Dear SaaStr:  How does a CEO/founder/owner pick their 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 (a different time, indeed).  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 $6m in revenue in Year 1.

The second time, at Adobe Sign / 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 …

So the second time, when it was up to me, as CEO:

  • 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 because we almost ran out of money. 🙂
  • Then once we raised $6m, we raised my salary from $0 to ~$150k.
  • Finally, for our last little stretch before our acquisition, we raised it to $175k, once we were cash flow positive.

It varies.

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 thingsYou 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.

And just one more guideline: as founders, try to make sure you aren’t the highest-paid executives in the startup.  Your VP of Sales should make more than the founders, at a minimum (if they are doing a great job).  Another VP perhaps, too.  If you aren’t the highest-paid folks at the startup, you’re probably doing it right.

And finally … finally … get your Board to approve founder comp.  Somehow, for some reason, founders stopped doing this a few years ago.  Even though the bylaws, investor agreements, and more often require it.  Get your annual salary approved.  Otherwise, things are always sort of … ambiguous.

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?

Because 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.

A related post here:

(note: an updated SaaStr Classic answer)

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