6 ms·

Ask HN: Is an Autonomy Fund a viable business model?

49 points by michaelochurch 14y ago

Here’s a software business model that helps engineers to retain control of their companies and aim for excellence, instead of having everything they build get hijacked by MBAs. It encourages engineers to build profitable companies rather than “get big or go home” (VC). It’ll encourage mid-growth companies. See: bit.ly/16guxvy. I want this thing to generate some Real Technology, and focus on hard problems instead of social media bullshit optimized for instant results. It’s for the mid-risk 10-40%/year growth range that’s underserved by existing finance. An Autonomy Fund’s like so: engineers get a base salary (say $125k) and the investors get a percentage (say 37.5%) of any profits they make. What do they work on? Whatever they want. Their own projects. Consulting. Startups. The fund owns part of it, but they have full autonomy over what they do. One idea here is self-organization. If two teams decide to work together and pool resources, they can. Since they're collectives of autonomous individuals, they don't need to worry about the (morale-killing) processes of merging HR structures and org charts. They just pull together and work. Who’d fund it? I think local governments might. (Am I right? Or off the mark?) It creates jobs, supports local businesses, and may build the next Facebook. I see this as the ultimate symbiosis between cities and tech. They want to make their cities tech hubs instead of having all the action go to star cities. We’d vet programmers, something a non-programmer can't (cf. Design Paradox). I'd aim for top-5% “10Xers”, with initial class size ~28 and a 2-year initial runway ($7 million). If the pilot succeeded, then similar funds could be launched all over the world, and there might be a business in setting cities up with their own Autonomy Funds. Is this something that: (a) local governments would support, and (b) a substantial number of top-5% people would join, even if it meant moving to a small city (~50-250k inhabitants)?

