The Upside of a Downturn in Silicon Valley

Re:The Upside of a Downturn in Silicon Valley by rdlecler1 on Friday August 28, 2015 @12:46AM (#10133773)

Let's be clear. There are four tiers of companies. The Googles and Facebooks of the world, that have the ability to pay for talent at whatever cost. The Ubers that get billions in venture funding who need to compete with this limited talent pool dollar for dollar. Then there is the 1%ers that are backed my major VC firms that are having boatloads of money dumped on them. They're trying to get good talent and they need to pay for it. and then there is the rest of us. every nickel is our prisoner. Founders pay themselves no more than they need for rent and food, and often less, and their employees make 2x-3x what they do because the market will pay 4x-5x. This is a winner takes all talent war. Companies that spend a lot of money are forced to, and this will mean that margins at big companies like Google will have to come down. But this is what the market is demanding. There is still tremendous growth opportunities In tech. Almost by definition technology implies growth.

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Re:The Upside of a Downturn in Silicon Valley by adventured on Friday August 28, 2015 @01:04AM (#10133814)

You missed the radical majority of all existing technology companies: moderately successful companies that have taken little to no venture capital, and operate all over the US and the world. Most have been in business for at least three to five years, are profitably self-sustaining and require no major venture capital. Most are growing modestly, and are easily able to keep the lights on and pay real salaries. They have ~$1 million to ~$50 million in sales.

Those companies make up nearly the entire technology industry across the US on a number of companies basis.

Start-ups (both big and small) are the minority and so are Googles/Facebooks.

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Re:The Upside of a Downturn in Silicon Valley by humanrebar on Friday August 28, 2015 @04:22AM (#10134253)

> Founders pay themselves no more than they need for rent and food, and often less, and their employees make 2x-3x what they do because the market will pay 4x-5x.

I don't get that attitude, to be honest. If you were making chicken sandwiches, would you buy discount chicken to cut costs until you "made it"? Would you hire under-qualified or substandard cooks?

OK. You'll "offer" equity to take up the slack. So you're basically requiring your employees to be investors in the company. What is the realistic ROI for the difference in their incomes compared to the market rates? If it doesn't realistically add up to at least 10% APY, isn't the whole setup a bit dishonest?

Well, maybe you're different. You're a guaranteed unicorn, so 0.1% of the company is a huge pile of money. I hope you're right. If you even get a modest buyout after that kind of deal, you're walking away with a nice chunk of change and your employees end up in a big net negative, financially.

So props to the founders who run the math after sub-billion dollar buyouts (most of them) and at least make up the difference to the investors (employees) they over-promised and under-delivered to.

"You don't understand. My pet-messaging flea collar slash social network would never get made if we didn't structure things this way!"

You're probably right. I guess that would be a shame. It still sounds like either a flawed or dishonest business model to me.

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