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Comment by _bixt | Hacker News Reader

IMO in the age of insanely high tech salaries, early stage funding is very overrated. I saved $2.2M in my 8 year Bay Area career as a regular engineer with no exits, and I didn't even work at FANG. I have friends who saved more than twice as much as me. And then YC gives out 150k? 150k is a joke to anyone with a decent job. Why not save 2 million and then start your company at age 29 instead of 21 begging people for tiny money for huge share of your company? The YC model made sense back when it was founded and engineers made 60-80k. Now after the second tech boom, you are much better off working for FANG for 5-10 years and then starting your own company owning 100% of the equity until a real money $10M+ series A

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Assuming your annual expenses came to $50K, you had to have made $225K-$325K a year before tax to save up that much in eight years. Shave or add a couple tens of thousands in either direction.

$225K is a high salary almost anywhere in the states that's not on the coast. It's an absolutely ungodly amount outside of a small number of countries. You're likely to make a third of that in the EU or Asia. Maybe half that in cities with large tech scenes.

Advising someone to save up $2M before they're thirty is like telling someone to be born rich, except that the odds of being born rich are much higher (~40M millionaires in the world vs ~3M programmers in the States, of which the majority make less than $90K a year).

You start a company and go through hell to get $2M in a bank, not the other way around.

I'm not nuanced in the ins and outs of YC, but $150K on fair terms is a sizable amount in almost every reasonable context.

I think your salary estimates aren't high enough. In California you're paying around 35% in state/fed income taxes, which means that with $225k gross you have $145k net of taxes and under $100k after living expenses. With $325k gross you're $160k after taxes and living expenses. Even starting at the top of your range, it gets you just over halfway there before investment gains.

So OP was making 300k (roughly standard for a mid-level engineer in the Bay Area at about 20+ different companies here) and dumping 160k of it into index funds every year.

With the market basically doubling over the past 8 years with no inflation, and those returns compounded, it's clear to see how he got to $2m.

This doesn't account for any returns on company stock OP held on to (tech companies have basically doubled the return of the S&P over the past 10 years).

Whether you could replicate OP's experience over the next 10 years, is debatable.

The scenario you describe makes sounds plausible, but it isn’t “I saved $2.2M over my 8 year career”. “Save” ≠ invest in the stock market. The commenter made this seem like the low-risk alternative to taking VC funding, so relying on stock market returns is antithetical to that.

I'm curious about the numbers — you saved $275k (annually, on average) after taxes and living expenses as a regular engineer? That implies a pre-tax salary of $420k if you ignore living expenses, which add at least another $30k in pre-tax earnings. I'm sure there are engineers who make $450k in SV, but you imply that this is possible/easy for folks who are 21. Maybe I'm wrong, but that seems pretty high for someone straight out of college.

Note: I'm not including interest/investment income from annual savings, and perhaps that's part of how you made money. Certainly it has been easy to make money buying tech stocks in the last 10 years. But that's not always the case, and even including investment gains I'm having a hard time seeing $2.2M being a typical or easy amount to save from age 21 to 29.

That said, I worked as a lawyer for 7 years, saved a decent amount, paid off my loans, and then started a startup. It was a good path for me, but man I never had $2.2M in the bank, even having worked at a well-known international firm and being on the partner track.

The full amount wouldn't be savings. There would also be return on investment. And the stock market has had a crazy decade after the great recession. From June 2008 to June 2016, stock market had an 84% return on investment with dividend reinvested. Someone starting saving this decade may not get the same chance.

https://dqydj.com/sp-500-return-calculator/

I would not be shocked to learn that decent share of those 2.2 million was earned by either mining or speculating with crypto currency. There definitely was some money to be made there in the past 10 years.

Yeah, but relying on a good decade of outside returns is not a good strategy for the future.

He or she was likely paid in equity for some portion, and that equity grew.

They are exaggerating at best, or highlighting an extreme outlier. Non-FAANG jobs are going to have between 50% and 70% if the total compensation of FAANG most of the time. Good example: a SWE 1/2 60th percentile base salary is around $120k in the Bay Area. Taxes and living expenses for a single individual will eat 40% of that, at least, unless the person is living in a slum with roommates. Lead/principle engineer (L5) salaries are about $175k at the 60th percentile. Again, taxes and living expenses for a single person will consume 35%-40% of that. RSU grants and bonuses at these places are good for maybe another 30% on top of the base, typically, in extreme cases.

