
Scaling in Lower Cost Locations - mcenedella
https://avc.com/2019/09/scaling-in-lower-cost-locations/
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boulos
The easiest public data on this is now levels.fyi. For example,
[https://www.levels.fyi/salary/Google/SE/L5/](https://www.levels.fyi/salary/Google/SE/L5/)
shows the locations and pay for L5 engineers at Google, which is not new
grads, but also not "only the most senior engineers". The data reproduces the
"engineers don't get paid well in London" story.

Fwiw, I have always found that startup pay (particularly equity) is incredibly
slanted against employees. I'm curious if the higher "risk-free rate" from the
various FAANG companies will mean that startups instead learn to push back
against the VC status quo of small equity grants. It sounds sort of bizarre to
me to instead attempt to match on salary / nearly-guaranteed compensation,
instead you must meet the "not having to deplete savings" bar and then the
rest are lottery tickets. Historically, with "1% of equity" (or so) those
lotto tickets don't sound so attractive.

~~~
opportune
I have not been in the software industry as long as other people on this site,
but I think this is a pretty worrying trend, and eventually, founders are
going to have to yield more equity to employees. If your startup involves
technically challenging work that requires good engineers, how are you going
to compete with companies that can compensate employees 2x what you can in
fully liquid comp? The only way is through more equity. Of course cash-rich
late stage startups can do that, and they can also convince people that there
is a very good chance that equity will actually be worth something to
employers. But early stage startups can't do that so easily.

Right now, it seems like working for an earlyish startup as an employee is
just a bad value proposition across the board. Even if the startup will be
successful, people are getting pitiful amounts of equity. I'm not sure that's
very good for the industry, but maybe it's always been like this

~~~
boulos
> how are you going to compete with companies that can compensate employees 2x
> what you can in fully liquid comp?

In addition to lottery tickets, I would argue that for some people the answer
is easier: purpose, people, and autonomy.

At all of the bigger companies with the great, guaranteed pay, you are also
one of many, quite likely a cog in a giant machine. By offering someone a
real, visible impact on direction, outcomes, and even a purpose beyond steady
(high) income, you can get _some_ folks to join. Others will join just to be
part of a small, hopefully excellent team or having autonomy. In a company of
5000, only 500 are in the top 10%, and you might work with very few. It's much
easier for everyone to be good when you're a small team (I like the pg rowing
analogy here).

~~~
cactus2093
The idea of having more purpose at startups sounds nice but really doesn’t add
up to me.

If you’re talking about the first employee at the company, even the first ~5
engineers, then yeah I buy it. The work is very different and there’s a lot of
purpose while you are still pre product/market fit.

But the problem is, if the startup is succeeding the work becomes similar to
bigger tech companies pretty quickly - the PMs and designers are dictating
exactly what to build, and as an engineer you show up and build that. If you
were to leave, someone else could probably take over for you pretty easily.
Even by like 5 or 10 engineers, the average engineer at a startup is already
becoming a cog in the machine. But the startup is still a long way from being
able to compete with FAANG on comp.

Is it really worth sacrificing hundreds of thousands of dollars a year just to
be a slightly different type of cog?

~~~
mahmoudimus
That's not accurate -- at least in startups that are on track to becoming
successful. If you join a startup just to become a cog, do not join that
startup. It does take about 6-9 months for an engineer to become impactful
from a business sense. If you can wait out that time period, you should join
and expect to have impact. If your ideas aren't valued and you're not getting
the opportunity of ownership, then maybe you should leave to join another
startup or go back to FAANG :)

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e_carra
When my father goes to Detroit for business trips is always astonished by the
amount of money his collegues get paid. He works on engineering processes and
tooling in a robotics company and makes about 30K €/year here in Italy, while
his american collegues make 120K $/year. I think there is a great chance for
businesses to save a lot of money by hiring personnel outside of the U.S.

~~~
xivzgrev
And is he equally astonished by the cost of living / housing? Maybe not
Detroit but certainly other major metro areas. The “profit” from employee
perspective is probably similar

~~~
balfirevic
You are always better off (economically speaking) in a higher cost-of-living
area with proportionally higher salary.

~~~
stbtrax
There are other externalities to this. Tax incentives are better if you can
buy vs rent, which is harder in high COL. Also from personal experience, you
get to live in more vibrant and diverse neighborhoods as opposed to more
homogenous ones that price out others. If you have children that go into non-
lucrative fields (ex: teaching), they will not be able to live by you without
your financial support.

