Going from $110k to $24k for more skin in the game
interdimensional-television.com
interdimensional-television.com
Only very recently had a heard a parable that began to challenge the idea that to do deep good, one must materially suffer...
However, I'm no where near cured, and hearing your take definitely helps.
As an investor I'd be very concerned by this move.
That to me is the opposite of "[does] not think very far into the future."
If you planned what lunch you would eat on January 15th, 2022, I'd also say that you were planning far into the future, even though it's only a tiny fraction of the time between now and the sun swallowing the Earth.
He's admitting he can't make payroll. 110k isn't a ton of money.
A decent programer can make at least 100k almost anywhere in the US. I'd expect anyone running a tech company to make more than their own developers.
You don't even need to be a good developer, you can use an easier language like Python or JavaScript. Honestly 90% of success in this industry is not being a jerk and showing up on time. I've seen developers outright confront C level execs and predictably it doesn't work out so well.
The other 10% is luck. Occasionally you'll have a bad manager, or you'll join a company which doesn't manage their money well. And the only thing you can do in that case is leave.
Yes. Almost 10 years experience and an MSIS. Making under $100k.
"Honestly 90% of success in this industry is not being a jerk and showing up on time."
I must be missing that other 10%. I've had multiple bad managers, switched stacks multiple times, and other bad luck.
Whereas his new salary is closer to a burger flipping salary, and actually less.
As I've noted in a top-level comment, my intended message about focus gets a bit muddled without me giving the proper context. I'll add an update to my post with some context.
> you likely do not think very far into the future
This is 1-2 year bet for me.
You're trying to run a company while making less than a single experienced engineer. If you even can't pay yourself that much, what exactly have you been doing with your investors' money?
You know that sentence is completely incoherent, right? The man running the company suddenly having a bunch of personal financial distractions is bad. You thinking that having less money will make you more focused is a red flag big enough to go in a car dealership parking lot.
Why not? Author remains exposed to the upside through equity but their downside was always limited by their comfortable salary
You might think that's a poor choice, and you might be right, but it's the very definition of skin in the game that poorer choices on their part leaves them more exposed to a poorer outcome.
I agree with you, having to take such drastic measures to prove (to investors or yourself) that you have "skin in the game" wouldn't look good to me. It's cute to romanticize this ala Rocky III, but coming up with creative ways to overcome a lack of intrinsic motivation to do your job well is drama best left for the big screen, IMO.
(a) I don't believe my company will afford to pay me $110k soon enough. Don't bother investing here.
(b) I don't value my time as a founder/CEO financially
(c) I'm thrifty where it doesn't matter
(d) I signal employees that this is not a place that pays well, thus getting only subpar employees
(e) I signal employees that I'm all for "sacrifice" and thus not professional, and not a good place to work (e.g. if I had any loose excuse to sacrifice them and their compensation, I'd do it in an instant).
(f) I'm not mature enough not to buy into all this "ramen founder" BS aspiration stories
This is the biggest message I got from the article. Everything about it screams that the author is someone you shouldn't trust with your time and/or money.
That one rings truest to me and was part of one work experience I had in the past. The owners "buy" a lottery ticket using everyone else's wages and time, but it's "cool" because you're "living the dream."
Furthermore, living at poverty level for 1-2 years, especially in New York, eventually gets depressing because you'll have to deny yourself a lot of experiences.
Be like the Buddha in your pursuits. Reject asceticism and extreme indulgence and find the middle path. You and your possible future employees will thank you.
Exactly, it absolutely does not matter as much as this person thinks. Investors don't value money the same way you do. This a nice gesture that will be quickly forgotten, an oddity.
You're also sending a signal to your investors that your time is not worth much, and a signal to your employees that they can also expect scant wages and personal sacrifices.
It sounds like a bad deal, one I personally would not agree to, let alone writing about it publicly.
It is quite likely that after let's say 6 months of gruelling work you will start to burn out, start to feel undervalued, become difficult to work with and end up getting fired as a result. If things are this tight you should probably raise more money instead.
> Sing along and it might just get you through
> Laugh along with the common people
> Laugh along, even though they're, they're laughing at you
> And the stupid things that you do
> Because you think that poor is cool
https://www.youtube.com/watch?v=yuTMWgOduFM
Frankly I find this type of exercise a bit obscene myself.
Sending signals, writing about it, and making visible sacrifices will likely have short lived results. The extrinsic motivations run out pretty fast once you start feeling stressed, spread thin, etc.
If you can find some purpose or passion based reason to increase your “skin in the game” it’ll probably last way longer.
This is manipulative and, because of his savings, ultimately meaningless.
Worse than, by dropping his salary for multiple years, then (most likely) getting the difference in a bonus or equity, he is able to escape being taxed, leading to a net profit.
But I spent awhile trying to figure out what I want to do and my wasn't able. I only managed to figure out what the hell I don't want to do.
I was also fortunate enough to be able to afford a year of this downtime. At some point I mentioned that I might actually start working again but have no idea where to go and my friend told, as a joke I o dead sure, that come work with us. We need good guys.
So by pure chance I ended up working with disabled kids at a school with a four month trial contract. And loved every bloody second of it.
During my downtime I had experienced with my routines and gotten rid of alcohol, meat and car. Also basically decided not to buy anything I don't need, the only luxurious stuff being something odd for my kid.
And I realized my life is so much better this way, with shitty salary and simplistic lifestyle. The dissonance about burning the planet down with my lifestyle was gone. I can handle the mortgage alright and can save some for bad days.
I don't miss a damn thing from the past that was supposedly way cooler than current life.
Life's much more than only money. At least when you get by alright. And "the things you own end up owning you".
