[shon]

It's interesting to see the popular response to this thread being one where people think employees are better off with salary over options.

This seems crazy to me as I have watched many close friends cash out options from companies including Google, Yelp, Apple and Pandora and buy houses (some with cash), start companies, become investors and/or take long sabbaticals with the proceeds from their options. With salary there is a clear upper bound and the tax on W2 income is simply the worst. I would say that at least in the Bay Area, options are a good bet and much better bet based on what I've seen.

Startups are always a gamble for everyone involved. But outside of the financial industry, where 6 and 7 figure cash bonuses are common, I think options are superior to other forms of compensation if you're trying to optimize for gaining a "life changing amount of money" in less than say 10 years. High salary could only compare if you are very good at minimizing tax and maximizing the money making potential of your salary though investments (requiring additional work). But if you're going to have to invest anyway, why not work for a company you believe in and have a chance at influencing the company's success as well as your own?

[rdtsc]

> I have watched many close friends cash out options from companies including Google, Yelp, Apple and Pandora and buy houses (some with cash)

I have watched friends get paid a smaller salary, hoping for a great exit only to find their options diluated or the company just simply failing.

Now you probably only have lucky and successful friends or that friends who didn't get enough cash to buy a house are probably not in the back of your mind, as nobody wants to advertise either their failure or failure of their friends.

It just get chucked to "oh well, startups are risky". But then the winner get famous and everyone talks about them, making it seem like joining a startup and accepting options instead of a good salary is a sure way to succeed.

Notice, this is the same process the lottery system uses. We make fun of those people, but it is the same idea. Lottery always havily publicizes their winners, that is not just random marketing but a very useful tactic -- make everyone believe they can win took -- "Look at him, they got a huge giant check, so can you". If they televised ever single lottery loser, nobody would buy the tickets.

[shon]

In my mind, startups are less like the lottery and more like blackjack. You are gambling either way (as with any investment) but, with blackjack and startups you can optimize.

Unlike the lottery, knowledge and skill play a role here.

[rdtsc]

> Unlike the lottery, knowledge and skill play a role here.

True, but that's not quite the analogy I was going for, the analogy was how survivorship bias is used in both cases for promoting the idea-- everyone picks the winners and remembers / tells / markets those while disregardign the losers. I do it too, it is just a natural human tendency.

In both cases, if every time someone heard about a successful startup they also heard about many failed ones, they might have a different perspective.

[morgante]

The odds for startups are a lot closer to a lottery than they are to blackjack.

[Artemis2]

Of course, but it's about control over your chances of winning big

[bostik]

Considering that the biggest factor for turning a startup into a massive success is luck, I find that sentiment delusory.

The best you can do is to accept that you're not an expert in picking winners. (Just see how many hedge fund managers underperform the market. Even the supposed experts have problems doing any better than random decisions.)

[marssaxman]

You have no control unless you are part of the core management team and even then you don't have very much. Startup options really are a lottery, and just because other people sometimes win doesn't mean you can actually count on getting there yourself.

[wastedhours]

I choose my lottery numbers, so have an illusion of control over my destiny as well.

[rhizome]

Unlike Blackjack, you have to make your entire bet for all hands up front.

[rezlov]

That's the name of the game. You take a risk to make big money, and sometimes that risk doesn't pay off.

[JohnTHaller]

*Most of the time in the case of startups

[rhizome]

Or you start working for a company thinking their product(s) are cool, strong and survivable as its own thing, and then it turns out the plan was not to build a business but to cash out.

[vinceguidry]

You're still taking a risk, only you're betting with your time and not money.

[rhizome]

Actually it was only 7 months and I still got ripped in the deal. You can say "low risk, low reward," but in the big picture my reward was sorely out of scale to my contribution. Sorely.

[pm24601]

or you get laid off, or you get diluted, or it takes 6 years and you want to do something else with the rest of your life, ....

[rhizome]

To be sure, it was a thinly-veiled anecdote.

[draw_down]

Different people have different ideas on the value of "sometimes" in that sentence :)

[bradleyjg]

Going the cash route has a higher expected value but a lower variance. Different people have different attitudes towards risk.

[shostack]

This. And things are not really comparable to big finance jobs as the bonus is more or less expected to some degree or people leave to places where they will get the bonus.

Startups are a lottery to a large degree, and for employees without significant equity, the odds don't seem great.

