6 ms·

I suppose it depends on who you are. If you have a family and a mortgage, the answer may be yes.

by troels 13y ago

cookiecaper 13y ago
Many investors are not very kind to founders with families and mortgages. YC itself is a horrible deal for anyone that's not a college dropout. Move out to SF for 3 months, leaving wife, kids, and property behind to fend for themselves, shack up in a tiny apartment with a co-founder, and get paid nothing for $20k and 5-7% of your company? That's alright man, pg can keep focusing on his college dropouts (of both sexes!). Even more traditional investment arrangements put a great deal of focus on "equity compensation", i.e., only paying founders and employees the bare minimum for survival and "making up" the lacked payment with equity. Not a very realistic deal for an engineer with a family and mortgage who makes 120k-150k in the job market to take a startup gig for 60k (multiply numbers based on local cost of living). The startup community is missing out on a lot of extremely useful experience and maturity with these cheapskate shenanigans. Of course, the investors are happy to lack this, because exploitation of naivety in founders is one of their primary mechanisms to maximize profit. I've sought funding a few times myself and always backed out because I was getting offered a sucker's deal. Yes, it's much slower and much harder to bootstrap, but unless you're desperate, taking investment is not worth it, because investors are going to rake you over the coals. And that's the long and short of it.
- onion2k 13y ago
  A few months on a very low wage (that is what the $20k is for..), away from your friends and family, living in a tiny apartment is nothing compared to working on something you feel exceptionally passionate about. Chances are you'll never find that problem. Most people don't. Those problems are rare, and solutions to them rarer still. But that's fine. If you have a business idea that you're keen on but don't want to give months away from your family or accept a huge drop in income for, bootstrapping is the right way to go. But that doesn't mean investment is always for chumps. For the few that do find a problem that they live to solve, making the tremendous sacrifices at the beginning is worth it, even if other people get rich off your efforts. Your friends, family, investors and humanity as a whole is better for it.
  - jnardiello 13y ago
    Only someone who doesn't have family could say: "A few months on a very low wage (that is what the $20k is for..), away from your friends and family, living in a tiny apartment is nothing compared to working on something you feel exceptionally passionate about." Do you have small children? If so, can you try to imagine how difficult could be to miss the first words or first steps of your baby? Can you imagine what could mean to simply drop everything on the shoulder of your wife? Your comment is so superficial.
    - argonaut 13y ago
      Why do we always have to assume we're talking about small children? If that's a concern, wait until your children grow up to be teenagers before you leave for 3 months for YC.
      - cookiecaper 13y ago
        Do teenagers not need fathers? I understand what you're saying, but the point is that it's silly to set up a false dichotomy between entrepreneurship and family and attempt to force the entrepreneur to choose. I believe that the startup community is much poorer because of the tendency to do this, and I'm extremely suspicious of anyone who'd advocate it.
        argonaut 13y ago
        Is it so hard to be away for 3 months? Doing a startup instead of taking a stable job involves tradeoffs, like all choices. How much of a tradeoff you take depends on you. You can move your entire family to the Bay Area, with the tradeoffs that entails (uprooting family, more expensive housing). You can move to the Bay for 3-4 months with the intention of permanently setting up the startup back home, with its own tradeoffs (farther from investors, farther from mentors, 3-4 months away from family). Etc. etc. etc. There is no false dichotomy. There is no free lunch. Stop making these narrow generalizations.
        13y ago
- sytelus 13y ago
  5-7% of your company Where are you getting that number? My impression was that YC had very fair deal with founder equity > 30% (unless they are funding beyond angel). Beyond that it's just risk/reward equation. If you want same income as your stable job then you are not taking risk and hence should not expect reward beyond that. Good founders rarely however expect same income as the stable job they could have gotten because they strongly believe in their vision and success and are willing to bet everything they have. That's the first requirement to be founder, IMO. Nearly every successful founders from Bill Gates to Elon Musk have showed this most important characteristics. BTW, lest you think Bill Gates was just another college dropout with nothing to loose, consider the fact that dropouts are usually at great schools, have spent lots of time, money and effort to get there and a suddenly giving up all that to chase some idea is significant risk taking. Even to this day, Elon Musk had been willing to bet every single penny he had on SpaceX. Without this singular characteristic, your chance of becoming successful founder is very low.
  - cookiecaper 13y ago
    You're still taking significant risk if you get paid market or near-market rates when you start your company. You've put your name on the line, you've committed yourself to providing a product and running a company, with all the difficulties it entails. I understand the impulse to have founders prove their commitment by living as paupers, but I just don't think it's a good way to judge the competence of an investment. I think there are other meters for passion that are more accurate than "Yes, I'm willing to take a 50-70% pay cut".
- argonaut 13y ago
