As venture capital dries up, tech startups discover frugality(latimes.com)
latimes.com
As venture capital dries up, tech startups discover frugality
http://www.latimes.com/business/technology/la-fi-tn-tech-downturn-20160429-story.html
58 comments
I would caution a counter point that this wouldn't be a bad thing if it were reducing technical debt or improving automation. Of course, you did say avoiding it if it were working fine, but sometimes things that work fine still end up having a lot of impact on day to day routines and ability to get work completed.
I'm focusing a bit more on devops so naturally I would defend my point of view and job security but I think if you have some balance in there with regards to rewriting something to reduce technical debt in some fashion would be OK.
But I'd venture a guess that lots of organizations have to find that middle ground between building constantly vs remodeling / improving the foundation.
I'm focusing a bit more on devops so naturally I would defend my point of view and job security but I think if you have some balance in there with regards to rewriting something to reduce technical debt in some fashion would be OK.
But I'd venture a guess that lots of organizations have to find that middle ground between building constantly vs remodeling / improving the foundation.
"Rewriting something to reduce technical debt" is the kind of nuclear option you would use if you had money - or developer hours - to burn.
Technical debt is better managed through gradual refactoring as part of the normal development processes. Of course there's still going to be a struggle between taking time to maintain code quality and sales wanting the next feature yesterday, but it's a different argument than "we want to rewrite this in shiny new framework X because someone on Hacker News said so" (not that this exact argument will be used, of course).
Automation I'd see more as a sensible move, if it reduces costs in the long term. Again it may take a back seat to short term priorities, particularly when cash is short.
Technical debt is better managed through gradual refactoring as part of the normal development processes. Of course there's still going to be a struggle between taking time to maintain code quality and sales wanting the next feature yesterday, but it's a different argument than "we want to rewrite this in shiny new framework X because someone on Hacker News said so" (not that this exact argument will be used, of course).
Automation I'd see more as a sensible move, if it reduces costs in the long term. Again it may take a back seat to short term priorities, particularly when cash is short.
Yes, indeed, I agree with all your points. And in pretty much all cases I would opt for "gradual refactoring" (and hopefully with lots of tests before starting).
What's fun is when bitrot in the automation sets in. It's hard to gauge the long term liability of it.
> But I'd venture a guess that lots of organizations have to find that middle ground between building constantly vs remodeling / improving the foundation.
> I'm focusing a bit more on devops
Shiny object syndrome can affect all fields.
A dev story: One of the new projects at work is an invoice automation system. For whatever reason, the initial design called for Redis as a key value store, and pgsql for their relational data. Ops already supports a ton of services on a shoestring budget, and Redis isn't currently on the list. I only found out about it when I saw a PR documenting the dependencies; they're now researching whether Postgres's hstore is compatible with their needs. Unconstrained, it's easy to end up with lavish designs that spread ops too thinly.
An ops story: Containers is the big one some ops members won't be quiet about. AFAICT, it provides us no real advantage over VMs, and we're likely to deploy containers on top of openstack VMs anyways. Of course, we deploy a number of open source apps like Drupal, WordPress, and MoinMoin that would need to be re-architected to support things like immutable infrastructure. And it's not like the dev has time to support those, they'd be busy auditing and fixing their own software.
> I'm focusing a bit more on devops
Shiny object syndrome can affect all fields.
A dev story: One of the new projects at work is an invoice automation system. For whatever reason, the initial design called for Redis as a key value store, and pgsql for their relational data. Ops already supports a ton of services on a shoestring budget, and Redis isn't currently on the list. I only found out about it when I saw a PR documenting the dependencies; they're now researching whether Postgres's hstore is compatible with their needs. Unconstrained, it's easy to end up with lavish designs that spread ops too thinly.
An ops story: Containers is the big one some ops members won't be quiet about. AFAICT, it provides us no real advantage over VMs, and we're likely to deploy containers on top of openstack VMs anyways. Of course, we deploy a number of open source apps like Drupal, WordPress, and MoinMoin that would need to be re-architected to support things like immutable infrastructure. And it's not like the dev has time to support those, they'd be busy auditing and fixing their own software.
