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Comment by blantonl | Hacker News Reader

The worst kept secret in Silicon Valley....

I would argue this is the best kept secret, because this flush out needs to occur to wash away all the so called disrupters who, as you put, are really just shuffling piles of money around instead of actually doing any innovation.

I hate to invoke schadenfreude here, but the past few years have been incredibly insulting to those of us who have been running highly profitable bootstrapped businesses, and so I eagerly await this flush. Picture Mr. Burns from the Simpsons tapping his fingers together.

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Like you, I am a co-owner of a bootstrapped, profitable, conservatively managed technology company. I am happy to have built what I have. But I can't find a whit of pleasure at the prospect of a disastrous reversal in private technology financing. There are a lot -- a lot -- of bad deals receiving favorable financing from out-of-touch or non-traditional institutionals. That's true. And painful but non-combustive reversals are part of the functioning of markets, sure.

But SV remains the one place in the world where smart investors with genuine science and technology backgrounds are willing to play the long game with entrepreneurs. I spend a lot of time in London and New York. The generally hidebound nature of their investment cultures, which make perfect sense when you're doing an Exotic Pet Vet Tax-Free Rollup, or a Midwest Refrigerated Storage Debt-Chummed Dividend Fête, would never have made a bet on Google, Oracle, Nvidia, PayPal, Oculus, to take a few at random.

So while there are a good dozen $1b liquidation preference-cap companies that are fundamentally silly, wishing for a tidal reversal in private tech funding isn't a good idea. VC qua asset class is important.

Why I want the bubble to burst: I can't afford to pay Google, et al and unicorn salaries. My bootstrapped, profitable, conservatively managed company isn't swimming in cash. 10 years ago the pay we offered was competitive, but now... salaries (+ benefits) have gone through the roof.

I'm pretty sure there are, even right now, plenty of decent developers who would take seemingly lower salaries in exchange for working in a much lower cost of living area, provided the company itself is still fairly modern and forward-thinking both technically and culturally.

This is doubly so if you're not in need of Google-caliber talent. Then you're not even directly competing with Google et. al. in the first place.

No matter what the actual number is, if your salary translates into a sales pitch that looks like "comfortably afford a 3-4 bedroom house in a beautiful neighborhood, and enjoy an easy 15 minute commute by car while your kids go to a safe, reliably decent public school nearby", then you're going to get people interested.

Relocating outside of major hyper-expensive tech hubs shouldn't be seen as a failure. It should be seen as opportunity. There are reasons to be in San Francisco, and there are just as many reasons not to be in San Francisco or anywhere close to it.

You would think, right? The last two offers I made where to people in very low cost of living places. I offered them our "Bay Area, not Google $$ salary" and they both said they expected Google salaries and turned down the offer. Until that point, everything had been clicking perfectly.

EDIT: last three people.

I know it's awkward, so I understand if you don't answer, but even wide number ranges would make this a lot less abstract. What is the range of "Bay Area, not Google $$ salary", and what do you alternatively think is reasonable and affordable to you?

Salaries of $125/yr were turned down. They were looking in the range of $150-175/yr. They where in areas where the $125/yr was equivalent to $75k/yr. We were looking at experienced developers only.

As I said elsewhere, we had a developer poached from Google for $250k.

> They were in areas where the $125/yr was equivalent to $75k/yr. We were looking at experienced developers only.

It sounds like you offered $75k a year [which you calculated as equivalent to a $125k/year offer for their location].

I'd turn that down too. People try to pull that adjustment trick on me all the time when I was looking to relocate, I'd go up there and they'd give me a number the day after I got home and I'd be like "...that isn't equivalent at all." and then politely decline.

Just fyi, maybe I misunderstood.

No, I offered $125k.

Thanks for the data!

The other question is where and how you're doing your recruitment. There are a lot of "under the radar" developers who work primarily for non-tech companies in a tech role. These folks are not rockstars, but many are competent enough and much cheaper (sub-6 figures) than a startup/tech developer.

You may be surprised by how many hidden gems, you have in your own network. It probably applies if you have worked for a long time (10+ years). Some months back, I was able to hire an ex-colleague, who is a great developer. Who took a paycut to join my company for privileges like work from home, and freedom to work on cutting-edge tech (relatively, by leaps, from his prior long held position in a corporate).