TheCoelacanth 14y ago
I think the hardest part would be getting the people funding it to agree to it. The plan, as you've stated it, gives them very little control of how their funds are used. I don't think it will be easy to convince the investors to trust the engineers not to just take the salary while producing nothing useful. If you can find a way around that problem, you might be on to something.
- michaelochurch 14y ago
  Maybe I'm naive here, but I think most software engineers (especially good ones) are careerist enough to want to produce something useful. That doesn't mean that there won't be some good-faith failures, but I think most engineers are already naturally aligned toward wanting to add value. Top engineers aren't that way when a company takes 100% of the proceeds and a boss takes all the credit; but this is still allowing engineers to get a 62.5% cut.
  - TheCoelacanth 14y ago
    I think with proper vetting you would be able to find engineers who would put in an honest effort in those circumstances. I just don't think it will be easy to convince investors of that.
    - michaelochurch 14y ago
      Ah yes, Theory X and Theory Y. I would like to believe that defection rates will be low. Are people going to abuse the system? Occasionally, yes. My feeling is that the defection rate will be low enough not to compromise the project. If someone uses the fund to build his career, then goes off to the Valley, good for him. "Alumnus Bob is now VP/Eng at Facebook" is part of our pitch. The trust issue is why local governments might be the best place to start: (a) they know they're not technologists and can't evaluate 10x programmers. I can. I think I can either (i) establish that I can, or (ii) bring someone more established and better than I am to do the vetting. (b) even if they fail, much of the money goes back into the city, which means it's not totally spilled on the floor. Fail case: those tech bozos made fools of themselves, but they ate at local restaurants for a couple years. It wouldn't only be local investors. I don't want short-term investors in this, though. I'd take a Buffett-esque approach of having the share price around $50,000. Value investors only, because talent takes time to ripen.
codewright 14y ago
The problem is that most local governments that want a tech hub are either focusing on tech already and will think they don't need this, or are on the other end of the spectrum and simply don't care. The key is to find a city on the cusp of making a serious decision to pursue becoming a tech hub. Google Fiber could be an incentive, or it might make them complacent, who knows? Maybe Provo? You can't really aim too small, small towns have serious conservative budgets and for good reason. Austin would be nice, I'm not sure how insecure they feel about their status as a tech city compared to NYC and SF. What I can tell you for sure is that they are seriously affordable. You can trivially get a house for less than $200k in a decent neighborhood. That they're already competing for the tech city thing is a bonus. Google Fiber in Austin could end up bringing in some fresh blood, even if it doesn't make that much of a difference on its own. Austin has a $3.1 billion budget, which makes this more feasible for them than a sub-$1bn budget city. $25mm planning and development budget. https://assets.austintexas.gov/budget/12-13/downloads/Vol_I_Combined.pdf https://assets.austintexas.gov/budget/12-13/downloads/Vol_I_... See here to see their job development efforts. Anything involving as much money as this does is going to have be sold as a job development play. I don't know if that argument can be made yet or not, I'd need to discuss it. Disclaimer: I'm headed to Austin as soon as I'm freed up in my consulting work to do a startup.
- michaelochurch 14y ago
  Getting Austin to sign up for that would be a huge coup. I don't think you'd have any trouble getting great engineers to move out there, given how many strong tech companies are already there. That would be ideal. But I'd also want to talk to other municipalities and see what terms they'd have to offer. It's definitely a job development play. These engineers are going to be founding companies that, if successful, are going to employ large numbers of people.
  - zwegner 14y ago
    This sort of idea is really interesting to me, and the thought of it happening in Austin is quite tantalizing (I wouldn't have to move!). I find it pretty hard to function in typical management structures, though I work better with teams/some sort of external visibility (my personal projects tend to gather dust too easily, though I'm working on improving this). The concept of an incubator-like environment for collaborating on ideas without the extreme focus on growth would be a perfect fit for people like me.
epenn 14y ago
I would love to see something like this. I think this shouldn't just be limited to one city or industry though. Assuming that this is successfully attempted in one city, it might be a good idea to try it in other cities while focusing on various industries that speak to the existing core competencies of that city. So for example, a Detroit version of the Autonomy Fund could focus on funding autonomous individuals within the automotive industry. As for choice of initial tech hub, my vote goes to Pittsburgh. The population size is [roughly] what you're going for at ~300K. The housing market here is great. It already has a tech-friendly local government. Plus Carnegie Mellon is here, ready to feed top young CS talent directly into the autonomous positions. For what it's worth Pittsburgh was also voted as the most livable city in the U.S. a couple years ago [1]. I might be biased since I live/work in Pittsburgh and take CS classes at CMU, but by that same token it also means I'm speaking with first-hand experience. [1] http://www.marketplace.org/topics/life/news-brief/its-official-pittsburgh-most-liveable-city-us http://www.marketplace.org/topics/life/news-brief/its-offici...
- michaelochurch 14y ago
