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Comment by Hurtak | Hacker News Reader

They run out of money? I thought they raised like 5M two years ago and they had like 3-5 employees and pretty much 0 expenses outside of salaries.

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According to HN, 1 good employee would cost you $1M per year, since everyone obviously lives in SV. 5 employees and that works out to 5M/year.

With payroll taxes and benefits, an employee is ~2x TC. Since startups underpay frequently, let’s say the average salary was ~150k in TC for early employees within SC. That’s 300k*5 = 1.8 million gone per year. Over two years that’s 3.6M. 1.4M left over for finance, legal, rent, and other expenses is kind of tight and you definitely won’t make it a 3rd without any kind of customers or other financial infusions. That’s why a company has to find some kind of product market fit quickly - you have to show there’s a there there so you could continue growing either through revenue growth alone or raising another round.

2x TC seems high. For one direct example I know of, benefits package (including all the insurances with all premiums paid by the employer) costs around $25k/yr. I feel like at $150k salary, it’s probably like $200k total cost? Payroll tax employers are responsible for seems around 7-8%. $30k benefits, $12k extra payroll tax leaves $8k for equipment and other expenses. That would be about $1M/yr for 5 employees.

Curious to learn more though.

I think the 2x number is a rough ballpark that includes total cost of employment (eg HR salaries / outsourced HR etc). It’s entirely possible that this overhead is smaller for startups and it may have shifted over time (this is a rule of thumb I was told by a few people 10 years ago)

Looking at the top contributors (https://github.com/rome/tools/graphs/contributors) that does not seem to be true?

It is Ireland, undisclosed (the founder, so probably SF), France, and UK.

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