Motivation for work when you already have money is definitely hard for some. Just go check out /r/FIRE.
Huh. Weird post. Depending on the situation, I would want the founder motivated by money (real money, equity money) or just blind passion. I guess stay crazy and try things. Good luck!
If the problem was motivation try and find out why you were lacking it, I suspect the answer was not "I'm too gosh darn rich"
He has the funds for 2 years and isn’t breaking his own legs.
A better analogy would be like Bruce Wayne giving up everything for 2 years to focus in the mountains his ninja skills.
OP, do your thing!
My understanding is basically just that he had a consulting company and made a good salary, which enabled him to save enough money to live off a 2k per month salary for 2 years if need be.
He then quit his consulting gig and focused on the product full-time, and since a product rarely makes lots revenue from day one, he cut his salary to the mentioned 2k so that he has a 2 year run rate to get revenue. That's what he means by focusing: he can focus his efforts on getting to revenue instead of mucking about getting distracted with "shiny new stuff" that developers love.
The "skin in the game" signal to investors is, what I think many investors would like to see: The investors invest their money to grow the company, not to pay his 110k/year salary. By paying himself a meager salary and (likely) spending the rest of the investor money to build the company, the incentives are aligned.
I'm not sure I understand why the blog post hit the front page of HN, though.
This means that they have to balance spending time on a) paid consulting, on b) unpaid product development, or c) investor financed development, or some mix of these. Investors require equity, so if you believe in your product and you can afford it taking a pay-cut it can make perfect sense.
As an occasional investor it makes sense to me that you would want to invest in a company where the founders value their shares more than their wages - who would want to invest invest somewhere the founders want to cash out through wages instead of a future exit?
Building revenue generation is not easy. If you're going all-in on the build, there may well come a point where if your revenues are not sufficient you will start to feel pain. If you can structure the development process to deliver revenue from as simple and maintainable a product as possible and quickly find a route to sales that would be ideal.
I would guess that in terms of surviving to long term viability there are far more not-so-great but quickly revenue-generating products than there are great products that were unfortunately slow to get recognised and generate revenue. With cash, further development is possible to clean a product up - without it, even great stuff will rot. There are tons of genius ideas that have been through successful (working) development but then just died because they never made money.
Access sales resource - effective sales resource (not easy to find) - as quickly as possible. If you're aiming for investment financing, remember that few things build investor confidence like existing sales and cash flow.
I reduced my salary to signal our investor
The sentiment though rings true for me at least — as I have been fortunate to have a large salary, over the years I in fact do finding new-self losing touch with old-self.
And losing touch with my roots, my friends less-fortunate lives, etc.
Most of the critical comments point out that this is a) not a good sign to investors and b) not a good deal financially for me. I appreciate the concern, and I think I should have done a better job at explaining the context:
- We are spinning off the product from the consulting company. We are getting new money from our existing investors, and it's them I want to show that I'm serious about this.
- I have a significantly higher equity share in the product company than in the consulting company.
I'm trading of salary for more equity. This is very common in startups, so I didn't explain this in detail in my post.
What I found interesting and potentially actionable for other people is that reducing my salary (and having more equity) has increased my focus to a point I couldn't reach when still a salaried employee.
I could have done a better job at sharpening the message, and I appreciate those that still saw my point and commented about it.
Start the first podcast, get subscribers and stop taking a salary.
That would be a fantastic way to show the viability of your platform.
As a customer I'd love the idea of premium podcasts assuming the content is good.
This is what I'm doing. But there's just no income yet from the product.
I actually think this could be really cool, but it also feels like it might already be a saturated space since it can be easier to make your podcast free but then just ask for support on patreon.
Probably don't want to post to social or mention it increasing your skin in the game until the light is visible though.
The opportunity cost maybe high to begin with, but if this doesn’t work I’m sure the author could also get a decently paid job again. He’s well qualified and has lots of experience, so there’ll be another job if he really needs one. Also having a Swiss passport provides a pretty soft landing if things really go wrong.
I still believe a founder should demonstrate commitment and not unnecessarily drain the startup of resources, especially early on. But you don't have to earn minimum wage for that. At my current startup, the founders are the lowest paid team members, but in today's world of high developer salaries that still plenty to live comfortably and build some savings. I also believe that once a startup starts having significant growth/revenue or profits, founders should use one of the subsequent fundraising rounds to set aside a safety cushion for themselves - not a huge payout, but maybe a years salary or so. This levels the playing field with investors as rounds and valuations grow and enable the founders to make decisions that are not driven by them being afraid of their livelihoods/living expenses/family. In difficult times you want to have founders who keep a cool head and make decisions that are best for the company and not for themselves.
There is often a phase in the beginning where you a bootstrapping/just starting out/don't have investors yet where there just isn't any money to pay yourself and there isn't much one can do about it except live of savings/family and reduce personal spending (like in this case). But that phase should end once the startup is in a better financial situation.
In the end, founders are expected to work a lot, prioritize the company over personal matters and take a discounted salary. In general that's fine, but we ought to recognize that there should be balance. You don't have to ridiculously overwork yourself be successful and it's OK to draw an livable salary, take occasional holidays and spend time with family.
P.S.: The industry standard in the VC industry is that the general partners collect a yearly management fee of about 2%. For larger funds, that's a lot of money and I've never heard anyone demanding that GPs don't pay themselves a salary and instead only receive the carry (percentage of profits after paying the investors/limited partners) in case the fund performs well a few years down the line. Instead, they always get the management fee (=founders salary) plus the carry (~20% of profits), the later possibly being significantly larger than the management fee if the fund performed very well (=successful exit). If they can live comfortably from their profession, so should the founders.