
A startup founder's hourly rate - jpadilla_
http://ninjasandrobots.com/a-startup-founder-s-hourly-rate
======
bermanoid
Yikes, this is painfully misguided.

The fact that on the 10% chance that a startup is successful the founder's
time will need to ultimately have been worth $1000/hour in order to make the
gamble worthwhile does not by any stretch of the imagination justify your
making decisions as if your time was actually worth that much. Because nine
out of ten times, your time is actually worth nothing. [Not to mention that
the market doesn't care one bit what your time _would need to_ have been worth
to make the gamble worth it for you, nor the fact that increasing your burn
rate actually decreases the chance that you'll succeed at all]

Your time is only worth whatever you can reasonably expect it to be worth, and
that _has to_ include the chance that it's worth $0. If you start only
considering the upside, then you can start justifying all manner of stupid
purchases: why walk when you can save six minutes ($100) per trip by keeping a
limo service on-call? Why bother cooking for yourself when you can hire a
private chef? Hell, why bother coding when you can "only" pay $500/hour and
get a best-in-the-business programmer to do it for you? You're still "saving
money".

Please don't think like this. It's a recipe for failure.

~~~
idleworx
I agree. I had written a post on my blog similar to your line of tought a
while back. More along the lines of people are overestimating what their time
is actually worth. <http://news.ycombinator.com/item?id=3376081>

~~~
FrojoS
Great article! Why isn't THIS on the front page?

Direct link: [http://blog.idleworx.com/2011/12/your-time-is-not-worth-
that...](http://blog.idleworx.com/2011/12/your-time-is-not-worth-that-
much.html)

~~~
idleworx
Thanks. I submitted it a while back but it didn't make it too far :-(

------
3pt14159
I agree with the sentiment, but in real life it doesn't work that way.

You get the pots from your parent's house because you don't have pots and you
have 10k in the bank. Getting those pots extends your runway by 5%. I do agree
with the idea that certain services should be bought, but if anyone really,
really believed what they were doing was worth $1000 per hour the first thing
they would do would be to hire a do-everything-secretary that would make
coffee and lunches, would send emails and do laundry. But people don't do
that, what people do is maximize the chance that they can take off.

~~~
amirmc
I think 'runway extension' is an interesting/better way of treating the early
stages. Using fictitious 'hourly rates' to make decisions seems strange and
ultimately counter-productive. Only if you've got a clear way of making money
(and customers waiting) can I see it making sense.

In general, I'm sure there are plenty of successful people for whom this
worked out but there are probably as many unsuccessful people (that we don't
hear from) who ended up spending cash they didn't need to. Cashflow matters.

------
marcusestes
This reads like a call to manage one's self in the same manner that we were
managed before we quit our shitty job to do our own thing.

I don't care how much I was making before. And I don't need to code as if
there were a gun to my head. I'm not worried about being beat to market, or
about the expectations of capital.

I'm just going to do the work I love, within a relaxed atmosphere, in the way
that makes me happiest. This seems like a way to produce good work. And
eventually, good company culture.

~~~
craze3
I agree; I work for equity- not hourly rates. I work towards completing my
projects because I believe them and WANT to work on them. Tasks such as
talking to users & adding features is fun for me.

I was actually hoping this article would translate the amount of equity most
startup founders receive into a per-hour rate. Now that would be an
interesting read.

------
pacemkr
I _need_ to be making $100, so I'm _worth_ $1000. You know, because I'm very
unlikely to succeed.

Something doesn't add up here.

That road trip to see your parents (or going out with friends, or stoping to
take in the present) is valuable in itself. It gives you time to center and to
regain your balance. Thinking that every hour that you take off is costing you
a thousand dollars is a great way to burn out.

Saving that $30 on hosting though, that's probably not worth it.

------
jiggy2011
Surely a lot of this is more about cashflow vs opportunity cost rather than
the "value" of your time.

I would imagine many small businesses fail because they are making the
decisions that would make a lot of sense _if_ their company was the big
established company that they wanted it to be but not the tiny cash strapped
thing it is.

Just about any successful small business founder (not necessarily tech
founders) I have spoken to has told me stories of staying up entire nights
stuffing envelopes, traveling all over the place to beg/borrow expensive
equipment that they required but could not afford or trying to learn HTML
themselves so that they could get a basic website up.

Of course for an established company it makes no sense for the CEO to do these
things but at this point survival is priority #1.

