7 ms·

Going from $110k to $24k for more skin in the game

37 points by BasilPH 5y ago

szundi 5y ago
I had no salaries for 5 years almost and just exited very nicely. This makes sense if you have limited capital and it makes a significant difference. This way you auto-invest your delayed salaries into the company.
sequel_database 5y ago
Wrong move. You're not that guy
devmor 5y ago
Dropping your salary by over 75% to below poverty wages doesn't signal to me that you have "skin in the game", it signals to me that you're compensating for poor choices by making further poor choices and you likely do not think very far into the future.
- lonbigtech 5y ago
  It wasn't clear to me while reading this that the drop occurred while at the company, or was the drop from their prior gig. If they indeed lowered the salary their company paid them... yikes. Especially if a justification is "investor signalling". Sounds like kowtowing to unhappy investors.
- BasilPH 5y ago
  What makes you so sure that it is a poor choice? It's definitely risky, but there's also a large upside. And as I wrote, I have multiple safety nets. > you likely do not think very far into the future This is 1-2 year bet for me.
  - devmor 5y ago
    Safety nets are for emergencies - by definition. If you are relying on them, you are having an emergency, by your own choice. Hard not to call that a poor one. You're trying to run a company while making less than a single experienced engineer. If you even can't pay yourself that much, what exactly have you been doing with your investors' money?
  - tweedledee 5y ago
    Once your safety net is gone you’ll be in a weakened position in further negotiations.
    - mental1896 5y ago
      Or in a great position to start over from scratch.
      - tweedledee 5y ago
        Perhaps I missed the sarcasm? Wouldn’t it be a terrible position to start over?
        mental1896 5y ago
        Depends on your perspective I suppose. As I see it, starting over is a opportunity to try again, this time with all the knowledge you lacked the first time around. You may still encounter many of the pitfalls of the first iteration, but this time, you'll have the advantage of experience.
  - causi 5y ago
    I reduced my salary to force myself to focus on what makes the most sense strategically for the product. You know that sentence is completely incoherent, right? The man running the company suddenly having a bunch of personal financial distractions is bad. You thinking that having less money will make you more focused is a red flag big enough to go in a car dealership parking lot.
- anonymouse008 5y ago
  While I agree with your sentiment and am working through this issue myself... the appeal of the entrepreneurial grind goes hand in hand with a lot of religious suffering, or specifically a Christian martyrdom. Only very recently had a heard a parable that began to challenge the idea that to do deep good, one must materially suffer... However, I'm no where near cured, and hearing your take definitely helps.
  - pirate787 5y ago
    Yeah the author seems to think going to a poverty wage will help him focus.
    - danjac 5y ago
      Unless they have significant savings and/or some passive income, or they don't have family and can live with their parents or adopt a very frugal lifestyle, they will find their focus distracted by worries over everyday things like rent and bills. They are more likely to make poor short-term decisions, or have to supplement their income to do things like consulting or part-time work, to literally keep the lights on. As an investor I'd be very concerned by this move.
  - dfxm12 5y ago
    I do think the idea of redemptive suffering unfortunately permeates (at least) American society too much. If someone else wants to suffer that's OK, but I feel like it's baked into every day life too much and suffering just for suffering's sake is confused with being moral or working hard. I guess that's expected from a country founded by puritans though!
- 999900000999 5y ago
  If I was an investor I'd assume the company was doing very poorly. He's admitting he can't make payroll. 110k isn't a ton of money.
  - BasilPH 5y ago
    We do actually make payroll and have a solid runway. What my salary cut does is: a) signal the investor and the team that I'm serious about this venture, b) increase my equity and c) increase our runway by a couple of months. As I've noted in a top-level comment, my intended message about focus gets a bit muddled without me giving the proper context. I'll add an update to my post with some context.
  - giantg2 5y ago
    $110k is a ton of money to me. But I agree that doesn't look good for a company.
    - devmor 5y ago
      It's a lot of money for a person, depending on where they live. But for a business it's definitely not.
      - coldtea 5y ago
        Well, it's about a yearly developer salary where that founder lives - so not really "a lot of money" for them there, just the expected amount (and FAANGs do better, as do developers in New York working for finance). Whereas his new salary is closer to a burger flipping salary, and actually less.
    - deleted 5y ago
      [deleted]
    - 999900000999 5y ago
      Are you a full time software engineer in the United States ? A decent programer can make at least 100k almost anywhere in the US. I'd expect anyone running a tech company to make more than their own developers. You don't even need to be a good developer, you can use an easier language like Python or JavaScript. Honestly 90% of success in this industry is not being a jerk and showing up on time. I've seen developers outright confront C level execs and predictably it doesn't work out so well. The other 10% is luck. Occasionally you'll have a bad manager, or you'll join a company which doesn't manage their money well. And the only thing you can do in that case is leave.
- sokoloff 5y ago
  Within two inches of that was the reasoning, which included that they had two years' of runway at this level of reduced income. That to me is the opposite of "[does] not think very far into the future."
  - gremloni 5y ago
    How is two years of runway thinking far into the future?
    - PaywallBuster 5y ago
      right, the company should be self sustaining and he shouldn't be burning through his savings
    - sokoloff 5y ago
      It's a horizon several factors longer than they would be able to make course corrections. If you planned what lunch you would eat on January 15th, 2022, I'd also say that you were planning far into the future, even though it's only a tiny fraction of the time between now and the sun swallowing the Earth.
