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> Many startup founders go through months, and years of living on beans, struggling to pay bills and making do on a shoestring budget. Why should they not enjoy the benefits of their spoils if they do make it?

Many of these founders have only "made it" in a paper sense. It's at best ungracious to be living large while your employees and investors are still sweating it out and/or losing money.

Also, I find the "years of struggle" trope irritating. Many of people live on beans while working 70-hour weeks and don't end up rich. Plenty of those people work at companies whose executives do get rich.

What is your point here? People can spend their money however they want. Are you trying to say that someone who has become financially successful should not spend it because someone somewhere is not at the same level?

"Many of these founders have only "made it" in a paper sense. It's at best ungracious to be living large while your employees and investors are still sweating it out and/or losing money."

Is it only in a paper sense until what? The IPO? Many companies are staying private much longer, because it's better for them. Can you really say that a company that has a valuation in the billions, that, let's be clear, has been paying thousands of employees, suppliers, etc. for years, and that is choosing to stay private because it's the smarter move for all its shareholders, is not considered a success warranting of the founders taking some money off the table?

Not to mention the fact that lots of companies simply remain private always, that's a perfectly legit option although not as often used in the startup world for various reasons. Nor to mention the fact that the founders who are "taking money off the table" are quite literally doing it by investors buying shares from them, meaning the investors themselves necessarily have to agree to this arrangement. (Although admittedly, those are later stage investors, and this could be against the interests of earlier shareholders, but then they made a business deal with a company, it's on them to do it in a smart way).

I don't get why suddenly when it comes to tech startups and founders, the normal rules of business are suspect. People start companies and sell off parts of them to outsiders all the time, and it's mostly up to the parties involved to agree on the details that seem right to their situation. If they are willing to do a deal with a company that isn't currently making a profit, fine! That's their business.

Yes, until the IPO for companies that are on the going-public track. Until sustained profitability for companies that intend to stay private.

> Can you really say that a company that has a valuation in the billions [...] is not considered a success warranting of the founders taking some money off the table?

I can definitely say that. Are the employees and investors getting rich at the same time? If not, then there may be pragmatic arguments for paying off founders (e.g., they will have an incentive for selling the company too soon), but I don't think there's much of a moral one. And if it happens, I think there is still zero excuse for the founders living large while the people actually doing the work and providing the capital have not received the same rewards.

> Not to mention the fact that lots of companies simply remain private always

This is just muddying the waters. This article is clearly about VC-backed companies, which are all about the exit. For truly private companies, founders get their dough when the company is in the black long enough that they start paying dividends or partner draws.

> I don't get why suddenly when it comes to tech startups and founders, the normal rules of business are suspect.

They aren't. Money-losing companies giving their founders tens or hundreds of millions of real cash dollars is not within the normal rules of business.

> Also, I find the "years of struggle" trope irritating. Many of people live on beans while working 70-hour weeks and don't end up rich. Plenty of those people work at companies whose executives do get rich.

Your logic is flawed. When I start a company I will be leaving my cushy job that pays damn well and living low in hopes of making it big one day. A founder making a deliberate choice here is very different from unskilled/unlucky/not-qualified (in whatever sense) people living on the beans. They don't have a choice. They are not part of the game.

I'm not sure how much of it is tall poppy syndrome when it comes to employees vs bosses. Its might be uncomfortable to talk about, but every dollar the boss keeps _is_ a dollar that the employees don't get and the boss is the one deciding how much both sides get.

Tall poppy syndrome would be more applicable if it was peers being upset at the success of one of their own, not between subordinates and leaders

The boss is not deciding how much both sides get, supply and demand determines at which price point someone is willing to work for someone.

Aren't bonuses a little separated from the standard market forces surrounding salaries? You don't know what your bonus will be when you agree to work for a company, and how the bonus is funded is truly in part left to discretion of your superiors, and also partly tied to company performance and not the going market wage.

Obviously you might leave after a few years of really unfair bonuses. But truly, they seem a little disconnected from regular market forces.

Of course they're not disconnected - they're simply priced in.

Everyone knows that if you go work for e.g. Google, you're getting a certain base salary, plus a bonus package (plus options/RSUs, plus free food, plus a lot of things). People consciously subconsciously price these in as much as they can. Of course if bonuses are variable it's harder to price them, but the same can be said of stock grants in companies. And no one can afford to ignore those - they can in practice make up a huge part of your pay package.

> ...they're simply priced in...

Well, you're correct. If the bonus is unacceptable, the employee can just quit. But a year of work (or more if it's event based instead of annual) is a big opportunity cost to find out that info.

