Dear SaaStr: How do VCs Really Feel About Founder Salaries? I Was Told That a General Rule of Thumb is 75% of Market
The 75% Rule once you are VC Funded for more than a few million dollars is a good one. But if you raise less than that — 75% may well be too high. You need the cash to last 24 months.
And of course, stage and timing does matter. Once you are profitable and at scale, I don’t think any VC expects founders to take anything less than market salaries 🙂
There are lots of good ideas for all different situations:
- 75% of market for founders’ salaries.
- $10k a year, if it’s very early and you have no cash!
- $10k a month, a good place once you have some cash but not that much.
- 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, especially pre-Scale (e.g., pre $10m ARR) … IMHE, 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 anything fair seems right to me.