Only imbecilic incompetent startups would do this. The more VC money you take in, the more you dilute the worth of your OWN employee shares in your startup. I've never seen it.
Lavish food spreads,
There is food, to be sure. It's a cheap way of getting engineers to work morning, noon, and night on projects critical to getting the company to revenue.
private jet flights, exorbitant salaries and compensation
You have to attract superstars that not only can hit the ground sprinting, but also attract other great talent. That takes larger salary and compensation - FOR THE SUPERSTARS. Without the superstars, you have no breakout product, or can't execute to bring it to market.
But "regular", hard-working execution engineers are also hired - usually at a lower than normal salary, with stock options as enticements - they take the risk that the long hours and lower salary will pay off via IPO or company purchase.
for still unprofitable companies.
Yes, they're startups. It's an amazing horrible fight to get to revenue at all, let alone profitability. That's why VC and Angel investors exist.
Forgive me if I don’t feel sorry that they “can’t make payroll” this week.
So the ability of regular people to get the paychecks they were promised, so they can pay their mortgage and other bills, is beyond your empathy. Nice.
Just curious - what abacus are you browsing FR on?
-Yossarian
(Silicon Valley Survivor)
Maybe a founder that ALREADY made a lot of money before joining that startup MIGHT take a private jet - but that's their own fortune at work.
Trust me, getting a startup to spend extra money is like pulling hen's teeth!
All startups that followed the “not all eggs in one basket” principle will be alright on this. Suppose they need to have 1M every other week to meet payroll obligations where 200k goes to taxes, 100k goes to insurance/401k, and 700k goes to employees. If you have 3 banks each with an account for payroll checks then there is no risk of delay as you put over 233.34k in each. You also identify the top earners and notify them long before a crisis that their paychecks are most at risk of delays in case of any bank hiccups and that should be less than 20% of the staff. In most cases the reputable ones will have a founder/CEO with several sources of instant liquidity, like home equity lines, Treasury direct account, and other sources available to do infusions to cover a couple of payrolls. If they don’t then they aren’t reputable and deserve to fail.