I surveyed 500 startup founders about their salaries • Hacker News Board

Re: I surveyed 500 startup founders about their salaries

#101

Post by Swizec » Mon, Oct 17, 2022, 10:58 PM UTC

rexreed wrote: post #98

Swizec wrote: post #94

Earlier quoted context omitted.

Something like that yes. Mind you some jurisdictions have laws around “reasonable salary” so always important to check these things with a professional first. For a more fun take: Watch WeCrash and notice how the protagonist magics 100mil for personal use after raising the huge Softbank round … and what happens to that liquidity when an IPO doesn’t materialize.

How and when does the loan get paid off then? How is this better than taking salary without the burden of debt repayment?

Alas I’ve never been wealthy enough to see how this works in practice. At my level (can borrow about 4 months worth of living cost) you do have to pay it off eventually, you just get quite favorable interest rates in the meantime.

Re: I surveyed 500 startup founders about their salaries

#102

Post by hn_throwaway_99 » Mon, Oct 17, 2022, 11:25 PM UTC

gamblor956 wrote: post #75

hn_throwaway_99 wrote: post #27

Earlier quoted context omitted.

Not really. There are tons of gray areas: 1. First, it's perfectly legal for an employer to pay for housing, but it may be counted as income to an employee. It depends: https://www.corporatehousing.com/blog/corporate-housing-tax-... 2. The IRS also allows deductions for a home office. The rules about this are pretty strict, but again, there are gray areas here about what counts as an office.

And by "tons of gray areas" you actually mean "a laser-sharp line between what is allowed and what is not." A founder using the company to pay for their own housing is subject to income tax on the value of the housing provided. Full stop. There are no defensible situations that will survive a tax audit in which the founder gets away with using the startup to pay for their housing without getting taxed on it. And the…

Ahh, good point, I forgot about the fact that the home office deduction is only available to self-employed people as of 2018.

Re: I surveyed 500 startup founders about their salaries

#103

Post by jrochkind1 » Mon, Oct 17, 2022, 11:56 PM UTC

dcow wrote: post #100

jrochkind1 wrote: post #97

Earlier quoted context omitted.

I have never heard of a "co-working-living space", so you know things I don't! Sounds like a different thing than just trying to deduct 100% of your apartment as a business expense because you don't have an office yet though. Which is what I thought we were talking about from the GP. Like, maybe lots of people are doing that, but maybe lots of people are committing tax fraud, the IRS instructions are not too fuzzy he…

I never said 100%. I am not sure if I put off the wrong vibe by accidentally insinuating that founders are lavishly burning money or something. That’s not my intention. My point is that 50k/yr is not enough to live in SF or NYC. Something is filling the gap. The logistics aren't really the point. No I don’t know how exactly founders do their taxes. But I do know that when you work 24/7, a lot of things look like busi…

My guess would be what's filling the gap is pre-existing savings/family money.

My point is just that the IRS has standards for what you can deduct or treat as a business expense (rather than wages), and it is not "when you work 24/7 a lot of things look like business expenses".

Not paying for your own apartment and instead treating it like a business expense still sounds like tax fraud to me, whether or not the business has it's own office yet.

Re: I surveyed 500 startup founders about their salaries

#104

Post by pclmulqdq » Tue, Oct 18, 2022, 1:41 AM UTC

rexreed wrote: post #93

pclmulqdq wrote: post #91

Earlier quoted context omitted.

Also, HELOCs have very high interest rates due to the illiquidity of the underlying asset. If you have a large private company that has some interest from private equity investors, you can get a much lower rate. ELOCs on huge blocks of the S&P 500 (essentially large margin loans) can have rates that are almost at the fed funds rate.

I would imagine with the very high failure rate of startups, loans based on company equity, especially for small, non-public non-liquid companies must have sky-high rates.

You probably can't get an ELOC against common stock in a series A startup. You can definitely get an ELOC at a pretty decent rate against preferred stock in a startup that is at series D and has 100 employees.

The question isn't what the company is worth or how likely it is to fail, the question is what demand there is for the shares. If an asset is in high demand, and is relatively easy to sell (like company shares), you can get an ELOC against it at a great rate.

They won't give you 100% of the valuation of the company in the form of an ELOC (you may only be able to pull out 10-20c/$1 of startup equity you have), but they will give you a good rate.