  Pittsburgh would be a great choice, I agree. Do you think the local government would invest? As I work on the idea, I'm starting to realize that it needs to involve public and private investment. The problem seems to be to convince investors that we can audit the programmers. I'd probably need to hire a well-known programmer as, at least, an advisor. Even if he didn't want to make the decisions and conduct the interviews, it'd be huge to have his name on the letter. The cities where I see the best odds of this taking shape are: Austin, Pittsburgh, Madison, and Portland. Apologies if I missed one; there are plenty of other good places, but those are the 4 that would be the big targets. I agree that one city is just a start. The concept needs a pilot, but ultimately the goal isn't to make one specific city a new Silicon Valley (if that happens, I've failed) but to encourage more equidistribution of talent and, as a nice side effect, also squeeze out the real estate assholes (who take advantage of the fact that our career needs force us to crowd into expensive cities). Once it's going multi-city, though, I'd need someone else to run it. I could be the lion for a couple years, but eventually I'd want to get back into code.
- codewright 14y ago
pekk 14y ago
It's an interesting idea, but I don't think local governments have room to pay lots of engineer salaries for no specific reason. Startups are risky and this will smell even riskier since it scans politically as a boondoggle. $125,000 is 5 working-class jobs. I don't see cities directly 'creating' jobs by just paying people to do things. So, maybe don't depend on local governments.
- michaelochurch 14y ago
  Or, here's an idea (that might be politically explosive, or really cool): the funding is contingent upon teaching local school students (at various grade levels) programming (which is still not part of the curriculum in most public schools)-- a 10-15 hour per week commitment. This does mean that we must select for people willing to teach, but as far as I'm concerned, if you're not a good teacher, you're not a good leader and I'm not interested in funding you. Now, public school students are getting after-school coursework with "Silicon [V]alley technology entrepreneurs". These aren't techies getting thrown a bunch of local money to build their careers; they're getting thrown local money to build businesses and teaching students how programming works in "the real world" So then, there's a great service provided that is of use to the community even if the startups flop.
  - julespitt 14y ago
    I don't think cities or towns have either the money to invest nor the knowhow to administer such a thing. I think it would likely have to be investor-led, preferably wealthy technologists, who would then shop it around to local governments.
    - michaelochurch 14y ago
      Hmm. That may be right. But I think something real is here, especially now that I've added in the teaching factor. Do you know anyone who'd be able to look at this idea as a potential principal? My email is michael.o.church at gmail.
      - 14y ago
mahyarm 14y ago
Copying my comment from here: https://news.ycombinator.com/item?id=5578223 https://news.ycombinator.com/item?id=5578223 --- How about Las Vegas? I've never been there but: 1) Cheap airfare, international destination 2) A Party Town, probably helps the gender balance in one aspect, people would like to visit you. 3) No Income Tax 4) Still close to the SF Bay Area 5) Never cold, barely rains (good or bad depending on your preferences) 6) Really cheap real estate. Buy a townhouse for under $100k! 7) Many tech conventions are hosted there 8) Driving from one corner to another takes only 30 minutes according to google maps.
- otoburb 14y ago
  Vegas also has the distinction of being Tony Hsieh's experiment to revitalize the LV downtown core[1]. Autonomy Fund on the surface looks like a great fit with Tony's DowntownProject vision[2]. [1] http://www.forbes.com/sites/evankirkpatrick/2013/02/13/lessons-learned-from-tony-hsiehs-350mm-downtown-project-in-las-vegas/ http://www.forbes.com/sites/evankirkpatrick/2013/02/13/lesso... [2] http://downtownproject.com/ http://downtownproject.com/
S4M 14y ago
It's a nice idea, but focusing of technical excellence for its own sake is dubious according to me. If I were offered to put my own money in that project and get paid in dividends after couple of years (we want long term investors), I would probably refuse, as there is no business plan at all. Whoever has money to invest will focus first on the product, and then on the technical quality. What you want is rather: 1. write good code 2. ??? 3. profits Also, you will need to attract non coders, such as domain experts or marketing. They will also want their shares of the cake, and you will need to pick good ones, which will not be trivial for you as a developer. I am sure there are many other flaws, and I'd rather suggest that you use your technical excellence to "scratch your own itch" and live from it.
- michaelochurch 14y ago
  Very good points. Thanks so much. I welcome disagreement because, without it, my ideas would stay in a raw crappy form. So... here are my thoughts. My end goal is for this to congeal into something like an open-allocation environment, but one that exists across companies to some extent. I feel like if we bring OA to the external market, we'll force the hands of employers who will have to improve conditions if they want to compete for talent. So, the trans-corporate open allocation (because each person carries an income that follows her whereever she goes) is the ultimate end goal. That may be completely insane, but isn't that what the open-source gift economy is-- trans-corporate collaboration? Getting designers, marketers and domain experts will be hard. I grant you that. Strong designers and marketers I can spot; domain expertise I would not be able to tell, unless I had it myself and, of course, for most domains I won't. I think that to get a domain expert, you'd have to hire her into a company already formed through this process, because you're right that there's no way we can build up a competent selection process for every domain we might care about.
