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.

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