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Ask HN: Is an Autonomy Fund a viable business model?

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Re: Ask HN: Is an Autonomy Fund a viable business model?

#41

Post by Mz »

codewright wrote: post #3

The problem is that most local governments that want a tech hub are either focusing on tech already and will think they don't need this, or are on the other end of the spectrum and simply don't care. The key is to find a city on the cusp of making a serious decision to pursue becoming a tech hub. Google Fiber could be an incentive, or it might make them complacent, who knows? Maybe Provo? You can't really aim too sma…

Just an observation: My understanding is that SF used to be affordable. That was part of its attraction. Than SV happened and that was the end of that.

Re: Ask HN: Is an Autonomy Fund a viable business model?

#42

Post by usea »

carterschonwald wrote: post #40
usea wrote: post #39

Earlier quoted context omitted.

In my company, profit sharing is 1/3 employees, 1/3 owners, 1/3 goes directly back into the company for investment. However, sometimes the company needs money to repair some equipment or whatever, and that comes out of the revenue (before profits). So the business needs come first obviously, but when times are good the employees are treated very well. This works best in companies where the employees can have a direct…

Yes I agree with that. But profit sharing with employees is per se taken from revenue left over after operating costs and such, profits are what you distribute to share holders. I agree with what you're saying, I'm mainly quibbling with the language of the structure of the proposed investment instrument. It would be very easy to do some Hollywood style accounting so that the business owner and employees all get a fra…

That's a good point, which I hadn't thought of.

Re: Ask HN: Is an Autonomy Fund a viable business model?

#43

Post by argonaut »

carterschonwald wrote: post #31

Your return structure is wrong :-) A successful growing business is never profitable, most / all the profit is reinvested in the business. There will per se be no investor return relatively speaking. I recently saw an article this past week that suggests a better structure: the investment is a loan that is forgiven if the business folds. This is actually better for both sides: the investor gets their money back with…

That is actually quite a bad arrangement.

Unless the fixed return is something intolerable to the startup, such as 100% return, that would make a terrible investment. Even ignoring the go-big-or-go-home type of startup in SV, the vast majority of startups that seek to make profits from day one do not succeed - they'll fail and the investors lose the loan. The only situation in which this makes sense is for the loan to have a very very high return - usually a multiple (1x, 2x, etc), since investors will need that rare winner to subsidize the losers. This is how the entire VC industry in SV works, and it definitely still applies even if you want to make a profit-first company, it just applies to a sightly lesser degree (usually for VCs in SV, one company in their entire portfolio will need to deliver 50x+ return). This is also bad for the startup because now they have this loan that they have to pay back in X years that has a huge interest rate.

Essentially, this is bad for investors because investors get all the downside, but their return is quite capped.

Re: Ask HN: Is an Autonomy Fund a viable business model?

#44

Post by carterschonwald »

argonaut wrote: post #43
carterschonwald wrote: post #31

Your return structure is wrong :-) A successful growing business is never profitable, most / all the profit is reinvested in the business. There will per se be no investor return relatively speaking. I recently saw an article this past week that suggests a better structure: the investment is a loan that is forgiven if the business folds. This is actually better for both sides: the investor gets their money back with…

That is actually quite a bad arrangement. Unless the fixed return is something intolerable to the startup, such as 100% return, that would make a terrible investment. Even ignoring the go-big-or-go-home type of startup in SV, the vast majority of startups that seek to make profits from day one do not succeed - they'll fail and the investors lose the loan. The only situation in which this makes sense is for the loan t…

Yes it's bad, but it's still less shitty than Hollywood accounting based revenue sharing. This is also not suitable for the vc round sized capital, but rather the micro seed /angel money as done by the YC heterlogue that Michael is suggesting.

Re: Ask HN: Is an Autonomy Fund a viable business model?

#45

Post by argonaut »

carterschonwald wrote: post #44
argonaut wrote: post #43

Earlier quoted context omitted.

That is actually quite a bad arrangement. Unless the fixed return is something intolerable to the startup, such as 100% return, that would make a terrible investment. Even ignoring the go-big-or-go-home type of startup in SV, the vast majority of startups that seek to make profits from day one do not succeed - they'll fail and the investors lose the loan. The only situation in which this makes sense is for the loan t…

Yes it's bad, but it's still less shitty than Hollywood accounting based revenue sharing. This is also not suitable for the vc round sized capital, but rather the micro seed /angel money as done by the YC heterlogue that Michael is suggesting.

Uh... the fact that this arrangement is less shitty than $OTHER_INDUSTRY really has no relevance to my point. Seed and angel economics mirror VC economics. This arrangement sucks for seed/angel investors as well.

Re: Ask HN: Is an Autonomy Fund a viable business model?

#46

Post by codewright »

otoburb wrote: post #33
codewright wrote: post #30

Earlier quoted context omitted.

Not sure why you'd think benefits are involved here. And a $125k salary does not cost $250k.

It would be great if an HR director could weigh in on how much a $125K salary might cost in total compensation with a "standard benefit package" range for a technologist/programmer/engineer role. The only other data point is from the Bureau of Labor Statistics Employer Costs for Employee Compensation (BLS ECEC) where it shows at the bottom that benefits accounted for around 30% of total compensation and 70% going to…

It doesn't cost that much either. [1]

[1] Ex-CTO

Those ratios are for average salaries, not $125k salaries.

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