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Easy money is not necessarily all that it seems: It drives salaries up and creates an arms race for scarce talent that is crippling to many startups. It also

Easy money is not necessarily all that it seems: It drives salaries up and creates an arms race for scarce talent that is crippling to many startups. It also creates a hype/hockeystick contest which is also largely unhelpful.

twelvedigits 11y ago
I agree. The strategic need for startups to exist in the Bay Area combined with the cost of living/cost of talent has caused costs to soar, necessitating more funding. Combined with easy money, this has been a tinderbox waiting to blow for some time.
rahimnathwani 11y ago
But if there were no easy money then those startups would have less money to spend on salaries as well. If we believe that easy money benefits established companies more than it does startups (not sure) or funded startups more than bootstrapped ones (almost certainly) then the net effect might be bad. But an 'arms race for scarce talent' probably benefits a large proportion of the readers here, and harms a much smaller proportion.
- jhonovich 11y ago
  "But an 'arms race for scarce talent' probably benefits a large proportion of the readers here, and harms a much smaller proportion." In the short term, yes. In the long term, it can lead to crashes where a large number of the readers here may struggle to get jobs at any price for a period of time.
  - rahimnathwani 11y ago
    "it can lead to crashes where a large number of the readers here may struggle to get jobs at any price for a period of time" You mean because high salaries, over the medium term, may result in increased supply of developers?
- grandalf 11y ago
  It surely does benefit many HN readers, but overall the culture is harmed by so many people jumping into software development just because of the money. It has also lured many who would have chosen banking, etc. And in spite of the better developer salaries, many startups can still not afford to let developers be makers and creators, and must instead focus on deadlines and other business metrics driven by fundraising. If the runway for startups were longer, then longer-term thinking and strategy would be more prevalent. Easy money reduces the penalty of a failed startup, and makes it easier for anyone involved (including investors) to jump ship. Since a startup is a stance about the future, this constrains startups who can get funding to those that are able to show traction after about a year, since there is little incentive to continue beyond that, and even a big series A won't pay for much talent in the valley anymore. I think there is just an inevitable tension between investment as a visionary stance about the future vs investment as fuel for a machine that is hungry to grow. Both are essential aspects of the startup ecosystem, but inflated prices and easy money benefits the growth stage startup much more by crowding out the kind of environment needed for ambitious future stuff.
  - rahimnathwani 11y ago
    "but overall the culture is harmed by so many people jumping into software development just because of the money. It has also lured many who would have chosen banking, etc." You've got this backwards. People who would have chosen banking are the ones who are attracted 'just because of the money'. IMO most people who become developers do so because they're interested in software/tech, but most people who become bankers do so mainly/exclusively because of the money (and perception of prestige). "...and must instead focus on deadlines and other business metrics driven by fundraising." This is not an issue for bootstrapped startups. For funded/fundable startups, being beholden to funding cycles is the flip side of getting access to capital.

twelvedigits 11y ago

I agree. The strategic need for startups to exist in the Bay Area combined with the cost of living/cost of talent has caused costs to soar, necessitating more funding. Combined with easy money, this has been a tinderbox waiting to blow for some time.

rahimnathwani 11y ago

But if there were no easy money then those startups would have less money to spend on salaries as well. If we believe that easy money benefits established companies more than it does startups (not sure) or funded startups more than bootstrapped ones (almost certainly) then the net effect might be bad. But an 'arms race for scarce talent' probably benefits a large proportion of the readers here, and harms a much smaller proportion.

jhonovich 11y ago
"But an 'arms race for scarce talent' probably benefits a large proportion of the readers here, and harms a much smaller proportion." In the short term, yes. In the long term, it can lead to crashes where a large number of the readers here may struggle to get jobs at any price for a period of time.
- rahimnathwani 11y ago
  "it can lead to crashes where a large number of the readers here may struggle to get jobs at any price for a period of time" You mean because high salaries, over the medium term, may result in increased supply of developers?
grandalf 11y ago
It surely does benefit many HN readers, but overall the culture is harmed by so many people jumping into software development just because of the money. It has also lured many who would have chosen banking, etc. And in spite of the better developer salaries, many startups can still not afford to let developers be makers and creators, and must instead focus on deadlines and other business metrics driven by fundraising. If the runway for startups were longer, then longer-term thinking and strategy would be more prevalent. Easy money reduces the penalty of a failed startup, and makes it easier for anyone involved (including investors) to jump ship. Since a startup is a stance about the future, this constrains startups who can get funding to those that are able to show traction after about a year, since there is little incentive to continue beyond that, and even a big series A won't pay for much talent in the valley anymore. I think there is just an inevitable tension between investment as a visionary stance about the future vs investment as fuel for a machine that is hungry to grow. Both are essential aspects of the startup ecosystem, but inflated prices and easy money benefits the growth stage startup much more by crowding out the kind of environment needed for ambitious future stuff.
- rahimnathwani 11y ago
  "but overall the culture is harmed by so many people jumping into software development just because of the money. It has also lured many who would have chosen banking, etc." You've got this backwards. People who would have chosen banking are the ones who are attracted 'just because of the money'. IMO most people who become developers do so because they're interested in software/tech, but most people who become bankers do so mainly/exclusively because of the money (and perception of prestige). "...and must instead focus on deadlines and other business metrics driven by fundraising." This is not an issue for bootstrapped startups. For funded/fundable startups, being beholden to funding cycles is the flip side of getting access to capital.