Salaries · Fundraising

Founder's Salary?

Anonymous

August 27th, 2015

Is it considered normal to pay oneself -- as Founder -- enough to cover cost-of-living when seeking Seed Funding?  I understand expectations for Series A round.
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Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

August 28th, 2015

It depends.  Professional investors are generally very pragmatic.  They don't want you to get rich on a salary, they want you focus on building the value of your equity (and theirs). But, they don't want you distracted by problems paying your bills.   Angel investors who have never been entrepreneurs may be less pragmatic, often to their own disadvantage. I've seen examples where tight fisted investors have hamstrung company founders living on shoe-strings, who could have led a company that might have taken off like a rocket, but instead wound up invested in a "hobby" company without any full time people.

Tanya Prive CEO. CoFounder. Life Student. Mom. Wife.

December 17th, 2016

At a seed round you want to raise the capital to assemble the team and to put together an MVP. That means that the more you pay yourself the less you have to execute on the other fronts and the additional risks that you are putting between now and the milestones that you need to hit in order to either break even or do a Series A. With that been said, I would stick to a low salary that is enough to pay your necessary needs.

Bill Warner Managing Partner of Paladin and Associates

August 28th, 2015

It certainly is normal and needed to pay oneself. Investors want to know that you can sustain yourself, but no frills beyond that. We don't want the founder to be worrying about paying the bills but would frown on you needing a Lexus or a vacation in Hawaii at this point in your business.  

Andrew Holmes Data scientist, coder, investor

August 29th, 2015

I think it would depend on the age and background of the founder. For a young founder without family money there's no way they could reasonably afford to work full time on the project without a salary. However, I've heard founders try to justify high salaries in the past based on what they could earn working for a large company instead - I wouldn't personally want to invest in someone who took this view.

Samuel Lavery Devops at Domino Data Labs

December 30th, 2016

VCs are money managers who don't want to pay you anything, they want to maximize their profit and don't really care about yours. If you need to draw a salary to survive, you can't found a startup that takes time start earning significant revenue. The trick is to design your operation such that it makes money on it's own, and doesn't need VC investment to survive. Once you hit that point, VCs will be falling all over themselves to write you a check. True story.

Arash Rajaeeyan Senior Software Engineer Manager at Capital One

August 27th, 2015

if I was an investor,and some one was not putting that in their plan,I would be sure they can't continue and the plan is not real !you should include all costs that will occur and may occur, it is ok to be optimistic but stay realistic!   

Kate Murphy Hustler at Hustle Con

August 27th, 2015

http://members.founderdating.com/discuss/2248/How-do-Investors-Look-Upon-Founder-Salaries

Check out this discussion. It's always super helpful to do a search beforehand. There is a lot of great content on the site.

David Still Founder of Start-ups, Entrepreneur, Financier and Advisor

August 27th, 2015

Yes.

Mark Stephenson Head of Technology and Delivery at evvnt

August 30th, 2015

This all depends on stage of company, in my opinion.  If you are just starting off then you should pay yourself as little as possible in order to keep lights on and eat.  As the company grows and becomes profitable you should always try to maintain a low cost base but you should also recognise that your position holds value.  If you had to hire in a replacement for yourself (or the board had to) how much would it cost?  It makes sense to have that amount in your plan.  If you are a megastar CEO or CTO etc and your contribution has accelerated the growth of the company to huge profits then the company needs to give you enough to keep it interesting and not feel the need to supplement with external revenues.  Speak with investors directly - they shouldnt be there as a one off pitch and grab, they are there to advise - typically theyve seen it all before.. use them.

Andrew Holmes Data scientist, coder, investor

August 30th, 2015

I don't think a founder with 70% of the equity can expect the same salary as a CEO hired in to do the job with only 5% options. Investors are likely to want the founder incentivised by an exit, not commercial-level salary.