[bradleyjg]

The finance industry has its own risks. It's a tournament type structure where as long as you stay in the tournament you are doing very well, but if you fall out you can end up doing pretty poorly. Whereas the tech industry, at least for the last several years, has offered a soft landing to many of those that choose to enter the startup lottery and lost.

Probably the least risky choice among high paying jobs that exist in reasonably large numbers is to become a doctor.

[jdmichal]

> Probably the least risky choice among high paying jobs that exist in reasonably large numbers is to become a doctor.

Though it's likely that your first several years of awesome salary will be spent paying off loans.

[shostack]

Can you elaborate on the "tournament type structure?" Are you referring to those at a high enough level where the expectation is that they source deals? If so, then yes, because at that point it is sales, and if you don't deliver new business, you bomb out, same as any other sales job.

If you are low enough level though, that isn't necessarily a concern since you aren't expected to source deals.

[bradleyjg]

In the investment banking industry you can't be a lifetime associate, it is up or out. If you make it to managing director you are doing very very well for yourself, but you still don't have any job security. That big pay packet is a ripe target when fortunes turn and the bank needs to cut costs. And if you get let go as an MD it is unlikely you will find another bank to take you in (the usual thing where it is harder to find a job without a job is even more so in the financial world.)

There's also a technical meaning to tournament theory that helps explain why firms in some industries are so structured. You can read more about that here: http://www.econ.ucsb.edu/~pjkuhn/Ec250A/Slides/Tournaments&T...

[shostack]

Interesting research and thanks for the link.

So it looks like we're in agreement that this primarily would apply to the upper levels of ibanking when there is an expectation of deal sourcing. But for junior analysts and such, there really isn't that stigma since their performance is not measured on a sales basis (and thus their mobility is not necessarily hindered by a down year).

Do you have any info or insights into how deal sourcing typically works at that level? Seems like a crazy thing to measure against when your annual deal volume would be relatively low given the size of the deals.

[landryraccoon]

I think you mean lower expected value, no? The way you put it cash is strictly better in every way than options - both higher expectation and lower risk. According to you there's no upside to options relative to cash.

[jonknee]

No, having your options be worth a lot is a very rare event. That's why they hand them out instead of giving you more money.

[bjacokes]

The main reason that options are handed out is to compensate for below-market salaries, and the main reason salaries are below market is that the company wants to increase its runway. Some specific valuations or offers warrant cynicism, but remember that any startup with negative cash flow (even successful ones with near-market salaries) should be giving out equity to keep their salaries costs down.

[jonknee]

Yes, but most of these companies fail and the options thus worthless. I mean it's great when it works out, but like lottery tickets they usually aren't worth the paper they are printed on.

[bjacokes]

Right: startups give out options, and those options are likely to be worthless. Your previous comment, however, was also suggesting causation: startups give out options because they are likely to be worthless. That's certainly not the entire reason. Like I said, a startup doesn't want to pay market salary because it would effectively ~halve their cash runway versus shifting compensation towards equity.

[Retric]

Generally companies hand out options because their expected value is Less than cash. Put another way, they could also just hand out stock instead of stock options.

[harryh]

He's talking about expected value in the probability sense.

EV = payout * probability

So for cash:

EV = 150k (or whatever your salary is) * 100% (it's guaranteed)

For equity it might be:

EV = 1M * 10% = 100k

[mikeash]

The upside is a non-zero chance of becoming filthy rich. Some people are willing to put up with a lower expected value in exchange for that chance. It's a fancy version of the lottery, which many people also play.

[jsprogrammer]

You shouldn't be able to influence a lottery outcome. Presumably, you can influence share prices if you work for a company that you have an ownership claim on.

[madgar]

Do you actually believe that as a non-founding employee you'll be able to make the difference between the company delivering "a life changing amount of money" to employees instead of the far more common outcome?

I guess the same type of mind that believes meritocracy really exists could believe such a thing...

[jsprogrammer]

Do you believe companies can accomplish anything they envision, without employees? Or do you think employees are entirely fungible?

Does my last employer not have a large contract with Prudential, because of my work?

[sokoloff]

"make the difference" alone? Probably not.

Did I "positively influence the outcome" in the company I work for? Almost assuredly.

Of course, this is coming from a mind which does basically believe in a meritocracy, so...

[sheepleherd]

you are correct to point out the "flaw" in what s/he said.

