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The ladder isn't the only way up

From BostonWorks.com
February 19, 2006

Many twentysomethings talk about feeling undervalued by corporate America.

Alexis Ohanian and Steve Huffman are doing what many others are doing to solve this problem: They started their own company.

At universities such as Harvard and Carnegie Mellon, 30 percent to 40 percent of graduates end up starting their own business after five years, and the trend is poised to go up.

The entry-level job inherently undervalues someone who is bright and driven, according to Paul Graham, partner at Y Combinator, a Cambridge venture capital firm that almost exclusively funds start-ups by very young people. He sees entrepreneurship as the great escape.

''For the most ambitious young people, the corporate ladder is obsolete," declares Graham.

For the last hundred years many started out at the bottom. Even if the candidate held extreme promise, corporations put the candidate as a trainee on the bottom rung so he didn't get a big head.

Graham writes, ''The most productive young people will always be undervalued by large organizations, because the young have no performance to measure yet, and any error in guessing their ability will tend toward the mean."

So, if you are smart and energetic, you might be better off working for yourself. Ohanian and Huffman started their own company before they even graduated from the University of Virginia. Today they are 22, and running their company, Reddit, out of their Cambridge apartment. Huffman turned down a job offer at a software company in Virginia so he could write the software for Reddit, which is a little like social book marking and a little like RSS feed: Think ''the five most e-mailed Boston Globe stories" only not just the newspaper but the whole World Wide Web.

The value of people in their 20s is touted fervently at Google, a company always on the lookout to buy companies from young entrepreneurs. On his personal blog site, Chris Sacca, principal for new business development at Google, wrote about a conference for entrepreneurs in their early 20s that Graham organized in Cambridge last October: ''I was instantly struck by the sheer energy of the crowd. No one was running off to check in with their assistant or jump onto a mindless conference call with sales finance."

Graham estimates a top programmer can work for $80,000 a year in a large company, but he can be 36 more times productive without corporate trappings (e.g. a boss, killed projects, interruptions) and will generate something worth $3 million in that same year if he is working on his own. Before you balk at those figures, consider that Ohanian and Huffman started their company in June 2005 and by November Ohanian said they had received a multimillion-dollar buyout offer from Google, (which they declined in favor of continuing to build the company on their own).

Original Article | Local Copy

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