- ac2u 5y ago
  "Dropping your salary by over 75% to below poverty wages doesn't signal to me that you have "skin in the game" Why not? Author remains exposed to the upside through equity but their downside was always limited by their comfortable salary You might think that's a poor choice, and you might be right, but it's the very definition of skin in the game that poorer choices on their part leaves them more exposed to a poorer outcome.
- dfxm12 5y ago
  Or that you can afford to take big risks because you have parents who are willing and able to support you. The rich get richer... I agree with you, having to take such drastic measures to prove (to investors or yourself) that you have "skin in the game" wouldn't look good to me. It's cute to romanticize this ala Rocky III, but coming up with creative ways to overcome a lack of intrinsic motivation to do your job well is drama best left for the big screen, IMO.
deleted 5y ago
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Sosh101 5y ago
I don't really understand the point of this.
JKCalhoun 5y ago
I get the inevitable criticism, he calls it out himself: he's dropping his salary but he can afford to since he has two years of savings to burn through. The sentiment though rings true for me at least — as I have been fortunate to have a large salary, over the years I in fact do finding new-self losing touch with old-self. And losing touch with my roots, my friends less-fortunate lives, etc.
thinkingkong 5y ago
This is a good chance to understand the difference between intrinsic and extrinsic motivation; The motivation that comes from within, and the one that is based on external factors. Sending signals, writing about it, and making visible sacrifices will likely have short lived results. The extrinsic motivations run out pretty fast once you start feeling stressed, spread thin, etc. If you can find some purpose or passion based reason to increase your “skin in the game” it’ll probably last way longer.
WORMS_EAT_WORMS 5y ago
I thought this post originally was about trading wages for equity via “skin in the game”. It seems it’s not though and is about motivation. Motivation for work when you already have money is definitely hard for some. Just go check out /r/FIRE. Huh. Weird post. Depending on the situation, I would want the founder motivated by money (real money, equity money) or just blind passion. I guess stay crazy and try things. Good luck!
- BasilPH 5y ago
  It is both. I do get more equity, but I already had a big chunk before. The reason for the reduction was motivation.
  - phpnode 5y ago
    I think you're rationalising a bad decision, one that weakens your position, and sadly it might be difficult to undo now, so you're even more likely to rationalise this to yourself. If the problem was motivation try and find out why you were lacking it, I suspect the answer was not "I'm too gosh darn rich"
    - WORMS_EAT_WORMS 5y ago
      Eh. People forget they can disagree without putting you down. He has the funds for 2 years and isn’t breaking his own legs. A better analogy would be like Bruce Wayne giving up everything for 2 years to focus in the mountains his ninja skills. OP, do your thing!
tiborsaas 5y ago
He missed the part from the story about how much his stake worth in the company. This move also tells me he can let $86k go because he doesn't need it badly.
tweedledee 5y ago
In my observation the less people pay you the less they will respect you, not more, despite whatever favor you think you’re doing for them.
- sweezyjeezy 5y ago
  He's the founder though...
  - tweedledee 5y ago
    It seems that this pay-cut is for the benefit of the investors - who I doubt will appreciate it as much as he expects. He could take deferred payment, use it to negotiate a bigger stake.
- Jyaif 5y ago
  Conversely, the more people pay you, the more entitled you are.
  - tweedledee 5y ago
    The more entitled they expect you to be... which helps in framing negotiations. E.g. we have to pay MBA guy X dollars or he will be upset.
danrocks 5y ago
Weird attempt to emulate the Gravity Payments dude, but without the profitable company and the good hair (presumably).
jstx1 5y ago
Doesn't dropping your own salary make you look less respectable in the eyes of investors? It did in mine but I'm not the target audience for this publicity stunt.
- marto1 5y ago
  I believe you’re correct, except for the ultra rich. Some of them pay themselves symbolically like a 1$ pr. year , e.g. https://thehustle.co/1-ceo-salary/ https://thehustle.co/1-ceo-salary/ that seems to have a positive effect.
  - jstx1 5y ago
    When you’re getting paid millions in equity giving up your salary doesn’t mean much.
octokatt 5y ago
So, let’s be clear that to focus on how to get social media content for podcasters spreading more quickly, he made a move to grab interest of a population. This is manipulative and, because of his savings, ultimately meaningless. Worse than, by dropping his salary for multiple years, then (most likely) getting the difference in a bonus or equity, he is able to escape being taxed, leading to a net profit.
phpnode 5y ago
Hmm, over two years you're putting in an additional $172k plus all of the time and effort cofounding a startup entails, plus the opportunity cost of doing a startup vs collecting regular tech company wages working a 9-5. Is your investment properly acknowledged in terms of equity? You're also sending a signal to your investors that your time is not worth much, and a signal to your employees that they can also expect scant wages and personal sacrifices. It sounds like a bad deal, one I personally would not agree to, let alone writing about it publicly. It is quite likely that after let's say 6 months of gruelling work you will start to burn out, start to feel undervalued, become difficult to work with and end up getting fired as a result. If things are this tight you should probably raise more money instead.
bottled_poe 5y ago
Despite what other noise says, I would like to discuss your prospects. Please contact me as per my profile.
coldtea 5y ago
Bad idea, that can backfire in many ways: (a) I don't believe my company will afford to pay me $110k soon enough. Don't bother investing here. (b) I don't value my time as a founder/CEO financially (c) I'm thrifty where it doesn't matter (d) I signal employees that this is not a place that pays well, thus getting only subpar employees (e) I signal employees that I'm all for "sacrifice" and thus not professional, and not a good place to work (e.g. if I had any loose excuse to sacrifice them and their compensation, I'd do it in an instant). (f) I'm not mature enough not to buy into all this "ramen founder" BS aspiration stories