Very familiar with the dev story and if new technologies on the dev side make it into production, it's yet another new technology that the ops team needs to support. I can't imagine the gazillion things that one might need to know as an ops person. There definitely needs to be a balance and a negotiation between dev and ops on what can be supported and whether these new shiny objects really make a material impact.
I've seen this exact case of trying to replace the front end with React. Then the recent economic climate lead to pretty much the entire team getting axed since the pre-existing codebase was working, just messy and not cutting edge.
I was really surprised at how expensive a lot of B2B software tools were considering how easy they were to build. Then I remembered that a lot of these companies have to feed hundreds of idle investors, board members, advertisers, landlords, property managers, etc...
Anyway, so I got together with a co-founder (a big open source contributor like me) and we built a cheap realtime pub/sub (push notification) service: https://baasil.io/#!/plans
We are like a tenth of the price of some of our competitors but our profit margins are still ridiculously large. I guess it's because we don't have to give our profits to hundreds of idle investors and board members. We just have to feed a couple of hard-working engineers (myself included).
I look forwards to this new age of frugality and restraint with open arms.
Anyway, so I got together with a co-founder (a big open source contributor like me) and we built a cheap realtime pub/sub (push notification) service: https://baasil.io/#!/plans
We are like a tenth of the price of some of our competitors but our profit margins are still ridiculously large. I guess it's because we don't have to give our profits to hundreds of idle investors and board members. We just have to feed a couple of hard-working engineers (myself included).
I look forwards to this new age of frugality and restraint with open arms.
More accurately, you don't have to pay a bunch of sales people. Sales is the dominant expense of SaaS companies (many SaaS companies in fact have more salespeople than engineers, especially when you consider that most "support" people are in fact sales).
Baasil looks interest. I've also never heard of it, but I have heard of your competitors—thanks to the marketing/sales which their higher fees pay for.
If you're actually planning to grow a business, you need to cover acquisition costs in your pricing. For many businesses, CAC is by far the biggest expense.
Baasil looks interest. I've also never heard of it, but I have heard of your competitors—thanks to the marketing/sales which their higher fees pay for.
If you're actually planning to grow a business, you need to cover acquisition costs in your pricing. For many businesses, CAC is by far the biggest expense.
Er just as a point I would say that most often support people, especially in b2b companies, are not sales. In fact there is often an intentional, clear distinction. I've worked support at several companies now and while I've definitely been a resource for sales I was never actually sales driven in any fashion.
Yes, true. I do think that generic B2B software services like this should be treated more like commodities. Maybe this will happen as more competitors spawn up.
In my view, paying to advertise such a service is equivalent to a farmer paying to advertise his wheat.
In my view, paying to advertise such a service is equivalent to a farmer paying to advertise his wheat.
A farmer may not have to advertise his wheat to consumers, but he still needs the stores to know about him if he's going to sell anything. I'm not a farmer, but I would imagine this would mean advertising or doing direct sales with stores. Also there is such a thing as commodity advertising. :)
Nobody really wants their product to be a commodity though, as that means low margins. Fortunately, software products tend to be complex enough that even if there are generic product categories (e.g. "email service provider"), there are still ways to stand out. Even the "pub/sub service" market has quite some variety.
Nobody really wants their product to be a commodity though, as that means low margins. Fortunately, software products tend to be complex enough that even if there are generic product categories (e.g. "email service provider"), there are still ways to stand out. Even the "pub/sub service" market has quite some variety.
In practice, that's basically what AWS is. They offer things at prices much lower than other B2B software, but don't have the niceties and sales efforts around each individual line item.
Enterprise companies don't want to buy software. They want to buy a solution to a problem that they have. In addition to software, they need someone to call upon whenever there are any issues. They also need support in terms of integrating software into their existing stack without red flagging compliance, finance and other departments who have a say in the technology stack. Price is a non-issue for enterprise companies - what they want is a reliable business partner.
I would say that most small B2B software companies aren't giving profits to investors, they're giving revenue to operations overhead to support staff that aren't strictly needed, but are nice to have (sales, marketing, HR, larger than necessary dev teams, etc.). Any company focusing on solving a single problem while growing slowly is generally a lifestyle company rather than a true startup in the HN sense, and can be as efficient and profitable as yours.
