- First, you have to decide if you are going to “hold the line on burn” after a fundraising. If you plan to — tell everyone. They will get it. Is your goal to hire 100 reps next week and 10x the marketing plan? That’s one approach. But everyone will expect all budgets to grow overnight. Another approach is to use the capital as a “buffer” so “we have plenty of runway”. If you communicate you are doing the second approach, most folks won’t expect out-of-turn raises. They’ll get the goal is to de-risk the company, not to grow the burn rate.
- Two, sometimes — sometimes — some people do deserve a raise after you close a round. Are folks taking under-market salaries? If so, marking some up closer to market after each round can make sense. My rough rule is after you raise $2m, the founders shouldn’t work for < 50% of market. And after you raise $20m, most employees will begin to expect to make full market salaries. Between those phases, a discount to market may (or may not) still fly. But the % will need to come down over time.
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Published on February 14, 2019