- jstx1 5y ago
  > (f) I'm not mature enough not to buy into all this "ramen founder" BS aspiration stories This is the biggest message I got from the article. Everything about it screams that the author is someone you shouldn't trust with your time and/or money.
- gtirloni 5y ago
  (c) I'm thrifty where it doesn't matter Exactly, it absolutely does not matter as much as this person thinks. Investors don't value money the same way you do. This a nice gesture that will be quickly forgotten, an oddity.
- kradroy 5y ago
  > (e) I signal employees that I'm all for "sacrifice" and thus not professional, and not a good place to work (e.g. if I had any loose excuse to sacrifice them and their compensation, I'd do it in an instant). That one rings truest to me and was part of one work experience I had in the past. The owners "buy" a lottery ticket using everyone else's wages and time, but it's "cool" because you're "living the dream." Furthermore, living at poverty level for 1-2 years, especially in New York, eventually gets depressing because you'll have to deny yourself a lot of experiences. Be like the Buddha in your pursuits. Reject asceticism and extreme indulgence and find the middle path. You and your possible future employees will thank you.
emrekzd 5y ago
I hope you find extra motivation from the extreme contraints you forced on yourself in the longer term. Making yourself live on 24k in NYC is not a good idea. Publicly sharing that is an even worse idea. I’d be surprised if this gave a positive signal to your investors, but it surely won’t to anyone you possibly employ/pay salary for.
simias 5y ago
> Sing along with the common people > Sing along and it might just get you through > Laugh along with the common people > Laugh along, even though they're, they're laughing at you > And the stupid things that you do > Because you think that poor is cool https://www.youtube.com/watch?v=yuTMWgOduFM https://www.youtube.com/watch?v=yuTMWgOduFM Frankly I find this type of exercise a bit obscene myself.
- marktangotango 5y ago
  Dude thanks for that, first time I've heard that band, instant fan.
  - simias 5y ago
    Glad you liked it, I also enjoy the cover of this song by William Shatner that's surprisingly good IMO: https://www.youtube.com/watch?v=ainyK6fXku0 https://www.youtube.com/watch?v=ainyK6fXku0
discordance 5y ago
I commend the author. It’s not easy to take risks like this, especially when we are paid so much. In a world where money is so cheap I’m surprised more people aren’t taking calculated risks like this. The opportunity cost maybe high to begin with, but if this doesn’t work I’m sure the author could also get a decently paid job again. He’s well qualified and has lots of experience, so there’ll be another job if he really needs one. Also having a Swiss passport provides a pretty soft landing if things really go wrong.
murillians 5y ago
I enjoy that the author(OP) posted an article about how excited they are to build a product that doesn't have a landing page, social media page, or reference to on their own website.
Andy_G11 5y ago
The consulting / building combo is a good way to keep earning moderately well while trying to build a new co. Building revenue generation is not easy. If you're going all-in on the build, there may well come a point where if your revenues are not sufficient you will start to feel pain. If you can structure the development process to deliver revenue from as simple and maintainable a product as possible and quickly find a route to sales that would be ideal. I would guess that in terms of surviving to long term viability there are far more not-so-great but quickly revenue-generating products than there are great products that were unfortunately slow to get recognised and generate revenue. With cash, further development is possible to clean a product up - without it, even great stuff will rot. There are tons of genius ideas that have been through successful (working) development but then just died because they never made money. Access sales resource - effective sales resource (not easy to find) - as quickly as possible. If you're aiming for investment financing, remember that few things build investor confidence like existing sales and cash flow.
al2o3cr 5y ago
I reduced my salary to signal our investor I mean, "HARDER DADDY" is indeed a signal.
smileysteve 5y ago
A founder and CEO should scarifice their salary if it comes to making payroll. Probably don't want to post to social or mention it increasing your skin in the game until the light is visible though.
shrubby 5y ago
Not the same starting point but I was making decent wage here at my previous jobs. Some logistics management and startups. I don't started to feel dissonance heavily and after the last startup was running out of runway we agreed it was best for me to go. I wasn't a founder either. But I spent awhile trying to figure out what I want to do and my wasn't able. I only managed to figure out what the hell I don't want to do. I was also fortunate enough to be able to afford a year of this downtime. At some point I mentioned that I might actually start working again but have no idea where to go and my friend told, as a joke I o dead sure, that come work with us. We need good guys. So by pure chance I ended up working with disabled kids at a school with a four month trial contract. And loved every bloody second of it. During my downtime I had experienced with my routines and gotten rid of alcohol, meat and car. Also basically decided not to buy anything I don't need, the only luxurious stuff being something odd for my kid. And I realized my life is so much better this way, with shitty salary and simplistic lifestyle. The dissonance about burning the planet down with my lifestyle was gone. I can handle the mortgage alright and can save some for bad days. I don't miss a damn thing from the past that was supposedly way cooler than current life. Life's much more than only money. At least when you get by alright. And "the things you own end up owning you".
erikprotagonist 5y ago
