11 ms·

This is a necessary, if painful, lesson. I remember the layoffs right before leaving LivingSocial in 2012. A raw, human catastrophe. Watching friends pack up t

by tyre 10y ago

This is a necessary, if painful, lesson. I remember the layoffs right before leaving LivingSocial in 2012. A raw, human catastrophe. Watching friends pack up their things, who had been sold on the culture and vision of what the company could be, was an eye opening experience. This is why you focus on business fundamentals. Not because it is sexy, not because you can tell ProductHunt about your run rate, and not because you want impress investors. Because if you fuck up, everyone who depends on you gets fucked. A few words of advice: - Before you raise money, ask yourself if that valuation is realistic or aspirational. If it is aspirational, know that you have to reach that valuation without raising another cent, just to break even. Ask yourself if you are default dead or alive. - Before you start a company, ask if it is solving a problem for customers or your desire "to be an entrepreneur." - Before you hire anyone, ask if their position is a need to have or a nice have. Like customers, few businesses can afford "nice to haves" - There is always capital available for businesses with strong fundamentals who are solving real needs. Layoffs are like throwing up from drinking. Not fun and nearly always your (the founders/managers') fault. - Pace yourself. - Build a company you're proud of. - Build something that people need. - Growth is great for slide decks, but employees can't use it to pay rent. Don't chase hypergrowth as an end in itself. Markets can stay irrational far longer than you can stay solvent, but they can also snap back to reality before you can wake-up.