I don't know the actual answer (and it would be difficult to convince me that anybody has all the data either) but many people "experienced" with startups believe that so many more options come out worthless that cash is strictly better, better expected return at lower risk.

however, in the same way that the freakonomics guys explain people playing state lotteries even thought they are "not worth it": state lotteries (and startups) offer some of the few chances that most people have to actually get rich, so even though they don't pay off on average, they are "the only way" and "worth it" to some people. Not claiming that these people have clear ideas about either expected values or risks involved, but they have clear ideas that "it's the only way". For workers at many skill levels, they may have a sense that in their industry they won't be too much worse off in the long run so why not take a shot.

[jessaustin]

That's really a moot point, important only from a "risk neutral" standpoint. You've just discovered why risk-averse people don't work for startups.

[bradleyjg]

You're assuming a utility function of someone that's either risk adverse or risk neutral. What happens when you plug in a risk seeker?

[YokoZar]

They'd probably be better off with cash and gambling in some other fashion.

[conistonwater]

Having a significant portion of your portfolio in options on one company, which also happens to be the company you work for, is overconcentrated. The usual (good) advice is that people should diversify their portfolio, and believing in your company is not a good reason to not do that. Maybe it'd help to think about it in reverse: if you had all your money in cash, would you then buy all those options in your company to get the same portfolio? (Note: perhaps you would, but it's generally considered to be a bad idea.)

[tibbon]

Would perhaps the best advice there to be exercise your options at every company you work at for all that you're vested for?

If you worked for 5 companies in 10 years, then you've got 50% of your options (likely) at each of those companies. Seems a decent-ish diversity.

[FussyZeus]

This is like someone winning the lottery then telling you to liquidate your retirement fund and buy powerball tickets.

Yeah, if you worked for Google back in the day, you could actually do this. Now? With the crowded landscape of tech companies competing to provide services, except for the few services who have one or MAYBE two companies that completely own the field? You'd be insane to take options.

[thisone]

you've had no close friends who've lost their options, or had their options become worthless when companies fail?

You're one lucky person to know!

[shon]

Of course I have seen people lose. I've personally lost on options as well. I didn't make the assertion that you can't lose. With options, you are betting that the company will not fail and that it will become much more valuable. Both are statistically unlikely. You are also betting that you won't leave or be otherwise eliminated before the exit.

Mainly I'm framing this in comparison to additional salary which is also unlikely to generate significant wealth unless you are very good or very lucky (Probobally both) at managing your money.

[mikeash]

How much is needed for something to qualify as "significant wealth"? You seem to be dismissing differences in salary as unimportant, so it's fine to take a pay cut in exchange for even a small chance at significant wealth, because that's all that matters.

Let's say the salary difference is $50,000/year. Over 20 years, that's maybe half a million dollars, post tax, that you gain by ditching options. Maybe that's not significant to you, but it seems to me to be a pretty rational decision to prefer a relatively certain half million dollars over a low chance of some substantially higher payout.

[shon]

In my experience the salary difference isn't usually that large. Sometimes it is, and some companies do pay unusually low salaries in exchange for options, obviously increasing risk, perhaps to an undesirable level.

I'm CEO and co-founder of a funded company. We pay competitive salaries + options. I don't begrudge someone who isn't interested in options. Options are actually expensive to me. We are still fairly early stage (Series A funded) so the founders own most of the company and the option pool primarily dilutes the founders. I want to give options to someone who wants them. I'm fine paying more salary in lieu of of options.

I think of options like a profit-sharing plan in a mature company. If the company does very well then the employees should share in that success. Some folks feel that paying very low salaries and heavy options breeds loyalty. I personally don't subscribe to that. I prefer to pay something competitive and have options as nice upside for the employee.

[thedufer]

> In my experience the salary difference isn't usually that large.

Speaking as someone who recently did a round of interviewing with a mix of established companies and startups, $50k is a _very_ conservative guess. The difference between my Google offer and the highest startup one was ~$100K - if you drop to the average startup offer, it goes up to ~$150k. And that was at ~3.5 years of experience - it gets worse as you become more experienced.

It's hard for me to imagine how sure of a bet a startup would have to be for their equity to be worth $150k/year.

[shon]

Interesting data point. Thanks for sharing. I'm no longer in SF so may be out of touch with current salary gaps.

That said, this is makes sense to me. Google's stock options aren't making employees wealthy these days. Yet it's still a fantastic company and obviously compensates with salary. On the other hand, no startup that I know of can pay 3-400K salaries for 3-4 years exp.