If it is not obvious - this company was started in 2015, and is doing consulting while building a product. This means that they have to balance spending time on a) paid consulting, on b) unpaid product development, or c) investor financed development, or some mix of these. Investors require equity, so if you believe in your product and you can afford it taking a pay-cut it can make perfect sense. As an occasional investor it makes sense to me that you would want to invest in a company where the founders value their shares more than their wages - who would want to invest invest somewhere the founders want to cash out through wages instead of a future exit?
ylere 5y ago
There was a time where I thought the same way: That the founders should reduce their salaries to basically minimum wage until the company is profitable. I believed it was the right and honorable thing to do, while also signaling to investors that we were serious and would not "take (their) money out" of the company until it was appropriate. The problem is that investors are not driven by honor and if things go bad one day they will leave you with nothing and not have your back. You are also always exposed to a higher legal risk and things are a lot easier when you have the savings to pay for counsel in such a situation. The investors even tried to leverage the fact that we had zero savings to force us to agree to very unfavorable terms. I still believe a founder should demonstrate commitment and not unnecessarily drain the startup of resources, especially early on. But you don't have to earn minimum wage for that. At my current startup, the founders are the lowest paid team members, but in today's world of high developer salaries that still plenty to live comfortably and build some savings. I also believe that once a startup starts having significant growth/revenue or profits, founders should use one of the subsequent fundraising rounds to set aside a safety cushion for themselves - not a huge payout, but maybe a years salary or so. This levels the playing field with investors as rounds and valuations grow and enable the founders to make decisions that are not driven by them being afraid of their livelihoods/living expenses/family. In difficult times you want to have founders who keep a cool head and make decisions that are best for the company and not for themselves. There is often a phase in the beginning where you a bootstrapping/just starting out/don't have investors yet where there just isn't any money to pay yourself and there isn't much one can do about it except live of savings/family and reduce personal spending (like in this case). But that phase should end once the startup is in a better financial situation. In the end, founders are expected to work a lot, prioritize the company over personal matters and take a discounted salary. In general that's fine, but we ought to recognize that there should be balance. You don't have to ridiculously overwork yourself be successful and it's OK to draw an livable salary, take occasional holidays and spend time with family. P.S.: The industry standard in the VC industry is that the general partners collect a yearly management fee of about 2%. For larger funds, that's a lot of money and I've never heard anyone demanding that GPs don't pay themselves a salary and instead only receive the carry (percentage of profits after paying the investors/limited partners) in case the fund performs well a few years down the line. Instead, they always get the management fee (=founders salary) plus the carry (~20% of profits), the later possibly being significantly larger than the management fee if the fund performed very well (=successful exit). If they can live comfortably from their profession, so should the founders.
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saxelsen 5y ago
Wow, a lot of hate for the guy in this thread. My understanding is basically just that he had a consulting company and made a good salary, which enabled him to save enough money to live off a 2k per month salary for 2 years if need be. He then quit his consulting gig and focused on the product full-time, and since a product rarely makes lots revenue from day one, he cut his salary to the mentioned 2k so that he has a 2 year run rate to get revenue. That's what he means by focusing: he can focus his efforts on getting to revenue instead of mucking about getting distracted with "shiny new stuff" that developers love. The "skin in the game" signal to investors is, what I think many investors would like to see: The investors invest their money to grow the company, not to pay his 110k/year salary. By paying himself a meager salary and (likely) spending the rest of the investor money to build the company, the incentives are aligned. I'm not sure I understand why the blog post hit the front page of HN, though.
dvdhnt 5y ago
Unrelated, I am inspired by the idea of having your own "digital garden". Cheers.
BasilPH 5y ago
Author here. This is my first time hitting the front page, and I'm still catching up. Most of the critical comments point out that this is a) not a good sign to investors and b) not a good deal financially for me. I appreciate the concern, and I think I should have done a better job at explaining the context: - We are spinning off the product from the consulting company. We are getting new money from our existing investors, and it's them I want to show that I'm serious about this. - I have a significantly higher equity share in the product company than in the consulting company. I'm trading of salary for more equity. This is very common in startups, so I didn't explain this in detail in my post. What I found interesting and potentially actionable for other people is that reducing my salary (and having more equity) has increased my focus to a point I couldn't reach when still a salaried employee. I could have done a better job at sharpening the message, and I appreciate those that still saw my point and commented about it.
- 999900000999 5y ago
  Why not just use your product as a source of income in itself. Start the first podcast, get subscribers and stop taking a salary. That would be a fantastic way to show the viability of your platform. As a customer I'd love the idea of premium podcasts assuming the content is good.
  - BasilPH 5y ago
    > Why not just use your product as a source of income in itself. This is what I'm doing. But there's just no income yet from the product.
    - 999900000999 5y ago
      So from what I understand this is basically a website where you can charge for premium podcast, I'm sure you post a link to your premium podcast at least a few of us would subscribe. I actually think this could be really cool, but it also feels like it might already be a saturated space since it can be easier to make your podcast free but then just ask for support on patreon.

