[btmorex]

You're right. It is a boring argument. Every time I get into it, I realize that most people don't even know what saving money is. Saving money != spending like an average person so I don't know why you would quote the median apartment price. Obviously, you would try to find a cheaper one.

[tptacek]

Without getting into value judgements about financial planning: what you don't want your comp plan to force founders to do is move to a new apartment (unless subsistence wages is part of your strategy).

[ramanujan]

Don't see why this follows. Many job offers require relocation. And YC itself requires relocation (for 3 months) to the Valley, with the expectation of subsistence wages.

In other words, grandparent has a very important point. In the context of all the stresses associated with startup life, moving to a new apartment (or city), cutting costs, and living on ramen is not even on the top 10 list.

Now, for someone like joshu who has a track record, fine, they don't have to live frugally their second time out of the gate.

On the other hand, if you have an exit that size, why raise money at all? Why not self-fund the whole shebang? If you think VC $ "legitimizes" it, ok, maybe give a traditional investor a small piece...but not much more than that.

Bottom line is that people who are able and willing to live on ramen can turn $700k into years of runway -- and are enriched for the kinds of people who can build a profitable cost-conscious business.

[tptacek]

Personally, I think you should self-fund the whole shebang.

Are you willing to live on ramen for years? Good on you. Really.

Bucket my take as "the perspective of a founder with a family to take care of", noting only that if you forego the externally-funded "aim the cannon at the moon and shoot yourself out of it" game plan, you can do better for yourself with a startup than ramen.

[ramanujan]

Hey tptacek, didn't mean any offense and hope none was taken.

> Are you willing to live on ramen for years? Good on you. Really.

Indeed I was (during grad school), and am, as are many/most YC alumni.

And I hesitate to mention this as it's such conventional wisdom -- but as for self-funding, absolutely one should bootstrap for as long as possible before accepting outside investment. To further belabor the obvious, pay yourself well when the company is profitable, or even better wait for exit. Here's Peter Thiel on the same topic:

----

http://techcrunch.com/2008/09/08/peter-thiel-best-predictor-...

The lower the CEO salary, the more likely it is to succeed. The CEO’s salary sets a cap for everyone else. If it is set at a high level, you end up burning a whole lot more money. It aligns his interest with the equity holders. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks.

In practice we have found that if you only ask one question, ask that.

[tptacek]

The 37signals management team pays themselves in Wisconsin farmhouses and (note plural) supercars. They seem to be doing just fine. I'm wary about C.W. that suggests founders should suffer for suffering's sake. Then again, 37signals never really went out for VC, either. I don't know anything about Fog Creek internals, but Joel and his partner don't seem to be suffering too much either.

I think many teams find that by the time they've scaled headcount even to a minimal degree, the founder's take-home pay is no longer a major budget concern. At least, that's how I've seen it rationalized.

(Don't ever worry about offending me, but thanks for the concern.)