Also it should be said that the type of work you likely do and the culture at a large public company will likely be very different from a small startup. Culture, ability to influence direction, large potential upside (though unlikely) are reasons people continue to pick startups despite lower salaries.

[wyman]

For a new grad several years ago comparing offers between say Uber, Airbnb, Stripe, Google, and Facebook, the mid-stage private companies like Uber/Airbnb/Stripe are likely paying $100K, while Google/Facebook offer barely more at $120K or so.

However, the Google/FB overs likely include RSUs valued at $400K that vest over 4 years, while the private companies offer options (at the time) "worth" (at current company valuation) ~$300-400K, with incredibly low strike prices since the 409a can be much lower than the preferred valuation. It really depends on how well the company has down, but since the last 3 years those private companies have doubled to 8x in value (see Uber), and thus the Uber employee's shares would be worth $2.4M-$3.2M. Google also appreciated (+50%) making the RSUs worth $600K, but still has not appreciated as much. Of course, this is just one example, picking the most successful companies, but it is illustrative of the general principle: if 20-30% of the time you can get on a rocketship, you can be +EV but with higher variance.

[mikeash]

Is 20-30% realistic? I'd have thought it would be more like 10% or less.

[jsprogrammer]

You are assuming the company sticks around you with that salary for 20 years, but that the options never become valuable.

It would take incredible foresight for a company to correctly manage to pull off such a feat.

[mikeash]

I'm merely assuming that your working life is at least that long, and that the salary/options tradeoff is something you can make throughout, as you change jobs.

If you go hardcore for options, then you might take every job with a reduced salary and a chance of striking it rich. If you're totally against then you might take every job with a more established company (or unconventional startup) that pays better. The tradeoff of potential riches versus more certain earnings is as I described.

[Dayshine]

What do you mean unlikely?

Something like 90% of companies fail in 5 years...

[kriro]

The idea of taking higher salary over options is basically summed up in the "why your dentist is rich" chapter in Fooled by Randomness. It's "safer" and you'll be relatively rich over all outcomes.

Additionally you can theoretically invest the extra money over your vesting period of the options at whatever $insert ETF produces as an annual return.

Setting all the monetary issues asside I'm not sure if I'd prefer more money or more options on a philosophical basis. I feel like I'd go for options because if you work at a startup you should share the vision and work there because you believe it's awesome stuff that will change the world. OTOH taking the salary might make you less prone to certain biases and more "objective" in everyday work (+not overinvested in one outcome). tl;dr: I think I'd take the options package if I'd work at a startup because if I wouldn't I'd have to question why I work there in the first place

[powera]

If you assume that you will be screwed out of your equity, it makes sense to be compensated entirely with cash up front.

And with companies like Uber that seem to plan to never have an IPO, and also this meme that it's good to screw ex-employees out of their vested shares, it's not necessarily an unreasonable assumption.

[justinlardinois]

Are you talking about options being the entirety of one's financial compensation? Because I wonder how people who work without a salary manage to pay the bills every month.

> the tax on W2 income is simply the worst

As opposed to getting taxed on what you eventually make from your options?

[khuey]

The maximum federal tax rate on what "you eventually make from your options" is likely 23.8%, whereas on the equivalent salary it'd be 43.4%.

[sokoloff]

It's hard to get substantial sums of money from options and have it all be taxable only at LTCG rates. ISOs are limited to $100K/yr when first exercisable and doing an 83b election (assuming your plan permits it) on unvested shares is fairly risky, to put it mildly.

Yes, it's possible to get such tax rates, but generally only for amounts under $100K.

[bogomipz]

That you have four close friends who have made significant windfalls is a bit of an anomaly. There are far more people that have lost on that gamble(trading salary for options) than there are that have won. Give it another ten years of working at startups and it won't look so crazy.

I'm mot even sure how you "optimize for gaining a "life changing amount of money"? That's like saying you are going to optimize for luck. There a substantial amount of luck involved in seriously "cashing out" on a startup.

[marssaxman]

My experience has been that you never get enough influence over the company's success to make a significant difference, and the options don't pay off frequently enough to rely on.

For my own part, I've been at this for over 20 years and I've never come close to making any significant amount of money from options. They have lost all incentive power. Pay me cash money now, and I'll invest it however I please.

[Retric]

A single person making 100k+ has a ~90% chance of saving enough in 10 years to retire in a cheap location. That is a life changing amount of money.

[dpark]

I'm not sure why you think single is a positive if you're trying to save. It's far more cost effective to be married to another high-income earner.