37 points by BasilPH 5y ago

I had no salaries for 5 years almost and just exited very nicely. This makes sense if you have limited capital and it makes a significant difference. This way you auto-invest your delayed salaries into the company.

sequel_database 5y ago

Wrong move. You're not that guy

devmor 5y ago

Dropping your salary by over 75% to below poverty wages doesn't signal to me that you have "skin in the game", it signals to me that you're compensating for poor choices by making further poor choices and you likely do not think very far into the future.

lonbigtech 5y ago
It wasn't clear to me while reading this that the drop occurred while at the company, or was the drop from their prior gig. If they indeed lowered the salary their company paid them... yikes. Especially if a justification is "investor signalling". Sounds like kowtowing to unhappy investors.
BasilPH 5y ago
What makes you so sure that it is a poor choice? It's definitely risky, but there's also a large upside. And as I wrote, I have multiple safety nets. > you likely do not think very far into the future This is 1-2 year bet for me.
- devmor 5y ago
  Safety nets are for emergencies - by definition. If you are relying on them, you are having an emergency, by your own choice. Hard not to call that a poor one. You're trying to run a company while making less than a single experienced engineer. If you even can't pay yourself that much, what exactly have you been doing with your investors' money?
- tweedledee 5y ago
  Once your safety net is gone you’ll be in a weakened position in further negotiations.
  - mental1896 5y ago
    Or in a great position to start over from scratch.
    - tweedledee 5y ago
      Perhaps I missed the sarcasm? Wouldn’t it be a terrible position to start over?
      - mental1896 5y ago
        Depends on your perspective I suppose. As I see it, starting over is a opportunity to try again, this time with all the knowledge you lacked the first time around. You may still encounter many of the pitfalls of the first iteration, but this time, you'll have the advantage of experience.
- causi 5y ago
  I reduced my salary to force myself to focus on what makes the most sense strategically for the product. You know that sentence is completely incoherent, right? The man running the company suddenly having a bunch of personal financial distractions is bad. You thinking that having less money will make you more focused is a red flag big enough to go in a car dealership parking lot.
anonymouse008 5y ago
While I agree with your sentiment and am working through this issue myself... the appeal of the entrepreneurial grind goes hand in hand with a lot of religious suffering, or specifically a Christian martyrdom. Only very recently had a heard a parable that began to challenge the idea that to do deep good, one must materially suffer... However, I'm no where near cured, and hearing your take definitely helps.
- pirate787 5y ago
  Yeah the author seems to think going to a poverty wage will help him focus.
  - danjac 5y ago
    Unless they have significant savings and/or some passive income, or they don't have family and can live with their parents or adopt a very frugal lifestyle, they will find their focus distracted by worries over everyday things like rent and bills. They are more likely to make poor short-term decisions, or have to supplement their income to do things like consulting or part-time work, to literally keep the lights on. As an investor I'd be very concerned by this move.
- dfxm12 5y ago
  I do think the idea of redemptive suffering unfortunately permeates (at least) American society too much. If someone else wants to suffer that's OK, but I feel like it's baked into every day life too much and suffering just for suffering's sake is confused with being moral or working hard. I guess that's expected from a country founded by puritans though!
999900000999 5y ago
If I was an investor I'd assume the company was doing very poorly. He's admitting he can't make payroll. 110k isn't a ton of money.
- BasilPH 5y ago
  We do actually make payroll and have a solid runway. What my salary cut does is: a) signal the investor and the team that I'm serious about this venture, b) increase my equity and c) increase our runway by a couple of months. As I've noted in a top-level comment, my intended message about focus gets a bit muddled without me giving the proper context. I'll add an update to my post with some context.
- giantg2 5y ago
  $110k is a ton of money to me. But I agree that doesn't look good for a company.
  - devmor 5y ago
    It's a lot of money for a person, depending on where they live. But for a business it's definitely not.
    - coldtea 5y ago
      Well, it's about a yearly developer salary where that founder lives - so not really "a lot of money" for them there, just the expected amount (and FAANGs do better, as do developers in New York working for finance). Whereas his new salary is closer to a burger flipping salary, and actually less.
  - deleted 5y ago
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  - 999900000999 5y ago
    Are you a full time software engineer in the United States ? A decent programer can make at least 100k almost anywhere in the US. I'd expect anyone running a tech company to make more than their own developers. You don't even need to be a good developer, you can use an easier language like Python or JavaScript. Honestly 90% of success in this industry is not being a jerk and showing up on time. I've seen developers outright confront C level execs and predictably it doesn't work out so well. The other 10% is luck. Occasionally you'll have a bad manager, or you'll join a company which doesn't manage their money well. And the only thing you can do in that case is leave.
sokoloff 5y ago
Within two inches of that was the reasoning, which included that they had two years' of runway at this level of reduced income. That to me is the opposite of "[does] not think very far into the future."
- gremloni 5y ago
  How is two years of runway thinking far into the future?
  - PaywallBuster 5y ago
    right, the company should be self sustaining and he shouldn't be burning through his savings
  - sokoloff 5y ago
    It's a horizon several factors longer than they would be able to make course corrections. If you planned what lunch you would eat on January 15th, 2022, I'd also say that you were planning far into the future, even though it's only a tiny fraction of the time between now and the sun swallowing the Earth.
ac2u 5y ago
"Dropping your salary by over 75% to below poverty wages doesn't signal to me that you have "skin in the game" Why not? Author remains exposed to the upside through equity but their downside was always limited by their comfortable salary You might think that's a poor choice, and you might be right, but it's the very definition of skin in the game that poorer choices on their part leaves them more exposed to a poorer outcome.
dfxm12 5y ago
Or that you can afford to take big risks because you have parents who are willing and able to support you. The rich get richer... I agree with you, having to take such drastic measures to prove (to investors or yourself) that you have "skin in the game" wouldn't look good to me. It's cute to romanticize this ala Rocky III, but coming up with creative ways to overcome a lack of intrinsic motivation to do your job well is drama best left for the big screen, IMO.