  - S4M 14y ago
    I am not sure I get your second paragraph, but it seems to me that you want to build some kind of consulting company owned by top coders. Your offer would be to offer programming services, that only very competent programmers could do. My guess for such services would be: ultra scalable web apps, or creation of DSLs - it has to be something very advanced in order not to compete with the numerous consulting companies that are already existing, most of them doing mediocre stuff. And I can see this taking off. Obviously not fast because most of your potential customers wouldn't even know yet they need your services, but that should be able to slowly bootstrap. And I suppose once you would have built a strong team and gotten some notoriety, you would be able to bootstrap your technological edge into some concrete product. Having said that, I still have some doubts, mainly because I think we are in a coding bubble, and the future belongs less to the programmers than to the engineers who will build the new space rockets or the technology to exploit green energies from example, while with the standardization of functional programming and the development of various libraries it will be easy for a non programmer to start creating software components that are currently requiring programmers (IMHO there will be less "pure" programmers and more "X's who can program" as you once said here on HN). Nevertheless I wish you can succeed with your idea, even though I don't think I'll be able to work in your company as I am not a top programmer.
kohanz 14y ago
Let's see: government funds for projects that have little to no regulation, oversight, or concrete goals. Yeah... good luck with that. I mean, is there any precedent for this? And I actually like the idea!
- michaelochurch 14y ago
  Ctrl+F "teaching". If we set up a "20/20" plan where the entrepreneurs spend 15-20 hours teaching (as in, the public) while they draw a salary, then it might work. The only danger is that it pisses off the teacher's unions. It'd have to be a free after-school program.
htormey 14y ago
Michaelochurch, I've read a bunch of your blog posts concerning alternatives to VC funded startups and I have a question for you. Why raise any funding at all? Instead why not save a year or so's living expenses, pick a niche market, do contracting in that area and then try to OpenSource and productize a common problem that a bunch of your clients have. This approach is very similar to what 37 signals does and seems to work for some of my friends. http://37signals.com/about http://37signals.com/about Software Engineering, done this way, does not require a lot of capital. What are your thoughts on this model?
lacker 14y ago
Two thoughts. (a) It will be hard to get $7 million for an untested investment model like this. It would be easier to start with something more like $150k, like the first YC class. (b) It's hard to advise people on something you haven't done yourself. If you first started a successful mid-growth company, you'd find it a lot easier to raise money for this plan.
clbrook 14y ago
I wonder if the Kauffman foundation would be interested in partnering. http://www.kauffman.org/ http://www.kauffman.org/
carterschonwald 14y ago
Your return structure is wrong :-) A successful growing business is never profitable, most / all the profit is reinvested in the business. There will per se be no investor return relatively speaking. I recently saw an article this past week that suggests a better structure: the investment is a loan that is forgiven if the business folds. This is actually better for both sides: the investor gets their money back with some fixed return if the biz succeeds, and the business doesn't have to pay it back if it fails. Then it becomes a small tech business entrepreneurship Loan/ investment vehicle. In which case the pitch to the city is the their investing in furthering local biz growth in a way that has potential to have a multiplicative return for local industrial base. Tl;dr no small privately held biz is ever truely profitable, structure it as a forgivable loan upon biz failure.
- usea 14y ago
  In my company, profit sharing is 1/3 employees, 1/3 owners, 1/3 goes directly back into the company for investment. However, sometimes the company needs money to repair some equipment or whatever, and that comes out of the revenue (before profits). So the business needs come first obviously, but when times are good the employees are treated very well. This works best in companies where the employees can have a direct affect on short-term profits.
  - carterschonwald 14y ago
    Yes I agree with that. But profit sharing with employees is per se taken from revenue left over after operating costs and such, profits are what you distribute to share holders. I agree with what you're saying, I'm mainly quibbling with the language of the structure of the proposed investment instrument. It would be very easy to do some Hollywood style accounting so that the business owner and employees all get a fraction of gross revenue after costs, but any investor would get zilch for all time. I know little of accounting, but I know that much :-) (This is of course orthogonal to the ethical / moral dimensions)
    - usea 14y ago
      That's a good point, which I hadn't thought of.
alexjeffrey 14y ago
I love this idea but the idea of tying it to your locality seems a little exclusionary for no reason. Granted, I am biased as I am based in the UK, but I can't think of any major problems with organising this through teleconferences?
activus 14y ago
Great idea. I'd actually submit Rochester, NY as a candidate (I'm from there, but live in Seattle now). The property taxes are high, but the cost of living is very low, power is very cheap, land is cheap and there is RIT and University of Rochester right there pumping out fantastic engineers (an hour away is University of Buffalo, not quite as good, but has a few gems). I know a few people doing startups there (it's tough because of funding, but these guys self fund). It's also not too far from Boston / NYC if you needed to grab people from there.

