4 ms·

The vast majority of founders are not spoiled rich kids playing with daddy's money. The vast majority of founders take a massive risk when they go all in on a s

The vast majority of founders are not spoiled rich kids playing with daddy's money. The vast majority of founders take a massive risk when they go all in on a startup. "The vast majority of founders" never take VC and aren't even working in a space that VCs will fund. I'm not talking about lifestyle businesses, which actually involve a lot of risk and sweat, I agree with you. When your startup falls, there's not some kind of cushy EIR gig waiting for you at the friendly VC. If you're VC-funded, there is. If you never get funding in the first place, then what you say is correct, there's no guarantee of anything. By the way, the fact that it's unfair I don't believe to be worth complaint. My problem is that we've ended up supporting a game that actually increases and perpetuates inequality by making pre-selected rich kids look like they earned it. In fact, the real respect goes to the risk-taking, unfundable, silent majority founders you described.

tptacek 13y ago
I was funded in 1999, at 2013 A-round levels. No EIR position awaited the failure of that company. Again: I don't even know anyone who's ever been offered an EIR position, and I know a fair number of people, many of whom have been funded, some of them by huge name VCs. So, why don't we do it this way: why don't you name a couple people who've been recipients of "EIR sinecures"?
- yuhong 13y ago
  Note the "in 1999". michaelochurch can you comment on when it started?
  - deleted 13y ago
    [deleted]
  - danielweber 13y ago
    Over the past decade I've had the, um, interesting experience of watching a number of start-ups fail, VC-funded or not, sometimes competitors to 'tptacek's companies. I've never seen an EIR landing. I'm not even sure there are enough EIR spots available. Maybe lightning will strike and your name becomes recognizable on the front-page of the business section and then people throw results and funding at you in a self-fulfilling prophecy because they want to be on your good side. But I've also seen a lot of people team up with these famous folks only to massively regret it. It's definitely not the most efficient graft-free super-meritocracy ever, and there's a lot of luck even once you get past that, but I just don't see it.
- U32LnJfiYoiLQP 13y ago
  I know of a company where the parent of one of the founders made a ton of money for the VC. Twice. In exchange, one of the partners has put some seed money into the kid's startup. The seed money is a pittance compared to how much money the VCs got. What's sad about it is that there's no entrepreneurial spark in the founders. They're not hungry for success. They're paying themselves way too much and working with no effect. The company will fail, and they'll go on to whatever nice lifestyle awaits them. (edit: Note that I'm not saying that this is typical, just that there are examples of this "insider" activity.)
  - michaelochurch 13y ago
    What's sad about it is that there's no entrepreneurial spark in the founders. They're not hungry for success. They're paying themselves way too much and working with no effect. The company will fail, and they'll go on to whatever nice lifestyle awaits them. This is interesting and insightful. I suppose the learned laziness these kids have is just as adverse to creative accomplishment as the learned helplessness that the rest of us end up with. I should add that I don't actually think every VC-funded startup is bullshit. It just seems that the good ones are quite rare. They're also very selective (which they should be) but that becomes a problem when you've worked for garbage startups that have damaged your career. So you have to be really careful in the VC-istan game.
imagnitude 13y ago
My comment is specifically about founders of VC funded startups. It might be different outside Silicon Valley. But in my experience in SV, I know the founders of about 20 venture funded startups socially. One of them is what you would call a "rich kid". The rest bootstrapped for many months, paying themselves virtually nothing, getting deep in debt, before their Series A. Even after raising an A round, they pay themselves subsistence wages, just enough to eat so that they can pay market rate six figure salaries to the engineers on their team. This might be unique to the West Coast. But around here, social/country club connections mean nothing for raising money. Anyone can get a meeting with a top tier VC pretty easily, even if you are a complete nobody. Having a well connected family might help with other things, but it has absolutely zero effect on fundraising.
- michaelochurch 13y ago
  The rest bootstrapped for many months, paying themselves virtually nothing, getting deep in debt, before their Series A. Even after raising an A round, they pay themselves subsistence wages, just enough to eat so that they can pay market rate six figure salaries to the engineers on their team. I actually agree with you that, if they're truly suffering financial hardship (but I'm never impressed by a rich guy taking a $1 salary) they deserve a lot more than the engineers taking full salary. What about those horrible executive implants installed by investors, though? They also get an order of magnitude more equity and full salary, and that's wrong.
  - tptacek 13y ago
    You don't actually agree with that. You said, just downthread, that only 4 such founders actually existed. As for horrible executive implants --- I've been the "victim" of those, scare quotes included because my victimhood was partially my own damn fault. VC firms don't "implant" executives as a way of soaking their own funds back from companies they've invested in; they do it because (a) they think those executives are going to help and (b) they are dumb. If you accept those people, or if you acknowledge the roles they're supposed to fill should exist but can't recruit your own credible candidate, you're dumb too. Being in a sticky situation in a board meeting where you acknowledge that you need someone to lead marketing but can't yourself find a viable candidate is, yes indeed, a good reason not to seek venture capital. The VC model requires you to strap yourself to an unguided missile that everyone hopes is aimed somewhere lucrative but is just as likely going to carom off a series of brick walls. Things move fast, because that's the model. What, exactly, does that have to do with the fairness of equity grants to executives?