DarkTree 10y ago
Right now it seems like there are two reasons for creating a company. One is for making a profitable business that creates wealth for the people invested. Two is for creating a product or service that customers need or want. These two revolve around servicing those invested, or the consumers of the product/service, or both. It's surprising to me that no one starts a company solely for creating an amazing place to work. A great workplace and work would be the product/service, and the employees the consumers of the product/service. Sure, you would have to have paying customers to fuel it, but that could always be secondary in some sense. Right now it seems like the workplace is secondary, so why not swap it? I'm sure there are a nice subset of people who would take less (even half) of their current salary just to work in a place that revolves around them and their experience working.. which is the majority of most of our days. Viable? Probably not, but it's interesting to think about and trying to imagine what that place would look like for you personally.
- kbenson 10y ago
  I think the reason it doesn't appear people are creating businesses to be a great place to work, is because if it's created for that purpose, you probably want to get as many people as possible working there to they can share in the happiness. How do you do that? Grow. From the outside, it can look just like any other company trying to grow. Are they adding perks because they need to attract talent so they can compete and grow for growth's sake, or are they adding perks because they think the employees deserve them and also just trying to grow?
- ghaff 10y ago
  You have to get pretty high up in salary level before at least roughly competitive salary isn't a tier one factor for most people. And, even then, salary is often taken as a proxy for overall value--see pro athletes, for example.
- telotortium 10y ago
  Don't forget these crucial categories: - Solving interesting (to the founders) problems - Social club (the most relevant to your proposal) - Ego trip - Nepotism - Tax dodge In all seriousness, I support your point that companies are founded for more than just to make money, even though (most) companies ultimately need to make money.
- gnaritas 10y ago
  > It's surprising to me that no one starts a company solely for creating an amazing place to work. They do, they're called lifestyle businesses and tons of people do them. You simply don't hear about them because the valley (thus VC money) is generally about Unicorns, not regular businesses.
  - rhizome 10y ago
    They're also called names like, "Smuckers." http://www.marcgunther.com/sustainable-smuckers-its-all-in-the-family/ http://www.marcgunther.com/sustainable-smuckers-its-all-in-t... I bet there are a lot of amazing or pretty darn good places to work in whatever that 37 Signals thing is that interviews companies who have been in business for a long time. Found it: https://thedistance.com/ https://thedistance.com/
Cyclone_ 10y ago
This is perhaps the best comment I have ever seen on YCombinator news. Seriously. All very good points that I wish more companies followed.
melvinmt 10y ago
I whole fully agree with the points you make but I want to point out that for engineers in Silicon Valley, it's less dramatic to get laid off than you make it sound (I've been a part of a couple and I've had to lay off people as well). The reality is in that most cases, you just change a tagline here and there, recruiters call you, and you just go on and do the next great thing. The only ones for whom this is a problem are probably the ones with a "nice to have" position and they will have a hard time finding a new job. This sucks, but this is, like you said, also the founder's fault so it's up to the founder to give them a nice severance pay, great recommendations and preferably even introductions to other companies.
- jonknee 10y ago
  > The reality is in that most cases, you just change a tagline here and there, recruiters call you, and you just go on and do the next great thing. That depends where in the cycle we are. You're talking about the normal churn of startups, but in a downtrend the recruiters stop calling and that is the time where it is quite dramatic.
  - ASinclair 10y ago
    This is where I point out the obvious: save enough of your huge paychecks to last you a few months in the event of a downturn. I keep about 6 months expenses in my savings account but it's up to your individual risk tolerance.
    - ryanSrich 10y ago
      6 months of expenses in SV is like $24k just in rent. That's going to hit people pretty hard whether they've saved for it or not.
      - ASinclair 10y ago
        $4k/mo is higher than average unless you're talking about supporting a family as well. If you're supporting a family your risk tolerance should be lower meaning you'll want more saved. Though it should hit people equally regardless of rent. The only difference is that people with lower rents can afford to take lower paying jobs in the event of a downturn. $4k/mo is significantly more than my total monthly expenses. This leads to the other obvious advice: live below your means.
bladecatcher 10y ago
Your opinions on employees cannot be truer. Keeping employees in the dark, even when the founders know what's coming is just terrible
beachstartup 10y ago
> There is always capital available for businesses with strong fundamentals who are solving real needs. just remember, sometimes that capital comes from customers, not investors.
ams6110 10y ago
I disagree that it's the employer's responsibility to look out for the employees beyond paying them the agreed-upon salary. Anyone who joins a startup should know that their job could disappear if the funding dries up. That risk is a big part of why startup jobs pay so well. Look at the company on the basis of the stuff you list. Are they spending lavishly on "nice to haves?" Do they have any customers? Does their business model seem sane? Talk to someone disinterested to try to understand if you're being attracted to hype or to a really sound idea.
- toomuchtodo 10y ago
  > That risk is a big part of why startup jobs pay so well. This is a joke, right? I must have missed something between the below market salary and the lottery ticket 0.2-1% equity grant over 4 years. Please, do tell where these startup jobs are that "pay so well".
  - matt_wulfeck 10y ago
    Maybe you've never taken a hard look at other, non-engineering positions. Where I'm from making $100k a year right out of college with zero experience is quite nice.
    - toomuchtodo 10y ago
      Hold on tight. We'll see if you'll still be making that in 6-12 months. Having lived through the first dot com bust, as well as the 2008 financial crisis, things usually fail slowly until they fail all of a sudden. Have 3-6 months emergency fund saved; if not, start saving today.
      - elbear 10y ago
        That was his point. You're making more, because you also have to live with a higher degree of uncertainty.
        10y ago
eva1984 10y ago
Basically, you are begging those entrepreneur to think reasonable, when they are at their highest...it won't work.
forrestthewoods 10y ago
You can ask for less money? Why didn't anyone tell me you ask for less money? FUCK!@
- Bartweiss 10y ago
  That show has snuck in some remarkably good lessons on startup funding. Just avoiding the mistakes SV has displayed would put a lot of startups in the upper half of the market.
force_reboot 10y ago
There seems to be a huge moral asymmetry in your worldview between hiring and firing, which I disagree with. Yes, layoffs are very disruptive. But not having jobs (or having lower paid jobs) in the first place is also bad. I don't think founders should go out of their way to avoid risk in order to avoid layoffs, because this would also mean employees would miss out on opportunities too. In fact, employees are already aware of the risks of smaller companies, and adjust their expectations accordingly.
je8 10y ago
Bubbles repeat cause no great lessons are learnt. The leaders who fuck up and fail are very rarely in the same positions of influence ever again. The leaders who fuck up and survive (through luck and ruthlessness) are busy inflating the next bubble believing whatever fantasy they cook up about the reason for their survival.
jlg23 10y ago
Wise words, I'd like to add one thing: You are doing it right only if your customers are providing most of your money - if it is VCs, you're probably in a bubble soon to burst.
mpdehaan2 10y ago
Good post. Random thoughts from me on reducing layoff potential: When hiring people, hire people that can work in many different roles/projects, think about hiring a person that will improve the business, not just someone to do a particular thing. This is not saying hire marketing/programmer/designers, but rather, know that a software developer can learn anything in a few weeks and is not just a developer in language XYZ. Hire people when you are really hungry for people and can't handle what you need to do with the number of people you have in a particular area, and you expect that need to be sustained for the long term. Avoid the idea that you can hire contractors for short term things, when contractors is really a euphism for disposable employees. Push management to hire full time employees. Make sure there is available revenue and burn rate to cover people. Even if you need help, hiring people when you are in dire straits may be bad for them if finding a new job is difficult. (Still, providing jobs == good). When projects end, give these folks new jobs and give them time to learn new things, rather than getting rid of them and then hiring new people for the next project that may be booting up in just a few weeks. Larger companies seem rather guilty of thinking a person just is hired for a department/project, and somehow thinks it's ethical to shut down or shrink whole departments. They should instead look about how to have lots of potential ideas in the pipeline for the future and move people around better.
- udkl 10y ago
  "Avoid the idea that you can hire contractors for short term things, when contractors is really a euphism for disposable employees. Push management to hire full time employees" .. Can you elaborate why ?