TheCoelacanth 14y ago

I think the hardest part would be getting the people funding it to agree to it. The plan, as you've stated it, gives them very little control of how their funds are used. I don't think it will be easy to convince the investors to trust the engineers not to just take the salary while producing nothing useful. If you can find a way around that problem, you might be on to something.

michaelochurch 14y ago
Maybe I'm naive here, but I think most software engineers (especially good ones) are careerist enough to want to produce something useful. That doesn't mean that there won't be some good-faith failures, but I think most engineers are already naturally aligned toward wanting to add value. Top engineers aren't that way when a company takes 100% of the proceeds and a boss takes all the credit; but this is still allowing engineers to get a 62.5% cut.
- TheCoelacanth 14y ago
  I think with proper vetting you would be able to find engineers who would put in an honest effort in those circumstances. I just don't think it will be easy to convince investors of that.
  - michaelochurch 14y ago
    Ah yes, Theory X and Theory Y. I would like to believe that defection rates will be low. Are people going to abuse the system? Occasionally, yes. My feeling is that the defection rate will be low enough not to compromise the project. If someone uses the fund to build his career, then goes off to the Valley, good for him. "Alumnus Bob is now VP/Eng at Facebook" is part of our pitch. The trust issue is why local governments might be the best place to start: (a) they know they're not technologists and can't evaluate 10x programmers. I can. I think I can either (i) establish that I can, or (ii) bring someone more established and better than I am to do the vetting. (b) even if they fail, much of the money goes back into the city, which means it's not totally spilled on the floor. Fail case: those tech bozos made fools of themselves, but they ate at local restaurants for a couple years. It wouldn't only be local investors. I don't want short-term investors in this, though. I'd take a Buffett-esque approach of having the share price around $50,000. Value investors only, because talent takes time to ripen.

codewright 14y ago

The problem is that most local governments that want a tech hub are either focusing on tech already and will think they don't need this, or are on the other end of the spectrum and simply don't care. The key is to find a city on the cusp of making a serious decision to pursue becoming a tech hub. Google Fiber could be an incentive, or it might make them complacent, who knows? Maybe Provo? You can't really aim too small, small towns have serious conservative budgets and for good reason. Austin would be nice, I'm not sure how insecure they feel about their status as a tech city compared to NYC and SF. What I can tell you for sure is that they are seriously affordable. You can trivially get a house for less than $200k in a decent neighborhood. That they're already competing for the tech city thing is a bonus. Google Fiber in Austin could end up bringing in some fresh blood, even if it doesn't make that much of a difference on its own. Austin has a $3.1 billion budget, which makes this more feasible for them than a sub-$1bn budget city. $25mm planning and development budget. https://assets.austintexas.gov/budget/12-13/downloads/Vol_I_Combined.pdf https://assets.austintexas.gov/budget/12-13/downloads/Vol_I_... See here to see their job development efforts. Anything involving as much money as this does is going to have be sold as a job development play. I don't know if that argument can be made yet or not, I'd need to discuss it. Disclaimer: I'm headed to Austin as soon as I'm freed up in my consulting work to do a startup.