~~~
Mistone
yup a little sacrifice and scrappiness goes a long way vs. chaining yourself
to a desk and coding 24/7. I did however like the underlying message of "quit
effing around and get stuff done" - thats advice everyone can use.

------
achy
The only time your actual hourly value matches your potential hourly value is
when 1) You have significant funding, 2) You have a time-to-market deadline,
3) You have either an income model OR a continued funding potential based on
point 2. If you have all of these things, then a day trip to save $600 bucks
is a waste, otherwise saving $600 dollar today gives you $600 more for
tomorrow. This blog entry is naive.

------
analyst74
I'll be first to admit, that I don't get the maths.

If a startup founder's hourly rate is <potential value of work per hour> / 10
(using Author's logic).

The saving of $600 is guaranteed, assuming it takes 10 hours, the founder
would be "making" $60/hour. Making it more "profitable" than working on
something that could potentially worth $5000 for 10 hours (given 0.1
probability, that ends up being $50/hour).

------
asanwal
Great post and points. BUT most founders (including myself when we started)
rarely follow this at least until profitability or funding. (note: I still
fall into this trap from time to time)

The reality is that founders, before they have money in the bank, value money
more highly than time. Money seems finite vs. time which doesn't seem to be
(that's obviously wrong). It's easy to spend extra time doing something vs
paying for it to be done because it feels like time is the asset you have
plenty of (vs money).

In addition, doing anything can make you feel like you're making progress.
When actuality, you're just mistaking activity for progress.

~~~
Arelius
The problem is that spending money also spends time, whereas spending time
does not also spend money.

Hypothetically, if as a one person startup, spend $1000 on rent and $1000 on
food a month, and can expect to work 8 productive hours a day every day in a
month (Just imaginary numbers here!)

That means we have an hourly cost of about $8 dollars an hour. Which is to
say, for every 8 dollars you spend you have one less hour of time.

P.S the counter intuitive property of looking at it like this, is that if you
are spending more monthly, it also takes _more_ money to loose an hour. But
this is due to the fact that you have fewer hours to start with, and thus each
hour is worth more.

------
ttcbj
I really like the sentiment of the post, and the quotes. It's easy to waste
time on things that are not important when starting a business.

However, from a bootstrapping perspective, I think it is useful to look at the
value of your time in a different way. If you are thinking about leaving a job
that pays $100K at big company X to bootstrap something, you might think of
your opportunity cost as $100K. But a lot of that $100K will go to taxes, so
when you quit your job you really only loose $60K. What's more, you might
spend more on living expenses with your big company job (vacations, etc), that
you would give up while bootstrapping but not really miss. So, maybe you are
really giving up something like $30K/year in true lost value.

I quit my big company job about 9 years ago to bootstrap a very small company.
It has worked out well, and proved quite profitable by whatever measure of
opportunity cost you'd like to use. But because when I quit, my taxes went to
zero and my expenses went way down, I found that the actual cost to me of
forgoing income for a period was much lower than I had imagined.

------
davemel37
Sometimes All You Have is Time. Sometimes, there is never enough time. The
reality is, there are always limited resources of one kind or another, and
your primary job as a founder is to maximize the usage of those resources in
every way shape and form.

The real practical value of this should be applied to maximizing your time
when you are actually "working."

Asking yourself is this coffee break, phone call, friendly chat, HN comment,
or whatever else you do at work, "Directly Contributing to Making Money (i.e.
talking to users, building features,etc...)"

As a consultant, I set a goal how much money I want to make this year. I
assume I get about 800 actual productive work hours a year(being honest with
myself) and divide it by the goal of what I want to make and now i have a
minimum value of my time.

In this context, when I stay true to it, I eliminate a ton of wasted time at
work because I know every moment I waste is another dollar i need to make up
elsewhere.

------
mvkel
This post completely contradicts the incentives behind founding a company in
the first place.

A founder should only get (truly) paid on a liquidation event, be it an IPO,
acquisition, or a new round of funding (this last one being a very big no-no).

No founder should ever be paying themselves market rate. If you hire a CEO
from the outside and you need them for your company to succeed, _that's_ an
instance when pay market value. But, if it's just you running the company, you
should be keeping cash in the company, deferring to when it really pays off.

Should you be eating ramen for 10 years until you sell a billion-dollar
company? Of course not. You also shouldn't be squeezing every penny into your
salary until you hit "market value."

I have a trick for how much you should pay yourself: figure out how much you
need to make per month so your company focus isn't interrupted with "how am I
going to pay rent this month?"

