How does a CEO/founder/owner pick his salary?
I’ll share my stories.
In my first start-up, we raised $9m in our seed round — a large first round, but the times were different. The VCs set my salary without discussing or consulting with me (I know, weird, but this was ’03, a different time). My prior salary as a VP before the company had been $150,000, and they raised it to $180,000, with a performance-tied bonus. On a monthly basis, that was a pretty small % of $9m for the guy that closed $5m in revenue in Year 1.
The second time, at EchoSign, we “only” raised $2.6m in our first round. There, each dollar mattered more … and also, I had a few nickels in the bank from the first one … :
- My salary was $120k for the first 8-9 months or so.
- Then, I took $0 for another 18 months or so until we raised the next round.
- Then once we raised $6m, we raised my salary from $0 to ~$150k.
- Finally, for our last little stretch before our acquisition, I think we raised it to $175k, once we were cash flow positive.
The “right” answer is probably the least practical when every single dollar matters. And then, probably, “low market” after that.
But later … once you have positive cash flow, and/or a large amount of capital in the bank … you need to de-stress things. You really do. It’s a 7-10+ year journey.
So at least then — take enough salary so it’s not a stress point. If it is — that’s bad for the company. And everyone.
When I invest in start-ups now, if they have revenue and it’s starting to take off … and they raise > $2.5m or so … this is one of the first questions I ask. Do you make enough?
‘Cuz I don’t want you sweating that. I’ll just invest another $100k if that’s the issue at that point.
But pre-Initial Traction, and/or if you don’t raise much … you have to manage your own salary like any other expense. And probably make it as small as possible.