michaelochurch 14y ago
Getting Austin to sign up for that would be a huge coup. I don't think you'd have any trouble getting great engineers to move out there, given how many strong tech companies are already there. That would be ideal. But I'd also want to talk to other municipalities and see what terms they'd have to offer. It's definitely a job development play. These engineers are going to be founding companies that, if successful, are going to employ large numbers of people.
- zwegner 14y ago
  This sort of idea is really interesting to me, and the thought of it happening in Austin is quite tantalizing (I wouldn't have to move!). I find it pretty hard to function in typical management structures, though I work better with teams/some sort of external visibility (my personal projects tend to gather dust too easily, though I'm working on improving this). The concept of an incubator-like environment for collaborating on ideas without the extreme focus on growth would be a perfect fit for people like me.

epenn 14y ago

I would love to see something like this. I think this shouldn't just be limited to one city or industry though. Assuming that this is successfully attempted in one city, it might be a good idea to try it in other cities while focusing on various industries that speak to the existing core competencies of that city. So for example, a Detroit version of the Autonomy Fund could focus on funding autonomous individuals within the automotive industry. As for choice of initial tech hub, my vote goes to Pittsburgh. The population size is [roughly] what you're going for at ~300K. The housing market here is great. It already has a tech-friendly local government. Plus Carnegie Mellon is here, ready to feed top young CS talent directly into the autonomous positions. For what it's worth Pittsburgh was also voted as the most livable city in the U.S. a couple years ago [1]. I might be biased since I live/work in Pittsburgh and take CS classes at CMU, but by that same token it also means I'm speaking with first-hand experience. [1] http://www.marketplace.org/topics/life/news-brief/its-official-pittsburgh-most-liveable-city-us http://www.marketplace.org/topics/life/news-brief/its-offici...

michaelochurch 14y ago
Pittsburgh would be a great choice, I agree. Do you think the local government would invest? As I work on the idea, I'm starting to realize that it needs to involve public and private investment. The problem seems to be to convince investors that we can audit the programmers. I'd probably need to hire a well-known programmer as, at least, an advisor. Even if he didn't want to make the decisions and conduct the interviews, it'd be huge to have his name on the letter. The cities where I see the best odds of this taking shape are: Austin, Pittsburgh, Madison, and Portland. Apologies if I missed one; there are plenty of other good places, but those are the 4 that would be the big targets. I agree that one city is just a start. The concept needs a pilot, but ultimately the goal isn't to make one specific city a new Silicon Valley (if that happens, I've failed) but to encourage more equidistribution of talent and, as a nice side effect, also squeeze out the real estate assholes (who take advantage of the fact that our career needs force us to crowd into expensive cities). Once it's going multi-city, though, I'd need someone else to run it. I could be the lion for a couple years, but eventually I'd want to get back into code.
codewright 14y ago

pekk 14y ago

It's an interesting idea, but I don't think local governments have room to pay lots of engineer salaries for no specific reason. Startups are risky and this will smell even riskier since it scans politically as a boondoggle. $125,000 is 5 working-class jobs. I don't see cities directly 'creating' jobs by just paying people to do things. So, maybe don't depend on local governments.

michaelochurch 14y ago
Or, here's an idea (that might be politically explosive, or really cool): the funding is contingent upon teaching local school students (at various grade levels) programming (which is still not part of the curriculum in most public schools)-- a 10-15 hour per week commitment. This does mean that we must select for people willing to teach, but as far as I'm concerned, if you're not a good teacher, you're not a good leader and I'm not interested in funding you. Now, public school students are getting after-school coursework with "Silicon [V]alley technology entrepreneurs". These aren't techies getting thrown a bunch of local money to build their careers; they're getting thrown local money to build businesses and teaching students how programming works in "the real world" So then, there's a great service provided that is of use to the community even if the startups flop.
- julespitt 14y ago
  I don't think cities or towns have either the money to invest nor the knowhow to administer such a thing. I think it would likely have to be investor-led, preferably wealthy technologists, who would then shop it around to local governments.
  - michaelochurch 14y ago
    Hmm. That may be right. But I think something real is here, especially now that I've added in the teaching factor. Do you know anyone who'd be able to look at this idea as a potential principal? My email is michael.o.church at gmail.
    - 14y ago