In other words, employees never take an unexpectedly huge bonus to the chagrin of the employer. So there is a power imbalance there.

The employee is (consciously or unconsciously) pricing in the bonus when they are hired. Whether or not they correctly calculate the bonus risk is not the onus of the employer. Meaning if you can’t afford or will be happy without the bonus, then you probably shouldn’t be accepting the job assuming the bonus will come through.

> Whether or not they correctly calculate the bonus risk is not the onus of the employer.

It at least partially is. The employer needs to meet reasonable expectations and any commitments they made.

Indeed...

> every dollar the boss keeps _is_ a dollar that the employees don't get and the boss is the one deciding how much both sides get.

I've thought a lot about this over the past few years. There's definitely a difference between being an owner and an employee. An owner lives with a whole different level of stress and risk. An employee has a choice to work for an owner, or go work somewhere else, or become an owner by starting a company.

I'm not sure where the balance of power between business owner and employee is determined...it's fairly complex.

Because owners are never allowed to become employees?

Good point. Owners can become employees, but there are much more benefits to being an owner that employees never really have access to, so unless the owner doesnt have the skill or capital, I don't see why an owner would want to be an employee. Sometimes employees can't even fathom making 1MM+ on a business deal because employees think in terms of their salaries.

Owners become employees when they accept too much outside investment. They become employees of investors...and investors buy ownership.

I think the balance of power is primarily affected by two things: 1) Barrier of entry into starting a business, such as laws that inhibit/regulate small businesses, or independent workers (owners) 2) Regulation that gives bigger businesses an inherent advantage over smaller businesses, such as limited liability, indemnification, bnakruptcy, mandated group health insurance plans, etc.

Sure, an owner can make 1MM per year and only pay the employee 100K.

But I think the question we really need to understand is, what's stopping the employee from quitting and starting his own company? I don't know the answer.

You are living in a bubble if you think that the balance of power between employers and employees is mostly determined by how easy it is to start a business.

Are you an indentured servant? The boss certainly doesn't get to decide how much both sides get. Those that hand out high salaries aren't doing it as some form of charity. It'd be absurd and stupidly inefficient if they were, most of the world lives on US$10 or less.

In my opinion, it is easy to feel like an indentured servant as an employee, especially if that employee lives paycheck to paycheck or is servicing a lot of debt (mortgage, car payment, health insurance premium and bills) that I see a lot in the American economy.

There is also a lot of pro-management literature that defines a work culture where employees should be loyal to their company, boss, etc., give two weeks notice when quitting, among other things that psychologically disenfranchise employees.

In reality though, at least right now in the tech industry, if you don't like your salary, job or work environment, it isn't hard to re-tool and find a new job...

In blue-collar/unionized industries, it might be totally different. I don't totally understand the work cultures of other industries, especially lower paying ones.

They don't, but the mechanism by which employees get more is to leave or threaten to leave. They are more likely to exercise this option if they feel like the boss isn't serious about the business and is living large on their efforts. This isn't in the boss's or the company's interests.

You are correct. I was using the term in relation to all of us here at HN critiquing the people mentioned in the article. Assuming none of us are employed by those companies, we are essentially peers in the industry.

The boss/employee relationship is an interesting one as well. If the boss is a self made entrepreneur that built his/her company from scratch and lived by the skin of their pants for years, then I believe it should be their decision as to how much of every dollar coming into the company goes into their pockets.

I would also assume that being successful from those beginnings would indicate that they are shrewd business people, and that they can figure out a ratio of boss/employee allotment that would be fair and also be beneficial for future company growth and reinvestment.

> and the boss is the one deciding how much both sides get.

Why would the boss give anything to the employees then? I think you’ll find that the employees decide how much they want.

> and the boss is the one deciding how much both sides get

Employee signed the contract out of his own free will? Then no, the boss is not the only one who's deciding that.

I think some of it is about the optics as far as raising future rounds. If you're a founder that has built a company with a valuation over $1B, raised a number of rounds, but really only proved that customers like your product at a price that's subsidized with lots of VC cash, living a lavish lifestyle could lead potential future investors to think that you believe you've already made it.

I think they'd prefer that you take the perspective that you've only really made it once you've made a profit for your investors. Or even, gasp, until you've built a self-sustaining, actually-profitable company. Otherwise investors will worry that their investment is in your lifestyle rather than a company that will eventually earn them a return on their investment.

Once a founder has built a company that's exited or doesn't need any more funding and is turning a profit, I doubt anyone particularly cares how they spend their money.

