7 ms·

Idiot CEOs

51 points by jasonlbaptiste 18y ago

erlanger 18y ago
"$175K is not a salary that leaves much on the table, especially not when you live in the expensive area around Sandhill Road." Is he serious? I'll bet money gets really tight when you factor in the silver cutlery, butler, and other essentials.
- rjurney 18y ago
  Yes, but I believe he is talking about a 'they made me move to Sand Hill Rd to be near them when they invested' scenario, where $175K is worth less than half that for the rest of that nation, owing to exorbitant cost of living there.
  - erlanger 18y ago
    Being that specific about where you live is ridiculous. I can see them demanding that you live in the Bay Area, or in a particular city, but the only thing I can see VCs having any say on beyond that would be the office location.
    - rjurney 18y ago
      If you're moving cross-country to be near your VC, I just assume you would need to be very near the office? The one case I know of, it was that way.
      - erlanger 18y ago
        I mean, one thing they're investing in is the company being well managed and communicative. It's up to the CEO and co. to make it happen, and there's a level of trust there.
- krschultz 18y ago
  note he says "support family", it is easy to be a bachelor on a lot less but 175k if you want to do any kind of saving for retirement, saving for your kids education, and paying for healthcare is not much. So if you want to look your kids in the eyes and say "hey I'm gambling on something for my own personal fulfillment rather than giving you the opportunities that I could easily if I had kept my old job" then go right ahead but its difficult for others to do. Thats why I want to my whole risky-taking entrepreneurship thing BEFORE having kids so you don't run into that quandary.
  - erlanger 18y ago
    If you can't support a family on $175k, you're doing it wrong.
    - comatose_kid 18y ago
      You seem pretty sure of yourself, and some differing data points would be nice to hear. Are you raising a family in the Bay Area?
      - deleted 18y ago
        [deleted]
      - catch23 18y ago
        There are quite a few poor families making a living in the Bay Area that happen to have other mouths to feed too. If you want more data points, come visit my neighbors and ask them how they do it. The cost of living here is not as bad as you might think.
        comatose_kid 18y ago
        I probably should have been more clear - are there areas in the bay area with good schools, and homes that require significantly less earnings than 175k per year (say, 125k?) And I'd like to not spend 2 hrs commuting, because spending time with my children would be nice. In my experience, you have to pay a lot more here to get the same quality of life that you could find elsewhere. I live in the Bay area, and am raising a family here. It is expensive - 175K/yr would probably buy you the same standard of living as 80k/yr would in Ottawa, Canada, where I grew up.
ido 18y ago
I've only skimmed the article, but one bullet point caught my eye: - Low salary Opportunity rather than salary is top of mind to entrepreneurs, but that changes quickly when they struggle to support their families and pay mortgages. $175K is not a salary that leaves much on the table, especially not when you live in the expensive area around Sandhill Road.
krschultz 18y ago
- Exorbitant loss of upside Great entrepreneurs are known for their passion to pursue their dreams at virtually any cost, and sub-prime VCs smell their blood and desperation. Those companies become owned by VCs quickly and because of the investors' lack of relevant operating experience yields a further deflation of the valuation of the company. We've seen many companies with end-game founder stock way below 5%, which is unlikely to become life-changing. So, why would you take the scrutiny of the CEO job with that outcome in mind? Always think about that, is it better to own 100% of a company worth 10 million bucks or 5% of a company worth 200 million? I would rather own completely the smaller business and have fewer people to answer to and focus on a more niche (often times more interesting) problem.
- diego 18y ago
  Except that if you own 5% of a company worth 200 million you should be able to quit and walk away with 10 million (for the standard definition of "own" and "worth"). If you own a company worth 10 million you can't really quit. If you sell it, chances are that the acquiring company will want you around for years so you'll be in the above situation but with golden handcuffs.
  - mediaman 18y ago
    It depends on how you manage it -- there are people who chain themselves to the business, but if the business is really worth $10mm (and not just because of inflated hope, let's say it has $2-3mm in sales and maybe $500k-$1mm in ebitda) you can bring in operators who, when smartly recruited, take a huge amount of stress off the founder and allow you to run the business part time, once you've instilled a good operating culture.
    - anamax 18y ago
      > $2-3mm in sales and maybe $500k-$1mm in ebitda) you can bring in operators who, when smartly recruited, take a huge amount of stress off the founder and allow you to run the business part time That's just barely big enough to go part time. Folks who can competently run such biz aren't cheap - they're at least $200k (fully burdened), taking a significant fraction of the $500k-$1M. And, even then part-time is an illusion because it takes time to figure out that you've got a good one and the good ones tend to move to greener pastures.
pg 18y ago
It's an interesting exercise to ask what the thesis of this article is. It's not that all founders who take VC are idiots. He's not saying that Larry & Sergey are idiots-- and implicitly that he's smarter than them. He hedges pretty conspicuously there. All he's saying is that some VCs are bad. But that is hardly news. Every line of work has some people who are bad. Imagine the corresponding article about roofers. It would be called "Idiot Homeowners," and say, as if it were some great discovery, that some roofers are bad-- that they overcharge you, and then do bad work as well.
- thras 18y ago
  "Founded in 1998, The Venture Company is a catalyst for disruptive innovation; helping entrepreneurs, corporations and investors innovate." I noticed a similar article yesterday. I'm skeptical that Hacker News will weather the upcoming storm once all of the professional-entrepreneur-advisers decide to start drumming up clients here.
  - pg 18y ago
    It's nothing new. In fact it used to be worse. Remember, HN started out as Startup News.
MaysonL 18y ago
I do find it interesting that for all the griping and sniping at sub-prime VCs and the idiot CEOs they fund, he doesn't mention one single example of either.
- knightinblue 18y ago
  That's just good business.
danbmil99 18y ago
I worked with 2 VC's, one was an idiot and the other was great. It's like anything else. As for $175/bay area, what he really means is live like you are 'supposed' to live if you are a hot CEO -- live in the right neighborhood, send your kids to the right schools, take the right vacations at Tahoe, etc. That may sound silly but it's part of the networking needed to play that game among that crowd.