mahyarm 14y ago

Copying my comment from here: https://news.ycombinator.com/item?id=5578223 https://news.ycombinator.com/item?id=5578223 --- How about Las Vegas? I've never been there but: 1) Cheap airfare, international destination 2) A Party Town, probably helps the gender balance in one aspect, people would like to visit you. 3) No Income Tax 4) Still close to the SF Bay Area 5) Never cold, barely rains (good or bad depending on your preferences) 6) Really cheap real estate. Buy a townhouse for under $100k! 7) Many tech conventions are hosted there 8) Driving from one corner to another takes only 30 minutes according to google maps.

otoburb 14y ago
Vegas also has the distinction of being Tony Hsieh's experiment to revitalize the LV downtown core[1]. Autonomy Fund on the surface looks like a great fit with Tony's DowntownProject vision[2]. [1] http://www.forbes.com/sites/evankirkpatrick/2013/02/13/lessons-learned-from-tony-hsiehs-350mm-downtown-project-in-las-vegas/ http://www.forbes.com/sites/evankirkpatrick/2013/02/13/lesso... [2] http://downtownproject.com/ http://downtownproject.com/

S4M 14y ago

It's a nice idea, but focusing of technical excellence for its own sake is dubious according to me. If I were offered to put my own money in that project and get paid in dividends after couple of years (we want long term investors), I would probably refuse, as there is no business plan at all. Whoever has money to invest will focus first on the product, and then on the technical quality. What you want is rather: 1. write good code 2. ??? 3. profits Also, you will need to attract non coders, such as domain experts or marketing. They will also want their shares of the cake, and you will need to pick good ones, which will not be trivial for you as a developer. I am sure there are many other flaws, and I'd rather suggest that you use your technical excellence to "scratch your own itch" and live from it.

michaelochurch 14y ago
Very good points. Thanks so much. I welcome disagreement because, without it, my ideas would stay in a raw crappy form. So... here are my thoughts. My end goal is for this to congeal into something like an open-allocation environment, but one that exists across companies to some extent. I feel like if we bring OA to the external market, we'll force the hands of employers who will have to improve conditions if they want to compete for talent. So, the trans-corporate open allocation (because each person carries an income that follows her whereever she goes) is the ultimate end goal. That may be completely insane, but isn't that what the open-source gift economy is-- trans-corporate collaboration? Getting designers, marketers and domain experts will be hard. I grant you that. Strong designers and marketers I can spot; domain expertise I would not be able to tell, unless I had it myself and, of course, for most domains I won't. I think that to get a domain expert, you'd have to hire her into a company already formed through this process, because you're right that there's no way we can build up a competent selection process for every domain we might care about.
- S4M 14y ago
  I am not sure I get your second paragraph, but it seems to me that you want to build some kind of consulting company owned by top coders. Your offer would be to offer programming services, that only very competent programmers could do. My guess for such services would be: ultra scalable web apps, or creation of DSLs - it has to be something very advanced in order not to compete with the numerous consulting companies that are already existing, most of them doing mediocre stuff. And I can see this taking off. Obviously not fast because most of your potential customers wouldn't even know yet they need your services, but that should be able to slowly bootstrap. And I suppose once you would have built a strong team and gotten some notoriety, you would be able to bootstrap your technological edge into some concrete product. Having said that, I still have some doubts, mainly because I think we are in a coding bubble, and the future belongs less to the programmers than to the engineers who will build the new space rockets or the technology to exploit green energies from example, while with the standardization of functional programming and the development of various libraries it will be easy for a non programmer to start creating software components that are currently requiring programmers (IMHO there will be less "pure" programmers and more "X's who can program" as you once said here on HN). Nevertheless I wish you can succeed with your idea, even though I don't think I'll be able to work in your company as I am not a top programmer.