deleted 5y ago

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Sosh101 5y ago

I don't really understand the point of this.

JKCalhoun 5y ago

I get the inevitable criticism, he calls it out himself: he's dropping his salary but he can afford to since he has two years of savings to burn through. The sentiment though rings true for me at least — as I have been fortunate to have a large salary, over the years I in fact do finding new-self losing touch with old-self. And losing touch with my roots, my friends less-fortunate lives, etc.

thinkingkong 5y ago

This is a good chance to understand the difference between intrinsic and extrinsic motivation; The motivation that comes from within, and the one that is based on external factors. Sending signals, writing about it, and making visible sacrifices will likely have short lived results. The extrinsic motivations run out pretty fast once you start feeling stressed, spread thin, etc. If you can find some purpose or passion based reason to increase your “skin in the game” it’ll probably last way longer.

WORMS_EAT_WORMS 5y ago

I thought this post originally was about trading wages for equity via “skin in the game”. It seems it’s not though and is about motivation. Motivation for work when you already have money is definitely hard for some. Just go check out /r/FIRE. Huh. Weird post. Depending on the situation, I would want the founder motivated by money (real money, equity money) or just blind passion. I guess stay crazy and try things. Good luck!

BasilPH 5y ago
It is both. I do get more equity, but I already had a big chunk before. The reason for the reduction was motivation.
- phpnode 5y ago
  I think you're rationalising a bad decision, one that weakens your position, and sadly it might be difficult to undo now, so you're even more likely to rationalise this to yourself. If the problem was motivation try and find out why you were lacking it, I suspect the answer was not "I'm too gosh darn rich"
  - WORMS_EAT_WORMS 5y ago
    Eh. People forget they can disagree without putting you down. He has the funds for 2 years and isn’t breaking his own legs. A better analogy would be like Bruce Wayne giving up everything for 2 years to focus in the mountains his ninja skills. OP, do your thing!

tiborsaas 5y ago

He missed the part from the story about how much his stake worth in the company. This move also tells me he can let $86k go because he doesn't need it badly.

tweedledee 5y ago

In my observation the less people pay you the less they will respect you, not more, despite whatever favor you think you’re doing for them.

sweezyjeezy 5y ago
He's the founder though...
- tweedledee 5y ago
  It seems that this pay-cut is for the benefit of the investors - who I doubt will appreciate it as much as he expects. He could take deferred payment, use it to negotiate a bigger stake.
Jyaif 5y ago
Conversely, the more people pay you, the more entitled you are.
- tweedledee 5y ago
  The more entitled they expect you to be... which helps in framing negotiations. E.g. we have to pay MBA guy X dollars or he will be upset.

danrocks 5y ago

Weird attempt to emulate the Gravity Payments dude, but without the profitable company and the good hair (presumably).

jstx1 5y ago

Doesn't dropping your own salary make you look less respectable in the eyes of investors? It did in mine but I'm not the target audience for this publicity stunt.

marto1 5y ago
I believe you’re correct, except for the ultra rich. Some of them pay themselves symbolically like a 1$ pr. year , e.g. https://thehustle.co/1-ceo-salary/ https://thehustle.co/1-ceo-salary/ that seems to have a positive effect.
- jstx1 5y ago
  When you’re getting paid millions in equity giving up your salary doesn’t mean much.

octokatt 5y ago

So, let’s be clear that to focus on how to get social media content for podcasters spreading more quickly, he made a move to grab interest of a population. This is manipulative and, because of his savings, ultimately meaningless. Worse than, by dropping his salary for multiple years, then (most likely) getting the difference in a bonus or equity, he is able to escape being taxed, leading to a net profit.

phpnode 5y ago

Hmm, over two years you're putting in an additional $172k plus all of the time and effort cofounding a startup entails, plus the opportunity cost of doing a startup vs collecting regular tech company wages working a 9-5. Is your investment properly acknowledged in terms of equity? You're also sending a signal to your investors that your time is not worth much, and a signal to your employees that they can also expect scant wages and personal sacrifices. It sounds like a bad deal, one I personally would not agree to, let alone writing about it publicly. It is quite likely that after let's say 6 months of gruelling work you will start to burn out, start to feel undervalued, become difficult to work with and end up getting fired as a result. If things are this tight you should probably raise more money instead.

bottled_poe 5y ago

Despite what other noise says, I would like to discuss your prospects. Please contact me as per my profile.

