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Why Dark covers 100% of employee and dependent healthcare

At Dark, we’re trying to make how we write software orders of magnitude better. That’s enough work for us… so we try to go with the existing wisdom on nearly everything else.

Usually this works, but sometimes we’re deeply wrong.

Last year, my first priority was getting us health insurance. I hadn’t picked a health insurance plan before, so I went with some internet research and asking friends. The insurance advice I got repeatedly was “startups don’t need good health insurance.” The rational was always very similar to this very common view:

“We certainly don’t want to stereotype, but startup employees tend to be young, healthy, and without families. In other words, they won’t be interacting with the healthcare system all that often. For this reason, plans at the Bronze level make the most sense for startups.”

There is a stereotype at play here, and it is rooted in some truth: a large portion of early startup employees are software engineers, and 75% of professional software engineers are under the age of 35. That said, the average age of startup founders is 42 (and successful founders are 45).

This felt off to me last year, but I was afraid of looking different from other startups, especially when it meant spending more money as a first time CEO. This resulted in relatively cheap insurance, and no dependent coverage.

A year in, I think this is a false cost optimization based on “what startups do” instead of what makes the most sense for the business. Here’s what I do think is true:

Startups don’t prioritize spending money on creating companies and policies that allow for a diverse workforce.

Core Beliefs

One of our core values is to be collaborative, and that includes the acknowledgment that we’re people, not work automatons. We’re not all 23 and healthy. We have families, and different levels of ability.

We also know that getting good work done is about being able to focus. Going through medical issues can be a huge distraction, and much more so if you’re worried about how to get care or pay for it. There are intangible benefits to having a comprehensive healthcare plan, too. It may make it easier to hire senior employees, who can then help develop the rest of our talent.

Since startups don’t do this, we don’t know all the benefits that might cascade out of a startup providing better health insurance.

Dark also believes in being equitable. My guess is that one way other startups get around not having full health insurance is by paying senior people “more” to compensate for them out of pocket health insurance costs. That rewards those who are willing to negotiate, and makes it harder to have transparency and pay bands. We’d rather set the culture where we can pay equitably and give everyone the benefit of healthcare.

Cost Evaluation

Our philosophical beliefs are well and good, but it’s also important to contextualize this choice within our startup budget.

This year, Stefi helped me do much more extensive research on our healthcare options. If each employee had an average of one dependent we’d spend $30,000 more per year. Given our current team we spend ~$6,000 more per year by supporting dependents.

That sounds like a lot of money, but not as much when you put it in the context of some of the other things that startups spend money on:

  • Recruiting. It’s not uncommon to spend 10–20% of a first year salary to a recruiting firm for a key hire. If we make one additional hire organically by having dependent health insurance, this could pay off. That’s not even taking into account the churn we might be able to reduce by having strong benefits and potentially having a more experienced team.
  • Relocation. We’ve always happily said that we’ll relocate good candidates. I’ve moved across the country several times, and that can easily run $10,000. If health insurance for 1–2 dependents closes a local candidate, that’s worth it.
  • Technology. We’ll happily spend $3,000 on a laptop (and and other peripherals people need to be productive). We’d get someone a second computer if they had a difficulty carrying theirs to and from work every day. That could be six months of dependent health insurance.
  • Free food (or booze). It’s extremely common for startups in the Valley to give “free lunch” as a benefit… or free breakfast, or free dinner, or all three. Having worked outside the valley for my entire career, I can assure you that the piece of mind that comes with insurance is way better than not having to pack a lunch.

You can question any of these expenses individually, but at the end of the day we often justify them as “what startups do” or “what we need to hire the best talent.” I see lots of founders talking about these or taking them for granted, but not very many talking about their great health insurance.

Could providing better health insurance still end up being more expensive than some alternatives? Absolutely. After all, we could end up hiring people with more dependents, and these are recurring expenses! The cost tradeoffs could also change if the bulk of our team wasn’t on the engineering side.

Do I think we can figure it out if that happens? Yes.

Does it feel reasonable in light of all the factors that went into this decision? Yes.

Am I willing to bet that a more diverse set of people would work at startups if we prioritized spending money on things that matter vs. things that help young healthy people? Yes.

From now on, Dark will provide full healthcare coverage for employees and their dependents.

Want to work at an early stage startup that prioritizes spending on health coverage for employees? We’re hiring.

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