A person saving 100% of their net of taxes and living expenses would have to see a return of well into double digits every year to accumulate $2.2M over 8 years or so, because their base savings rate over that period will be (probably far) less than $1M under optimal circumstances.

It isn’t at all common enough to obviate the need for things like YC.

I think their using the term FANG and not FAANG is a tell

> I think their using the term FANG and not FAANG is a tell

Which A do you think is being omitted and why?

I'm going to guess it stands for Aardvark, which has two As.

It also entirely ignores the core point of YC, which is not (and never was) the modest sum of money. It's the network, the other entrepreneurs, the advice / mentoring, the reputation sharing that it provides when dealing with investors in the future, and so on. Going through YC is a form of validation, other investors will take you more seriously by default afterward (the reputation sharing).

You can get $150k from a lot of sources these days. The value of the YC network is far beyond that.

The author of the article here. Agreed. I wrote about this just 2 weeks ago! https://www.growthclub.online/post/what-to-do-after-an-accel... Sam Altman: "We at Y Combinator always say we want to get a lot bigger because this is a network effect, this is a network that matters. Most venture capital firms will say out of one side of their mouth, “Oh no, smaller is better,” because they don’t want to work more. Then they’ll tell all their businesses, “The network effect is the only thing that matters.”

You are very right. To be blunt, the OP needs to be called out on his BS. I personally, lived in the SV area for over a decade (single and very frugal) made good salary (non FAANG companies) but my savings though substantial, were nowhere near what the OP is claiming. It is simply not possible.

I am not sure why people on HN state/claim all sorts of outrageous salaries in the Bay area. It gives a very distorted view of reality and frankly harmful to both employers and employees.

Depends, if you got FB stock awards 8 years ago that were valued at $20,000, those would be worth more than $150,000 today.

It’s not unreasonable to believe someone could keep their stock for 8 years and have the combined total be worth 2.2M.

Sure, but that presupposes stocks, other investments, equity etc etc. You need those and a big dose of luck too. The way the OP's post was written it seemed to imply that he made it on his take-home salary by itself which is impossible. The only thing i agree with the OP, is to NOT go for VC money in the beginning (as far as possible).

A more realistic and cautious way to do a startup (for normal people) would be (see Nassim Taleb's description of Extremistan/Mediocristan for ideas - https://kmci.org/alllifeisproblemsolving/archives/black-swan... and https://www.capitalideasonline.com/wordpress/mediocristan-vs... );

1) Hold down a regular job for a decent period of time and earn as much as you can.

2) Save, Save, Save i.e. no risky investments on a large portion of your income. This is your safety net.

3) Simultaneously, get started working on your ideas/company by yourself or with a close-knit group. Spend no money; only your effort and time.

4) Once you have the whole picture/Prototype/MVP figured out estimate how much it is going to cost you to move ahead. All information is available on the net and hence do your proper research i.e. don't pay any "consultant" for advice. You can also shoot an email and seek advice from people like Paul Graham/Joel Spolsky etc. Remember, "Fortune favours the Brave".

5) As long as it is bearable, spend your or group's money to move ahead. It is important to cut any and all unnecessary expenses at this stage. Spend only what is needed and not a penny more.

6) Once the above is stable, you can now decide on whether you want to quit your day job and spend your whole time on your "New" company. This will be a function of your safety net savings mentioned above.

7) In order to not blow everything on a idea/company which may not pan out, set a threshold on your expenditure dropping below which you will approach others for money (i.e. VC/Angel etc.) or abandon the idea/company and return to being a regular salary man. This is to ensure that you don't end up on the streets.

8) Your are now at the stage where you are proceeding with your own company or have gone back to salaried employment and hopefully working on taking a second crack at entrepreneurship.