FYI... My monthly living expenses in the midwest, for everything, are less than $1500, and I have a family and a mortgage. If I were single, I could live nicely on < $1K/mo. Starting salaries here are $60K and senior engineers expect > $100K.

Value drives the discussion. If you're not paying $120k + 25% overhead for skilled/good tech people, you're catching people who don't know the market, are in a bind or underestimate their worth.

I think there is a phenomena where people measure themselves by salary more strongly than quality of life, because it is easier to compare apples to apples. When I was graduating from Business school (twenty years ago when people did that so don't throw shade) people compared themselves against their other classmates in terms of salary almost exclusively.

In retrospect it may have been more important to get your foot in the door of a company or industry that you wanted to stick with for a career. Alternately, if you get paid a lot when you are young it becomes your quote. In my experience, people who don't get paid a lot at the start tend to get paid less for the rest of their working lives.

> I offered them our "Bay Area, not Google $$ salary" and they both said they expected Google salaries and turned down the offer. Until that point, everything had been clicking perfectly.

Can I ask what number you went with?

The reason I ask is I don't live in the Bay Area and do live in a lower cost of living area [but still not cheap] but the figures for any decent senior engineer here are still $100k+.

See my reply here: https://news.ycombinator.com/item?id=10948416

So... what does that practically mean? Bay Area salary = $100k+benefits, Google salary = $200k?

I definitely know folks who claim Bay Area $ to be $60-$70k and play the numbers game... but then they play the numbers game (and 3 isn't a numbers game).

See my reply here:

https://news.ycombinator.com/item?id=10948416

How many times does it have to happen before it makes sense to offer a higher rate?

That would create problems for existing developers. Last thing I want to do is piss off my current, valuable staff who absolutely love working for me. Many have been on the job for 10+ years.

Okay, but then the question becomes, how often would it have to happen before you increased the salary of your current staff as well as the offer to new hires, to reflect the new market reality?

I mean, the broader question seems to be, is this just a thing we're going through or has the world changed and are developers just demanding more money for the kind of work you're doing?

A good chunk of that is not the bubble. It is due to ending the anti-poaching collusion between top tech companies that had been letting companies keep salaries down.

This is wrong on two levels:

1. That was deemed illegal and they've stopped.

2. Salaries are not being kept down in SV. The whole topic here is that they are out of control. Have you actually tried to hire anyone? I have. Even people that telecommute from low cost of living areas want SV salaries. I've had to go outside the US for my last 2 hires.

You misunderstood me. I'm saying that the fact that they stopped means that we should expect salaries to go up. Because they were artificially lowering salaries before, and now they stopped that.

I highly doubt they have stopped. Just got smarter about how they do it

Right. Thanks for the clarification.

I think you're getting downvoted because you seem to have misunderstood the parent commenter. They were saying the same thing as what you're saying here. Ie. that salaries are high because "that was deemed illegal and they've stopped".

Comp is being driven by Google, Facebook, Apple, etc, generally not unicorns.

But before this bubble, as a bootstrapped startup one could beat Google by offering very early stage employees an attractive mix of cash and a lot of stock: Google's stock options are not that attractive since it has gone public. Now on paper you cannot beat the offerings of the unicorns, since they also offer cash and stock options. From experience, the existence of unicorns made the life for a bootstrapped startup in San Francisco very difficult. In our office building in SF, we had probably about 6 bootstrapped companies in 2012, now only mine is left: the other 5 moved elsewhere (most are still open). The smaller offices were joined and the companies were replaced by the larger funded ones. Also the building was bought by a more greedy landlord.

Google's stock is very attractive. employees are generally paid in actual stock, and not options. there's a huge difference between options, and stock.

options in a startup, especially since ~95% of startups fail, are generally worthless.

I am talking about very early employees. What is the typical dollar amount in RSUs or stock a new engineer after MEng is getting in Google?

>$100k over a few years at the initial date of the grant. You can roll the dice all you want on startup options or take RSUs with actual value

They may be the leaders, but they have to compete so fiercely because VC money is employing a lot of engineers and programmers. If that VC money stops, there will be an oversupply of labor. And prices will fall.

I wouldn't say an oversupply of labour, but much less competition for the currrent supply, for sure.

Google and Apple are very different from a unicorn. They are profitable public companies, and they'll still be around even if all the unicorns suddenly disappear.

