5 ms·

Y Combinator has one of the strongest brands of any investor, which matters a ton for recruiting. It's very hard for engineers considering working at an early

by s17n 6y ago

Y Combinator has one of the strongest brands of any investor, which matters a ton for recruiting. It's very hard for engineers considering working at an early stage company to determine whether it's legit or not, and Y Combinator is probably a better known name than any VC. Personally when I was looking for jobs I'd immediately disqualify any company that wasn't backed by a relatively small list of investors and YC was on that list.

mediaman 6y ago
Would you disqualify companies that had bootstrapped successfully, were profitable, and did not take any outside money? Not a judging question - I understand the value of a good investor's due diligence and backing in improving the odds of sane leadership. But it's interesting to think how that can impact a successful, self-funded copmany's access to talent.
- NationalPark 6y ago
  I think there are so few tech companies that are entirely bootstrapped and profitable that you could probably take the time to specially consider one if they made an offer.
  - winphone1974 6y ago
    There's way more than you think, b they just don't need to spend time on the PR front building a public persona. They also get the opportunity to take outside money from a position of far greater power for things like paying out strategic early employees vs.v keeping the lights on. I've been involved with 2 companies that took private equity instead of IPOs because of the operational changes that a public listing entails. It takes longer to grow to this point, but the deals were substantially easier and quicker.
    - NationalPark 6y ago
      Could you share some examples? Every unicorn I can think of took some VC funding. But maybe I'm missing some niche SaaS type companies?
- drewrv 6y ago
  As a founder, self funding makes a lot of sense, as you avoid dilution and aren’t beholden to a group of people expecting 10x growth every year. But as a candidate I’d be cautious about taking a job at a self funded startup. They’re probably cash constrained so the base salary might not be as much. And if there is equity, I would want management beholden to people expecting 10x growth.
  - msoad 6y ago
    As an engineer I would love to work for a company that makes money and pays me from that money.
    - marcinzm 6y ago
      Curious, why does it matter if your paycheck comes from VC money or revenue money? In the end the same amount comes to your bank account.
      - jccooper 6y ago
        It may matter if you'd rather not look for another job in a year or two when the VC money runs out.
      - chrsig 6y ago
        VC money dries up. Revenue money is self sustaining. From a job stability standpoint, the latter is much more appealing.
      - codingdave 6y ago
        Because VCs work by pushing for high returns on some of their investments, not low returns on all of their investments. They therefore push for business decisions to force high growth, when there can be a better chance of success with a slow burn in some situations. So you end up taking business risks to chase high growth, instead of simply focusing on a niche market to stay profitable, and having a flexible timeframe for growth. As an engineer, this does hit the paycheck directly - if they go hire more devs to speed product features to market while at the same time increasing sales and marketing... it can change from a bootstrapped model with no end to the runway into a situation where you do have a runway, and it is counted in months, not years. Instead of steady pay with plenty of time to deliver new product, I'm being pushed to deliver quickly, and if we fail, we're unemployed. And yes, we probably get lower salaries for that model because we are taking less risk. But steady, lower stress work is desired by some of us, and a small bootstrapped group delivers it better than a VC.