  I'm not sure if you don't know what you're talking about or if you're just exaggerating for the sake of argument. 1. Most YC founders are not college dropouts. Quite a few are in every batch of YC, but nowhere near 20%. 2. YC isn't in SF. And most YC companies don't stay in SF during YC. Lots of companies stay in Mountain View, Palo Alto, Menlo Park, etc where you can rent out a 4-6 bedroom with your co-founder(s). Housing is even cheaper in other areas like Sunnyvale, Santa Clara, and San Jose, where you can potentially have a house to yourself. 3. If you expect to get paid for starting a startup, then obviously starting a startup is not for you. By definition there's nobody there to pay you except yourself. By definition you are exchanging equity for salary. 4. YC gives you $100k: $20k directly and $80k in convertible notes (well, SAFEs now) at the best possible terms (you'd never see elsewhere). The additional value of YC is that as long as you build a product with some users, you have an extremely high chance (not guaranteed) of raising 1M+ at a 5M+ valuation. Other companies that don't raise can go on to raise more convertible notes. In fact, going through YC is one way of guaranteeing that you don't end up being offered a sucker's deal.
  - cookiecaper 13y ago
    1. OK, we can expand it to "recent college graduates". The point is, YC is predominantly young adult males, aged in their early 20s, unlikely to have major external responsibilities. 2. As someone who's not from SV, everything in that area gets lumped into "SF" for me. My apologies if this is considered obtuse. 3. Isn't this kind of part of the point of seeking investment? Aren't you saying, "I can't do this all on my own, I need some help with the finances, and will cut you in if you'll hook me up"? Somehow I don't see that as the same thing as "please pay me a pittance". As I stated in another reply, if the founder could live on a pittance, the chances are he'd save up a little bit at his cushy corporate job and enter conservation mode with that, rather than seeking external funding. 4. I haven't looked for a few years, but I was not aware that YC offered an additional $100k in financial instruments. This is somewhat better, but I'm not sure how those instruments work in this specific case so I can't make a complete evaluation. As far as follow-on investments go, these all have their own separate terms, yes? Unless YC is officially brokering all of these, how can being a YC company prevent you from getting suckered by YC copycats?
- altreal 13y ago
  It would be hard to appreciate this without thinking like an investor. Let's say you pitched an investor. He has seen your passion and drive 100s of other times before. He decides to give you $200K as seed money so you can keep getting same income as your corporate cushy job. He knows your chance of failure is 90%. Next year very likely investor is going to loose all of that money. On the other hand, you have no downside. For you, it's pretty much the change of job because you get to keep same income as before. In fact, it's much better than a change of job because now you get to work on stuff you want in your pajamas in your backyard of your 4 bedroom home. Come next year, there is 90% probability that your startup would have failed. But you would have zero loss in any material respect. Instead most likely you are just going to move on with your life and find another corporate cushy job with minor or even major promotion given that now you can brag about having tried your own startup and claim that experience. So you see, we have a transaction where one party has 90% chance of loosing everything and other party gains 110% always. Anyone fantasizing about such transaction would have to find a great fool or own a casino. This is why you can't expect any competent investor funding your startup so you get to keep your "cushy job" income. PS: Betting your "name" and "reputation" is meaningless to investors unless you are Evan Williams or Kevin Rose. PS2: If you think investors are still getting fair deal because they have chance of hitting a jackpot, know this: Average VC fund has less returns than S&P 500. Rate of failures of startup takes away pretty much everything but small slice of big pot.
  - cookiecaper 13y ago
    1) Investors can vastly improve their odds by knowing what they're investing in. There's a reason Paul Graham and YC are the gold standard in these circles now, and that is because Paul Graham and YC are one of the only informed investors in the game. Practically everyone else is just playing a favorable casino game. 2) If an investor wants to give you $200k seed money, and you can make a justifiable case that you need $200k to maintain a reasonable lifestyle based on your family's needs, then you're going to need more than $200k. That said, I don't argue that most founders need $200k, I just argue that they should be given reasonable allowances to provide some basic decencies for themselves and their families, instead of ending each pay cycle with less than ten bucks left in their pockets. 3) The risk should be appropriate on both sides. If $200k is a risk that jeopardizes the welfare of an investor, he shouldn't be investing it; "never invest more than you can afford to lose". And if taking a job at a startup is a risk that jeopardizes the welfare of a founder and his family, he shouldn't be risking it, for the same purpose. A good founder is worth a good salary. He probably shouldn't be rolling in the dough, but most investors seem skeptical if the founder isn't living off of ramen. This is not acceptable if you have a family to support. What does a VC really lose if a company goes under? Not that much. The founders are pouring years of their life into the development of a product. They are asking their friends and colleagues to trust them to build something great and join them, transferring responsibility for their livelihoods as well. Founders have a legal and moral obligation and fiduciary duty to output the best product possible with their investment. Most founders take this responsibility very seriously. The failure of this venture is a major emotional loss to the founder. And what's the loss to the VC? Oh yeah, a rather insignificant portion of their total play, because it was specifically engineered to be that way. In fact, most of them hardly notice when these failures occur, unless they begin to occur en masse. I find the argument "VCs have everything to lose if you don't take a 50-70% pay cut!" despicably shallow. VCs never have anything to lose except money, and certainly make sure never to jeopardize that in a serious manner, so what do VCs have to lose? Almost nothing. What does a founder have to lose? Oh, a few years of his life, emotional health and well-being, reputation and trust among his family and friends, etc. Just petty stuff compared to