For example, I do think figuring out compensation
structures is really important and something the
CEO should spend time on. And it’s something that
most CEOs don’t.
This. I've been a part of three startups and in all three, the CEO didn't take compensation seriously. In today's economy, you can't sit on your hands and assume that 3-5% annual pay raises and the promise of future stock payouts will keep talent in-house, year over year, when the big guys are pushing the pay bar higher and higher.
For example, in my last job, 3 years of startup caused my annual pay as an iOS dev in the Bay to drop ~30k below the average for someone of my tenure. I loved the company, but I couldn't justify the loss in income, especially with housing prices being what they are. CEOs should consider compensation as critical to their company health.
I loved reading this just now. I'm CEO of a small young startup (3 co-founders, 3 employees, 1 more coming), and today I spent ~1 hour to think about compensation really, really deeply, before engaging in a conversation with a future hire.
I know we're small, but I absolutely agree that compensation is super important from the very beginning. Like company values.
It's like a seed. A big tree will come out of it, one day. How you plant the seed, and what seed it is, is super important.
This. It's pretty annoying that whenever there are posts about salary on HN, a lot of people from SF/BayArea start complaining about how their already super inflated salaries are not inflated enough and should be higher because the top 3 largest tech companies in the world pay higher salaries.
If you are one of those people, then please stop complaining and just go get a job with the compensation you supposedly deserve at one of the companies that can afford it.
On the other hand, plenty of startups and their investors insist on being in the Bay area, so I can't really fault employees there that they compare them to the local market. As someone with no desire (and no easy route) to live there, I find this centralization annoying, but startups fueling it IMHO aren't in much of a place to complain.
Startup compensation for developers makes zero sense, because market rates can easily jump 50 - 100% per year of experience. This means that at some points of the year a developer might be earning market rate, but other times they are vastly under-compensated and very vulnerable to getting poached.
There should be a way that startups can just automatically give people a raise every two weeks, so that way they make the same amount of money over the course of a year but their compensation is always equidistant from a projected fair market rate.
Then for the employees you'd just need to give them a tool so they could see how much money is going to hit their bank accounts every two weeks.
Two years ago, we wrote about a more decentralized compensation model that may be interesting to some startups and open source projects here. It aligns everyone’s incentives and promotes freedom and results-oriented culture:
Pay raises that rise faster than inflation are unsustainable, rather, you're pointing at a specific asymmetry between the BigCos and startups in the Bay, which is definitely causing strain.
Outside the Valley and specific centres, this isn't quite so much an issue.
Inside, it's an intractable problem ...
Though your point might be valid from the Dev's perspective, consider the other side for a moment and you see how tough it is - i.e. to have the expectations of ever increasing normalized outflows.
So we need to look at this kind of objectively (i.e. not from just Exec/Dev perspective) to figure out how to deal with the situation.
Pay raises that rise faster than inflation are sustainable as long as revenue — or at least expectations of future revenue — are also rising at a similar rate. It's not at all an intractable problem. If that situation doesn't exist then you're not managing a start-up, you have something else such as a value business, small business, or lifestyle business.
But at the same time if you're just building iOS apps then it would seem foolish to locate the majority of the engineering team in Silicon Valley. There are plenty of talented iOS developers all over the world now in lower cost areas.
A) The issue is specifically pay rates at 'BigCos' are rising quickly, making it harder and harder for startups to keep up. This is 'intractable' to the point where many simply stay away from the Valley, which was less the case before.
B) Companies with lofty margin increases over time are extremely rare and such inside wage inflation is totally unsustainable over any period - forget business cycles. Only at a rising Google, or the very rare lucky startup growing the customers is this not a problem. Very, very rare. And it creates the 'A' problem above for other companies.
I don't see anything intractable. There is abundant investment funding available to pay employee compensation at start-ups with the potential to scale up with increasing profit margins. That just means founders will have to recalibrate their expectations on early stage valuation.
On the other hand, for businesses without the potential for high margins it never made sense to locate in high cost areas. There are plenty of other suitable areas. For example Cleveland would be an excellent ___location for a health IT business. The tech industry as a whole would be healthier with more geographic diversity.
"There is abundant investment funding available to pay employee compensation at start-ups with the potential to scale up with increasing profit margins."
No, there is not an abundance of capital floating around to just pay developers ever increasing (above inflation) salaries commensurate with the massive profitability of other major companies in their immediate vicinity.