- marcinzm 6y ago
  As someone else said, as an employee my goals align better with investors than with bootstrap founders. I want good salary and equity that will grow rapidly in value and be liquid in reasonable time. I also want some reasonable measure that my equity is in fact growing in value. Even if the company doesn't go liquid in reasonable time with outside investors the chance of them being able to buy my stake at fair market value is decent.
  - winphone1974 6y ago
    IME you're not getting equity but options, which have no ownership or value, no market and restrictions on transfer, exercise and lifespan. No one is going to buy you out in the future, so if there company doesn't make it big they have no value. Established, profitable companies can do profit sharing or use a shadow equity plan that actually rewards you in an ongoing basis. YMMV
  - robocat 6y ago
    > as an employee my goals align better with investors than with bootstrap founders. If you are a gambler, VC equity is best. If you want to maximise your expected returns, equity in a bootstrapped company is better IMHO. VCs have their risks spread across multiple investments, where you will only be able to work for a limited number of companies before burnout or ageism hits you (if you don’t win a D10 die roll). Also VCs get liquidation preferences. Finally, when younger we undervalue money in our wallet and the value of our own time: $200k at 20 (if invested) is often worth a lot more to you than $x at middle age; and as you get older you tend to start valuing your vacation time very highly! Work through the numbers for your time investment (time is your pot because we all only have x years) using the Kelly Criterion[1] and you will be surprised to see what drops out as the optimal strategy. I would be interested to see a Monte Carlo simulation of outcomes where we can choose different strategies. Edit: many people seem to be chasing money and joining the cult of startup to achieve high status. If you care about status, there are far more optimal paths than chasing a big equity payout. One thing I notice as I get older is that money is a very poor proxy for status, and that you tend to find your peer group earns about the same regardless of earnings, so chasing $ for status is loser’s race. Disclaimer: I just want to not work if I don’t have to and to be able to spend my time on my own goals. That requires enough $ for a nice house, some fun, and a comfortable retirement - and it appears I have got that via being a cofounder of a bootstrapped company. Edit 2: The IRS would have the stats on actual returns for startup employees over the whole sample population. That would be fascinating to know! [1] https://en.wikipedia.org/wiki/Kelly_criterion https://en.wikipedia.org/wiki/Kelly_criterion
- askafriend 6y ago
  > Would you disqualify companies that had bootstrapped successfully, were profitable, and did not take any outside money? Yes. Absolutely. If you're going to pay me in equity, I am an investor. If you can't paint a picture of goals, timelines and a sense of what an exit looks like - I'm not joining you. If you're paying my comp in cash, then you can do whatever you want. But know that the cash comp will have to be very high to convince me - probably too high for a bootstrapped startup.
jt2190 6y ago
Isn’t this factor dominated by the increased risk of failure that venture funded early-stage companies have? Does being funded by YC move the needle toward “success” by a noticeable amount? Or is there something else that you value that YC brings?
mlthoughts2018 6y ago
This can also go the other way too. YC repeatedly exhibited horrific treatment towards Michael O. Church. I know many, many software engineers who personally hold a severe grudge against YC for it, and the YC brand is an instant signal that they would reject that company.