Just be careful you're not ignoring the expensive parts of B2B businesses: sales/marketing/service, customer specific setup/integration/features.
There's a reason why other companies charge a lot and have "fat" orgs.
Also, "leaving money on the table" does no one good. Let businesses with budget pay you money. If anything, the money lets you improve the product for your customers - everyone wins.
There's a reason why other companies charge a lot and have "fat" orgs.
Also, "leaving money on the table" does no one good. Let businesses with budget pay you money. If anything, the money lets you improve the product for your customers - everyone wins.
I'm confused by your statement. Investors and board members aren't generally paid? These other things like landlords and property managers are a function of size admittedly. Advertising should not be a net loss as well...
Is there something wrong with my browser? Because looking at the website it is designed for the visually impaired. The font must be something like 72point.
What is a pub/sub service and why would I want one? Would it help with distributed teams? Sincere question (but you shouldn't ignore all sales and marketing!).
For real frugality, I'd like to see much more innovation supporting non-collocated teams. The advantages are huge for everyone to work from home: no offices, no commute, recruit from anywhere without relocation. Instant messaging isn't enough. 10 years ago we had always on video phones and such. What is state of the art today?
This 1000x. Having an office space might make you feel like a "real company", but then again so will turning a profit. Having your own custom office space can be very expensive, especially if it's tricked out with all the stereotypical Silicon Valley amenities. The funny part is, most people don't care about those and would prefer to work remotely.
So, you're paying more money to make things worse for employees.
Additionally, if you're all in the relative area of a city and really need to meet there are often coworking spaces you can use.
So, you're paying more money to make things worse for employees.
Additionally, if you're all in the relative area of a city and really need to meet there are often coworking spaces you can use.
> most people ... would prefer to work remotely.
I'm really curious about this. I did full remote for about 3 months and I thought I was going to go crazy.
I'm really curious about this. I did full remote for about 3 months and I thought I was going to go crazy.
I agree.
I work from home, but also rent an office downtown because the value of actually getting dressed, leaving my house, and interacting with people is worth more than the monthly rent.
I work from home, but also rent an office downtown because the value of actually getting dressed, leaving my house, and interacting with people is worth more than the monthly rent.
Pretty much the same here. I ditched my 45-minute commute and rented 1-person office about .5 miles from my house about a year ago. I can choose to have lunch with my wife and I got back 90 minutes of my life every day.
I find that I'm more productive and focused when I'm "at work." I have to overcome so many distractions at home that it feels like "trying to work." Big difference.
I find that I'm more productive and focused when I'm "at work." I have to overcome so many distractions at home that it feels like "trying to work." Big difference.
I've been doing full remote for two years and I'd never go back to an office.
I worked in an office for a few years and I thought I was going to go crazy.
Optionally, consider actual co-located teams in cheaper areas. I fully support expanded virtual teams, but there are some benefits to co-location as well, and investing in long-term co-location areas, even in other parts of the US, would be a step towards getting the benefits of both co-location and lower costs. You might even be expanding the labor pool to include some culture that isn't an SV echo chamber (potentially cheap-shot, I know).
The problem with co-locating teams in cheaper areas is that it drastically reduces your supply of labor. A lot of developers already live in the Bay Area and even more are willing to move there.
Relatively few live in Dayton, Ohio (random example) and even fewer are willing to live there.
The advantage of remote working is you can draw from talent all over the world (or at least all over the US) without having to worry about the fact that a lot of people would be unwilling to live in your particular LCOL area.
Relatively few live in Dayton, Ohio (random example) and even fewer are willing to live there.
The advantage of remote working is you can draw from talent all over the world (or at least all over the US) without having to worry about the fact that a lot of people would be unwilling to live in your particular LCOL area.
> The problem with co-locating teams in cheaper areas is that it drastically reduces your supply of labor. A lot of developers already live in the Bay Area and even more are willing to move there.
You say this, but others say there is a chronic shortage of talent in the area. Having the largest concentration of X does no good if local demand is X+Y.