See rhino369's reply:

https://news.ycombinator.com/item?id=10946880

He's spot on.

>Why I want the bubble to burst: I can't afford to pay Google, et al and unicorn salaries. My bootstrapped, profitable,

that is called market economy. Whoever can use programmer more efficiently and thus pay higher salary would get that programmer. In a big picture, using a resource less efficiently means pretty much wasting it. Do you make revenue per programmer like Google? If not, may be you need to look at where is a waste in your business process. Your employees wanna be productive and as result wanna do a lot of money for you and the themselves. You owe them efficient organization of business.

> 10 years ago the pay we offered was competitive,

the point of technology industry is to facilitate the process of natural selection out of anybody anywhere who hasn't changed in 10 years.

I'm not trying to offend you. I've been sitting in my current BigCo for 4 years already, and see how i myself starting to be the candidate for being selected out if don't do something in the near future. 10 years is a historic epoch in the industry. The industry did look completely different back then.

Ours has offices mainly in South Bend, Indiana and Denver, Colorado. ;)

I wish I could relocate, but I can't. As I mentioned in other places, because I'm in the SF Bay Area, people from low cost of living areas expect us to pay SF Bay Area salaries, even when they telecommute. I agree, if I was in a low cost of living place, that wouldn't be the case. I just wish it was, though.

As an example of the cost of living in South Bend, I easily afforded an apartment in the converted Studebaker family guest home, around the corner from the Studebaker mansion.

On my grad student stipend.

Low wages are one of the biggest reasons (if not THE reason) we're in so much trouble in this country to begin with.

Yeah, but I don't think the wages paid to developers in SV (or pretty much anywhere in the western world) would be classed as 'low'.

We're talking about premium developers here. People making $150K/yr or more. I literally had people stolen by Google that were offered more than $250K/yr.

You are talking about something completely different than the rest of us.

Google aren't paying those salaries out of dumb VC money. They're paying them because developers can generate that much value for them.

Not really- but Google probably thinks they might be able to. Applying it's monopoly power, Google can easily charge more for its services if required. If it's moonshot projects fail to generate returns or its monopoly is threatened, then it may have to resort to Microsoft style 10,000 layoffs to readjust. Till then they can outspend you and anyone else to get what they want. We are in the Developer's market- in time we will be in Employer's market. Cycle of Life.

You did not have people literally "stolen by Google". People don't belong to you.

I think you know what I meant. I don't, literally, think they belonged to me.

I'm in Seattle, and $125k (which you mentioned elsewhere) is definitely on the thrifty end of the spectrum these days around here, and I'd expect that to be really low for SV. You might be able to pull it off if your company is extremely cool or if you're offering crazy equity (which a profitable, conservatively managed company most certainly is not doing), but even up here, the big boys are easily hitting $300k total comp for senior developers. I can't imagine expectations are any lower in SV.

Obviously, this just underscores your point, but I wanted to give you some datapoints since you seemed surprised that someone might not take the $125k offer. It's a seller's market.

$250K would be about my minimum to coax me into moving to SV. Maybe (probably) more, I haven't done the math lately.

Hell, I'd probably still keep a better lifestyle staying put here in Florida where I make about half of that (and I'm considered highly paid around here). I would never expect SV pay for a 100% remote job that allowed to me to stay in my lowish COL beach town, and I don't know who would. That doesn't even make any sense.

250k total compensation or base? I can only imagine a good senior developer (10-15 years) getting paid 250k base.

True, but imagine how many more new Google-like companies VCs could have helped to create if they hadn't spent money on silly "Uber for Pets" start-ups. It almost seems like investing in early stage, but serious companies is a thing of the past. Now, it is more like "pump-and-dump".

I have read more than one post on hn about freelance developers bragging about how much money they are making and handing out advice to others for how to make more. When this 'bubble' deflates, dev salaries are going to take a big hit and it is going to be painful.

The best advice for those of you getting paid $150+ an hour is save your money and don't take on long term liabilities.

> The best advice for those of you getting paid $150+ an hour is save your money and don't take on long term liabilities.

That's good advice, regardless of how much you earn (but it might need a 'save your money when you can').

Spending money when you don't actually have to is a bad strategy when you're young and you can still materially alter you later-in-life situation with relatively little funds.

That's why I hate student debt of any form, it saddles those that would benefit the most from some savings with debt so they can't start to save until they're in their mid 30's or even later.

