Hacker News Reader

Comment by nojvek | Hacker News Reader

I've always wondered how much of the money YC seeds to its founders eventually ends up in a landlord's pocket? $3000/month on a studio apartment. That's crazy burnout for a startup.

View on HN

"So startups are just an inefficiency imposed on wealth transfer from VCs to landlords. What if someone disrupted the industry and connected VCs directly to landlords?"

;)

(Source: https://labnotes.org/weekend-reading-hi-id-like-to-add-you/)

Seems like VCs would do well to buy some housing. A few more years of rent hikes down the line, "far below-market housing" could be a seriously compelling employee benefit. Apartments big enough to raise a family in would do wonders for employee retention.

IIRC Microsoft bought the apartments across the street for visitors and interviewees, cheaper.

That doesn't make sense though. They could still provide the same benefit by renting the apartment and giving it to the employee. Unless you think VCs should be betting on real estate, because that's the only advantage - they get the upside if the property goes up in value.

Houses are comfier to live in than apartments?

Currently, VCs must fund salary increases to keep pace with rent hikes. Renting apartments for employees just shuffles the numbers around. VCs could buy their way out of exposure to this phenomenon by owning their employee's homes and not increasing the rent.

Yes, this is a bet on rising home prices in the Bay Area, but that seems basically equal to a bet on the Bay Area tech ecosystem, which is already their core business.

This is something that has existed before https://en.wikipedia.org/wiki/Company_town

I've lived in 'man camps' on remote jobs where it was easier to just put up trailers for workers than put them all in hotels. Or sometimes there isn't any temporary housing options available so you get to stay in the man camp. Pretty sure programmers aren't going to fall into line for that option though.

This wouldn't be remote, though - there'd be a few dozen such company towns on overlapping geography. True, you'd need to move to change employers, but it could just be across the street.

I dunno, maybe it makes sense, but there seems to me to be something incredibly demeaning about living in housing owned by your employer. Very....19th century. Is there a company store?

"Here's some Amazon credits. Knock yourself out"

Andreessen's family is one of the largest property owners in Silicon Valley via his wife's father, John Arrillaga.

https://en.wikipedia.org/wiki/John_Arrillaga

That's more or less Erlich Bachman's strategy in the show "Silicon Valley". Buy a house and rent it to one man startups for equity...

Life imitates art...

Don't startup incubators long predate the show?

> Seems like VCs would do well to buy some housing.

Incubators yes. But exchanging a place to stay for equity (as OP alluded to) is mostly in the realm of the show although it has happened a few times in real life as well...

Example: http://fusion.net/story/134163/silicon-valleys-startup-castl...

The savings would be great, but what happens when you want to change jobs, but not cities? I'd be a little weary of renting from my employer.

The median rent on a 1-bedroom in SF has increased from $2500 in 2010 to $3600 in 2016.

I don't accumulate as much stuff as some do, but I'd say $12k/year in extra discretionary cash (not just throughput to a landlord) is more than adequate compensation for the risk of a cross-town move.

Sounds like company towns all over again. VCs could open their own stores and sell food and only accept their own currency. And they can pay you in their own currency so you don't have any exchange rate costs. Oh, until you want to get out.

Remember who really got rich in the gold rushes of the 1800s? Not the miners.

Samuel Brannon established his tool monopoly by diverting church money and using thugs to keep out the competition. Once he made his money he lost it all in real estate speculation and a divorce.

so the ex-wife made all the money from the gold rush? ;)

A number of successful industries have owed a deal of their success to the fact that they slowly turned into real estate magnates. And not just their property but property around them.

Maybe that suggests that these incubators should be owning rather than renting. Your investment in property is generally going to be recoverable if you have to kick out a failed startup.

One of the richest people in Silicon Valley is John Arrillaga.[1] He bought farmland in Silicon Valley and began converting it to office space. About a square kilometer of building floor space.

[1] https://en.wikipedia.org/wiki/John_Arrillaga

And he's father-in-law to Marc Andreessen, making it all look like some Texas oil family.

come on, don't bash Texas. The way Marc Andreessen just talks his book nonstop and ignores anything else would make Wall Steet deathly proud.

Sorry, wasn't trying to bash Texas. Maybe I should have said "Dallas oil dynasty". I haven't seen, read or viewed anything from or with Marc after he left Netscape, so I can't comment on what he's doing these days. All I know is that he's part of a VC.

My sentiment is that after salaries most of the VC money gets funneled to landlords, lawyers, and subsidized food/food delivery.

Ah, that's why VCs were so bullish on food delivery companies.

Wasn't there talk of building YC dorms at one point?

Doesn't really solve the problem, you have to buy out the landlords to get the land.

But then you (rather than the landlords) can pocket the rent increases.

Yes, except the sale price will probably have a good portion of expected future rent increases "priced in". (I'm not saying you won't make any money at all)

I can't imagine a lot of it. At some point you make the conscious decision to quit your current job and work on your startup. If you've prepared financially for that joining YC shouldn't really change that. You're spending your own money on your own rent.

Granted, if you can't afford rent in SV you might want to reconsider joining a YC class. It's a tough decision for sure.

You live with a few roommates. It's not hard to find housing in SF for 900-1300/month if you're willing to make some lifestyle tradeoffs.

Yes because we all want to relive the glory days of being a poor student. Will the tradeoff include a divorce and place to stay for the kids?

Brin built his company on a kind of ageism. Several kinds in fact.

So that he and his peers think that continuing to live like you did in college isn't that big of a logical leap when you consider that their interview process feels exactly like a final exam in college, despite the fact that you and I and indeed Google's own success stories know the difference between theory and practice.

> Yes because we all want to relive the glory days of being a poor student.

I thought that's exactly what people in the startup world glorified.

Days when "ramen-profitable" meant you actually ate ramen are over. Now everyone jumped on the fitness bandwagon, and eating various types of salads & green stuff is hip. And also expensive - "natural"/organic food is a big business these days.

Ramen, just not Maruchan ramen. Asian bistro hand-made organic gluten free gastro molecular gastronomy ramen.

I think that was targeted towards 20somethings that don't have a wife/kids yet. Obviously, a start-up with extra baggage is an entirely different ballgame.

Well starting a business has traditionally involved personal risk and sacrificing lifestyle for future gains. Only recently and mostly in American tech has entrepreneurship been "give away control of your company as fast as possible so you can pay yourself a comfortable salary while you build a company for someone else."

To a lot of people, that's still absurdly expensive. Your total living costs can be less than that in a lot of places.

The idea that you should make livestyle tradeoffs while making $140K+ a year is absurd. But the alternative, spending $4k a month on rent, is also absurd.

Reply on news.ycombinator.com