Exploiting Silicon Valley For Profit (and Maybe Fun)

What kind of money do people pull out of a startup, assuming VC funding? How big a salary are founders allowed to pay themselves?

This discussion seems to be mostly theoretical, so as someone who actually has $7 million, I'll provide my experience. In summary, not life-changing - my life is pretty much like the average engineer. I'm not spending like a rock star - your car, computer, stereo, clothes, etc are probably better than mine. (Although my house is a bit larger than average for Silicon Valley: 5br/3ba in an unfashionable city.) It's not enough money to feel even slightly important or rich in Silicon Valley. I don't feel like the "money problem" is solved; I plan to keep working for the foreseeable future.

I suppose I could move to somewhere like Kansas and retire, and live an upper-middle class life, but I don't see the point in that. (The "official" recommended spending rate of 4% would yield a high but not enormous income. Expecting 6-8% income is crazy talk.) The obvious HN answer is to start a company, but a) I'd be bad at it, b) I wouldn't enjoy it, c) I'd probably end up losing a pile of money, d) large opportunity cost, and e) health care.

Trying to summarize: the people who say a few million doesn't go far in Silicon Valley are right. It eliminates various problems (and I do sympathize with those with financial difficulties), but otherwise hasn't changed much for me. (Or maybe I'm just using it wrong.)

To be realistic, who wouldn't want to be holding 30% of a $10M or $20M buyout? There will always be the allure of quick money, and tech isn't immune to the sentiment.

It seems to be similar to the Zed Shaw talk-within-a-talk [1]. Instead of working for BigCo for a paycheck and going home to work on your own things, you use a lesser idea and work for a VC via their investments while developing your master idea. The difference is the level of risk and the size of the payout.

[1]: http://vimeo.com/2723800

The other part that isn't mentioned here is this is a commentary on the most visible portion of the tech industry, namely web/app based social startups. I can't help thinking of Sturgeon's Law. In a way, that makes me cautiously optimistic. You have a bunch of people tackling hard problems in computing as well as society. When Facebook changes it's privacy settings, or Path collecting our address books, we all freak out. It forces us to confront things we as a society never had to think about before. Fifteen years ago, who was thinking this seriously about mass privacy concerns that didn't involve the government?

I also look around and think about what cool things happened in the last decade. I can look up anything from a black monolith sitting in my pocket. I can connect with people I haven't seen physically in years. I can read about events as they happen in real time. I can buy just about anything without ever leaving my house, and it will arrive a couple of days later. I can learn about any subject from very respectable institutions for free.

In a few years, we will have a (more or less) unified communication system for health records, cheap 3D printers and fabricators, a mass market for self driving cars, and privately funded space travel. Right now people are seriously considering space mining of all things.

All of these things were born alongside purely self-interested companies that have since failed or were acquired. If it takes many short term companies to get a few gems, then let the VCs, GooBooks, and hustlers knock themselves out. I highly doubt we can optimize for more success, so I don't see a point in fighting it. Maybe it's that very culture that allows for such gems to be formed in the first place. Even if you are involved with such a company, the talent and knowledge you come away with is invaluable and will follow you wherever you go.

I would say you should try to make your ideas a reality. You should try to make money, build companies, and commit yourself. You just might be involved with something great.

I would think the tax rate would be lower, considering that a sale of shares is treated as capital gains. 15%?

true. but that's only for long term. i have no idea what short term tax is, but i know it's also less than 30%.

i was trying to overestimate taxes (so that the reported annual income, if anything, would be less than actual annual income) and use a nice round number so i didn't have to use a calculator.