Hey look it's a bubble deflating comment again for the millionth time in the last 5 years.

Why would contractors suffer? Generally when the economy dives it's full-time employees that get replaced by contractors.

Also, $150 /hr is a pretty low rate even in the leanest of times.

EDIT: Really surprised at the down votes on this. What I'm saying is hardly radical. There seems to be a lot of sour grapes in this thread sadly.

My tip: don't envy those doing better than you, learn from them.

$150/hr for a contract that will last 5 hours is terrible, because of all your overhead costs. If the contract lasts 8 months, is likely to be renewed, and you are expected to bill around 40 hours a week, the overhead is pretty much gone, so it's very easy to make comparisons with salaried work.

Around here in the midwest, under those long-term circumstances, many contractors don't hit the three figures. A whole lot of senior devs around here are slumming it at a $50-$80/hr range.

> $150/hr for a contract that will last 5 hours is terrible, because of all your overhead costs.

That was my point about how $150 isn't some insane amount of money. Depending on the length of contract, it may be almost nothing at all with the overhead factored in.

Out of curiosity are those senior devs keeping their skills up, or are they programming in Java/.NET or something similar?

At those rates I'd definitely be interested in taking a look at their CVs since I often need to hire developers. It's WAY below market.

Platforms such as Java or .NET make up a lot of the developer community, just not the visible (startup/tech) community. I'm classified as a "senior developer" at my day job ($90K/year) and I also do contracting ($60/hour). I could probably eek up both of those numbers a little bit, but not a lot without having to move to the cutting edge of technology.

There's a lot of folks like me who program on older, non-sexy, maintenance roles on established systems which use older technologies. Outside of big cities, these positions don't generally command a big wage.

> I could probably eek up both of those numbers a little bit, but not a lot without having to move to the cutting edge of technology.

That's my point. As a developer (especially a contractor) you must always be learning new things and technology. It also helps to specialize in a field/domain.

If you're a senior developer you could absolutely make double $60/hr as a contractor by just focusing on the business side of contracting a bit more.

I've been paid $109k a year for work on Smalltalk. And yes, it was this century, in Houston. (As of this writing, 4th largest city in the US.)

> Out of curiosity are those senior devs keeping their skills up, or are they programming in Java/.NET or something similar?

Those two things aren't mutually exclusive. There is very good money to be made consulting at the enterprise level doing Java/.NET or something similar, but you also have to keep your skills up.

Yeah, practically a McDonald's salary.

I am reminded of that lovely remark once made by Boris Johnson's, London's blond bombshell of a mayor, when asked about his £250,000 a year contract to write a column for The Daily Telegraph: "It's chicken feed."

You do realize that most contractors don't have 100% utilization (far from it) and also don't get paid for time it takes to make sales, find clients, they pay for their own health insurance...

$150 /hr is basically the least you're going to want to charge. Realistically you're going to be looking at 90-120k /year depending on how much work you land at that rate.

For highly skilled intellectual work, that's not very much money.

Hello form planet Earth:

It is not what you "want to charge", it is what they are willing to pay you, that counts.

Right and plenty of companies will pay > $150 /hr, on planet Earth.

Presumable some/many of those full time employees will become contractors. Increasing the supply of available contractors.

What happened to contractor pay in 2000?

> Presumable some/many of those full time employees will become contractors. Increasing the supply of available contractors.

My experience is most of these people will leave the industry. Very few have the skillset to become an independent contractor because of all the sales and marketing involved (in addition to the tech skill set you're actually selling).

> What happened to contractor pay in 2000?

I have no official data, but I was contracting at the time and continued to raise my rate a reasonable amount at semi-regular intervals (every year or two). During that time, people needed to get work done but they wanted one super contractor to do the work that a team of middling engineers used to do, for 1/5 the cost.

$150/hour is rare for anyone except so-called 10x developers on shortish term contracts.

Absolutely not, it's a base rate for most full-time consultants. "10x developers" and specialists make MUCH more.

Given it was obvious to people on the sidelines for awhile that something was off, I'm not sure if its well kept.

> I hate to invoke schadenfreude here, but the past few years have been incredibly insulting to those of us who have been running highly profitable bootstrapped businesses, and so I eagerly await this flush.

I wouldn't say its insulting. Business is business. You'll have a company when this mess implodes, they won't.

Excellent

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