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0 pointsnostrademons14y ago0 comments

I'm curious what the average founder's take is in a talent acquisition. http://ycombinator.com/nums.html indicates that 80% of YC's acquisitions have been for <$10M - so does that work out to about $1-2M per founder, after investors and employees get their cut?

Not chump change by any means, but skilled engineers in Silicon Valley can easily make $250K/year in total compensation. If a startup takes about 3 years of ramen wages to come to fruition and then the founders are locked up for another year while they vest, the plain old employee will have made about $1M in the time that the startup founder made maybe $2.5M. Startup founder is still ahead, but they took on all the risk of their startup failing and them getting nothing, and the difference is only about a factor of 2 instead of an order of magnitude.

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pg14y ago

Yes, talent acquisitions tend to be 1-2m per founder. The founders make more after tax though because they pay long term capital gains tax rather than income tax.

A talent acquisition is not usually the founders' first choice. What they get in return for the risk of the startup failing is the chance of a really big success. A talent acquisition is usually a backup plan. As a backup plan it's a pretty good deal.

(A talent acquisition is sometimes the founders' first choice if it happens early enough. Then it's a better deal because the money is divided by less time.)

zackattack14y ago

>(A talent acquisition is sometimes the founders' first choice if it happens early enough. Then it's a better deal because the money is divided by less time.)

I thought acquisitions were one of the last surviving relics of indentured servitude, besides universities. My guess is that it's still a better deal when you adjust for risk, likelihood of large success, and fully look at the expected value matrix. Though I'm skeptical that you can really discuss probability in the context of multiple people's talents, without historical data (the best proxy I see is that you were _chosen_ by pg or other tier 1 VC, and said VC has this historical record, etc.)

onewland14y ago

$250k easily? I think that's a level of skill that is not at all common.

I'm not saying nobody gets paid that all, but developer compensation needs to be more realistically looked at on this forum. I'd say the majority make less than $100k, and $150k or more puts you in the top 5 percentile.

nostrademonsOP14y ago

The level of skill needed to build a company from scratch and have it bought by Google is also not all that common. Apples-to-apples here: if you're going to compare a startup founder to an employee, you should compare them to someone of equal skill.

Hisoka14y ago

Anyone can "build" a company from scratch.... But it takes a lot to build a successful company from scratch, which isn't what Fridge did here. I mean, I know not everyone is a startup founder, but the costs and barriers to being one is pretty low these days... just start a website, say you're doing something special, and you can call yourself a "founder".

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jsavimbi14y ago

Well, if you're making that magical $100K and you vest after three years for, oh let's say $300K, that'll bring you up to $600K not including benefits and other compensation that could, in theory, make you $250K if you're willing to swallow the opportunity cost of working at $100/yr.

jsavimbi14y ago

Was I downvoted for math errors?

suhail14y ago

You should note: founders do make a salary which lowers risk. We have to eat and pay the bills somehow. So the opportunity cost you speak of is simply the net loss of potential salary - startup salary. Founders probably take nothing in a year one, something small in year 2 (50-80), and year 2+ is variable.

Another consideration is you learn a lot more than you generally would at a big company. There's a lot of value in knowledge and many (despite it sounding corny) deem that as invaluable--worth forgoing 100K/year in salary.

brandnewlow14y ago

Startup founder will also have no shortage of people willing to back her next company and a network of interesting people she can draw on for advice for life. Might that be even more valuable than the money?

diolpah14y ago

This is not always true. Plenty of founders who spend time working instead of networking end up with a sparse network and very few people even aware of their success.

rdl14y ago

Less true if you are the kind of startup which could get talent acquired in the first place.

In the bay area at least, it would be really hard to be working on something worthwhile and remain totally sequestered from a network. The bigger problem is not getting caught up in it to the exclusion of spending time working.

I'm sure it is different outside the bay area, and is absolutely different outside the USA.

akkartik14y ago

I tend to think of offers in terms of how long I can live on the savings from a single year. If you make 100k and save 20k, you make 200k and save 120k[1]. It's not 2x but 6x.

[1] I'm not considering taxes and so on, but the basic idea of leverage still applies.

nostrademonsOP14y ago

That's a fair way of looking at it, but again, you need to compare equivalent lifestyles. If a startup founder lives on $30K/year because they were constrained to that for the 3 years they were growing their startup, you should compare that to an employee also living on $30K/year. In both cases, their expenses are negligible compared to their income. The employee banks about 7 years for every year he works (modulo taxes, which are not insignificant), while the startup founder banks nothing for the first 3 years and then banks 60-70 years in the final year.

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pg14y ago

Yes, talent acquisitions tend to be 1-2m per founder. The founders make more after tax though because they pay long term capital gains tax rather than income tax.

(A talent acquisition is sometimes the founders' first choice if it happens early enough. Then it's a better deal because the money is divided by less time.)

zackattack14y ago

>(A talent acquisition is sometimes the founders' first choice if it happens early enough. Then it's a better deal because the money is divided by less time.)

onewland14y ago

$250k easily? I think that's a level of skill that is not at all common.

nostrademonsOP14y ago

Hisoka14y ago

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jsavimbi14y ago

Was I downvoted for math errors?

suhail14y ago

brandnewlow14y ago

diolpah14y ago

This is not always true. Plenty of founders who spend time working instead of networking end up with a sparse network and very few people even aware of their success.

rdl14y ago

Less true if you are the kind of startup which could get talent acquired in the first place.

I'm sure it is different outside the bay area, and is absolutely different outside the USA.

akkartik14y ago

I tend to think of offers in terms of how long I can live on the savings from a single year. If you make 100k and save 20k, you make 200k and save 120k[1]. It's not 2x but 6x.

[1] I'm not considering taxes and so on, but the basic idea of leverage still applies.

nostrademonsOP14y ago

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