Good luck and Godspeed :-)

I made an average of $220k including salaries, bonuses and 401k matches. I lived on 30k and invested the rest, mostly in QQQ after maxing my retirement contributions for tax advantages. I had about 40k saved when I started working after graduate school. Yes I benefited from a booming tech market, both in my investments and my career. But that boom is ongoing, and really it only majorly picked up 5 years ago. I quit working 2 years ago to focus on my own projects, so someone starting today would likely have an easier path than my own. I saw someone on reddit fatfire yesterday who has $75k at age 20 just from FANG internships. He could have 200k by the time he starts his first real job, and there are entry-level offers higher than my average salary at top companies right now.

At that point your unlikely to take the plunge for various reasons:

Once you have saved that amount of money your only going to be a 'few' more years from hitting some version of FIRE.

You've grown accustomed to a certain lifestyle and friend group that will be hard to walk away from.

You've lost skills having worked with some internal tech stack your entire career and don't know how to do anything.

Skills you learn at your FAANG equivalent job don't transfer over to entrepreneurship its just a different domain.

You've never actually 'worked hard' and it's just going to seem plain silly to quit your 250k+ job to work all the time when the chances of success are low.

People who get into entrepreneurship generally can't stand their jobs and have ideas running through their head all the time to the point where going to the job is pure torture.

Why not work at a FAANG equivalent company for long enough to give you 2-3 years of runway and then take the plunge? The longer you wait the less likely you are to do it.

> Once you have saved that amount of money your only going to be a 'few' more years from hitting some version of FIRE.

> You've grown accustomed to a certain lifestyle and friend group that will be hard to walk away from.

> You've lost skills having worked with some internal tech stack your entire career and don't know how to do anything.

> Skills you learn at your FAANG equivalent job don't transfer over to entrepreneurship its just a different domain.

> You've never actually 'worked hard' and it's just going to seem plain silly to quit your 250k+ job to work all the time when the chances of success are low.

Can confirm all of the above (except lifestyle inflation, I watch that carefully). At this point, it really does make more sense to grind for a few more years, go have a nice FIRE and then maybe work on something on your own just for fun. So, essentially, golden handcuffs all the way.

Maybe some people don’t agree with the ethics of FB/amz/google/Netflix and are not interested in a career with Apple? I think for a lot of people money isn’t everything in life.

Spot on, rvn1045. Your brain will be bent into the wrong shape, your engineering and product management skills will have become too specialised, you won't realise what you took for granted in the workplace until it isn't there, and then you'll have to split your time between your start-up, your new partner, and your new children, with less than half the income and no security.

Nevertheless, some people will do it better at 29 than at 22, and others will excel at another age. We're all different.

When the time comes for you, if it ever does, you'll know.

> I saved $2.2M in my 8 year Bay Area career as a regular engineer with no exits

> 150k is a joke to anyone with a decent job.

Your income is an outlier in the US and an extreme outlier in the rest of the world. Your perception of what "a decent job" pays, the value of $150k, and the chance most people have to obtain this kind of money is massively skewed.

"Regular engineer"

If you distribute your $2.2M over 8 years and gross it up with 35% withhold and minimal living expense like $30k/year you'd have to average over $400k/year.

This post is simply a lie?

Fwiw I think top value from an accelerator whether YC, 500, First Round or EF is about a customer network that makes it easy to bootstrap b2b, not about the cash at all really.

I really agree with this, though I suspect some young bright 20 year olds are desperate to work hard for the little cash VCs throw at them, especially if FAANG says no to them for arbitrary reasons.

The thing that has always stopped me from starting a business is the fear of being sued, the fear of failure, and the fear of just breaking even compared to working for a normal company. I also am not very good at sales despite years of trying-- my personality is hardwired towards laying all my cards down on the table immediately.

My question to you is, if you have 2 million, why not continue to work for FAANG or retire semi-frugally to do hobbyist work, when considering that starting a startup involves immense downside risk (getting sued）

> is the fear of being sued...

I can't discount it entirely, but... for many situations, that's probably a somewhat overblown fear. It's why you get insurance, pay professionals to do legal/paperwork stuff, and get on with your business. Almost anyone can sue for anything, but it probably doesn't happen anywhere near the number of times you might think it does. When you start, you're going to be too small to get sued in the first place. And being sued probably means you have paying customers, so you're already doing something right.