I personally will not go near the Bay Area for less than $200k base. Considering the Bay Area exodus story posted yesterday, it sounds like there are thousands of people with similar opinions.
> Relatively few live in Dayton, Ohio (random example) and even fewer are willing to live there.
Fortunately Dayton is one of hundreds of decent-sized metro areas that are not the Bay Area. Every one has negatives and every one has people not willing to move there. So does the Bay Area.
> The advantage of remote working is you can draw from talent all over the world (or at least all over the US) without having to worry about the fact that a lot of people would be unwilling to live in your particular LCOL area.
I think the idea is to do clusters. Do light offices in any metro area where you hire more than one person. It provides the flexibility of a distributed team with the benefits of having some people colocated.
You say this, but others say there is a chronic shortage of talent in the area. Having the largest concentration of X does no good if local demand is X+Y.
I personally will not go near the Bay Area for less than $200k base. Considering the Bay Area exodus story posted yesterday, it sounds like there are thousands of people with similar opinions.
> Relatively few live in Dayton, Ohio (random example) and even fewer are willing to live there.
Fortunately Dayton is one of hundreds of decent-sized metro areas that are not the Bay Area. Every one has negatives and every one has people not willing to move there. So does the Bay Area.
> The advantage of remote working is you can draw from talent all over the world (or at least all over the US) without having to worry about the fact that a lot of people would be unwilling to live in your particular LCOL area.
I think the idea is to do clusters. Do light offices in any metro area where you hire more than one person. It provides the flexibility of a distributed team with the benefits of having some people colocated.
> You say this, but others say there is a chronic shortage of talent in the area. Having the largest concentration of X does no good if local demand is X+Y.
There's a shortage in the market, but at least there is a market.
If I wanted to hire a team of 20 Go engineers, I could do it in SV. It might be expensive but I could do it relatively easily. I'm unconvinced I could hire the same team for less in Dayton.
> I personally will not go near the Bay Area for less than $200k base. Considering the Bay Area exodus story posted yesterday, it sounds like there are thousands of people with similar opinions.
Neither would I. The problem is that the alternatives to SV are different for everyone. For example, I'd be happy to live in Vermont or Minnesota. But you'd have to pay me even more than $200k to get me to live in the South. Meanwhile, there are thousands of other people who would never live in Vermont.
Remote working lets everyone live in their personal "best value" city. If you're insistent on having people colocated, you're still going to be better off having your offices in a place which enough people are attracted to that it's not hard to convince people to live there.
> Do light offices in any metro area where you hire more than one person.
I don't really see the benefit of this. You're incurring all the costs of having a distributed team but not gaining some of the biggest benefits (letting people work from wherever they want).
There's a shortage in the market, but at least there is a market.
If I wanted to hire a team of 20 Go engineers, I could do it in SV. It might be expensive but I could do it relatively easily. I'm unconvinced I could hire the same team for less in Dayton.
> I personally will not go near the Bay Area for less than $200k base. Considering the Bay Area exodus story posted yesterday, it sounds like there are thousands of people with similar opinions.
Neither would I. The problem is that the alternatives to SV are different for everyone. For example, I'd be happy to live in Vermont or Minnesota. But you'd have to pay me even more than $200k to get me to live in the South. Meanwhile, there are thousands of other people who would never live in Vermont.
Remote working lets everyone live in their personal "best value" city. If you're insistent on having people colocated, you're still going to be better off having your offices in a place which enough people are attracted to that it's not hard to convince people to live there.
> Do light offices in any metro area where you hire more than one person.
I don't really see the benefit of this. You're incurring all the costs of having a distributed team but not gaining some of the biggest benefits (letting people work from wherever they want).
There are cities that are trying actively to become startup hubs to compete with SV, which are currently cheap but probably won't stay so. Kansas City will stay cheap long enough for a startup to take off.
Also, if we're talking about being frugal rather than relying on VC money, why not pick an area with a good university but not so much of a "city scene"/VC-land-ness, and hire college students? For example, Urbana-Champaign, IL. That way you're drawing from a pool where not all the talent has been snapped up yet, and the rent is usually reasonable because students have to live there.