To the point wherein even Peter Thiel wants to opt for LA, with his statement: "I'm spending all of my money on Silicon Valley landlords"
>Pay raises that rise faster than inflation are sustainable as long as revenue — or at least expectations of future revenue — are also rising at a similar rate.
You're assuming that revenue is decoupled from payroll costs.. in which case why should increased revenue lead to a pay raise?
In reality, an increase in revenue is supported by increased labor costs/manhours.
The whole point of start-up businesses is to make them scalable by finding ways to decouple revenue from labor costs. If you can't figure out a way to do that then you don't have a real start-up, you have some other kind of business and will have to apply other compensation approaches.
If that's the case, then why does a company like Google or Groupon go from 2 co-founders to 5,000+ developers once they get funding and start to scale?
And (to repeat myself), if revenue is uncorrelated to labor, then why should the labor get a proportional piece of it?
I think you're missing the point. As companies grow they tend to expand into other lines of business, which obviously requires additional resources. But if a software business is structured properly then revenue will trend upward at a rate which increasing diverges from labor costs. That's literally the whole point of automation. Draw a chart of revenue per employee for Google from when they were founded until now.
Labor isn't necessarily entitled to any particular share of revenue. Employees get whatever they can negotiate based on market rates at the time. And those rates are based far more on local area and industry demand than on the current revenue at any single company.
Labor doesn’t get a proportional piece of it, and nradov didn’t say it does. From my reading, nradov just said increases in pay above the norm are sustainable if revenue is also increasing at a rate above norm.
They're only unsustainable if the employee's productivity is stagnant. If one year of experience increases an employee's productivity then you can more than happily increase their pay by greater than inflation.
Because that growth is not sustainable in the majority of cases. Sure, there are exceptions, but I bet you're not going to be eagerly handing the org money back once growth flattens out.
In very rare cases do startups have that kind of growth and in many of them their unit costs are bad and they are making less and less money. In the few cases wherein sales are growing, AND they are more profitable, AND it wouldn't make more sense to put the money elsewhere - then yes - fat wage increases are possible, for a short period. In almost no companies is this reasonably sustainable.
Man, as a capitalist it really sucks when the free market is working against you, doesn't it? For years there, supply was way below demand and employers got really comfortable treating employees as trivially replaceable cogs with no bargaining power.
If you can't pay your devs a competitive salary, they'll leave. Bummer.
I consider sama to be an extraordinary investor and thinker (I know this is the most consensus thing one could say on HN). The personal bets on Boom, Helion Energy, Cruise and many others are really phenomenal (even the re-bet on Reddit) -- not just for being early/contrarian for their time, but also necessary for the world for these companies to succeed.
The highlights of this interview imo are the following pieces of advice:
1) get a coach sooner than later
2) always keep revisiting what is urgent vs important and keep prioritizing; if in 'war-mode' then users, team, revenue above all else; ignore things that don't amount to much (potential candidates: investor updates, press, conferences etc -- they are not more valuable than users)
3) don't get too far away from the product (some things cannot be delegated early on)
4) "boards hate surprises...and boards hate feeling like you’re trying to hide bad news". Be open. Ask for help.
Really great points.
I feel that the point about the role of the CEO in a downturn is under-explored in this interview (felt rushed). This is rich territory (and relevant). The discussion about specific examples of things that don't merit CEO time veers into 'made-up territory' quickly and doesn't feel relevant -- e.g. some "[CEOs] then stop going to the executive team meeting (that’s a very bad idea)" -- I don't see as many companies as these two, but no CEO stops going to an executive team meeting (infact, bad CEOs go to too many of those! as they enjoy 'playing CEO' :)). If a CEO stops going to an executive team meeting, that is quite counter-intuitive and interesting in many respects in of itself (e.g. there is a fire; CEO doesn't want to be CEO etc) :-) I feel Elad should have pressed more as an interviewer rather than rushing to the next point.
Overall, always good to hear sama's views -- he is an incredibly important investor of our age (my prediction). And Elad thanks for working on this book. For a few $$ everyone can get this wisdom -- you did a great service for entrepreneurs. Congrats on the launch.
Thanks for the feedback! To your point Sam had great points as always.
The book does get into some of the other issues you mention in other sections. There are only a few pages about "managing in a downturn" (which is literally the name of a section later in the book).
I think when we finally end this long bull market run we have been in, there will be lots of pain (and lots of articles and blogs about what to do now that the sky is falling).
Oh hey Elad! You are welcome.