the $200k check an investor will write and instantly forget about. The founder should be made to put even more on the line! He shouldn't be allowed a salary that's commensurate even with a cruise-control corporate position for all that responsibility. He shouldn't even be allowed a salary that will afford him a few basic privileges like a decent mode of transportation, decent living quarters in a decent neighborhood, or a bit of leisure every so often. No income to fiddle with new gadgets or experiment. No room to breathe. On top of the stress of the company, he must endure the stress of barely meting out enough to make his mortgage, which several people rely upon for shelter. He should do all of this because he needs more to lose, so that the VCs are satisfied. The founder's only way to make any decent income backported over those years of indentured servitude is to make the VCs a billion dollars first. Seriously. And if anyone doesn't like this, then the VCs try to shame him and lecture him about the stakes. Remember how I said VCs depend heavily on the naivety of founders to maximize profits? Here you go.
- patio11 13y ago
  The general "YC gives you not so much for quite a lot of equity" critique would have made a lot of sense ~5 years ago, when all you'd reasonably count on from doing YC is $10-20k. Currently, you're structurally guaranteed a substantial follow-on investment on terms which are practically "free money", and if your startup is not a walking zombie you're all but a mortal lock on a seed round at quite possibly the most systematically founder-friendly funding feeding frenzy terms in the Valley. That's if you value the actual participation in YC (and later in their mafia) at nothing. I'd personally suggest, on the basis of numerous reports by founders I find personally credible, that it's a really good network to be in if your life plan includes doing a funded trajectory sort of company. Incidentally, I've got a wee bit of experience with the boostrapped software business thing, and unless you do the consultancy to product route (which has plenty to recommend it) you're most probably going to take a dip from $120k to $150k for a couple of years at the outset. I know people who paid themselves that in year 2, but that's not incredibly common, and I'm coming up blank thinking of any bootstrapped product companies which made their founders that right out of the gate. (It's doable in consulting -- aggressive, but clearly doable.) If that's a huge problem for you, I recommend a job at AmaGooFaceSoft. They're all good companies, they cut quite steady checks, and there is nothing wrong with taking their money if your family situation demands an iron floor at $120k.
- ryanSrich 13y ago
  > The startup community is missing out on a lot of extremely useful experience and maturity with these cheapskate shenanigans. Of course, the investors are happy to lack this, because exploitation of naivety in founders is one of their primary mechanisms to maximize profit. Perhaps the SV Startup Community is but as far as the Midwest and East Coast goes; 90% of the founders I interact with have a house and kids. The biggest difference in business is that most of these companies actually have mechanisms for generating revenue. Aside from the fact they are solving 'real world' problems, not just building iPhone apps that delete the picture after you take it...
juanitod 13y ago
These are the wrong assessments. You should rather say: "I suppose it depends on your type of business. If you are a B2C and you need lot of traction before charging customers, the answer may be yes." Family and Mortgage should not affect your choice for bootstrapping.
- troels 13y ago
  Those are relevant factors too, surely. But you have to relate to the reality that you are in. If you have a high burn rate and no way of lowering it considerably, you have to take that into consideration.
- cookiecaper 13y ago
  If you're a B2C that can't charge customers until you've gained a lot of traction, you should get no investment. How many times does this la-la-land "business" plan of "pay nothing, get everything" have to play out before we recognize it's not a business at all? Facebook is not profitable. Twitter is not profitable. Google's fundamentals are questionable (AdWords is a ripoff), and they lucked out with Google Apps for Business and other sources of direct revenue which similar companies have yet to replicate. And those are the "successful" free products.
sytelus 13y ago
I would argue exact opposite. If you have family and mortgage, you most definitely don't want to go seek funding unless you are willing to lower living standards for your family. Funding will almost always come with significant cut on your income. So if you do have family and mortgage, the best route for you is a long slow crawl. This means, you do your regular job and then burn midnight oil to do a single person startup. With 2X more determination as well as 4X longer time than typical startup, you might find yourself in a year or two with a product that is compelling and convincing. By this time lots of risks had been absorbed by you and VC/Angels would be far more in favor for the terms that allows you to continue your income levels. Larry Ellison started Oracle pretty much this way and so many other founders who started out later in life with lots of financial obligations hanging on their heads.
- argonaut 13y ago
  Why do you think that's the opposite? Nothing is stopping you from paying yourself a six-figure salary after taking investment.
  - cookiecaper 13y ago
    Many investors will do whatever they can to stop you. I've personally interacted with a few of them, who've instructed me that if I took their money, I should not "take anything more out of the company than what's required to eat, sleep, drink". Of course, their ultimate ability to enforce that may be questionable, but the guys 'round these parts are certainly not shy about their expectation that founders live on practically nothing.
    - argonaut 13y ago
      There are good investors and there are bad investors. Good investors won't take board control after a seed financing and will understand if someone with a family takes a $100k+ salary. Now, if you're a 20-something who can survive on ramen, a mattress on the floor, and internet, investors will be very suspicious of you taking a $150k salary. Expectations shift.