> too small to get sued in the first place. And being sued probably means you have paying customers

Apparently I'm the exception, but my business was pretty small (under $1M ARR), and one of our investors (which was also our largest client), sued us to pay his convertible note back. The company went bankrupt and after bankruptcy he sued my cofounder and I personally for the note. Still dealing with the whole thing. Every step of the way our other investors and lawyers were caught off guard, because the situation is apparently very rare, however, it still happened.

Having said that, knowing what I know now, I'd prefer to start a business, with all the issues and risks that it might entail, rather than let fear keep me from doing it. It's also been a hell of a learning experience and I'm sure it's all going to help me in the future.

Wow, sounds pretty crazy. Did the note have personal guarantees? My understanding is that kind of thing is very rare. If not, what grounds did he have for suing you personally? Fraudulent conveyance or breach of fiduciary duties? Something else?

It is not crazy and not rare. I can sue you right now, personally, and you would need to pay someone to defend you in court.

If you've never owned a business and have no relation to me, then probably you'll survive the suit just fine.

But as you can see, OP had a business relationship with the person involved, and though OP probably won the suit in the end, he still had to pay oodles of money to protect himself. And if he lost, well, then there's my point.

The note did not have personal guarantees. But that didn't stop him from trying to claim alter ego. Like the sibling comment says, even if we win, we still need to pay tons of money to lawyers just to deal with it, and put in a lot of our time as well.

Our lawyers and other investors do think this situation is pretty rare, as the guy ended up killing the business that could have given him a better return on his money, and also screwed everyone else involved in the process.

interesting (sorry you had to deal with that).

"having investors" is perhaps a different sort of business than other small businesses that start up. many of the smaller businesses (esp software) don't have 'investors' as such, though some have taken out bank loans.

You are totally right. And it will take me a very long time before I want to have investors again (if ever at all).

This is so interesting because you could watch a 5 minute video on "limited liability" and dissolve all of those fears.

The company concept is a shield. Money is allowed to pass through to you, outside capital is not a tax event and everything you spend is deducted against the much smaller salary you paid yourself. You can have negative AGI, actually have a high compensation, and still get $1,200 checks signed by the President.

Risk is allowed to stay with the company, whether it has anything left to pay to the aggrieved investor or not. This knowledge alone acts as a deterrent to many risks.

You're really overthinking this.

This. Add on to the fact that none of your customers has any incentive to sue you or screw you (i.e. it almost never happens) and that you can get insurance for all kinds of eventualities. And you still have a limited-liability corporation.

I'm actually not overthinking it, because judge's remove the protection an LLC gives your personal assets for arbitrary reasons. Additionally, you need a multi member non spousal LLC to even get the protection in the first place.

I have a lot of assets to protect.

Arbitrary reasons being? Generally this happens if you’ve been grossly irresponsible with your companies’ funds.

As mentioned the first one is not having a cofounder who isnt in your immediate family, which for some people is fine and for me is honestly a waste of time and equity. Just another vector for failure.

Beinf grossly irresponsible with your companies' funds is an interesting way of saying "I tried to pay myself without the detailed advice of a skilled accountant and I made an oopsie and now the judge says I need to pay a lawyer ${sum_i_dont_have} to protect a random plantiff from becoming the new owner of my house"

Again, how amazing is your idea and execution and business networking capabilities that you somehow think you are gonna make more than $2.2M in 10 years of work, like you would at Google?

> As mentioned the first one is not having a cofounder who isnt in your immediate family, which for some people is fine and for me is honestly a waste of time and equity. Just another vector for failure.

so wrong lol. you seriously have no asset protection because you believe that? better yet, your actual asset protection strategy is having none and a completely misunderstanding the basics?

"There are two cases, one a federal bankruptcy case and the other an employment tax liability case that deal with liability of a member in an LLC. In Re Ashley Albright and Littriello v. United States, et al., remind us that proper asset protection planning, especially in the design of an LLC, is a necessity and without it the consequences may be disastrous. These cases are important because courts are beginning to view a single-member LLC as a disregarded entity under multiple scenarios in some states"

Literally the top result on google. Why are you insulting me?

Because you are still overestimating the issue and fell for some law firm's scare campaign. Whats the date on that huh?