by tyre 10y ago

DarkTree 10y ago

Right now it seems like there are two reasons for creating a company. One is for making a profitable business that creates wealth for the people invested. Two is for creating a product or service that customers need or want. These two revolve around servicing those invested, or the consumers of the product/service, or both. It's surprising to me that no one starts a company solely for creating an amazing place to work. A great workplace and work would be the product/service, and the employees the consumers of the product/service. Sure, you would have to have paying customers to fuel it, but that could always be secondary in some sense. Right now it seems like the workplace is secondary, so why not swap it? I'm sure there are a nice subset of people who would take less (even half) of their current salary just to work in a place that revolves around them and their experience working.. which is the majority of most of our days. Viable? Probably not, but it's interesting to think about and trying to imagine what that place would look like for you personally.

kbenson 10y ago
I think the reason it doesn't appear people are creating businesses to be a great place to work, is because if it's created for that purpose, you probably want to get as many people as possible working there to they can share in the happiness. How do you do that? Grow. From the outside, it can look just like any other company trying to grow. Are they adding perks because they need to attract talent so they can compete and grow for growth's sake, or are they adding perks because they think the employees deserve them and also just trying to grow?
ghaff 10y ago
You have to get pretty high up in salary level before at least roughly competitive salary isn't a tier one factor for most people. And, even then, salary is often taken as a proxy for overall value--see pro athletes, for example.
telotortium 10y ago
Don't forget these crucial categories: - Solving interesting (to the founders) problems - Social club (the most relevant to your proposal) - Ego trip - Nepotism - Tax dodge In all seriousness, I support your point that companies are founded for more than just to make money, even though (most) companies ultimately need to make money.
gnaritas 10y ago
> It's surprising to me that no one starts a company solely for creating an amazing place to work. They do, they're called lifestyle businesses and tons of people do them. You simply don't hear about them because the valley (thus VC money) is generally about Unicorns, not regular businesses.
- rhizome 10y ago
  They're also called names like, "Smuckers." http://www.marcgunther.com/sustainable-smuckers-its-all-in-the-family/ http://www.marcgunther.com/sustainable-smuckers-its-all-in-t... I bet there are a lot of amazing or pretty darn good places to work in whatever that 37 Signals thing is that interviews companies who have been in business for a long time. Found it: https://thedistance.com/ https://thedistance.com/

Cyclone_ 10y ago

This is perhaps the best comment I have ever seen on YCombinator news. Seriously. All very good points that I wish more companies followed.

melvinmt 10y ago

I whole fully agree with the points you make but I want to point out that for engineers in Silicon Valley, it's less dramatic to get laid off than you make it sound (I've been a part of a couple and I've had to lay off people as well). The reality is in that most cases, you just change a tagline here and there, recruiters call you, and you just go on and do the next great thing. The only ones for whom this is a problem are probably the ones with a "nice to have" position and they will have a hard time finding a new job. This sucks, but this is, like you said, also the founder's fault so it's up to the founder to give them a nice severance pay, great recommendations and preferably even introductions to other companies.

jonknee 10y ago
> The reality is in that most cases, you just change a tagline here and there, recruiters call you, and you just go on and do the next great thing. That depends where in the cycle we are. You're talking about the normal churn of startups, but in a downtrend the recruiters stop calling and that is the time where it is quite dramatic.
- ASinclair 10y ago
  This is where I point out the obvious: save enough of your huge paychecks to last you a few months in the event of a downturn. I keep about 6 months expenses in my savings account but it's up to your individual risk tolerance.
  - ryanSrich 10y ago
    6 months of expenses in SV is like $24k just in rent. That's going to hit people pretty hard whether they've saved for it or not.
    - ASinclair 10y ago
      $4k/mo is higher than average unless you're talking about supporting a family as well. If you're supporting a family your risk tolerance should be lower meaning you'll want more saved. Though it should hit people equally regardless of rent. The only difference is that people with lower rents can afford to take lower paying jobs in the event of a downturn. $4k/mo is significantly more than my total monthly expenses. This leads to the other obvious advice: live below your means.