I suppose it depends on who you are. If you have a family and a mortgage, the answer may be yes.

by troels 13y ago

I suppose it depends on who you are. If you have a family and a mortgage, the answer may be yes.

Many investors are not very kind to founders with families and mortgages. YC itself is a horrible deal for anyone that's not a college dropout. Move out to SF for 3 months, leaving wife, kids, and property behind to fend for themselves, shack up in a tiny apartment with a co-founder, and get paid nothing for $20k and 5-7% of your company? That's alright man, pg can keep focusing on his college dropouts (of both sexes!). Even more traditional investment arrangements put a great deal of focus on "equity compensation", i.e., only paying founders and employees the bare minimum for survival and "making up" the lacked payment with equity. Not a very realistic deal for an engineer with a family and mortgage who makes 120k-150k in the job market to take a startup gig for 60k (multiply numbers based on local cost of living). The startup community is missing out on a lot of extremely useful experience and maturity with these cheapskate shenanigans. Of course, the investors are happy to lack this, because exploitation of naivety in founders is one of their primary mechanisms to maximize profit. I've sought funding a few times myself and always backed out because I was getting offered a sucker's deal. Yes, it's much slower and much harder to bootstrap, but unless you're desperate, taking investment is not worth it, because investors are going to rake you over the coals. And that's the long and short of it.