That case was from 2001 and decided in 2003 and the world has evolved so much in the last 20 years. The primary validation is the use of these entities. And let's just imagine your two decade old view of the world is correct and also probable, nobody even needs to know you are a single member LLC. When "12 Forest Road LLC" owns your vacation home at that specific address and no further information exists about the LLC to even the state, the person that sues your other company that has outside capital and employees will never name the other LLC in the lawsuit, and if they did it is much more likely that it gets tossed out or at least that other LLC gets removed from the lawsuit.

And your real issue is that you worked too hard for your other assets that you haven't protected. Nobody needs to know your other assets are held by title holding single member LLCs.

> Why are you insulting me?

Can I insult you into actually doing something about it?

Ask yourself, is it more important for you to be right or more important for you to actually make deterrents and even absolute protections?

and let's not forget, you are using all of this as excuses to not even attempt profitable ideas.

> because judge's remove the protection an LLC gives your personal assets for arbitrary reasons.

first you have to get sued: RARE

then everything has to go wrong: RARE

then it has to make it actually to trial court: RARE

then that one judge has to leverage an "alter ego" statute: RARE

> Additionally, you need a multi member non spousal LLC to even get the protection in the first place.

This is false.

> I have a lot of assets to protect.

Then protect them? Put them in different LLCs, trusts, foundations. To save money you can use a Series LLC which lets you separate liabilities or business lines into different series, about 20 states offer those, and outside the US the concept is called a "Segregated Portfolio Company". Use states where there isn't information about you in the LLC filing. You should basically have nothing in your name. Even better, you should have a negative AGI and be in debt on paper. If someone actually wins a civil lawsuit against you, you can tell them to get in line.

The fact you believe the $150k is where the value in an accelerator like YC lies says a lot.

If I was running another startup and I could join YC for $0 in return for 7% I'd still seriously consider it.

Peak SV bubble right here. Hard to begin but: most people cannot earn anything near these ludicrous sums; most founders are much older and can not afford to wait; the chances of failure justify the terms.

Fortunately, $150k is not a joke to the many people not in your situation, which is akin to winning the lottery. I work remote for low six figures and it'd make a huge difference for me.

It makes no sense from a risk diversification POV to spend your life savings (pre-)seeding your startup.

If you can pull in that much money it probably makes more sense to get a loan with favorable conditions and then pay it off in your 30s if your business fails.

It makes no sense from any kind of rational investment strategy to found a startup.

Your trolling comment pushed the right buttons around here. You did everything except mention the time when the Undertaker threw Mankind off Hell in a Cell.

Seems reasonable. If you want to live with your parents until 30 and at the same time is one of the highest paid engineers in the whole world.

what range is your annual comp if you don't mind me asking? 2.2 is very impressive given how high the rent is in SF. Or did you invest your savings very well.

Sounds like a crazy amount to save unless you managed to keep living at home and not paying rent, along with saving every dime and investing (investing being the easiest part around 2010, everything went up).

I’m assuming it’s a non FAANG salary (sub 200k), but even then the best numbers I could come up with is about 600-800k over 8 years (the top end only being achievable by aggressively investing every dime).

Regardless, it’s got me thinking if I should pump most of my paycheck into Delta and all the distressed market sectors for the bounce when this all ends.

They probably got very lucky with stock appreciation.

While I believe this is your experience, I don’t believe it’s possible for the average engineer in the Valley to save anywhere close to $2m over 8 years.

The author of the article here. I agree wholeheartedly! Not a solo founder myself, but I've been advising GrowthClub and leading my bootstrapped startup Panda Training, based on my experience - funding is definitely overrated and often brings trouble. Many of the founders (both solo and not) in GrowthClub bootstrap.

I have not heard of any of these wealthy FAANG engineers ever starting a great startup. Are there any examples we should be aware of ?

I don't mean to sound like I'm gatekeeping, but IMO, this thought process is not conducive to successful entrepreneurship. A true entrepreneur doesn't care about things like job security or financial independence. They take risks to make something and try to invent the future. Money has little to do with it.

In 8 years things will change, I had an idea to start a used book selling platform back in 1998. The same idea won't work now.

I do not know if you are joking or insulting engineers, mainly those outside a tiny hole in the Valley, more so globally.

Wow.., how did you save that much?

You do it to change the world.

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