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I am intimately familiar with high-level metrics at software businesses in many locales other than Silicon Valley, and direct cost of employees is the largest e

by patio11 13y ago

I am intimately familiar with high-level metrics at software businesses in many locales other than Silicon Valley, and direct cost of employees is the largest expense at all of them. (Not true generally, since marketing budgets get arbitrarily high at some firms, but true of all dozen or so that I have direct experience with.) It can easily range to 80%+. Also, the imputed salaries being paid here are very much not Google/Facebook numbers. The payroll for a team of five Goolgers is plus or minus $100k a month, almost double what it was for Everpix. Everybody was likely taking far below-market salaries.

patio11 13y ago
I did a bit of Excel modeling of this, based on Everpix's hiring timeline and published numbers. My count is that they had 157 employee-months prior to shutdown at a fully-loaded cost of approximately $9,200 per employee-month. An employee-month is one month worked by a founder or employee, but not a consultant. Fully-loaded costs includes recruiting, healthcare, salary, and taxes, but (for the purpose of this calculation) does not include pro-rated costs for rent, hardware, software licenses, or what have you. Those are all numbers I'd be careful to bake into my planning as a founder but which I don't need to reverse the math here to salary packages. I would ballpark the average package at Everpix as what Americans would understand as "$90k plus healthcare plus equity." This is not straight-line comparable to "$90k plus healthcare" at other US-based software firms, even those with baseline perks packages for working professionals rather than those competing in the Valley perks arms-race with Google and Facebook. For example, if one were to take "$90k plus healthcare" at an insurance company doing Java EE XL mappings every day, it is virtually beyond question that there'd be 401Ks with employer matching and whatnot in the picture as well. If you were to do a straight-line comparison with e.g. Google or Facebook, this is substantially below their pure-cash offers for fresh graduates with no professional experience, and both would add both substantial cash bonuses and incentives plus equity grants plus perks with non-trivial cash value. The compensation packages employees capable of solo-shipping e.g. iOS applications or non-trivial image recognition software would be offered are substantially north of that. $140k cash-on-the-barrel plus industry standard perks isn't even an eyeraising number for intermediate engineers with no skill more specialized than shipping working software. I'm mostly doing this math to say that "Lavish expenditures on employees were not a contributing factor here. They paid substantially below-market wages for employees doing similar jobs locally." I know that this might cause people who are not located in the Valley to feel a bit of heartburn given the absolute numbers, but that's another discussion entirely. (It should be noted that I live in an area where $90k cash packages would be unusual for engineers with 20+ years of professional experience.)
- mr_luc 13y ago
  I think this is probably the definitive comment for the 'cost of talent' portion of the discussion. I just wish it weren't buried so far down.
  - deleted 13y ago
    [deleted]

by patio11 13y ago

patio11 13y ago

I did a bit of Excel modeling of this, based on Everpix's hiring timeline and published numbers. My count is that they had 157 employee-months prior to shutdown at a fully-loaded cost of approximately $9,200 per employee-month. An employee-month is one month worked by a founder or employee, but not a consultant. Fully-loaded costs includes recruiting, healthcare, salary, and taxes, but (for the purpose of this calculation) does not include pro-rated costs for rent, hardware, software licenses, or what have you. Those are all numbers I'd be careful to bake into my planning as a founder but which I don't need to reverse the math here to salary packages. I would ballpark the average package at Everpix as what Americans would understand as "$90k plus healthcare plus equity." This is not straight-line comparable to "$90k plus healthcare" at other US-based software firms, even those with baseline perks packages for working professionals rather than those competing in the Valley perks arms-race with Google and Facebook. For example, if one were to take "$90k plus healthcare" at an insurance company doing Java EE XL mappings every day, it is virtually beyond question that there'd be 401Ks with employer matching and whatnot in the picture as well. If you were to do a straight-line comparison with e.g. Google or Facebook, this is substantially below their pure-cash offers for fresh graduates with no professional experience, and both would add both substantial cash bonuses and incentives plus equity grants plus perks with non-trivial cash value. The compensation packages employees capable of solo-shipping e.g. iOS applications or non-trivial image recognition software would be offered are substantially north of that. $140k cash-on-the-barrel plus industry standard perks isn't even an eyeraising number for intermediate engineers with no skill more specialized than shipping working software. I'm mostly doing this math to say that "Lavish expenditures on employees were not a contributing factor here. They paid substantially below-market wages for employees doing similar jobs locally." I know that this might cause people who are not located in the Valley to feel a bit of heartburn given the absolute numbers, but that's another discussion entirely. (It should be noted that I live in an area where $90k cash packages would be unusual for engineers with 20+ years of professional experience.)

mr_luc 13y ago
I think this is probably the definitive comment for the 'cost of talent' portion of the discussion. I just wish it weren't buried so far down.
- deleted 13y ago
  [deleted]