"$175K is not a salary that leaves much on the table, especially not when you live in the expensive area around Sandhill Road." Is he serious? I'll bet money gets really tight when you factor in the silver cutlery, butler, and other essentials.

rjurney 18y ago
Yes, but I believe he is talking about a 'they made me move to Sand Hill Rd to be near them when they invested' scenario, where $175K is worth less than half that for the rest of that nation, owing to exorbitant cost of living there.
- erlanger 18y ago
  Being that specific about where you live is ridiculous. I can see them demanding that you live in the Bay Area, or in a particular city, but the only thing I can see VCs having any say on beyond that would be the office location.
  - rjurney 18y ago
    If you're moving cross-country to be near your VC, I just assume you would need to be very near the office? The one case I know of, it was that way.
    - erlanger 18y ago
      I mean, one thing they're investing in is the company being well managed and communicative. It's up to the CEO and co. to make it happen, and there's a level of trust there.
krschultz 18y ago
note he says "support family", it is easy to be a bachelor on a lot less but 175k if you want to do any kind of saving for retirement, saving for your kids education, and paying for healthcare is not much. So if you want to look your kids in the eyes and say "hey I'm gambling on something for my own personal fulfillment rather than giving you the opportunities that I could easily if I had kept my old job" then go right ahead but its difficult for others to do. Thats why I want to my whole risky-taking entrepreneurship thing BEFORE having kids so you don't run into that quandary.
- erlanger 18y ago
  If you can't support a family on $175k, you're doing it wrong.
  - comatose_kid 18y ago
    You seem pretty sure of yourself, and some differing data points would be nice to hear. Are you raising a family in the Bay Area?
    - deleted 18y ago
      [deleted]
    - catch23 18y ago
      There are quite a few poor families making a living in the Bay Area that happen to have other mouths to feed too. If you want more data points, come visit my neighbors and ask them how they do it. The cost of living here is not as bad as you might think.
      - comatose_kid 18y ago
        I probably should have been more clear - are there areas in the bay area with good schools, and homes that require significantly less earnings than 175k per year (say, 125k?) And I'd like to not spend 2 hrs commuting, because spending time with my children would be nice. In my experience, you have to pay a lot more here to get the same quality of life that you could find elsewhere. I live in the Bay area, and am raising a family here. It is expensive - 175K/yr would probably buy you the same standard of living as 80k/yr would in Ottawa, Canada, where I grew up.