onion2k 13y ago
A few months on a very low wage (that is what the $20k is for..), away from your friends and family, living in a tiny apartment is nothing compared to working on something you feel exceptionally passionate about. Chances are you'll never find that problem. Most people don't. Those problems are rare, and solutions to them rarer still. But that's fine. If you have a business idea that you're keen on but don't want to give months away from your family or accept a huge drop in income for, bootstrapping is the right way to go. But that doesn't mean investment is always for chumps. For the few that do find a problem that they live to solve, making the tremendous sacrifices at the beginning is worth it, even if other people get rich off your efforts. Your friends, family, investors and humanity as a whole is better for it.
- jnardiello 13y ago
  Only someone who doesn't have family could say: "A few months on a very low wage (that is what the $20k is for..), away from your friends and family, living in a tiny apartment is nothing compared to working on something you feel exceptionally passionate about." Do you have small children? If so, can you try to imagine how difficult could be to miss the first words or first steps of your baby? Can you imagine what could mean to simply drop everything on the shoulder of your wife? Your comment is so superficial.
  - argonaut 13y ago
    Why do we always have to assume we're talking about small children? If that's a concern, wait until your children grow up to be teenagers before you leave for 3 months for YC.
    - cookiecaper 13y ago
      Do teenagers not need fathers? I understand what you're saying, but the point is that it's silly to set up a false dichotomy between entrepreneurship and family and attempt to force the entrepreneur to choose. I believe that the startup community is much poorer because of the tendency to do this, and I'm extremely suspicious of anyone who'd advocate it.
      - argonaut 13y ago
        Is it so hard to be away for 3 months? Doing a startup instead of taking a stable job involves tradeoffs, like all choices. How much of a tradeoff you take depends on you. You can move your entire family to the Bay Area, with the tradeoffs that entails (uprooting family, more expensive housing). You can move to the Bay for 3-4 months with the intention of permanently setting up the startup back home, with its own tradeoffs (farther from investors, farther from mentors, 3-4 months away from family). Etc. etc. etc. There is no false dichotomy. There is no free lunch. Stop making these narrow generalizations.
        13y ago
sytelus 13y ago
5-7% of your company Where are you getting that number? My impression was that YC had very fair deal with founder equity > 30% (unless they are funding beyond angel). Beyond that it's just risk/reward equation. If you want same income as your stable job then you are not taking risk and hence should not expect reward beyond that. Good founders rarely however expect same income as the stable job they could have gotten because they strongly believe in their vision and success and are willing to bet everything they have. That's the first requirement to be founder, IMO. Nearly every successful founders from Bill Gates to Elon Musk have showed this most important characteristics. BTW, lest you think Bill Gates was just another college dropout with nothing to loose, consider the fact that dropouts are usually at great schools, have spent lots of time, money and effort to get there and a suddenly giving up all that to chase some idea is significant risk taking. Even to this day, Elon Musk had been willing to bet every single penny he had on SpaceX. Without this singular characteristic, your chance of becoming successful founder is very low.
- cookiecaper 13y ago
  You're still taking significant risk if you get paid market or near-market rates when you start your company. You've put your name on the line, you've committed yourself to providing a product and running a company, with all the difficulties it entails. I understand the impulse to have founders prove their commitment by living as paupers, but I just don't think it's a good way to judge the competence of an investment. I think there are other meters for passion that are more accurate than "Yes, I'm willing to take a 50-70% pay cut".
argonaut 13y ago
I'm not sure if you don't know what you're talking about or if you're just exaggerating for the sake of argument. 1. Most YC founders are not college dropouts. Quite a few are in every batch of YC, but nowhere near 20%. 2. YC isn't in SF. And most YC companies don't stay in SF during YC. Lots of companies stay in Mountain View, Palo Alto, Menlo Park, etc where you can rent out a 4-6 bedroom with your co-founder(s). Housing is even cheaper in other areas like Sunnyvale, Santa Clara, and San Jose, where you can potentially have a house to yourself. 3. If you expect to get paid for starting a startup, then obviously starting a startup is not for you. By definition there's nobody there to pay you except yourself. By definition you are exchanging equity for salary. 4. YC gives you $100k: $20k directly and $80k in convertible notes (well, SAFEs now) at the best possible terms (you'd never see elsewhere). The additional value of YC is that as long as you build a product with some users, you have an extremely high chance (not guaranteed) of raising 1M+ at a 5M+ valuation. Other companies that don't raise can go on to raise more convertible notes. In fact, going through YC is one way of guaranteeing that you don't end up being offered a sucker's deal.
- cookiecaper 13y ago
  1. OK, we can expand it to "recent college graduates". The point is, YC is predominantly young adult males, aged in their early 20s, unlikely to have major external responsibilities. 2. As someone who's not from SV, everything in that area gets lumped into "SF" for me. My apologies if this is considered obtuse. 3. Isn't this kind of part of the point of seeking investment? Aren't you saying, "I can't do this all on my own, I need some help with the finances, and will cut you in if you'll hook me up"? Somehow I don't see that as the same thing as "please pay me a pittance". As I stated in another reply, if the founder could live on a pittance, the chances are he'd save up a little bit at his cushy corporate job and enter conservation mode with that, rather than seeking external funding. 4. I haven't looked for a few years, but I was not aware that YC offered an additional $100k in financial instruments. This is somewhat better, but I'm not sure how those instruments work in this specific case so I can't make a complete evaluation. As far as follow-on investments go, these all have their own separate terms, yes? Unless YC is officially brokering all of these, how can being a YC company prevent you from getting suckered by YC copycats?
altreal 13y ago
