Dear SaaStr: How Do VCs Really Feel About Founder Salaries?

Dear SaaStr: How Do VCs Really Feel About Founder Salaries in the Early Days?

Let me add just one thought to the discussion on founder salaries, once you are venture-backed.

There are lots of good ideas for all different situations:

  • 75% of market for founders’ salaries.
  • As little as possible, until it doesn’t matter
  • $10k a month
  • Market once you are well funded, not until then.
  • Etc. etc.

There are lots of good answers. And also — lots of different situations.

In my first start-up, we raised $9.2m in the seed round. So it really didn’t matter that much in that scenario. The second time, I funded the prototype myself ($0 salary) and then we raised a $2.6m seed and I took a small salary (no need to be $0 anymore, but anything large would decrease the runway). So different situations = different answers, up to a point.

One thing I have learned, though.

If the founders are the highest compensated people in an early-stage start-up, at least pre-Scale (e.g., pre $10m ARR) … something is often wrong. Incentives are not aligned here.  Later, as you scale, it makes sense if the CEO has the highest salary, at least by a modest margin.  But not when cash matters.

If the founders are really going for it, there’s always one great engineer, a Stretch VP, even a sales rep, a marketing lead, someone, the first great hire that wasn’t quite a founder but still is great … that makes more than the founders. Always.  At least the VP of Sales.

If the founders take the highest salaries though … then … usually … that’s a flag at least for me.

Other than that, as long as it’s appropriate, and doesn’t harm the runway of the company, most anything fair seems right to me.

Published on March 15, 2022

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