by s17n 6y ago

mediaman 6y ago

Would you disqualify companies that had bootstrapped successfully, were profitable, and did not take any outside money? Not a judging question - I understand the value of a good investor's due diligence and backing in improving the odds of sane leadership. But it's interesting to think how that can impact a successful, self-funded copmany's access to talent.

NationalPark 6y ago
I think there are so few tech companies that are entirely bootstrapped and profitable that you could probably take the time to specially consider one if they made an offer.
- winphone1974 6y ago
  There's way more than you think, b they just don't need to spend time on the PR front building a public persona. They also get the opportunity to take outside money from a position of far greater power for things like paying out strategic early employees vs.v keeping the lights on. I've been involved with 2 companies that took private equity instead of IPOs because of the operational changes that a public listing entails. It takes longer to grow to this point, but the deals were substantially easier and quicker.
  - NationalPark 6y ago
    Could you share some examples? Every unicorn I can think of took some VC funding. But maybe I'm missing some niche SaaS type companies?
drewrv 6y ago
As a founder, self funding makes a lot of sense, as you avoid dilution and aren’t beholden to a group of people expecting 10x growth every year. But as a candidate I’d be cautious about taking a job at a self funded startup. They’re probably cash constrained so the base salary might not be as much. And if there is equity, I would want management beholden to people expecting 10x growth.
- msoad 6y ago
  As an engineer I would love to work for a company that makes money and pays me from that money.
  - marcinzm 6y ago
    Curious, why does it matter if your paycheck comes from VC money or revenue money? In the end the same amount comes to your bank account.
    - jccooper 6y ago
      It may matter if you'd rather not look for another job in a year or two when the VC money runs out.
    - chrsig 6y ago
      VC money dries up. Revenue money is self sustaining. From a job stability standpoint, the latter is much more appealing.
    - codingdave 6y ago
      Because VCs work by pushing for high returns on some of their investments, not low returns on all of their investments. They therefore push for business decisions to force high growth, when there can be a better chance of success with a slow burn in some situations. So you end up taking business risks to chase high growth, instead of simply focusing on a niche market to stay profitable, and having a flexible timeframe for growth. As an engineer, this does hit the paycheck directly - if they go hire more devs to speed product features to market while at the same time increasing sales and marketing... it can change from a bootstrapped model with no end to the runway into a situation where you do have a runway, and it is counted in months, not years. Instead of steady pay with plenty of time to deliver new product, I'm being pushed to deliver quickly, and if we fail, we're unemployed. And yes, we probably get lower salaries for that model because we are taking less risk. But steady, lower stress work is desired by some of us, and a small bootstrapped group delivers it better than a VC.
marcinzm 6y ago
As someone else said, as an employee my goals align better with investors than with bootstrap founders. I want good salary and equity that will grow rapidly in value and be liquid in reasonable time. I also want some reasonable measure that my equity is in fact growing in value. Even if the company doesn't go liquid in reasonable time with outside investors the chance of them being able to buy my stake at fair market value is decent.
- winphone1974 6y ago
  IME you're not getting equity but options, which have no ownership or value, no market and restrictions on transfer, exercise and lifespan. No one is going to buy you out in the future, so if there company doesn't make it big they have no value. Established, profitable companies can do profit sharing or use a shadow equity plan that actually rewards you in an ongoing basis. YMMV
- robocat 6y ago
  > as an employee my goals align better with investors than with bootstrap founders. If you are a gambler, VC equity is best. If you want to maximise your expected returns, equity in a bootstrapped company is better IMHO. VCs have their risks spread across multiple investments, where you will only be able to work for a limited number of companies before burnout or ageism hits you (if you don’t win a D10 die roll). Also VCs get liquidation preferences. Finally, when younger we undervalue money in our wallet and the value of our own time: $200k at 20 (if invested) is often worth a lot more to you than $x at middle age; and as you get older you tend to start valuing your vacation time very highly! Work through the numbers for your time investment (time is your pot because we all only have x years) using the Kelly Criterion[1] and you will be surprised to see what drops out as the optimal strategy. I would be interested to see a Monte Carlo simulation of outcomes where we can choose different strategies. Edit: many people seem to be chasing money and joining the cult of startup to achieve high status. If you care about status, there are far more optimal paths than chasing a big equity payout. One thing I notice as I get older is that money is a very poor proxy for status, and that you tend to find your peer group earns about the same regardless of earnings, so chasing $ for status is loser’s race. Disclaimer: I just want to not work if I don’t have to and to be able to spend my time on my own goals. That requires enough $ for a nice house, some fun, and a comfortable retirement - and it appears I have got that via being a cofounder of a bootstrapped company. Edit 2: The IRS would have the stats on actual returns for startup employees over the whole sample population. That would be fascinating to know! [1] https://en.wikipedia.org/wiki/Kelly_criterion https://en.wikipedia.org/wiki/Kelly_criterion
askafriend 6y ago
> Would you disqualify companies that had bootstrapped successfully, were profitable, and did not take any outside money? Yes. Absolutely. If you're going to pay me in equity, I am an investor. If you can't paint a picture of goals, timelines and a sense of what an exit looks like - I'm not joining you. If you're paying my comp in cash, then you can do whatever you want. But know that the cash comp will have to be very high to convince me - probably too high for a bootstrapped startup.

jt2190 6y ago

Isn’t this factor dominated by the increased risk of failure that venture funded early-stage companies have? Does being funded by YC move the needle toward “success” by a noticeable amount? Or is there something else that you value that YC brings?

mlthoughts2018 6y ago

This can also go the other way too. YC repeatedly exhibited horrific treatment towards Michael O. Church. I know many, many software engineers who personally hold a severe grudge against YC for it, and the YC brand is an instant signal that they would reject that company.