The idea would be to get all the awesome 100k/yr+ hackers with mortgages/families to try their hand at a startup. Their current options are 1) Risk their marriage/mortgage/savings by quitting their day job. 2) Build up traction on the side of their day job.
Most people won't do #1 and #2 makes failure much more likely. If some of these people are significantly more likely to succeed (my theory) it would make sense to invest more on one of these.
Starting a start-up will risk your marriage in plenty of other ways besides financially.
And those people wouldn't be willing to go all out killing themselves like the start-up myth around YC funded companies seems to more or less ask for. That's self selecting to some extent because one of the demands YC makes (drop everything and move here for 3 months) only applies to young or at a minimum fairly unattached people willing to take a fairly large risk in return for a shot at a potentially larger success.
Founders with 'lives' are a lot less likely to take that plunge, even an 80K investment would not be enough to provide the required security for a team of four to get to the break even point, after all that depends not on the size of the investment as much as to how long it will take you to get to 'ramen profitable' and that point is a lot further in to the future than you'd be with 3 or 4 'cheap' people.
The problem is to get monthly income to become greater than monthly expenses, and to get people that would require more payment during the launch phase the whole picture becomes terribly unattractive as long as there are plenty of young guns willing to try it for a lesser take home pay.
Their chances of success are better, they are less demanding and they probably have more energy (even if less experience).
You are in direct competition with them and I don't think that from an investors point of view there is an incentive to change the formula if it already works. The chances of those larger investments tanking is just as large or larger as it is with the small ones.
And a nice side bonus is that younger people are less set in their ways and more likely to listen to good advice.
Another way (and perhaps the optimal way) to mitigate your risk is to join an existing startup early on, which we're also trying to make easier for hackers to do:
The value proposition for not-quite-founders when you compare your market-rate salary vs. a startup-salary + equity tends to drop steeply. I don't have data, but from my own anecdotal experience you'll probably take around a 20-25k per year salary cut for 0.1% - 0.5% in options if you take a position at a series-A to Series-C funded startup.
This economic situation is really a kind of hybrid of full-salary and apprenticeship, where you're partially compensated in startup experience. I'm doing it now so I can learn the ropes of an early-stage startup while paying off my student loans. But long term I suspect your EV is better as a founder or cash-compensated so long as you properly invest your cash compensation.
<only-marginally-realistic rant>
Even better is to be one of those VP's who come in during Series C at an already-successful company and somehow make a market-salary and get 10%+ in equity. You know, the fuckers in suits who come in and do nothing.
Risk and reward tend to be correlated, at least in efficient markets. And since there are so many startups to choose from, all desperate to get programmers, there's a reasonable hope of getting market price for your risk.
The startups presenting at Workatastartup range from established companies 5 years old to startups from the most recent YC cycle that are currently run by single founders and are looking for people to be de facto cofounders, in every sense including equity.
Fundamentally I think startups overvalue the risk of coming up with a product vision and undervalue the risk of executing on that vision. It's arguable harder and more risky to go from "lets make a social network" to the entire product that is Facebook, and a majority of the people that bridge that gap get relatively shafted on equity.
As to your point about joining a post-YC company, employees #1-#5 are generally defacto cofounders and are often given similar equity. I'm not disputing that. I'm talking more about (roughly) employees #6 -> #30. At that point you have a product vision, but no concrete product. Since the major work of a startup is discovering the details of what to build, a majority of the work isn't done yet, and the real risk hasn't been mediated. However, a majority of the equity has already been passed around.
The risk and reward are certainly correlated. To say for certain you'd need a rather complex economic analysis that factors in opportunity costs to really say what the monetary sweet-spot is on the founder<->enterprise-employee spectrum. My suspicion is that the startup talent market isn't very efficient; As an industry we haven't really found a good way to judge technical skill other than working alongside someone for months. This hurdle means all the good jobs come via social connections. All the good positions are taken by the founder's network, and all the great devs already have a good gig.
My suspicion is that the startup talent market isn't very efficient
I think this is true of the hiring market in general. "You made $80k at your last job as a senior developer? Super. Alright, we have to ask: FizzBuzz. Can you do it?"
I hate to say it, but I've interviewed a 'senior devs' who made six figures before who couldn't do fizz buzzish problems in any language of their choice (and many more who took >15min to do so ...)
What's the harm in asking if it's a quick and simple discriminator?
I'm talking more about (roughly) employees #6 -> #30. At that point you have a product vision, but no concrete product.
I don't think this is true, at least not for consumer internet startups. If you can't build a concrete product in this space with 5 people, you probably can't build one at all.
If you have your first scalable product with 5 people, there's a good chance that after you start hiring up to 20-30 employees (not just engineers), the market and your product will make large shifts. You'll have to rework and rethink your product after you start scaling, too.
My co-founders and I are in this situation, and we did YC this winter (Zencoder), so it definitely can be done. We basically ran on savings for four months, and were able to raise money quickly, so none of us lost our homes or wives/girlfriends.
But not risking your savings, on the other hand - if you aren't willing to risk your savings, being a startup founder might not be for you. :)
i.e., "Make it easier to put risk capital into people who are more risk averse."
A mortgage and family are a handicap in something that requires high levels of uncertainty and huge amounts of time. It seems you'd want to bias selection towards those who would take the plunge despite that handicap rather than offering a work around with a 6 month expiration date.
For an individual with a mortgage and family, when the going get's tough, they drop the startup and go get jobs. For someone who can live on a grad student budget (YC funding level), there are many months of productivity left after money starts to get thin.
Most people won't do #1 and #2 makes failure much more likely. If some of these people are significantly more likely to succeed (my theory) it would make sense to invest more on one of these.