Living in a cheap location is also not everyone's dream. It would be life changing for me to retire to Costa Rica, but it would not be a positive change. I live in a pretty expensive city (Seattle) because I like it here.

[Retric]

If X, says nothing about if not X. Dual income no kids @ 200+k can be a great way to save a lot of money. But, you have far less control over your spouses spending and willingness to relocate.

Also, even if you don't move having 500+k / person in the bank is life changing. The median bay area house is 635,000$ which becomes affordable while saving money. Dual income with a 1+ Million down payment and you can actually buy a nice place.

[dpark]

In general conversation, "if X" often says a lot about "if not X". "If you're a white male on America, you have entrenched institutional benefits" actually does imply something about non-white/non-males. It implies that non-white/non-males do not have the same entrenched institutional benefits. General conversations do not follow the rules of prepositional logic.

When you repeatedly refer to being single, you imply that it's the better way to save, whether you intend that or not. And when someone asks about it, brushing off the question by pretending they should have applied rigorous logic to the statement is somewhat... let's say silly. Ability to control a spouse's spending and willingness to relocate are legitimate answers that you make weaker with the attempted logical refutation.

Having 500k in the bank also isn't really life changing if your plan is to spend it on a house. With a high income, you could theoretically save for 10ish years and buy a pretty nice home outright. You could also just take a loan out immediately and live in the same home for those ten years, acquiring equity and tax benefits along the way.

Saving to buy outright or mostly outright only makes sense if you are either extremely risk averse or you believe that non-real assets will appreciate much faster than real assets over the medium term. Right now you can get a super jumbo loan at less than 4%. If you want buy a million dollar home and have a million dollars in cash, it's really not a given that you should buy the house in cash. That implies that you believe the stock market will do worse than, say, 3% (reduced due to tax advantages of mortgages and disadvantages of capital gains) for many years.

[Retric]

The glaring exception for dual incomes as I said was you can't control your partners behavior. That's a major caveat and derails the conversation. You go from stuff you can do, to some sort of theoretically ideal couple. In most areas the major savings is being socially acceptable to share a bedroom with someone and being a 1 car family. But, in SF you may already be sharing a bedroom limiting the savings.

Further a 100k income simply can't afford to buy a 900k place. 900k * .06 = 54k/year + taxes + repairs + insurance + utilities. Put a 500k down payment on that and suddenly it's a 400k place and much higher taxes. Now you might be able to swing 900k that with a roommates, but again not having them is a major life change.

[dpark]

> in SF you may already be sharing a bedroom limiting the savings.

I mentioned that in another fork of this thread but was being facetious. Adults do not generally share a bedroom unless they're in a sexual relationship. Sharing a bedroom platonically is not a reasonable thing to expect people to do to save money. Sharing an apartment, yes. A bedroom, no.

> Further a 100k income simply can't afford to buy a 900k place. 900k .06 = 54k/year + taxes + repairs + insurance + utilities. Put a 500k down payment on that and suddenly it's a 400k place and much higher taxes. Now you might be able to swing 900k that with a roommates, but again not having them is a major life change.*

Your numbers don't make sense. First, if you're paying 6% on your mortgage, you're overpaying by a ton. Assuming you even try to get a decent rate, you're looking closer to 3% once you factor in the tax advantages. Second, if you can save 500k in 10 years, you're saving close to 50k/year plus paying for housing. So it's a lie to claim you cannot afford 54k/year in house payments.

[steven2012]

Lol $635k. Maybe including condos but definitely not SFHs

[mathgeek]

That's a great bet if you ignore the possibility of not being single your entire life.

[Retric]

You can still do remote work from a cheap location, or stay and have FU money.

Giving up 500k in salary for a chance to make 500k in stock is a terrible bet. Alternatively, only save up 100k in 10 years, go to Vegas and bet it all at slightly negative odds. You can set things up for a 20% chance of getting ~500k which is better odds than many startups while still having more day to day money.

[lbn]

> You can still do remote work from a cheap location

Wouldn't the employer insist on paying in the local salary range?

[mathgeek]

In my experience, this is not the case.

[rhizome]

You can still do remote work from a cheap location, or stay and have FU money.

Do they have good schools in $cheap_location?

[Retric]

There are a very large number of cheap locations with good schools. Especially when you include private schools.

[mathgeek]

Private schools tend to increase the "cheap" part quite a bit.