ido 18y ago

I've only skimmed the article, but one bullet point caught my eye: - Low salary Opportunity rather than salary is top of mind to entrepreneurs, but that changes quickly when they struggle to support their families and pay mortgages. $175K is not a salary that leaves much on the table, especially not when you live in the expensive area around Sandhill Road.

krschultz 18y ago

- Exorbitant loss of upside Great entrepreneurs are known for their passion to pursue their dreams at virtually any cost, and sub-prime VCs smell their blood and desperation. Those companies become owned by VCs quickly and because of the investors' lack of relevant operating experience yields a further deflation of the valuation of the company. We've seen many companies with end-game founder stock way below 5%, which is unlikely to become life-changing. So, why would you take the scrutiny of the CEO job with that outcome in mind? Always think about that, is it better to own 100% of a company worth 10 million bucks or 5% of a company worth 200 million? I would rather own completely the smaller business and have fewer people to answer to and focus on a more niche (often times more interesting) problem.

diego 18y ago
Except that if you own 5% of a company worth 200 million you should be able to quit and walk away with 10 million (for the standard definition of "own" and "worth"). If you own a company worth 10 million you can't really quit. If you sell it, chances are that the acquiring company will want you around for years so you'll be in the above situation but with golden handcuffs.
- mediaman 18y ago
  It depends on how you manage it -- there are people who chain themselves to the business, but if the business is really worth $10mm (and not just because of inflated hope, let's say it has $2-3mm in sales and maybe $500k-$1mm in ebitda) you can bring in operators who, when smartly recruited, take a huge amount of stress off the founder and allow you to run the business part time, once you've instilled a good operating culture.
  - anamax 18y ago
    > $2-3mm in sales and maybe $500k-$1mm in ebitda) you can bring in operators who, when smartly recruited, take a huge amount of stress off the founder and allow you to run the business part time That's just barely big enough to go part time. Folks who can competently run such biz aren't cheap - they're at least $200k (fully burdened), taking a significant fraction of the $500k-$1M. And, even then part-time is an illusion because it takes time to figure out that you've got a good one and the good ones tend to move to greener pastures.

pg 18y ago

It's an interesting exercise to ask what the thesis of this article is. It's not that all founders who take VC are idiots. He's not saying that Larry & Sergey are idiots-- and implicitly that he's smarter than them. He hedges pretty conspicuously there. All he's saying is that some VCs are bad. But that is hardly news. Every line of work has some people who are bad. Imagine the corresponding article about roofers. It would be called "Idiot Homeowners," and say, as if it were some great discovery, that some roofers are bad-- that they overcharge you, and then do bad work as well.

thras 18y ago
"Founded in 1998, The Venture Company is a catalyst for disruptive innovation; helping entrepreneurs, corporations and investors innovate." I noticed a similar article yesterday. I'm skeptical that Hacker News will weather the upcoming storm once all of the professional-entrepreneur-advisers decide to start drumming up clients here.
- pg 18y ago
  It's nothing new. In fact it used to be worse. Remember, HN started out as Startup News.

MaysonL 18y ago

I do find it interesting that for all the griping and sniping at sub-prime VCs and the idiot CEOs they fund, he doesn't mention one single example of either.

knightinblue 18y ago
That's just good business.

danbmil99 18y ago

I worked with 2 VC's, one was an idiot and the other was great. It's like anything else. As for $175/bay area, what he really means is live like you are 'supposed' to live if you are a hot CEO -- live in the right neighborhood, send your kids to the right schools, take the right vacations at Tahoe, etc. That may sound silly but it's part of the networking needed to play that game among that crowd.