kohanz 14y ago

Let's see: government funds for projects that have little to no regulation, oversight, or concrete goals. Yeah... good luck with that. I mean, is there any precedent for this? And I actually like the idea!

michaelochurch 14y ago
Ctrl+F "teaching". If we set up a "20/20" plan where the entrepreneurs spend 15-20 hours teaching (as in, the public) while they draw a salary, then it might work. The only danger is that it pisses off the teacher's unions. It'd have to be a free after-school program.

htormey 14y ago

Michaelochurch, I've read a bunch of your blog posts concerning alternatives to VC funded startups and I have a question for you. Why raise any funding at all? Instead why not save a year or so's living expenses, pick a niche market, do contracting in that area and then try to OpenSource and productize a common problem that a bunch of your clients have. This approach is very similar to what 37 signals does and seems to work for some of my friends. http://37signals.com/about http://37signals.com/about Software Engineering, done this way, does not require a lot of capital. What are your thoughts on this model?

lacker 14y ago

Two thoughts. (a) It will be hard to get $7 million for an untested investment model like this. It would be easier to start with something more like $150k, like the first YC class. (b) It's hard to advise people on something you haven't done yourself. If you first started a successful mid-growth company, you'd find it a lot easier to raise money for this plan.

clbrook 14y ago

I wonder if the Kauffman foundation would be interested in partnering. http://www.kauffman.org/ http://www.kauffman.org/

carterschonwald 14y ago

Your return structure is wrong :-) A successful growing business is never profitable, most / all the profit is reinvested in the business. There will per se be no investor return relatively speaking. I recently saw an article this past week that suggests a better structure: the investment is a loan that is forgiven if the business folds. This is actually better for both sides: the investor gets their money back with some fixed return if the biz succeeds, and the business doesn't have to pay it back if it fails. Then it becomes a small tech business entrepreneurship Loan/ investment vehicle. In which case the pitch to the city is the their investing in furthering local biz growth in a way that has potential to have a multiplicative return for local industrial base. Tl;dr no small privately held biz is ever truely profitable, structure it as a forgivable loan upon biz failure.

usea 14y ago
In my company, profit sharing is 1/3 employees, 1/3 owners, 1/3 goes directly back into the company for investment. However, sometimes the company needs money to repair some equipment or whatever, and that comes out of the revenue (before profits). So the business needs come first obviously, but when times are good the employees are treated very well. This works best in companies where the employees can have a direct affect on short-term profits.
- carterschonwald 14y ago
  Yes I agree with that. But profit sharing with employees is per se taken from revenue left over after operating costs and such, profits are what you distribute to share holders. I agree with what you're saying, I'm mainly quibbling with the language of the structure of the proposed investment instrument. It would be very easy to do some Hollywood style accounting so that the business owner and employees all get a fraction of gross revenue after costs, but any investor would get zilch for all time. I know little of accounting, but I know that much :-) (This is of course orthogonal to the ethical / moral dimensions)
  - usea 14y ago
    That's a good point, which I hadn't thought of.

alexjeffrey 14y ago

I love this idea but the idea of tying it to your locality seems a little exclusionary for no reason. Granted, I am biased as I am based in the UK, but I can't think of any major problems with organising this through teleconferences?

activus 14y ago

Great idea. I'd actually submit Rochester, NY as a candidate (I'm from there, but live in Seattle now). The property taxes are high, but the cost of living is very low, power is very cheap, land is cheap and there is RIT and University of Rochester right there pumping out fantastic engineers (an hour away is University of Buffalo, not quite as good, but has a few gems). I know a few people doing startups there (it's tough because of funding, but these guys self fund). It's also not too far from Boston / NYC if you needed to grab people from there.