It would be nice if our culture taught people how to be happy with less expensive things, since it's kind of a waste from a utilitarian point of view if a multi-millionaire is spending all of their money on giant houses they live in one week a year and so on and only getting a small amount of utility. Better if they didn't have a taste for giant houses, and gave the money to someone who needed it, or invested in something doing more useful things.

I can see how people may consider some of these things a 'waste', but a lot of the time, they fail to see the 'down river' consequences of the spending.

I remember there was a great deal made in the press a few years back about a famous Indian movie star spending several million dollars on his wedding in a poor city that he grew up in. He was criticised for his 'wastefulness'. However, a follow up report on the event a few months later pointed out that his one wedding actually was massively beneficial for the entire city's economy. Catering and hire companies made several year's profits in one day, and were able to hire more people and take them off the streets.

Similarly, we may criticise the extravagant marble entrance stairway in a startup founder's mansion, but that stairway may have probably put the stonemason's kids through college or helped to extend that dying artform for another generation.

If they have an empty house, they still contribute to the local government's activities via land tax or rates bills, and they probably also employe local cleaners, garden maintainers etc. Far better than just snorting it all away in cocaine and other heavy drugs.

This is perilously close to the broken window fallacy: https://en.wikipedia.org/wiki/Parable_of_the_broken_window

True, the money doesn't evaporate. But it's also true that if the house(s) built with that money were occupied full time, that would be even better.

> Far better than just snorting it all away in cocaine and other heavy drugs.

But when they buy cocaine they still contribute to the income of local dealers and the activities of gangs. Their money may well put a gang leader's kids through college. And drug lords can have huge weddings as well.

It seems to me like you as well fail to see the downstream consequences of that spending.

I do agree that building a house and letting it sit empty is usually slightly better than spending the money on drugs, but that can easily reverse itself depending on the specific building materials and drugs in question.

More importantly, there are not just two alternatives. Why spend money on a house you don't need and pat yourself on the back for helping the people you paid, when you could have used the money much more efficiently to directly improve people's lives?

Touche. You make a good point.

The fact is - no matter how it happens, that money sloshing around is good for the economy. I guess the worst thing they could do is to convert it to bank notes or gold bars and bury it somewhere.

I think spending it on a house is one of the worst ones though. If the money was kept in the bank it would at least go to reinvest into other companies or help people get loans, etc. But a big house, it just reserves land away and wastes material.

P.S.: I'd love to have a big house, and don't jusge people who can afford it that do. Luxury is fun, but in this case its wasteful non the less.

Yep. That's why I was careful to say 'bury the money/gold' rather than leave it in a bank account. At least in a bank account it earns nominal interest, and the bank can reinvest that money to generate more.

I guess some of the worst investment advice ever was repeated to us as kids - viz Scrooge McDuck swimming in his vault full of money, or pirates constantly burying their loot... :)

Huh. I initially had the dilemma framed in my mind as an environmental, not economic one. Interesting perspective shift.

They already “give money to those who need it”, by buying all those expensive things. I want the opposite. I want them to spend every dollar they have on the most ridiculous bullshit and thus move the economy forward.

> Many startup founders go through months, and years of living on beans, struggling to pay bills and making do on a shoestring budget. Why should they not enjoy the benefits of their spoils if they do make it?

I think the problem is that they are still working for the investors, having sold them the dream. Because they are also acting as CEO, they are still on duty to the investors to create an exit.

They haven’t “made it” yet, unless you consider raising investment as the goal. But it isn’t. Until you’ve made your investors a great return, the point of the article is to show some modesty.

"Many startup founders go through months, and years of living on beans, struggling to pay bills "

Most don't though.

Most come from upper middle class families.

They live 'Grad School Life' until they are successful.

Meaning: ok, nothing phat or fancy, but they don't have any real trouble or risk.

Of course - many do struggle for a long while.

I think they should buy what they want ... but they shouldn't be showy about it.

Don't drive your Ferrari into work when there's a layoff :). Or ever maybe.

EDIT: there's quite a lot of data to validate that richer kids are more likely to be successful founders [1]. I'm not indicating that this is always the case of course, but it's pretty common.

I worked for a while at a Fortune 50 and the kids we saw coming in as interns were really well prepared - I also noticed a pattern - their parents were Doctors, CEOs, high level government officials. I'm not saying they didn't earn the positions, but there's no doubt that their status helped, moreover, they already knew how to behave properly in a corporate/professional setting. I had no idea, that's not something my parents could teach me.

Two of my 'rich kid' interns went on to found major companies, one of which there's 100% chance you've heard of and probably 80% chance you've used - the other just raised $50M.