Also, if we're talking about being frugal rather than relying on VC money, why not pick an area with a good university but not so much of a "city scene"/VC-land-ness, and hire college students? For example, Urbana-Champaign, IL. That way you're drawing from a pool where not all the talent has been snapped up yet, and the rent is usually reasonable because students have to live there.
right, and the company is Dayton Ohio doesn't understand that I'm not interested in flying out to their office party every month.
just go remote all in
just go remote all in
yeah, but a lot live in places like austin, portland, chicagoland, out in the woods somewhere on the east coast, etc.
> no offices
Don't forget that, in working from home, you do want to have an office; its just a home office. For a lot of people, that means paying more for a home with an office room. Overall, working from home doesn't save money, it saves time (which is, at least to me, worth more than the extra money is costs to work from home).
Don't forget that, in working from home, you do want to have an office; its just a home office. For a lot of people, that means paying more for a home with an office room. Overall, working from home doesn't save money, it saves time (which is, at least to me, worth more than the extra money is costs to work from home).
Yes, having a dedicated working space is very important. I think when you have people that work remote and cover their own working environment costs it is cheaper for the company on the whole.
But if the company is assisting remote work, e.g. paying for coworking space with an allowance that is probably still cheaper. Consider a team of 10... Even at a $200 / mo allowance for coworking that it still only 20~30% of what it would cost per month for a decent space in most major cities and there's no long term commitment.
So I think when you scale it out for small to medium teams it is cheaper and would be cheaper for a lot of startups that weren't already in a shared space.
But if the company is assisting remote work, e.g. paying for coworking space with an allowance that is probably still cheaper. Consider a team of 10... Even at a $200 / mo allowance for coworking that it still only 20~30% of what it would cost per month for a decent space in most major cities and there's no long term commitment.
So I think when you scale it out for small to medium teams it is cheaper and would be cheaper for a lot of startups that weren't already in a shared space.
Yep.
Even if every employee worked in their own coworking space, the advantage is that they can choose one within walking distance of their front door.
No-one needs to cause carnage to their family life if they are forced to change jobs multiple times. The idea that to find a job, you have to relocate and separate your children from their friends, clubs and schooling is quite horrifying really.
Even if every employee worked in their own coworking space, the advantage is that they can choose one within walking distance of their front door.
No-one needs to cause carnage to their family life if they are forced to change jobs multiple times. The idea that to find a job, you have to relocate and separate your children from their friends, clubs and schooling is quite horrifying really.
I've been a remote worker for over four years, and my experience is this statement is partially true. With a laptop and wifi connection, I can work from any location where I am most productive. Spending every day in the same spare bedroom kills creativity, and a laptop can go anywhere that spurs it.
It saves money if you cast off things you don't need, such as an extra car (my wife and I now car share), business casual clothing, eating out, &c, and if you live somewhere cheap. I live somewhere cheap (Louisiana), so I have a house with a couple of spare bedrooms from which to work.
It saves money if you cast off things you don't need, such as an extra car (my wife and I now car share), business casual clothing, eating out, &c, and if you live somewhere cheap. I live somewhere cheap (Louisiana), so I have a house with a couple of spare bedrooms from which to work.
To an extent, but at a pinch I can work on the sofa with a laptop. Peace and quiet are really the most important things - I find it difficult to do "deep" work in a crowded cafe, although I can do some trivial stuff like tidying up code, answering emails and so on.
Depending on your locale and situation, you might get tax breaks and/or company subsidies for a home office and equipment as well.
Depending on your locale and situation, you might get tax breaks and/or company subsidies for a home office and equipment as well.
But then all your programmers have private offices, which has been thoroughly established as dramatically important to productivity, as well as a bargaining chip in recruiting the best people.
http://www.joelonsoftware.com/articles/FieldGuidetoDeveloper... (Kind of old, but still applicable.)
Supplying an allowance to rent somewhere with a good workspace or set up an office is still mostly cheaper than renting an inner-city space with private offices... and then you don't have issues with VCs thinking you're burning their money unnecessarily.
http://www.joelonsoftware.com/articles/FieldGuidetoDeveloper... (Kind of old, but still applicable.)