tptacek 13y ago

I was funded in 1999, at 2013 A-round levels. No EIR position awaited the failure of that company. Again: I don't even know anyone who's ever been offered an EIR position, and I know a fair number of people, many of whom have been funded, some of them by huge name VCs. So, why don't we do it this way: why don't you name a couple people who've been recipients of "EIR sinecures"?

yuhong 13y ago
Note the "in 1999". michaelochurch can you comment on when it started?
- deleted 13y ago
  [deleted]
- danielweber 13y ago
  Over the past decade I've had the, um, interesting experience of watching a number of start-ups fail, VC-funded or not, sometimes competitors to 'tptacek's companies. I've never seen an EIR landing. I'm not even sure there are enough EIR spots available. Maybe lightning will strike and your name becomes recognizable on the front-page of the business section and then people throw results and funding at you in a self-fulfilling prophecy because they want to be on your good side. But I've also seen a lot of people team up with these famous folks only to massively regret it. It's definitely not the most efficient graft-free super-meritocracy ever, and there's a lot of luck even once you get past that, but I just don't see it.
U32LnJfiYoiLQP 13y ago
I know of a company where the parent of one of the founders made a ton of money for the VC. Twice. In exchange, one of the partners has put some seed money into the kid's startup. The seed money is a pittance compared to how much money the VCs got. What's sad about it is that there's no entrepreneurial spark in the founders. They're not hungry for success. They're paying themselves way too much and working with no effect. The company will fail, and they'll go on to whatever nice lifestyle awaits them. (edit: Note that I'm not saying that this is typical, just that there are examples of this "insider" activity.)
- michaelochurch 13y ago
  What's sad about it is that there's no entrepreneurial spark in the founders. They're not hungry for success. They're paying themselves way too much and working with no effect. The company will fail, and they'll go on to whatever nice lifestyle awaits them. This is interesting and insightful. I suppose the learned laziness these kids have is just as adverse to creative accomplishment as the learned helplessness that the rest of us end up with. I should add that I don't actually think every VC-funded startup is bullshit. It just seems that the good ones are quite rare. They're also very selective (which they should be) but that becomes a problem when you've worked for garbage startups that have damaged your career. So you have to be really careful in the VC-istan game.

imagnitude 13y ago

My comment is specifically about founders of VC funded startups. It might be different outside Silicon Valley. But in my experience in SV, I know the founders of about 20 venture funded startups socially. One of them is what you would call a "rich kid". The rest bootstrapped for many months, paying themselves virtually nothing, getting deep in debt, before their Series A. Even after raising an A round, they pay themselves subsistence wages, just enough to eat so that they can pay market rate six figure salaries to the engineers on their team. This might be unique to the West Coast. But around here, social/country club connections mean nothing for raising money. Anyone can get a meeting with a top tier VC pretty easily, even if you are a complete nobody. Having a well connected family might help with other things, but it has absolutely zero effect on fundraising.

michaelochurch 13y ago
The rest bootstrapped for many months, paying themselves virtually nothing, getting deep in debt, before their Series A. Even after raising an A round, they pay themselves subsistence wages, just enough to eat so that they can pay market rate six figure salaries to the engineers on their team. I actually agree with you that, if they're truly suffering financial hardship (but I'm never impressed by a rich guy taking a $1 salary) they deserve a lot more than the engineers taking full salary. What about those horrible executive implants installed by investors, though? They also get an order of magnitude more equity and full salary, and that's wrong.
- tptacek 13y ago
  You don't actually agree with that. You said, just downthread, that only 4 such founders actually existed. As for horrible executive implants --- I've been the "victim" of those, scare quotes included because my victimhood was partially my own damn fault. VC firms don't "implant" executives as a way of soaking their own funds back from companies they've invested in; they do it because (a) they think those executives are going to help and (b) they are dumb. If you accept those people, or if you acknowledge the roles they're supposed to fill should exist but can't recruit your own credible candidate, you're dumb too. Being in a sticky situation in a board meeting where you acknowledge that you need someone to lead marketing but can't yourself find a viable candidate is, yes indeed, a good reason not to seek venture capital. The VC model requires you to strap yourself to an unguided missile that everyone hopes is aimed somewhere lucrative but is just as likely going to carom off a series of brick walls. Things move fast, because that's the model. What, exactly, does that have to do with the fairness of equity grants to executives?