coldtea 5y ago

Bad idea, that can backfire in many ways: (a) I don't believe my company will afford to pay me $110k soon enough. Don't bother investing here. (b) I don't value my time as a founder/CEO financially (c) I'm thrifty where it doesn't matter (d) I signal employees that this is not a place that pays well, thus getting only subpar employees (e) I signal employees that I'm all for "sacrifice" and thus not professional, and not a good place to work (e.g. if I had any loose excuse to sacrifice them and their compensation, I'd do it in an instant). (f) I'm not mature enough not to buy into all this "ramen founder" BS aspiration stories

jstx1 5y ago
> (f) I'm not mature enough not to buy into all this "ramen founder" BS aspiration stories This is the biggest message I got from the article. Everything about it screams that the author is someone you shouldn't trust with your time and/or money.
gtirloni 5y ago
(c) I'm thrifty where it doesn't matter Exactly, it absolutely does not matter as much as this person thinks. Investors don't value money the same way you do. This a nice gesture that will be quickly forgotten, an oddity.
kradroy 5y ago
> (e) I signal employees that I'm all for "sacrifice" and thus not professional, and not a good place to work (e.g. if I had any loose excuse to sacrifice them and their compensation, I'd do it in an instant). That one rings truest to me and was part of one work experience I had in the past. The owners "buy" a lottery ticket using everyone else's wages and time, but it's "cool" because you're "living the dream." Furthermore, living at poverty level for 1-2 years, especially in New York, eventually gets depressing because you'll have to deny yourself a lot of experiences. Be like the Buddha in your pursuits. Reject asceticism and extreme indulgence and find the middle path. You and your possible future employees will thank you.

emrekzd 5y ago

I hope you find extra motivation from the extreme contraints you forced on yourself in the longer term. Making yourself live on 24k in NYC is not a good idea. Publicly sharing that is an even worse idea. I’d be surprised if this gave a positive signal to your investors, but it surely won’t to anyone you possibly employ/pay salary for.

simias 5y ago

> Sing along with the common people > Sing along and it might just get you through > Laugh along with the common people > Laugh along, even though they're, they're laughing at you > And the stupid things that you do > Because you think that poor is cool https://www.youtube.com/watch?v=yuTMWgOduFM https://www.youtube.com/watch?v=yuTMWgOduFM Frankly I find this type of exercise a bit obscene myself.

marktangotango 5y ago
Dude thanks for that, first time I've heard that band, instant fan.
- simias 5y ago
  Glad you liked it, I also enjoy the cover of this song by William Shatner that's surprisingly good IMO: https://www.youtube.com/watch?v=ainyK6fXku0 https://www.youtube.com/watch?v=ainyK6fXku0

discordance 5y ago

I commend the author. It’s not easy to take risks like this, especially when we are paid so much. In a world where money is so cheap I’m surprised more people aren’t taking calculated risks like this. The opportunity cost maybe high to begin with, but if this doesn’t work I’m sure the author could also get a decently paid job again. He’s well qualified and has lots of experience, so there’ll be another job if he really needs one. Also having a Swiss passport provides a pretty soft landing if things really go wrong.

murillians 5y ago

I enjoy that the author(OP) posted an article about how excited they are to build a product that doesn't have a landing page, social media page, or reference to on their own website.

Andy_G11 5y ago

The consulting / building combo is a good way to keep earning moderately well while trying to build a new co. Building revenue generation is not easy. If you're going all-in on the build, there may well come a point where if your revenues are not sufficient you will start to feel pain. If you can structure the development process to deliver revenue from as simple and maintainable a product as possible and quickly find a route to sales that would be ideal. I would guess that in terms of surviving to long term viability there are far more not-so-great but quickly revenue-generating products than there are great products that were unfortunately slow to get recognised and generate revenue. With cash, further development is possible to clean a product up - without it, even great stuff will rot. There are tons of genius ideas that have been through successful (working) development but then just died because they never made money. Access sales resource - effective sales resource (not easy to find) - as quickly as possible. If you're aiming for investment financing, remember that few things build investor confidence like existing sales and cash flow.

al2o3cr 5y ago

I reduced my salary to signal our investor I mean, "HARDER DADDY" is indeed a signal.

smileysteve 5y ago

A founder and CEO should scarifice their salary if it comes to making payroll. Probably don't want to post to social or mention it increasing your skin in the game until the light is visible though.

shrubby 5y ago

Not the same starting point but I was making decent wage here at my previous jobs. Some logistics management and startups. I don't started to feel dissonance heavily and after the last startup was running out of runway we agreed it was best for me to go. I wasn't a founder either. But I spent awhile trying to figure out what I want to do and my wasn't able. I only managed to figure out what the hell I don't want to do. I was also fortunate enough to be able to afford a year of this downtime. At some point I mentioned that I might actually start working again but have no idea where to go and my friend told, as a joke I o dead sure, that come work with us. We need good guys. So by pure chance I ended up working with disabled kids at a school with a four month trial contract. And loved every bloody second of it. During my downtime I had experienced with my routines and gotten rid of alcohol, meat and car. Also basically decided not to buy anything I don't need, the only luxurious stuff being something odd for my kid. And I realized my life is so much better this way, with shitty salary and simplistic lifestyle. The dissonance about burning the planet down with my lifestyle was gone. I can handle the mortgage alright and can save some for bad days. I don't miss a damn thing from the past that was supposedly way cooler than current life. Life's much more than only money. At least when you get by alright. And "the things you own end up owning you".

