Why do startups hire so many people?(quora.com) |
Why do startups hire so many people?(quora.com) |
Because I had no money, I had to make money and then hire slowly. 10 years in and 10 employees later, I know this venture would have been over long ago if I landed that lead investor.
> Well, what kinds of people work for 1% of a post-A startup? Average people (and below).
The people hired in the A round have no doubt been selected, _and_ self-selected a startup, for their ability to work at the mentioned 20x force multiplier. A 100-person company (let's call that late series B) is running, using the article's own numbers, at a 2-4x force multiplier, and a C-or-later startup with 200 or more people is running at perhaps even a 1.5x force multiplier.
Yes, there will be individuals who bring the force multiplier up, and individuals who bring the force multiplier down, but ultimately, the people in the organization are _above_ average if the organization's force multiplier is greater than one.
Also considering that founding engineers are sometimes some of the first to leave (especially as non-startup culture becomes entrenched), we can't as easily argue that the original 20x engineers are carrying the (0<n<1)x engineers.
His response was that the number of employees they have is used to show government how much support they are putting into the ecosystem, how much the government earns in income tax from the employee base, how much money gets pumped into the local economy due to the thousands of employees they have. Demand for housing, transport, how it supports the local coffee shops and restaurants, etc etc. These figures are then used to get government grants. So in many ways, it's a form of free capital.
At the same time, it isn't like the company just hires anybody they can, and throws the money away, but I had a friend who worked there, and he said the work was kinda interesting, but they had sucked up so many amazing engineers, everyone felt like they were working under the level at which they'd be challenged.
For a while blog posts would include an unsourced hand drawn curve that looked like data to prove their point, but was completely made up
What seems to happen is small companies do not have the same requirements as big companies (and in these companies that aspire to be big fast). I18N, Scaling, Accessibility, Security, the list goes on and on. So they "appear" more productive by feature, but some of that would be dead in the water with the same team with a big customer base or regulatory concerns.
A team of one could write twitter in a weekend (how productive is that!), and it will be fail whales as far as the eyes can see under the same load requirements. (Not modern twitter, the more basic first versions)
It could also be my own bias, but I have never been at a company where the founding team was great technically, maybe that is because I am in the midwest, so it is not ex-googlers with deep technical knowledge. But it has always been a guy who could get barely get the job done or a friend of a friend who could code, but had a great idea/niche.
The real question is why. Surely it is obvious that if you expect employee #1 to work for well below market salary and maybe 1% equity, you will never be hiring the kind of 20x individuals described in the piece here. But in the entire software industry, has no-one considered diluting the founders' equity and offering 5% or even 10% to bring on someone else of the same calibre (assuming the founders are both that good and open-minded)?
I'm trying to go in a similar direction with my company. The idea is to consult under the same brand and create small passive revenue streams together (apps, websites, books, streaming). Earning are split based on the people working on it. The brand may help sell the individual consulting. We help and support each other and share costs.
I've seen startups with a lot of founders and generally all the problems started once they had VCs, funding and pressure to grow faster than it's reasonable.
That is essentially what I was suggesting, yes. This kind of arrangement doesn't seem unusual in many other industries, yet in software it seems very rare, even though the potential for 5 or 10 top class people to outperform 50 or 100 mediocre contributors or basically any number of juniors is higher than many other fields. It has always puzzled me that we don't see it more often.
In some other industries the competence of the contributors is much more closely tied to the success of the company. Software is not like this. That's why you might see docs, lawyers and stock-brokers entering in partnership; those professions have the quality of work tied directly to outcome.
But other things being equal, a team of 10 excellent developers will annihilate a team of 50 or maybe even 100 mediocre ones in terms of sustained productivity and quality, so if you do have the market and the business strategy, why wouldn't you want the dev team as well?
My point was mostly to shed light on the fact that most VCs want few founders and diffuse ownership can cause investment challenges.
But for pure software businesses my answer to your final paragraph would be "OK, so maybe you just bootstrap the business with a few good people and skip the VC part". If you aren't hiring hundreds of staff or buying up expensive cloud resources like they're about to run out regardless of how inefficient your product is, how many software startups could get by just fine with a real business model that actually makes money and some steady growth? Who says you have to have a pitch deck, a huge cash injection based on hope and high variance VC investment models, and one hand tied behind your back with investors holding the strings until the Big Exit(TM) or, more likely, the funding runs out before you have actually built a sustainable business and everything just gets shut down?