for as long as you try. The calculator adds it up and shows how long your savings last.
What are the odds that a startup succeeds?
About 60% of startups fail between pre-seed and Series A, and about 16% of seed-funded companies raise a Series A within two years. Around 1.8% of seed investments become unicorns. These are averages; a team with a paying customer starts ahead of most.
What does the break-even chance mean?
It is the chance of a given exit at which founding pays back the income you give up, on average. If trying costs €100,000 and your share of a €10 million exit is €2.5 million, you come out ahead on average if that exit has better than a 1 in 25 chance.
Has the letter of intent turned into a paying customer?
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