Startups · Salaries

Is it acceptable to have one cofounder with a higher salary than the other?

Edvin Stokic Investor Relations at Pristine Advisers NYC

September 18th, 2016

As one of my contacts is looking into launching a new venture I am speaking with some folks about partnering up to found a new venture. In this process I am talking with some individuals that feel they should be entitled to a higher salary than other founders with the same amount of equity. What do you all think?

Thomas Kaled Business Development Consultant @ thomas.kaled@gmail.com

September 18th, 2016

Given your scenario it is difficult to visualize someone who has the idea to create the venture receiving less than those who will join the venture with the following proviso's:

-all founders intend to work the same hours in the venture
-the idea/concept is unique to the individual launching the venture
-all founders have the same contribution including in-like, in-kind or capital
-all founders are key employees to the operation

If that is not the case then the potential team disharmony regardless of the willingness to accept original conditions/positions places the venture in jeopardy. 


Thomas Kaled Business Development Consultant @ thomas.kaled@gmail.com

September 18th, 2016

I am again assuming that each 'founder' has distinctive talents. If that is the case I would suggest you consider handling each on a performance bonus basis tied to the outcome of their talent. Although I agree with @Irwin Stein I also understand human nature sufficiently to suggest that if all else is the same with the exception of wages, eventually this difference in the absence of performance longitudinally, becomes problematic for key employee harmony.               

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

September 18th, 2016

Some people are worth more. 

Christopher Brunner Founder - Payments

September 18th, 2016

As is often the case, more information is required. 
All levels of seniority are equal among founders?
All levels of commitment the same?
I suspect you've given out equity at a perceived level of fairness vs. actual value and commitment provided per founder. 

Neil Gordon Board Member, Corporate Finance Advisor and Strategy Consultant

September 18th, 2016

What Irwin Stein said is true. Some people are worth more. On the other hand, I'd be careful about letting anyone who felt they were "entitled" on the team. (I'm not saying don't do it; just be careful!)

Rod Abbamonte Co Founder at STARTREK / @startupHunter / @startupWay / @CoFounderFound / @GOcapital / @startupClub / @lastminute

September 18th, 2016

When you have a reasonable reason why yes, it is acceptable. 

David Rowell CEO & Founder at LifeLinker Inc

September 18th, 2016

There is an obvious answer here, and some undercurrents as well.

The obvious answer is that people should be paid 'what they are worth' - whether their pay is in normal salary or earned equity or in any other form.

The undercurrents :

'Founding partners' is an amorphous concept and while the concept of 'equal' may be implied, it seldom occurs in reality.  Maybe one partner has the idea, another has the time to execute it, and a third has the money to fund it.  Those are three very dissimilar contributions and there is only fairness in treating them differently.

If a founding partner walks away from a job paying $200k elsewhere, that doesn't automatically mean he is entitled to the same pay in the new venture, of course.  That is an added level of complication - should you pay your founders at the same level they were getting elsewhere, or at the rate which other people would cost to do the same job in the new startup.

The big thing is to realize that there is no obligation at all to have all founding partners paid the same, and to discuss and agree between the partners on what is fairest, as part of the upfront partnership discussions.

Steve Simitzis Founder and CEO at Treat

September 18th, 2016

This is the employee vs cofounder question.

If you are a true cofounder, your only concern is "what is the most time/money/energy I can afford to give the company to guarantee its success?"

If you are asking the question "what is the most I can get from the company?" then you're an employee.

Sometimes the founders will need enough of a salary to pay rent, immediate debts, etc. Since everyone has different financial needs, unequal salaries are fine. You're giving as much as you can, but getting evicted shouldn't be on the table.

But "I am worth it/entitled to it" isn't a financial need. And it may be true, you may be worth it. In that case, you should go apply for a job.

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

September 18th, 2016

Mr. Simtzis: When I start a  company I want to associate with the best and the brightest. That you would dismiss them because they would not work for what you work for is foolish.  I have value to any startup because I have many years of experience advising them. I don't ask "what is the most time/money/energy" I can expend. To the contrary, I try to solve problems quickly and efficiently, which I can because I have solved many of those problems many times before and because I have an extensive number of very qualified people who can help and advise me.  Investors look more kindly at a start-up if I am involved because I have a well earned reputation.  If a partner wants me as a co-founder, then pay me what I am worth. If the partner brings similar value, then the partner gets paid too.  I don't ask what I can get from a company. I agree that no founder should face eviction but paying people just by their financial need is wrong. Pay them for the value that the company receives and you will get more value in the end. 

Steve Simitzis Founder and CEO at Treat

September 18th, 2016

Then we have different values. At the founding of a company, there is no money to pay anyone. People who come on later may truly be high value, and by no means am I dismissing their contribution or abilities. But they're not founders.