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.
- 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.