You should know that everyone I know who has interacted with you, speaks incredibly highly of your wisdom —- I am amazed by the breadth you cover —- as these people work on things ranging from Longevity to SaaS to Crypto! I have always admired your wide ranging interests and sharp wisdom (We have never met, but have been an indirect beneficiary of your wisdom — we have a number of common folks). Your personal investing track record is enviable too! Any insights on how you pick who/what to bet on? (Is there a self interview in the book ? :-))
I think the two key things are to (1) spend time where hypersmart, slightly weird people are and (2) focus on markets with real (versus theoretical) needs...
> I consider sama to be an extraordinary investor and thinker (I know this is the most consensus thing one could say on HN).
Yeah I'm gonna disagree with you there. These are some of the things he's said over the years
"I realized I felt more comfortable discussing controversial ideas in Beijing than in San Francisco"
"This is uncomfortable, but it’s possible we have to allow people to say disparaging things about gay people if we want them to be able to say novel things about physics."
"US growth has stagnated while Chinese growth has continued to do pretty well. The US has become less competitive globally"
"The current business model of the US requires the dollar to be the world reserve currency, though the Chinese currency is rapidly becoming a viable alternative"
"The other stark contrast is how much harder people in China seem to work than people here, and how working hard is considered a good thing, not a bad thing."
It's not self-evident that any of those things are wrong. Could you explain what you believe instead, and why? Perhaps in a blog post so as not to pollute this discussion.
It isn't particularly reasonable, one might even say dismissive, to suggest that someone explains themselves, off site no less, when you aren't adding much to the discussion yourself. Plenty of people have already written about these comments. Most widely after Mike Mortiz made similar ones in the Financial Times.
Why are the above statements a problem? You can reasonably disagree with them but Sam seems to have made them in good faith based on his observations. His comments speak to important issues and merit a discussion, even if he's wrong at times.
Either way, his observations suggest someone who thinks about major issues and reaches his own conclusions - something I appreciate.
Going to a repressive country saying that you feel free in thought is pretty controversial. If you are doing that as someone who is rich and has influence it is a lot worse.
> You can reasonably disagree with them but Sam seems to have made them in good faith based on his observations.
Everyone does, or can at least be said to do, that. That doesn't mean anything. What means something is whether your thoughts and conclusions have merit. That you communicate the things you are saying clearly and that those things hold up to scrutiny.
His opinions doesn't do that. Being interviewed by people you know and being discussed on forums that are friendly to you isn't much of a discussion at all. And a lack of you hearing something isn't an indication of that whoever has your ear is right.
Matt Levine is one of the few people who even cares to comment on such things. He is fairly well respected even on HN. This is what he has to say:
> Silicon Valley entrepreneurs are bold iconoclastic innovators who move fast and break things and question established paradigms to change the world, unless someone makes fun of them. In which case they crumple instantly? There's no suggestion of actual censorship in Altman's post, no chance of the government suppressing controversial opinion (as it does in China!). It is just a sort of cringing terror that someone might disagree with you, say that you're wrong, criticize your priorities, make jokes at your expense. "How can I change the world if someone might mock me on Twitter?"
What does "High Growth" mean? Based on the kindle preview this is a book containing startup advice which includes how to scale up your business in terms of hiring and acquisitions but not in terms of growing revenue and profits.
In a way this advice optimises large portions of Silicon Valley where large companies in terms of employees and venture capital funding produce very little profit. A case in point being Stripe itself. Stripe employees can't tell you how to grow into a profitable company because they haven't achieved that yet. But they can tell you how to grow your HR department and how to acquire other companies because Stripe has done that.
Companies like Stripe can become profitable in a simple way: by cutting R&D. And they'd stay profitable for a while, before fading into obsolescence.
For most tech companies, the right long-term strategy is to spend heavily on R&D and growth, using up all profits and some investor money to do so.
The exception is established companies in a declining industry, where the right answer is to cut R&D and growth to nothing and try to extract as much profit as possible in the remaining years.
"High Growth" in this case means companies that are scaling revenue, team, and complexity of business. Companies included here are meant to be "post product/market fit". In other words, they are selling something their customers really want, have fast growing revenue, and are either unit-economic positive or have a path to it.
While come technology companies (or retail, or other companies) are profitable from day 1, many instead chose to invest in growth early on to go for market share and win the market. They then hike prices, cross-sell product, or drop costs at scale and then spin off a ton of cash. In Silicon Valley these companies are usually funded by VCs. In other industries, they may have different types of loans or in some cases private equity, VC, or friends and family money.