It would be hard to appreciate this without thinking like an investor. Let's say you pitched an investor. He has seen your passion and drive 100s of other times before. He decides to give you $200K as seed money so you can keep getting same income as your corporate cushy job. He knows your chance of failure is 90%. Next year very likely investor is going to loose all of that money. On the other hand, you have no downside. For you, it's pretty much the change of job because you get to keep same income as before. In fact, it's much better than a change of job because now you get to work on stuff you want in your pajamas in your backyard of your 4 bedroom home. Come next year, there is 90% probability that your startup would have failed. But you would have zero loss in any material respect. Instead most likely you are just going to move on with your life and find another corporate cushy job with minor or even major promotion given that now you can brag about having tried your own startup and claim that experience. So you see, we have a transaction where one party has 90% chance of loosing everything and other party gains 110% always. Anyone fantasizing about such transaction would have to find a great fool or own a casino. This is why you can't expect any competent investor funding your startup so you get to keep your "cushy job" income. PS: Betting your "name" and "reputation" is meaningless to investors unless you are Evan Williams or Kevin Rose. PS2: If you think investors are still getting fair deal because they have chance of hitting a jackpot, know this: Average VC fund has less returns than S&P 500. Rate of failures of startup takes away pretty much everything but small slice of big pot.
- cookiecaper 13y ago
  1) Investors can vastly improve their odds by knowing what they're investing in. There's a reason Paul Graham and YC are the gold standard in these circles now, and that is because Paul Graham and YC are one of the only informed investors in the game. Practically everyone else is just playing a favorable casino game. 2) If an investor wants to give you $200k seed money, and you can make a justifiable case that you need $200k to maintain a reasonable lifestyle based on your family's needs, then you're going to need more than $200k. That said, I don't argue that most founders need $200k, I just argue that they should be given reasonable allowances to provide some basic decencies for themselves and their families, instead of ending each pay cycle with less than ten bucks left in their pockets. 3) The risk should be appropriate on both sides. If $200k is a risk that jeopardizes the welfare of an investor, he shouldn't be investing it; "never invest more than you can afford to lose". And if taking a job at a startup is a risk that jeopardizes the welfare of a founder and his family, he shouldn't be risking it, for the same purpose. A good founder is worth a good salary. He probably shouldn't be rolling in the dough, but most investors seem skeptical if the founder isn't living off of ramen. This is not acceptable if you have a family to support. What does a VC really lose if a company goes under? Not that much. The founders are pouring years of their life into the development of a product. They are asking their friends and colleagues to trust them to build something great and join them, transferring responsibility for their livelihoods as well. Founders have a legal and moral obligation and fiduciary duty to output the best product possible with their investment. Most founders take this responsibility very seriously. The failure of this venture is a major emotional loss to the founder. And what's the loss to the VC? Oh yeah, a rather insignificant portion of their total play, because it was specifically engineered to be that way. In fact, most of them hardly notice when these failures occur, unless they begin to occur en masse. I find the argument "VCs have everything to lose if you don't take a 50-70% pay cut!" despicably shallow. VCs never have anything to lose except money, and certainly make sure never to jeopardize that in a serious manner, so what do VCs have to lose? Almost nothing. What does a founder have to lose? Oh, a few years of his life, emotional health and well-being, reputation and trust among his family and friends, etc. Just petty stuff compared to the $200k check an investor will write and instantly forget about. The founder should be made to put even more on the line! He shouldn't be allowed a salary that's commensurate even with a cruise-control corporate position for all that responsibility. He shouldn't even be allowed a salary that will afford him a few basic privileges like a decent mode of transportation, decent living quarters in a decent neighborhood, or a bit of leisure every so often. No income to fiddle with new gadgets or experiment. No room to breathe. On top of the stress of the company, he must endure the stress of barely meting out enough to make his mortgage, which several people rely upon for shelter. He should do all of this because he needs more to lose, so that the VCs are satisfied. The founder's only way to make any decent income backported over those years of indentured servitude is to make the VCs a billion dollars first. Seriously. And if anyone doesn't like this, then the VCs try to shame him and lecture him about the stakes. Remember how I said VCs depend heavily on the naivety of founders to maximize profits? Here you go.
patio11 13y ago
The general "YC gives you not so much for quite a lot of equity" critique would have made a lot of sense ~5 years ago, when all you'd reasonably count on from doing YC is $10-20k. Currently, you're structurally guaranteed a substantial follow-on investment on terms which are practically "free money", and if your startup is not a walking zombie you're all but a mortal lock on a seed round at quite possibly the most systematically founder-friendly funding feeding frenzy terms in the Valley. That's if you value the actual participation in YC (and later in their mafia) at nothing. I'd personally suggest, on the basis of numerous reports by founders I find personally credible, that it's a really good network to be in if your life plan includes doing a funded trajectory sort of company. Incidentally, I've got a wee bit of experience with the boostrapped software business thing, and unless you do the consultancy to product route (which has plenty to recommend it) you're most probably going to take a dip from $120k to $150k for a couple of years at the outset. I know people who paid themselves that in year 2, but that's not incredibly common, and I'm coming up blank thinking of any bootstrapped product companies which made their founders that right out of the gate. (It's doable in consulting -- aggressive, but clearly doable.) If that's a huge problem for you, I recommend a job at AmaGooFaceSoft. They're all good companies, they cut quite steady checks, and there is nothing wrong with taking their money if your family situation demands an iron floor at $120k.
ryanSrich 13y ago
> The startup community is missing out on a lot of extremely useful experience and maturity with these cheapskate shenanigans. Of course, the investors are happy to lack this, because exploitation of naivety in founders is one of their primary mechanisms to maximize profit. Perhaps the SV Startup Community is but as far as the Midwest and East Coast goes; 90% of the founders I interact with have a house and kids. The biggest difference in business is that most of these companies actually have mechanisms for generating revenue. Aside from the fact they are solving 'real world' problems, not just building iPhone apps that delete the picture after you take it...