erikprotagonist 5y ago

If it is not obvious - this company was started in 2015, and is doing consulting while building a product. This means that they have to balance spending time on a) paid consulting, on b) unpaid product development, or c) investor financed development, or some mix of these. Investors require equity, so if you believe in your product and you can afford it taking a pay-cut it can make perfect sense. As an occasional investor it makes sense to me that you would want to invest in a company where the founders value their shares more than their wages - who would want to invest invest somewhere the founders want to cash out through wages instead of a future exit?

ylere 5y ago

There was a time where I thought the same way: That the founders should reduce their salaries to basically minimum wage until the company is profitable. I believed it was the right and honorable thing to do, while also signaling to investors that we were serious and would not "take (their) money out" of the company until it was appropriate. The problem is that investors are not driven by honor and if things go bad one day they will leave you with nothing and not have your back. You are also always exposed to a higher legal risk and things are a lot easier when you have the savings to pay for counsel in such a situation. The investors even tried to leverage the fact that we had zero savings to force us to agree to very unfavorable terms. I still believe a founder should demonstrate commitment and not unnecessarily drain the startup of resources, especially early on. But you don't have to earn minimum wage for that. At my current startup, the founders are the lowest paid team members, but in today's world of high developer salaries that still plenty to live comfortably and build some savings. I also believe that once a startup starts having significant growth/revenue or profits, founders should use one of the subsequent fundraising rounds to set aside a safety cushion for themselves - not a huge payout, but maybe a years salary or so. This levels the playing field with investors as rounds and valuations grow and enable the founders to make decisions that are not driven by them being afraid of their livelihoods/living expenses/family. In difficult times you want to have founders who keep a cool head and make decisions that are best for the company and not for themselves. There is often a phase in the beginning where you a bootstrapping/just starting out/don't have investors yet where there just isn't any money to pay yourself and there isn't much one can do about it except live of savings/family and reduce personal spending (like in this case). But that phase should end once the startup is in a better financial situation. In the end, founders are expected to work a lot, prioritize the company over personal matters and take a discounted salary. In general that's fine, but we ought to recognize that there should be balance. You don't have to ridiculously overwork yourself be successful and it's OK to draw an livable salary, take occasional holidays and spend time with family. P.S.: The industry standard in the VC industry is that the general partners collect a yearly management fee of about 2%. For larger funds, that's a lot of money and I've never heard anyone demanding that GPs don't pay themselves a salary and instead only receive the carry (percentage of profits after paying the investors/limited partners) in case the fund performs well a few years down the line. Instead, they always get the management fee (=founders salary) plus the carry (~20% of profits), the later possibly being significantly larger than the management fee if the fund performed very well (=successful exit). If they can live comfortably from their profession, so should the founders.

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saxelsen 5y ago

Wow, a lot of hate for the guy in this thread. My understanding is basically just that he had a consulting company and made a good salary, which enabled him to save enough money to live off a 2k per month salary for 2 years if need be. He then quit his consulting gig and focused on the product full-time, and since a product rarely makes lots revenue from day one, he cut his salary to the mentioned 2k so that he has a 2 year run rate to get revenue. That's what he means by focusing: he can focus his efforts on getting to revenue instead of mucking about getting distracted with "shiny new stuff" that developers love. The "skin in the game" signal to investors is, what I think many investors would like to see: The investors invest their money to grow the company, not to pay his 110k/year salary. By paying himself a meager salary and (likely) spending the rest of the investor money to build the company, the incentives are aligned. I'm not sure I understand why the blog post hit the front page of HN, though.

dvdhnt 5y ago

Unrelated, I am inspired by the idea of having your own "digital garden". Cheers.

BasilPH 5y ago

Author here. This is my first time hitting the front page, and I'm still catching up. Most of the critical comments point out that this is a) not a good sign to investors and b) not a good deal financially for me. I appreciate the concern, and I think I should have done a better job at explaining the context: - We are spinning off the product from the consulting company. We are getting new money from our existing investors, and it's them I want to show that I'm serious about this. - I have a significantly higher equity share in the product company than in the consulting company. I'm trading of salary for more equity. This is very common in startups, so I didn't explain this in detail in my post. What I found interesting and potentially actionable for other people is that reducing my salary (and having more equity) has increased my focus to a point I couldn't reach when still a salaried employee. I could have done a better job at sharpening the message, and I appreciate those that still saw my point and commented about it.

999900000999 5y ago
Why not just use your product as a source of income in itself. Start the first podcast, get subscribers and stop taking a salary. That would be a fantastic way to show the viability of your platform. As a customer I'd love the idea of premium podcasts assuming the content is good.
- BasilPH 5y ago
  > Why not just use your product as a source of income in itself. This is what I'm doing. But there's just no income yet from the product.
  - 999900000999 5y ago
    So from what I understand this is basically a website where you can charge for premium podcast, I'm sure you post a link to your premium podcast at least a few of us would subscribe. I actually think this could be really cool, but it also feels like it might already be a saturated space since it can be easier to make your podcast free but then just ask for support on patreon.