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.
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.