The Rising Costs of Scaling a Startup in San Francisco • Hacker News Board

Re: The Rising Costs of Scaling a Startup in San Francisco

#51

Post by peteretep » Sun, Feb 22, 2015, 2:10 PM UTC

smikhanov wrote: post #50

peteretep wrote: post #47

Earlier quoted context omitted.

In reverse order... > please, tell me about the added value recruiters in the UK bring anyone Sure. Firstly, the last 5 candidates I've placed were not looking for jobs. Each was in a role where they were slightly unhappy, but inertia was keeping them put. Having chatted to them, I was able to find them roles they enjoyed more, with a significant pay rise. You could see this as introducing liquidity to the market. A…

> who reads long comments anyway? I do! It's great that someone is able to see through an emotional response and explicitly address most of the points. I'll try doing the same (and also in reverse order). > the Russian way is better because there is a duopoly > in the job-board market, rather than meaningful competition The Russian way is better because the marketplace is more efficient for both sides. If I'm a candi…

    > I understand this conversation is a bit meaningless.
    > It's as if someone would talk to me saying that
    > programming profession is outdated and needs to be
    > replaced with something else. I would refuse to believe
    > that, of course.

The conversation is meaningless because you do not - or will not - read.

You are talking to me as if I think the agency model is perfect, where the originating comment specifically stated I thought it needed to be fixed.

You are talking to me as if I am primarily a recruiter, where the originating comment mentions that I am in fact primarily a tech guy. I have been programming commercially for longer than you, and I have been a CTO at a company two orders of magnitude larger than yours, and I have had to fill headcount larger than your entire company - a task that would have been impossible without recruiters.

You are talking to me as if I see the world through an agency recruitment role, where the originating comment mentions that I have a specialisation in recruitment software. As it happens, many of the world's largest companies (and many of its smaller ones) used the software we built at my last role with their in-house recruitment teams - I was responsible for a software system through which 70% of all job-ads posted in the UK passed. My understanding of recruitment comes through working with recruitment teams from 2 person companies to gigantic multinationals, from personal experience as a hiring manager, from countless times as a technical candidate, and - of course - from the time I spend working as an agent.

Re: The Rising Costs of Scaling a Startup in San Francisco

#52

Post by _random_ » Sun, Feb 22, 2015, 6:37 PM UTC

peteretep wrote: post #48

_random_ wrote: post #23

Earlier quoted context omitted.

Yes, unfortunately in London either: 1) recruiter effectively steals a percent of your starting salary; 2) company is so cheap they cannot afford a recruiter; 3) big tech companies are paying extremely low in comparison to the primary sector - finance (and the most interesting stuff will still be developed in USA).

> 1) recruiter effectively steals a percent of your > starting salary This is absolutely true for contractors, and absolutely not true for permanent staff. I have only lengthy experience to back this up, rather than anything I can link you to, but: * For a contractor, companies budget a maximum amount to spend per day. How that gets cut between the recruiter and the contractor, they don't care about. If you're going…

"better negotiators than developers" - well in my experience they are always trying to "tempt" with a mere £5k boost and never going for the top bracket offered. It is in their interest to play it safe.

Re: The Rising Costs of Scaling a Startup in San Francisco

#53

Post by franklinho » Mon, Feb 23, 2015, 5:29 AM UTC

sheepmullet wrote: post #20

franklinho wrote: post #3

Key point to take away from this is: Wages constitute the majority of the increase in startup expenses. Real estate costs add only 5% of per employee costs. The market has driven up salaries ridiculously high.

"The market has driven up salaries ridiculously high." Has it really? My dad owned his first home freehold after working for 5 years. I'm almost there after ~15 years. And I've had help from my wife. Real estate has driven up salaries ridiculously high.

I meant in terms of startup costs. The increase in office space prices are a tiny fraction compared to the salary increases.

Re: The Rising Costs of Scaling a Startup in San Francisco

#54

Post by franklinho » Mon, Feb 23, 2015, 5:33 AM UTC

yourapostasy wrote: post #27

franklinho wrote: post #3

Key point to take away from this is: Wages constitute the majority of the increase in startup expenses. Real estate costs add only 5% of per employee costs. The market has driven up salaries ridiculously high.

Please clarify your assertion. Are you saying real estate price increases have contributed 5% of employee costs, or (and this is what everyone else so far reacting to your assertion is interpreting) are you saying residential real estate is 5% of employee compensation costs? Increases in SF and SV area alone over the past 10 years, I can easily buy the 5% figure; could be even smaller. But see my comment further belo…

The former. The article indicates that while costs of office space have increased (doubled in rate really), when compared to the increase in costs from employee salaries, it's minuscule in comparison.

Thus, the vast majority of the increase in costs that it takes to run a startup is in employee salaries, rather than office space.

Re: The Rising Costs of Scaling a Startup in San Francisco

#55

Post by sheepmullet » Mon, Feb 23, 2015, 10:32 PM UTC

franklinho wrote: post #53

sheepmullet wrote: post #20

Earlier quoted context omitted.

"The market has driven up salaries ridiculously high." Has it really? My dad owned his first home freehold after working for 5 years. I'm almost there after ~15 years. And I've had help from my wife. Real estate has driven up salaries ridiculously high.

I meant in terms of startup costs. The increase in office space prices are a tiny fraction compared to the salary increases.

And the salary increases are driven by real estate prices. I'm currently on ~$120k/year and I calculated that I would need $200k/year in the valley in order to have an equivalent lifestyle!

I'm not going to uproot my entire family for an equivalent lifestyle so realistically I wouldn't move for less than $240k/year.

I'm not saying I'm worth that kind of money; I'm just saying it's not worthwhile for me to work in the valley for less.

Re: The Rising Costs of Scaling a Startup in San Francisco

#56

Post by yourapostasy » Wed, Feb 25, 2015, 9:48 AM UTC

franklinho wrote: post #54

yourapostasy wrote: post #27

Earlier quoted context omitted.

Please clarify your assertion. Are you saying real estate price increases have contributed 5% of employee costs, or (and this is what everyone else so far reacting to your assertion is interpreting) are you saying residential real estate is 5% of employee compensation costs? Increases in SF and SV area alone over the past 10 years, I can easily buy the 5% figure; could be even smaller. But see my comment further belo…

The former. The article indicates that while costs of office space have increased (doubled in rate really), when compared to the increase in costs from employee salaries, it's minuscule in comparison. Thus, the vast majority of the increase in costs that it takes to run a startup is in employee salaries, rather than office space.

It isn't cost of office space people are pointing out though, but cost of residential space. At least 30%, and more commonly 50% in SV/SF, of your company's salary compensation goes out to residential shelter payments. That's the low-hanging fruit to address if you want to reduce employee salaries.

Especially for a startup in like a stealth stage where the initial talent pool is already selected, and you don't really need all the touted soft benefits of the SV talent ecosystem when you are head-down in secretive development, it's advantageous to stay out of the high living expense metro areas. Living in flyover country during that period with the fully-communicated intent to the team that you will move to SV/high-COL-metro-area once you reach a specific level of financial success with specific commensurate salary adjustments for them, yields 15%+ salary cost savings from residential shelter cost differentials alone (plus other cost of living adjustments on top of that), and lets your initial employees plan ahead life events.

Now that startups are increasingly tapping the Millenial generation cohort for their talent, who statistically are already more indebted at their stage of life than previous generations, starting up in a very low cost of living area can be a bigger selling point for recruiting.