Supplying an allowance to rent somewhere with a good workspace or set up an office is still mostly cheaper than renting an inner-city space with private offices... and then you don't have issues with VCs thinking you're burning their money unnecessarily.
Does Microsoft have the best people? Or does massive pay and moonshot projects outweigh a private office for most of the best?
That really depends on the time period and specific team within Microsoft. Working on Excel in the mid-90s (where Joel worked as a PM) is a significantly different experience than being on the windows installer team today.
That's pretty much what Gigster (https://gigster.com/) (YC) is about.
Developers on Gigster are often able to work fewer hours and yet are more productive - As a developer, you can work from anywhere. It gives you the freedom to live outside of major urban centers where rent is cheaper.
Developers on Gigster are often able to work fewer hours and yet are more productive - As a developer, you can work from anywhere. It gives you the freedom to live outside of major urban centers where rent is cheaper.
Always on webrtc, screen sharing and realtime document collaboration.
There are remote controlled robots with iPad faces, but I think those are more of a gimmick.
So really just evolutionary, nothing revolutionary.
There are remote controlled robots with iPad faces, but I think those are more of a gimmick.
So really just evolutionary, nothing revolutionary.
As long as Facebook and Google pay interns and recent college graduates ridiculous salaries, then startups have to match them. As long as they offer crazy working environments with massages and free food and fantasy offices, then startups have to do the same. At least in SV frugality isn't a word.
Maybe, just maybe... What a startup lacks in fringe benefits they can make up for in solving real/unique/enjoyable problems ;)
Oh... And escaping corporate BS.
Oh... And escaping corporate BS.
But most startups aren't even solving those types of problems. They're building marketing analytics or hr management or food delivery software..
I think he means solving these problems in the work environment.
Not really... But if you want to interpret it that way it's still a valid point.
I meant not working at the startup doing marketing analytics (although this could be fun if the problem is unique and challenging) hr management or food delivery. Maybe look for the next Pied Piper and work for them :D
I meant not working at the startup doing marketing analytics (although this could be fun if the problem is unique and challenging) hr management or food delivery. Maybe look for the next Pied Piper and work for them :D
And we should all be really pleased that we're working in a sellers market for our skills. Nothing lasts forever.
Sure, but not everyone can get into Facebook or Google. They take the best of the best (we can argue whether that's true or not, but that's the perception). Do startups really need Google-level developers, or just competent journeymen?
It sounds more like startups are outbidding each other, not Facebook or Google.
It sounds more like startups are outbidding each other, not Facebook or Google.
This ^
I think startups can be competitive simply by hiring remote. No offices. Trying to manage a slick office space and afford being located in SF is a big overhead. Hiring remote will open up your pool of candidates to people that Google & Facebook can't get.
I think startups can be competitive simply by hiring remote. No offices. Trying to manage a slick office space and afford being located in SF is a big overhead. Hiring remote will open up your pool of candidates to people that Google & Facebook can't get.
>ridiculous
Why ridiculous? Why are you rooting for people in our industry to make less money?
Why ridiculous? Why are you rooting for people in our industry to make less money?
I might be generalizing, but I get the feeling this is how world-wide start ups have operated for a long time.
The reality I've seen (in France and Chile) is quite different from what I've heard of Silicon Valley Startups.
Also virtualpascal is good for this, better language than BASIC and the included IDE is very TurboPascal like.
After that there is Free Pascal and the excellent Lazarus IDE which allows much more modern programming for a beginner in a friendly low friction environment.
After that there is Free Pascal and the excellent Lazarus IDE which allows much more modern programming for a beginner in a friendly low friction environment.
About damn time.
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Where was this general agreement and skepticism about the industry in the comments for Mims' "tech bubble" article yesterday?
I wonder however if "frugality" might extend to software development practices - for example, we're not going to rewrite the frontend in ReactJS this month because it's working fine as it is and we need to concentrate developer time on new (profitable) features.
In other words things like "JS fatigue" (not pointing at JS in particular) are symptoms of over-staffed, over-funded teams looking for things to do.