How do Venture Capital Firms really feel about founder salaries? I was told that a general rule of thumb is 75% of fair market value. I am considering taking on a well established, rather expensive co-founder.

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JASON LEMKIN

Let me add just one thought to the discussion.

There are lots of good ideas for all different situations:

  • 75% of market for founders’ salaries.
  • $10k a year.
  • $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 the start-up, at least pre-Scale (e.g., pre $10m ARR) … something is wrong.

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.

If the founders take the highest salaries though …

Then … usually … I’m out.

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

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Published on November 19, 2015
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