[1] http://www.andrewoswald.com/docs/entrepre.pdf

While I would not argue that a "good upbringing" (hence ability to do all the tribal signaling) is a major contributor to success, I would contend that claiming that most founders have these advantages is over-reaching. (Esp. given that most start-ups fail)

Coming from a remote Wyoming ranching childhood, I will claim that signalling can be learned, and that most if not all customers, VCs and bankers I might talk to are shocked to learn that I was not brought up just like them.

It's no different than lawyers or doctors, though. Every group has tribal signaling to help them identify if a person is in or out of their group. Learn to speak the language. Heck, even poor people (like me!) can do that.

People do with their money what they want, but a _MASSIVE_ mansion won't add much value to their life. And owning too many properties can be a real hassle.

You can have a large house or mansion, somewhere isolated (if that's what you want), but unless you have a family with 4 kids running, it can get lonely pretty fast.

"But a _MASSIVE_ mansion won't add much value to their life". Not sure I agree. Have you ever seen the kind of parties you can throw in a mansion? That's quite a lot of value that you otherwise wouldn't have.

Unless you're throwing massive (40+ people) parties ever week it's more economical to buy an average sized house and rent massive space for when you throw huge parties

Most of the examples used (with the very notable exception of the WeWork guy who honestly seems like he’s a con artist), are buying $4M homes in SF. That would be a mansion in most of the US, but it’s a typical family home in a decent neighborhood in SF.

Also as the article points out, people aren’t using their stock to buy these places (Evan Spiegel being the exception). They are almost certainly using money they got when they (and often the rest of their employees) were offered the chance to take some money off the table in a later round of funding. Investors do this for a few reasons — they want a larger percentage that would cause more dilution than existing shareholders want to take, they want the founder focused on the home run IPO instead of potentially taking a buyout offer that would net the founder life-changing wealth but only be a single or a double for their fund, and probably more I’m not aware of. Point being, investors are fully involved participants in this — no one is being taken advantage of. (Again WeWork may be an exception — the external optics there are very bad.)

Finally, using something like Dropbox as an example, Drew has built a multi-billion dollar company and his investors (with the possible exception of the last round which was basically an IPO without the listing) are very happy. Is a $9M condo really a sign that he’s not working hard? Anyone who knows him knows nothing could be further from the truth.

Price has nothing to do with sq. ft. I think owning a (really nice) townhouse is fine, regardless of the purchase price. Some markets are just more expensive than others.

Just pointing out that, just because a house is massive, it won't make you happy. It's often seen as a status symbol, though it doesn't make much sense anymore in this day and age in my eyes, unless you constantly have people around and you have a large family.

Statistics will quickly tell you price has something to do with sq ft. Location is the other thing that’s highly correlated.

Yes, a big house won’t make you happy by itself. Neither will money, a girlfriend, kids (especially kids!), a bar where everyone knows your name, etc. You can be happy sharing a bedroom with two other people you don’t particularly like and you can be unhappy despite everything in your life going exactly how you hoped it would (speaking from experience here). But that’s human psychology, and I don’t think it’s useful to try and paychoanalyze why people are choosing to buy what they buy. Honestly, we all have better things to do with our time.

The whole point of the article was to point out that many of these unicorn companies may not have “made” it just yet and that modesty (if you can call a < $3mil gone modest) might be smarter for unicorn founders.

Founders / big stakeholders can live it up xor credibly ask long hours and other sacrifices for the good of the company of rank-and-file and more recent employees, but not both.

Well,it is a bad idea to invite your employees to your house anyways - renting space at park is very cheap and a much better idea. First you have to worry about employees stealing stuff or scoping out the house for robbery, etc. Secondly I'd be worried about liability. If someone got hurt during one of these BBQs the homeowners insurance might not want to pay out because they could make an argument you were engaging in business activities during the incident and lots of home owners insurance don't cover business activities. Thirdly, your employees might not be all that comfortable going to your house, going to someone's house, feels a lot more "intimate" than meeting in a public place, and many people aren't comfortable with going to a party at the big boss's house.

> First you have to worry about employees stealing stuff or scoping out the house for robbery, etc.

You shouldn’t hire people with whom this is a legitimate concern.

I've worked for multiple companies, where, somewhere near the 100 employee mark, one seems to be -> sociopathic and starts stealing laptops -- or the company card.

These companies were "best places to work"

Ah yes big companies. Doesn’t an inner circle usually develop at those sizes and the CEO would only invite the inner circle to their house rather than all 100+ people?