~~~
jiggy2011
What if your not building your business with the intention of (necessarily)
selling it or getting IPO?

There needs to be some point at which you say "ok, I've done well so I'm going
to reward myself by upgrading my lifestyle"

------
CompiledCode
To me, the occasional two-day road trip is necessary to preserve my sanity.
Even if it's based on a thinly veiled excuse.

While I think it's important not to waste time away on twitter, reddit,
hackernews et al: if you start running a tally of how much $$$ every one of
your waking hours is worth, you'll drive yourself crazy.

A related issue I'm having right now though - I only want to spend my
productive hours creating and developing. I don't want to do the "social media
expert" work as well (test-marketing and promoting my sites, etc.) I feel that
my "developer hours" are worth considerably more than the non-development
work, especially given that I'm not very good at the latter. I've been
thinking how I could engage my unemployed friends to help me out with testing,
promoting, etc. and make it a fair deal (based on future success/web
statistics) but haven't gotten very far.

------
jazzychad
This line of thinking can be good motivation sometimes (like when you're
wasting time commenting on HN and should be working instead, oops), but other
times it can be a burden on your psyche.

If you always think in terms of "how much is this activity costing me per
hour?" then you will never let yourself do anything fun or relaxing because
the guilt will be too much to let yourself enjoy it.

Having fun and relaxing to prevent burnout is equally important to making your
startup work, otherwise you will drive yourself (and the business) into the
ground, in which case everything is worth $0 anyway.

------
PStamatiou
Wow, thanks for including my tweet. :) I wrote that after being annoyed that a
good friend, who had finally taken the leap from his full-time engineering job
and quit to do a startup with friends wasn't really doing it 100%. In fact, he
got bored or something and picked up a part-time job at a clothing store.. for
the "discount" he said. Even though he had about $100k already saved up and
was living outside of the bay area.

------
lionhearted
I've thought this way before, and it's a mistake if your bankroll isn't
gigantic. Cashflow comes before hourly rate (though both are worth thinking
about).

------
vacri
I like how the articles here flip-flop between "you should be doing nothing
but slaving yourself to your company" and "you gotta take some time for
yourself, or you'll burn out".

------
smthomas
I don't think this post is valuable if you take it to the extreme. Obviously
hiring a private chef, or limo service for a small startup is not a good idea
and you will quickly run out of money. However, if you are smart with your
money. Know how much runway you have, and can easily send off simpler tasks to
things like Mechanical turk, etc. You can focus on what really matters...
building a great product that people actually want to use.

------
polshaw
Value your time appropriately is good advice, but it does not exist in a
vacuum-- the author is just working backwards here to post-justify his
decision.

If anyone actually used this logic (note the expectation of 4-9 failures per
success that brings about this time valuation), they would be broke very damn
quickly. Good luck getting funded the next time after 4+ failures.

------
izak30
Sbvtle has made it very difficult to distinguish visually if I have seen
something from a particular writer or not. This is bad.

------
sneak
I hate to nitpick, but it's very difficult to not get distracted by the
horrible punctuation and spelling.

~~~
kylebrown
The author couldn't proofread because he was so busy making features and
talking to users.

------
tyrelb
I love this line:

You should only be working on two things. Talking to users. And making
features.

:)

------
astrofinch
Regarding the pots example, you could divide the cost of pots by your burn
rate then figure out how much time getting the pots would buy before you ran
out of money.

------
buttfucker
Hindsight is 20/20. For the first 18 months when I was workin for sweat
equity, it turns out that, thus far, my time was worth $400 /hr then. If
things continue to go well, it will have been worth even more. Also, equity is
taxed at a much lower rate than salary, so when you include that
consideration, it's even more. Of course, had we failed the equity would have
been worth $0 :) ... So the question is like what's your time worth at the
card table in Vegas? A Silly question without a crystal ball!

------
MrDavidChan
Nice article, aside from the fact it should be proofread.

------
rckstrbizguy
i just raised a $200k round in 2 weeks, hourly rate = $595/hour. beat that,
hot shot