[eru]

Sure. Better ones than in the US, even. (Eg Finland perhaps?)

[turnip1979]

Not if you live in the Bay area. Definitely not if you have to support a family.

[Retric]

Many "single people" in the Bay area make less than 40k/year. They don't starve.

If you are single, living in the bay, and making 100+k and not saving like a bandit it's because that's your choice.

[aioprisan]

I don't know what housing costs you must be talking about then. $40k/year pre-tax is close to $2648/month after state and federal taxes, and you're saying that with Bay area housing prices, you're not starving? I'm guessing that's also with no school loans or trying to work and pay your way through school, which probably applies to a very small fraction of the population.

[dpark]

It's easy. You just live in a small 2-bedroom apartment with 3 other people. $40K goes a long way if you're willing to have no space to yourself.

[imtringued]

>which probably applies to a very small fraction of the population.

If you consider Walmart and McDonalds employees then that's a large part of the us population.

[EpicEng]

>including Google, Yelp, Apple and Pandora

So, companies that exist in that tiny portion which are actually hugely profitable? Most companies aren't, and most options are worth little to nothing at the end of the day. After a decade in start ups and now supporting a family, I'll always take salary over options.

[morgante]

> But if you're going to have to invest anyway, why not work for a company you believe in and have a chance at influencing the company's success as well as your own?

For one thing, it's fiscally unsound to have the majority of your net worth and your salary tied to a single investment.

[logicallee]

I would like to point out that there is a practical third option given that some people say "Pay Employees A Market Salary", whereas some companies may not yet be able to afford it.

In practice when you're a technical founder (or cofounder with one), you might have three fantastic people you can't afford, great technical roles. They'd do great work for 40 hours per week, they believe in your vision and you, because your vision has a competitive advantage they can execute well with, and you can essentially generate equity value out of thin air together. They cost way less than the amount of value that could be generated, so they make sense from a business investment perspective.

But the company just might not have the funds yet.

So, besides giving out options as compensation, or giving out a market salary, the third, practical alternative, is not to hire any of the three persons, but instead work for 130 hours per week doing their 3 jobs and your job, and sleep 5.4 hours per day.

This divides to 32.5 hours per "job" (130 / (3+1)). In practice by not hiring these great engineers, you've also not hired their coffee breaks, lunches, not hired the time they spend reading Hacker News, reading about new technologies, trying various stuff such as a new framework they'd like to try, you've not hired the time they spend writing documentation or any kind of testing whatsoever, and you've not hired any downtime they spend waiting for anything whatsoever. In fact, with these concessions, the 130 hours turns out to be an exaggeration.

So, some people call the results of this "technical debt", which is a bit of a misnomer.

It's a misnomer because if the project doesn't start generating value, you can kill it and nobody has to clean up anything. So in this sense, rather than a "technical debt" - it's more of a technical option. Instead of generating employee stock options, you've created technical stock options, where if the technical results actually make it rain, then at that point the project is investable, people can be hired for a market salary, and they can rewrite all the code that you've optioned. In this very real sense it really is an option, rather than debt.

So, in practice a lot of silicon valley seems to work this way. A lot of successful people have succeeded using more or less this formula.

We've all heard lots of stories of seasoned developers being brought on to clean up spaghetti code written by a founder or cofounder, that proved the business case but was hideous, poorly documented, structured, tested, with even security and backup policies and redundancy policies making it a miracle that nothing melted down.

So when one wonders why some founders work so much - well, this is the reason.

The people who could have written all this properly from the start, weren't available given the finances the company had at the time.

Often other people aren't willing to share the vision, and if you want something built, regardless of its value, at times you just have to do it - before anyone has funded you.

So this is a very real third possibility that many people do not realize really is a kind of "option".

An essay on this is here:

http://higherorderlogic.com/2010/07/bad-code-isnt-technical-...

[morgante]

I upvoted you because this is a fairly good comment, though I think it is fundamentally incorrect.

Working really hard and acquiring technical debt isn't really an alternative to hiring and compensating employees, it's (usually) a prerequisite. A single technical cofounder can be enough to get a company to Series A, but at some point you have to hire people.

If we wanted to discuss an actual alternative, it would be to hire people in other locations at far lower rates than those commanded in SV. But that comes with its own set of problems.

[harryh]

Not sure why you're getting downvoted. A huge % of highly successful startups were started more or less just like this.

How awful do you think the original Facebook PHP codebase was? Or Google's original hacked together web crawler.