You're not wrong to think Tailscale is primarily a software company, and yes, salaries are a big part of any software company's costs. But it's definitely more complex than just payroll.

A few other things:

1. Go-to-market costs

Even with Tailscale's amazing product-led growth, you eventually hit a ceiling. Scaling into enterprise means real sales and marketing spend—think field sales, events, paid acquisition, content, partnerships, etc. These aren't trivial line items.

2. Enterprise sales motion

Selling to large orgs is a different beast. Longer cycles, custom security reviews, procurement bureaucracy... it all requires dedicated teams. Those teams cost money and take time to ramp.

3. Product and infra

Though Tailscale uses a control-plane-only model (which helps with infra cost), there's still significant R&D investment. As the product footprint grows (ACLs, policy routing, audit logging, device management), you need more engineers, PMs, designers, QA, support. Growth adds complexity.

4. Strategic bets

Companies at this stage often use capital to fund moonshots (like rethinking what secure networking looks like when identity is the core primitive instead of IP addresses). I don't know how they're thinking about it, but it may mean building new standards on top of the duct-taped 1980s-era networking stack the modern Internet still runs on. It's not just product evolution, it's protocol-level reinvention. That kind of standardization and stewardship takes a lot of time and a lot of dollars.

$160M is a big number. But scaling a category-defining infrastructure company isn't cheap and it's about more than just paying engineers.

> but it may mean building new standards on top of the duct-taped 1980s-era networking stack the modern Internet still runs on.

That’s a path directly into a money burning machine that goes nowhere. This has been tried so many times by far larger companies, academics, and research labs but it never works (see all proposals for things like content address networking, etc). You either get zero adoption or you just run it on IPv4/6 anyway and you give up most of the problems.

IPv6 is still struggling to kill IPv4 20 years after support existing in operating systems and routers. That’s a protocol with a clear upside, somewhat socket compatible, and was backed by the IETF and hundreds of networking companies.

But even today it’s struggling and no company got rich on IPv6.

Totally fair to bring up IPv6 vs. IPv4. However, I think Tailscale’s approach might sidestep some of that pain.

Avery (Tailscale CEO) has actually written about IPv6 in the past:

    - https://apenwarr.ca/log/20170810 (2017)
    - https://tailscale.com/blog/two-internets-both-flakey (2020)

IPv6 has struggled in adoption not because it’s bad, but because it requires a full-stack cutover, from edge devices all the way to ISP infra. That’s a non-starter unless you’re doing greenfield deployments.

Tailscale, on the other hand, doesn’t need to wait for the Internet to upgrade. Their model sits on top of the existing stack, works through NATs, and focuses on "identity-first networking". They could evolve at the transport or app layer rather than rip and replacing at the network layer. That gives them way more flexibility to innovate without requiring global consensus.

Again, I don’t know what their specific plans are, but if they’re chasing something at that layer, it’s not crazy to think of it more like building a new abstraction on top of TCP/IP vs. trying to replace it.

Yes, a move to static IPv6 addresses everywhere would help a lot.

At least tailscale funnel isn't control-plane-only, unless I'm totally misunderstanding something

>I'm sure they have some cloud fees, but I thought it was mostly "control plane" and not data plane

Don't they host the relay servers that are the fallback if NAT hole punching and their other bag of tricks doesn't work?

> I don't know much about Tailscale, nor about how much it costs to run a company

$33m/year is only 33 fully loaded software developers including all overhead like HR and managers and office space, and also a cloud hosting bill.

33 really isn't that many.

I'd be surprised if the average package for SWE is $1M/year (fully loaded).

Generally package is around half of what company spends per extra engineer. And $500k average for a tech heavy product company doesn't sound too far off.

> $500k average for a tech heavy product company doesn't sound too far off.

Tailscale puts salary ranges on their job postings. The salaries aren’t bad, but no, they aren’t $500k.

Didn't knew that. It's significantly lower than $500k.

Holy hell I need to ask for a raise.

When people say they get 500k they mean they get paid 200k in salary and got 300k in RSUs, with the details mixed around the edges. ICs aren't getting 500k salary except in a few rare cases.

Funny enough, you could double that to 70 engineers and that's still a TINY amount of engineers.

This is just wrong. What exactly do think companies are spending 500k on per engineer beyond the TC package?

HR, marketing, sales, management, office space, servers, licenses, insurance, etc.

It seems on the high end, but not too unrealistic.

It’s wildly and hugely unrealistic.

The rule of thumb that employees actually cost a business roughly twice their salary is based on two things:

1. Retention. Hiring costs are “huge”, and so if you have a higher or lower average retention, may make up a disproportionate cost compared to salary. Ramp up time and institutional knowledge loss is no joke either.

2. A spread of average wages. 500k is not average, and a huge number of the costs are relatively fixed. $1,000 a month worth of software licensing isn’t an uncommon number and is fully 1/3 of the salary of a $3k a month or $36k/year junior clerk. It’s peanuts when you look at it next to a $500k/year salary. It may be that the clerk is, all in, costing the company 3x their salary after indemnity insurance and so on. The dev will never reach 10%.

Non-salary cost such as payroll taxes, benefits, workers comp, training, equipment, space add another 25-50% typically.

They don’t, those are fixed. Even taxes are capped because TC includes equity.

For a 500K dev GP is correct, additional expenses will never reach 50K for someone making 500K.

I haven't traditionally seen these areas of spend rolled into Eng costs in the budgeting process.

US Health Insurance is stupid expensive as well.

It's really not at scale. It's on the order of 500$ a month per dev for "gold" level care for a company of 50 people. I'm sure it's less the larger you get.

It might depend on the state and the age pool but I have to pay a percentage and based on that it's more like $10k/year. So you are almost 2x undercounting

... But maybe if the average employee of a company is 25 they could get a better deal

Nope. 2x total comp is standard fully loaded cost.

office space of course!

This might be true for HFT companies. They usually start at 200-300k and mid senior engineers probably make close to a million

33M would be 33 software consultants each making 250k a year.