In either case, the companies will share common issues - How do I add executives in functions I have never dealt with? E.g. a CFO or GC? How does my role as CEO evolve as the team grows and I am no longer needed to do the things I used to do when we were 5 people? Etc.
This book definitely has a Silicon Valley Tech bias, as that is what I know best. Anecdotally, I have been told by people in non-tech industries who saw an early copy that some of the "people-centric" chapters are more broadly relevant. But rapidly scaling technology companies will definitely benefit the most from it.
In terms of growing revenue and profits, I think a number of books focus on that. E.g. how to build a sales org, or compensate them, or different channel strategies. Those are really valuable topics but I felt they were better covered than some of the topics I focus on.
The relevance of some of this advice seems like it best serves an VC track company dealing with SV ecosystem pros and cons - especially commentary around investor behavior and availability.
Some of the points around distractions, planning, and tactics do apply outside the bay, but in general the term "High Growth" feels like "early high valuation large cash infused startup", which while interesting, isn't terribly relevant to an extremely large portion of the entrepreneurial ecosystem.
Given that - does anyone have any recommendations for reading in this space that are a bit less "valley flavored"?
Outside of financing and M&A, most of the topics in the book are core to most fast growing companies - Silicon Valley or not. They key is whether the company needs to grow rapidly, or is a rapidly growing division of a company. "Grow rapidly" means "scaling revenue (and if the right time for the company, profits), and growing headcount and organizational complexity". If it is a 12 person org that is not going to grow, only a smaller subset of topics apply.
Key topics include things like hiring and managing an executive team, your role as CEO, organizational topics (re-orgs, choosing what executive owns what etc.), marketing and PR, product management, managing your board, building a recruiting pipeline and recruiting organization. Many of these are reasonably universal topics. To your point, what I know best is silicon valley technology companies, and the book reflects that experience (versus that of an industrial company).
I'm sure there are plenty of others who find it hard to find time to sit down & read a book. When I do, I tend to read the kind that don't work as audio books or just aren't available.
Also, there is something nice about being outside & walking while listening to a book.
Is there any chance this book will become available on Amazon.co.uk? It's cost about double the price for Europeans to buy it from Amazon.com due to high shipping costs and import taxes and fees.
Any chance this will get back in stock on Amazon? I don't feel like signing up with Kobo but I would purchase this book. Also a softcover version would be awesome!
I think two sections might be most generically interesting or useful:
1. The interviews. There are 14 interviews with Sam Altman, Marc Andreessen, Patrick Collison, Joelle Emerson, Erin Fors, Reid Hoffman, Claire Hughes Johnson, Aaron Levie, Mariam Naficy, Keith Rabois, Naval Ravikant, Ruchi Sanghvi, Shannon Stubo Brayton, Hemant Taneja.
In some cases, their advice is at odds with my own. So I think the richness of perspectives and experiences are valuable.
2. The sections on executives, recruiting, people, onboarding, re-orgs, etc.
Startups are a team sport, and getting the right team together and helping them be effective is really the key (assuming you already have product/market fit).
A big part of that is also the role of the CEO, and the CEO managing their own psychology, not burning out, etc.
Hello Elad. Thank you very much for being so open to sharing. Do you have any snippets or content about traction? To me, that seems to be the most difficult part about team-building and startups in general. I have a lot of brilliant friends with whom I have an easy time bouncing ideas around with. Every couple months, an idea will be fleshed out enough to justify starting to work on it, but it's the groundwork that translates to long term growth that I have the most difficulty with, assuming that the problem is worth solving, the product is "good", and the product-market fit is there. Of the people you interviewed, did someone provide any insight into that?
Unfortunately my book focuses on the stages right after that - i.e. you have traction and need to scale.
There are some good things written on this topic that you have probably seen - e.g. Paul Graham has some great posts on this as do Sam Altman, Michael Seibel and Aaron Harris.
On the non-YC side Peter Thiel's Zero to One, Marc Andreessen's archives (on the A16Z site) and Chris Dixon's pre-crypto writings are all great on this topic too....
For example, in my last job, 3 years of startup caused my annual pay as an iOS dev in the Bay to drop ~30k below the average for someone of my tenure. I loved the company, but I couldn't justify the loss in income, especially with housing prices being what they are. CEOs should consider compensation as critical to their company health.