~~~
novok
On the other hand, if your kids go into fields where the pay is unequal across
the country, they are less likely to stay in your small town of 100k and move
to somewhere else with more economic or artistic opportunity. And by being in
small town, it's a lot more time and money for them to fly to see you, so they
will see you less.

Ex: I can fly across the ocean for the same price it is to fly 2 hours direct
equivalent / 4 hours connecting to see my family in their relatively small
town.

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awinter-py
> the ability to spin up and then successfully operate remote engineering
> locations is a skill that technology companies need to develop earlier

+1. As someone who puts (expensive) food on the table in a metro area, this is
scary to me, because it makes me more replaceable.

But the old arguments (we need people on-site, we need people to understand
the context, remote teams have lower quality) sound thin now, especially given
that on-site has its own efficiency problems in the open-office era.

Commuting & telecommuting tech may get better, project management tools may
get better, reputation management will transform marketplaces like fiverr,
something better than slack may come onto the scene, but even without these
improvements, the talent bubble will force managers to hire away from the
center.

I've worked at small cos where the engineering budget is the main blocker to
growth / the business model working.

~~~
hinkley
It always kind of amazes me when I work for a company that has national
customers and is getting into multinational and they still only know how to
run one server room.

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fizx
I've often thought that on my next startup, I should just start it in Cabo San
Lucas. Package on-site interviews with a weekend trip. Pay middle-America
salaries. Work hard, beach often.

~~~
boulos
Not enough folks will join you.

People need other (personal) employment options when your company fails or
they get bored.

Their partners need an employment option.

If they have, or want, children, they need schooling options.

All this said, maybe a bunch of 20-somethings who enjoy beaches would go for
this! In many software things, the likelihood of success is much more on
getting ten awesome people, than it is being able to hire 500 people.

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mooreds
We see this in the Denver metro area. Lots of growing Bay area companies
moving in (Slack, Strava, Checkr), while the bigger companies (Microsoft,
Google, Oracle) have long had a presence (often through acquisition).

Not that Denver is cheap compared to many places in the USA, but compared to
NYC/SF, it certainly is.

I think it's great for everyone. I also think the future of work is totally
remote, as I outlined here:
[http://www.mooreds.com/wordpress/archives/2919](http://www.mooreds.com/wordpress/archives/2919)

------
thomaswang
In my experience.

The brain mostly follow the money and that inflates the salary for everyone in
that area.

The very talented individuals who stay "home" get pretty much the same pay the
individual Whould in an inflated area, but the individuals peers don't.

I think the inflation which happens in pretty much every large city with a
thriving tech/startup environment, is largely due to the fact that lage groups
of highly skilled and talented people gather and then that super salary
becomes "normal" and then the rest wants an even salary. Lowering the tops pay
is a no go as that salary they can get literally in any geographic location.
Then the only thing left is base pay has to go up.

Just my guess.

~~~
opportune
>The very talented individuals who stay "home" get pretty much the same pay
the individual Whould in an inflated area, but the individuals peers don't.

Depends on where the home is. Short of starting your own company in your
hometown, in a lot of places there just aren't comparable jobs.

Also even if you are working somewhere with an inflated cost of living, the
key thing is that you can save a lot more money in absolute terms, and then
later in life you can move back to a lower COL area. Your crappy $1.2m house
in the Peninsula can be traded for a mansion in other parts of the country,
and if you are putting ~30% of your inflated salary in stocks vs. 30% of your
non-inflated salary, you will have a lot more stocks when you leave the
inflated area.

