[ryanmercer]

I truly don't understand why a payroll company would need to raise 200 million dollars and what they could possibly do with the bulk of it aside from buying 24k gold toilets. You're not going to hire 200 million worth of people, or buy that many ads, you could build your own server farm for a fraction of that and cloud services would take quite a long time to burn through that. So why?

Why would you sell that much of your company to investors?

Why would you invest that much money in a payroll company?

I can sometimes understand it, say a company was working on some sort of energy generation and needed tens of millions of dollars of equipment/infrastructure to even start truly testing their idea, or you were going to sell some physical good that was going to sell for hundreds or thousands of dollars per unit and you've already been selling other versions but need a large amount of cash for the MOQ to manufacture your new hardware in the best setting and banks are hesitant to pony up, but for a payroll company?!

This stuff always blows my mind.

[user5994461]

One way to think about it is that each employees costs $100k or $200k a year.

So for $100M, you can comfortably afford a few hundreds people for a few years with all the office space, benefits and hardware required. A regular small-medium business really, nothing special.

[ryanmercer]

>One way to think about it is that each employees costs $100k or $200k a year.

Those are some expensive employees, me and my friends don't cost anywhere remotely near that. I make 34k a year after 13 years on the job. A company doesn't have to hire in one of the highest COL cities in the country.

[ojeggplant]

If I was making 34k a year after 13 years on ANY job in the USA, I'd get off Hacker News ASAP and make changes in my life so that it doesn't reach 14 years.

As an answer to your original question, Gusto's CTO responded in the question above yours. His answer below:

Co-founder and CTO of Gusto here. This is a REALLY good question and something that’s hard to appreciate until you actually to build a payroll system. I think a common misnomer is that if you’re not doing ML/AI/AR/blockchain/[insert latest technology here], you’re not doing R&D. The domain of Payroll turns out to be an incredible complex business domain. I think Ron Jeffries says it best in his post: http://wiki.c2.com/?WhyIsPayrollHard The software design of such a complex business domain at scale turns out to be an incredibly hard engineering challenge, and something that is often overlooked when we think about big engineering challenges. A little known fact is XP and Agile were developed by Kent Beck while working on a Payroll system for Chrysler (In fact, Kent now works at Gusto to help us with our payroll system).

[jogjayr]

The market's been really good for software engineers in the past 10 years. It's absolutely none of my business, and I don't want to be rude. But I hope you go out and make hay my friend. You could easily be making twice that, even in low CoL states.

[opportune]

This argument makes no sense. You making $X/year has no bearing on how another company pays its employees. There are people in Bangladesh making shirts for $5/day so why would I pay you $1000/day to make websites? Well maybe because that's the going rate for the area and you can generally buy higher quality labor with more money...

[ryanmercer]

> You making $X/year has no bearing on how another company pays its employees.

Yes it does, because I and many many many many other people are doing fine on one amount outside of the Bay Area. My job equates to effectively any non-coding job that they have, someone was trying to claim that every employee costs 100-200k, I pointed out that is patently false and gave my income as an example.

When I pointed that out then it changed to "oh yeah but rent costs 200 million!"

No.

I've still seen exactly zero sensible explanation in this entire thread as to why a payroll company felt he need to raise 200 million in funding, and why any sane investor would provide such an amount.

Let's say an employee DID cost 150k after salary, benefits, and a year of their share of the building rent though, 200 million dollars gets you:

- 1333 employees for 1 year

Pretty sure that a payroll company doesn't need 1,333 costing 150k just to grow/become profitable.

Pretty sure they don't need 100 employees costing 150k each to do so, even if they do that's 13 years of money, er sorry 'runway'. I highly doubt they're going to hire 100 software engineers.

But hey, I'm not a VC so I guess my question is silly to everyone here.

So I'll point out that the people investing the money, that some of them are also scratching their heads and concerned about such:

https://www.inc.com/business-insider/sam-altman-thinks-start...

https://twitter.com/sama/status/977593111592357892?lang=en

[user5994461]

It's fully loaded costs, an employee is a lot more expensive than just the yearly salary. Looks like they're expanding to NYC so definitely closer to $200k.

[ryanmercer]

My 34k salary does not cost my company 200k, I don't know what benefits you get but for me to cost my company that they'd have to feed me multiple times every day (worth pointing out here, most companies do not provide ANY food or drink outside of tap water) and give me a phone and a car and a bonus or four and I probably still wouldn't get close to costing them 100k. Most people don't make 100k, or anything close to it. The median HOUSEHOLD income in 2016 in the United States was $60,309. Again, household.

The median household income in my state (Indiana) was $54,181 in 2017.

It's my experience many people on HN generally have no clue what most of the country makes.

>The costs to this point (basic salary, employment taxes and benefits) are typically in the 1.25 to 1.4 times base salary range

https://web.mit.edu/e-club/hadzima/how-much-does-an-employee...

[user5994461]

Worth noting that just like you pay 30% of your salary into rent, the company also pays a two digits percentage of your salary into office space.

So when management says the overhead is only 1.25, they clearly missed out on a lot of things.

[ryacko]

Just how large is your cubicle and expensive is your office equipment?

[ryanmercer]

To -user5994461-, I can't reply directly to you but:

Commercial real estate is pretty cheap in most of the country, we have 3 shifts in my building and are open almost 6 days a week, sharing desks with another shift, my company isn't paying thousands of dollars per person per year for this building.

Not every place is the bay area with insanely expensive rent and insanely expensive cost of living.

I've still seen exactly no one even attempt to explain to me why a payroll company needed to raise 200 million dollars.

[spookthesunset]

What the heck are you doing where you are making 34k a year after being at a place for 13 years?

[fhbdukfrh]

You're a software dev with 13 years experience and make $20/hour?

You've been significantly undervaluing yourself for a long time

[dragonwriter]

> You're a software dev with 13 years experience and make $20/hour?

Assuming a consistent 40hr workweek, $16.34/hr from the annual pay posted. Which reinforces rather than contradicts your point.

[ryanmercer]

>You're a software dev

I never said this, not everyone on HN is a coder...

[notfromhere]

unless you're living in a low cost third world country, 34k after 13 years of experience is depressingly low and you're being grossly underpaid.

[ryanmercer]

>you're being grossly underpaid.

I'm making 62% of my state's -household- median income. This is the problem with HN, everyone thinks that everyone in America makes 100-200k. Minimum wage is 7.25 and there are TONS of minimum wage workers.

[notfromhere]

Median full-time salary is between 40k for females and 51k for males. You're being underpaid for 13 years experience, especially if you're working in tech.

No one assumes everyone makes 100-200k, but since most people here work in tech of some sort, 34k is unheard of.