bladecatcher 10y ago

Your opinions on employees cannot be truer. Keeping employees in the dark, even when the founders know what's coming is just terrible

beachstartup 10y ago

> There is always capital available for businesses with strong fundamentals who are solving real needs. just remember, sometimes that capital comes from customers, not investors.

ams6110 10y ago

I disagree that it's the employer's responsibility to look out for the employees beyond paying them the agreed-upon salary. Anyone who joins a startup should know that their job could disappear if the funding dries up. That risk is a big part of why startup jobs pay so well. Look at the company on the basis of the stuff you list. Are they spending lavishly on "nice to haves?" Do they have any customers? Does their business model seem sane? Talk to someone disinterested to try to understand if you're being attracted to hype or to a really sound idea.

toomuchtodo 10y ago
> That risk is a big part of why startup jobs pay so well. This is a joke, right? I must have missed something between the below market salary and the lottery ticket 0.2-1% equity grant over 4 years. Please, do tell where these startup jobs are that "pay so well".
- matt_wulfeck 10y ago
  Maybe you've never taken a hard look at other, non-engineering positions. Where I'm from making $100k a year right out of college with zero experience is quite nice.
  - toomuchtodo 10y ago
    Hold on tight. We'll see if you'll still be making that in 6-12 months. Having lived through the first dot com bust, as well as the 2008 financial crisis, things usually fail slowly until they fail all of a sudden. Have 3-6 months emergency fund saved; if not, start saving today.
    - elbear 10y ago
      That was his point. You're making more, because you also have to live with a higher degree of uncertainty.
      - 10y ago

eva1984 10y ago

Basically, you are begging those entrepreneur to think reasonable, when they are at their highest...it won't work.

forrestthewoods 10y ago

You can ask for less money? Why didn't anyone tell me you ask for less money? FUCK!@

Bartweiss 10y ago
That show has snuck in some remarkably good lessons on startup funding. Just avoiding the mistakes SV has displayed would put a lot of startups in the upper half of the market.

force_reboot 10y ago

There seems to be a huge moral asymmetry in your worldview between hiring and firing, which I disagree with. Yes, layoffs are very disruptive. But not having jobs (or having lower paid jobs) in the first place is also bad. I don't think founders should go out of their way to avoid risk in order to avoid layoffs, because this would also mean employees would miss out on opportunities too. In fact, employees are already aware of the risks of smaller companies, and adjust their expectations accordingly.

je8 10y ago

Bubbles repeat cause no great lessons are learnt. The leaders who fuck up and fail are very rarely in the same positions of influence ever again. The leaders who fuck up and survive (through luck and ruthlessness) are busy inflating the next bubble believing whatever fantasy they cook up about the reason for their survival.

jlg23 10y ago

Wise words, I'd like to add one thing: You are doing it right only if your customers are providing most of your money - if it is VCs, you're probably in a bubble soon to burst.

mpdehaan2 10y ago

Good post. Random thoughts from me on reducing layoff potential: When hiring people, hire people that can work in many different roles/projects, think about hiring a person that will improve the business, not just someone to do a particular thing. This is not saying hire marketing/programmer/designers, but rather, know that a software developer can learn anything in a few weeks and is not just a developer in language XYZ. Hire people when you are really hungry for people and can't handle what you need to do with the number of people you have in a particular area, and you expect that need to be sustained for the long term. Avoid the idea that you can hire contractors for short term things, when contractors is really a euphism for disposable employees. Push management to hire full time employees. Make sure there is available revenue and burn rate to cover people. Even if you need help, hiring people when you are in dire straits may be bad for them if finding a new job is difficult. (Still, providing jobs == good). When projects end, give these folks new jobs and give them time to learn new things, rather than getting rid of them and then hiring new people for the next project that may be booting up in just a few weeks. Larger companies seem rather guilty of thinking a person just is hired for a department/project, and somehow thinks it's ethical to shut down or shrink whole departments. They should instead look about how to have lots of potential ideas in the pipeline for the future and move people around better.

udkl 10y ago
"Avoid the idea that you can hire contractors for short term things, when contractors is really a euphism for disposable employees. Push management to hire full time employees" .. Can you elaborate why ?