juanitod 13y ago

These are the wrong assessments. You should rather say: "I suppose it depends on your type of business. If you are a B2C and you need lot of traction before charging customers, the answer may be yes." Family and Mortgage should not affect your choice for bootstrapping.

troels 13y ago
Those are relevant factors too, surely. But you have to relate to the reality that you are in. If you have a high burn rate and no way of lowering it considerably, you have to take that into consideration.
cookiecaper 13y ago
If you're a B2C that can't charge customers until you've gained a lot of traction, you should get no investment. How many times does this la-la-land "business" plan of "pay nothing, get everything" have to play out before we recognize it's not a business at all? Facebook is not profitable. Twitter is not profitable. Google's fundamentals are questionable (AdWords is a ripoff), and they lucked out with Google Apps for Business and other sources of direct revenue which similar companies have yet to replicate. And those are the "successful" free products.

sytelus 13y ago

I would argue exact opposite. If you have family and mortgage, you most definitely don't want to go seek funding unless you are willing to lower living standards for your family. Funding will almost always come with significant cut on your income. So if you do have family and mortgage, the best route for you is a long slow crawl. This means, you do your regular job and then burn midnight oil to do a single person startup. With 2X more determination as well as 4X longer time than typical startup, you might find yourself in a year or two with a product that is compelling and convincing. By this time lots of risks had been absorbed by you and VC/Angels would be far more in favor for the terms that allows you to continue your income levels. Larry Ellison started Oracle pretty much this way and so many other founders who started out later in life with lots of financial obligations hanging on their heads.

argonaut 13y ago
Why do you think that's the opposite? Nothing is stopping you from paying yourself a six-figure salary after taking investment.
- cookiecaper 13y ago
  Many investors will do whatever they can to stop you. I've personally interacted with a few of them, who've instructed me that if I took their money, I should not "take anything more out of the company than what's required to eat, sleep, drink". Of course, their ultimate ability to enforce that may be questionable, but the guys 'round these parts are certainly not shy about their expectation that founders live on practically nothing.
  - argonaut 13y ago
    There are good investors and there are bad investors. Good investors won't take board control after a seed financing and will understand if someone with a family takes a $100k+ salary. Now, if you're a 20-something who can survive on ramen, a mattress on the floor, and internet, investors will be very suspicious of you taking a $150k salary. Expectations shift.