What is the typical salary a startup CEO takes after the first round of funding from Angels?

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JASON LEMKIN

Here are my rough rules:

  • CEO’s total annual comp should never exceed 5% of the financing round. Assuming the round has to stretch 2 years, that means the CEO won’t be taking more than 10% of the total round out as comp. Something is wrong if more than 10% of a round goes to the CEO over the coming 24 months. Incentives are misaligned here.
  • CEO should try to take only a token salary when raise < $1m.

But

  • CEO should be paid Normal Salary once raise > $1m and salary is < 5% of round.

Working for free isn’t a good idea. It’s just that taking too much out of the round isn’t, either.

View original question on quora

Published on October 5, 2016
  • matt carrasco

    Hmm… I get the thinking here, but what if you’re a grown up, with the grown up operating experience, judgement, contacts, and skills of a 20-year exec (with a mortgage and family to care for too)? Even after taking a 50%+ pay cut making $150k is a squeeze financially if you live in California (and you’re in your 40’s, not 20’s). Sure, you can bootstrap and offshore some talented dev and engineering for less than $40/hour (which we’re doing) but the process slows down because you’re working three jobs – parent/spouse, day job, and co-founder. As a first time entrepreneur – a veteran entrepreneur – raising capital is a slog. Sacca, Calacanis, and others say they want proven operators, especially early on because as investors, you’re investing in the team. My founders and I could do a lot with $1M but I don’t think asking founders to sell their house (and risk divorce!) to get there is realistic. So I ask, if you’re really investiing in people – the founders – early on, how is not paying a “reasonable” salary, based on operating experience, truly an investment in the founders? After all, Maslow’s hierarchy of needs tells us that in order to achieve higher orders of self actuslization, as parents we have to pay the bills first! It’s hard to imagine you’re going to get the best out of people if they’re worried about paying for daycare, healthcare, and rent/mortgage.

    As an aside but related rant, as a veteran with additional veteran co-founders and experienced operators, I would also ask, “Where’s the early stage funding for our nation’s finest – seasoned operators who know how to lead under duress? Where’s the syndicate or venture fund for vetrepreneurs led by you, Calacanis, Sacca, and other big names in the space?” I hear and read how “hard” running a startup is…please. “Hard”, is being separated from your family, spouse, and children for 6 to 12 months in a war zone. “Hard” is going into harms way (voluntarily) with the lives of other men and women in your hands. “Hard” is adapting to adversaries who want to kill you. Running a startup is a privilege and it is easily one of the most important things I’ve ever had the pleasure of doing, since we are focused on placing these same veterans and the spouses of veterans at companies who seek to employ our nation’s finest. So, asking seasoned founders – veterans or otherwise – to draw down their savings, when in return experienced executives should be able to generate substantial business based on their years of contacts, that just doesn’t ring true. Freedom isn’t free. Investing in people shouldn’t be free either. It’s time to invest in the people who keep this nation secure and stable so that capital, great ideas, and businesses can thrive.

    – Matt Carrasco. Father, husband, Navy Veteran, and CEO/Co-founder HighRscout

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