
Peter Thiel: Best Predictor of Startup Success Is Low CEO Pay  - raghus
http://www.techcrunch.com/2008/09/08/peter-thiel-best-predictor-of-startup-success-is-low-ceo-pay/
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boredguy8
Is there a difference between a "startup" and "starting a company"?

I ask because, "In Startupland, everybody should be working towards the same
goal: that big juicy exit," couldn't be further from my mind. I know what that
means to me (as does my team) in terms of access to venture funding, but I'm
not particularly interested in an "exit". I want to build a service that's
beneficial and worth paying for and that is responsive to my customer's needs.

Am I missing something, or do I need to change how I think about what I'm
doing?

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alaskamiller
startups => exits

company => provides services and products

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jon_dahl
Why not startup => company => provides services and products => exit?

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axod
Well one reason would be that the startup needs to be bought by someone in the
right position to exploit it before it can become profitable.

So in that case, you could create a startup that in itself cannot be
profitable, but when purchased by a larger company can become wildly
profitable for them.

I don't think that's an unusual case.

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diego
What he probably meant is that high CEO pay is a good predictor of failure. If
the CEO of a startup that is looking for a big exit demands a high salary,
that means he/she is not too convinced about the big payoff to come.

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fallentimes
Thiel was definitely nervous, but what he did say was awesome and interesting.
I wish Arrington wouldn't have interrupted him EVERY OTHER SENTENCE. Christ. I
wanted to hear what Thiel had to say, not Arrington's cheap shots about Slide
and Chess.

~~~
ardit33
From pictures and hearing about him I thought he would be more of a jock, but
he was more of a ultimate geek.

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fallentimes
I wish I could find the link to the quote by him, but when he was at Paypal
they actively tried to _not hire_ jocks.

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steveplace
If the interviewee played pickup basketball in his spare time, he would be
out.

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ScottWhigham
I think the article either leaves out a critical part of the speech or Peter
just didn't cover it. That approach may be the right approach for CEOs of new
companies that haven't taken big investment (like the TC50) or for first or
second time CEOs of low capital requirement companies. I know he doesn't
believe that for VC-backed companies or for companies in which the CEO brings
huge value to the table in terms of past performance/experience/contacts.

Bottom line: you aren't going to be able bring in a proven CEO for $100-$125k
a year. I don't care whether you're in Cincinnati, Boston, Austin, Silicon
Valley - you can't expect someone who has a $15,000/month mortgage (as a
proven CEO would likely have) and expect him to work for $8k/mth. "Hmmmm -
over the next four years of my life, I can make $600k a year plus
bonuses/benefits working for ACME Corp or I can make $100k a year with the
chance to take home a $3m-$5m payoff..."

~~~
staunch
If he's "proven" wouldn't he be wealthy enough to live off a measly $125k/yr
for a couple years at least?

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ScottWhigham
I think you didn't read this:

"Hmmmm - over the next four years of my life, I can make $600k a year plus
bonuses/benefits working for ACME Corp or I can make $100k a year with the
chance to take home a $3m-$5m payoff..."

~~~
staunch
Well, you're just making up those numbers. Here's some I made up:

"Hmmmm - over the next four years of my life, I can make $350k a year plus
bonuses/benefits working for ACME Corp or I can make $130k a year with the
chance to take home a $10m-$20m payoff..."

~~~
ScottWhigham
At least the made up numbers I proposed at least we in the double digits of
probability lol. I put your numbers in the 0.0001% chance of occurence. In
other words, I give you a 0.0001% likely that a group of founders+investors
will bring in a CEO post-financing and give him (1) enough equity that he
earns a $10-$20m payout, yet (2) only let him earn $130k/yr.

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pc
Video: <http://www.ustream.tv/flash/video/698620>

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nishantmodak
Stay Hungry, Stay Foolish! - Thats all matters I think.

Steve Jobs Speech: <http://in.youtube.com/watch?v=D1R-jKKp3NA>

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mattmaroon
In that case, I think I'm going to be the next Bill Gates.

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morbidkk
By YC equation (5k _n founders + 5k)_ 4 = 1 year bare minimum salary for
founding team

$100-125k is pretty good for funded startup then i.e. as good as corporate
salary

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jlogic77
CEO pay is a very good indicator. You should also pay attention to perks. Not
all compensation is in terms of pay.

A CEO to taking a lower compensation says to me they are taking the company
seriously. It's another way they have skin in the game.

If they aren't willing to sacrifice a little for the end game, may mean they
are either purely in it for themselves or don't have confidence in the
company. Either one is not so good for the company.

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jamiequint
I hope you're not suggesting you should sacrifice healthcare though... bad
idea.

~~~
DabAsteroid
If your CEO requires a healthcare-nanny in order to stay healthy during a
~4-year start-up run, perhaps you should be shopping for a new CEO. IQ codes
for both business-competency and self-healthcare competency. High-IQ
individuals with little money and no health insurance tend to be healthier
than the average person. Linda Gottfredson details this further:

[http://www.udel.edu/educ/gottfredson/reprints/pubtopics.htm#...](http://www.udel.edu/educ/gottfredson/reprints/pubtopics.htm#health)

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streety
"Tend to" is a nice statistic on a population level but has little relevance
to you or me as individuals.

I live in the UK were basic health care is free so perhaps I don't have the
experience to comment but healthcare wouldn't be somewhere I would be trying
to save a few pennies/cent.

~~~
byrneseyeview
_I live in the UK were basic health care is free_

No, you like in the UK, where basic healthcare is paid for by taxpayers. It
doesn't become _free_ because the money is taken rather than given.

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petercooper
By that argument, it's not "free" to just walk down the street, because your
tax dollars are paying to maintain that street - and reading a book at the
library isn't "free" because you're paying for it through taxes. Heck, almost
nothing's "free" by those criteria.

~~~
DanielBMarkham
Lots of stuff is free.

Come couch surf at my place. I pay for it, but you enjoy it: it's free to you.
Here's an ice cream cone. Once again, I paid, but you enjoy it.

To you, it's free.

Now -- use the powers of government to force people to pay taxes to buy you an
ice cream cone? It's not free to you any more.

The danger is that you start feeling like I'm going to give you ice cream
cones anytime. I can correct you of that assumption pretty quickly. But when
the giver is some anonymous blob, starts looking like free money.

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rrf
Interesting that this is not a question on younoodle, a Thiel portfolio
company (although previous salary is considered).

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sgrove
If the CEO sets the ceiling pay, and an acceptable range is $100-125k, what
then constitutes acceptable pay for (non-CEO) founders? Is $60k too high
(given reasonable funding, pre-profitability)? $80k?

Just curious at what the usual funding agreements end up at.

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comatose_kid
I don't know the answer, but if I were CEO, I wouldn't care if I wasn't the
highest paid person - as long as I am happy with the % of the company I owned.

So if this view is reasonable, I don't think that the CEO's salary is a
ceiling.

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comatose_kid
An aside, but I wonder what the stats are on the signal to noise ratio (as
judged by upvotes?) vs. average indentation depth of a particular discussion
thread....

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vizard
What about performance related pay? For example, pay directly tied to profits?

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jon_dahl
I think this is probably pre-profit pay. If your startup is cash-flow
positive, then by all means, pay yourself a market rate!

