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If my startup makes it to a series A stage, am I rich personally?
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Re: If my startup makes it to a series A stage, am I rich personally?
#2Let's take Loopt as an example. Y combinator gives the founders $10,000. They code and live like animals for three months. Their hard work pays off... another VC gives them $5M.
At this point, do the founders still have to share a crappy 2 bedroom rental and eat ramen? Or, can they pay themselves $300K a year and use their salaries to put a down payment on a decent condo?
Re: If my startup makes it to a series A stage, am I rich personally?
#3Let's take Loopt as an example. Y combinator gives the founders $10,000. They code and live like animals for three months. Their hard work pays off... another VC gives them $5M. At this point, do the founders still have to share a crappy 2 bedroom rental and eat ramen? Or, can they pay themselves $300K a year and use their salaries to put a down payment on a decent condo?
Rich is a subjective thing, but in a short answer: no.
You are not rich. The money comes with strings and it will almost certainly say what you can and cannot do with it. It is not your money, it is the companies money. The company which you no longer have full control over. As well, when and if a liquidity event occurs, conditions on the series A financing may have the VC's taking several times their listed percentage. On the chance that this doesn't happen and you go out of business, which you probably will if you give everyone a quarter million dollar salary and a cushy office downtown, the VC's will take several times their initial investment and this time... this time you get nothing.
VC funding is not an end. It is only a step. And it is a step that can, and in my mind should if possible, be skipped. Five million VC bucks in the bank isn't cash in your pocket, it's debt. Holding debt doesn't make you rich.
Re: If my startup makes it to a series A stage, am I rich personally?
#4Why do you ask such a question? Getting VC money is validation that what your working on has the potential to solve a really big problem. Depending upon th liquidation preferences the angel investors can cash out or retain a new class of share. Its still ramen and hard work until you a) build a super sustainable company (recurring revenue, cash, employees, scalability) or exit (being bought by another company, trade sale, IPO etc) Then you've made it as an entrepreneur...
Re: If my startup makes it to a series A stage, am I rich personally?
#5good question, most vc's will be ok with the CEO and a co-founders paying themselves $150k salary. They do not want you to starve and salaries are a component of every companies operating costs. $300k is a bit excessive. VC's love frugality.
So while you won't be rich, you will be able to upgrade from a 7-11 diet to Whole Foods.
Re: If my startup makes it to a series A stage, am I rich personally?
#6No, you're not rich personally. The money belongs to the company and any sane founder will put more money back into the company rather than taking substantial salaries.
You can upgrade from ramen to TV dinners though.
Re: If my startup makes it to a series A stage, am I rich personally?
#7good question, most vc's will be ok with the CEO and a co-founders paying themselves $150k salary. They do not want you to starve and salaries are a component of every companies operating costs. $300k is a bit excessive. VC's love frugality. So while you won't be rich, you will be able to upgrade from a 7-11 diet to Whole Foods.
Saying $300k is a bit excessive is like saying gas prices are only a bit excessive -- huge understatement. I don't know how plausible a $150k salary is after a Series A, but I can't imagine any good founder paying himself close to that amount.
Re: If my startup makes it to a series A stage, am I rich personally?
#8All -
This is an important question, and one that may have not been answered. To the people who say you can take a $150K salary: how sure are you? ($300K seems wildly excessive to me, as CEOs of 400M corporations don't make that much in salary, they usually get stocks + benefits to augment salary to the $500K range)
This would have been great to ask at startupschool.
Re: If my startup makes it to a series A stage, am I rich personally?
#9Let's take Loopt as an example. Y combinator gives the founders $10,000. They code and live like animals for three months. Their hard work pays off... another VC gives them $5M. At this point, do the founders still have to share a crappy 2 bedroom rental and eat ramen? Or, can they pay themselves $300K a year and use their salaries to put a down payment on a decent condo?
Rich is a subjective thing, but in a short answer: no. You are not rich. The money comes with strings and it will almost certainly say what you can and cannot do with it. It is not your money, it is the companies money. The company which you no longer have full control over. As well, when and if a liquidity event occurs, conditions on the series A financing may have the VC's taking several times their listed percenta…
I beg to differ.
In the Bay Area, VCs expect and want the founder/CEO to make approximately $150K to $175K per year after the VC round (i.e. Seies A). I have confirmed this by asking VC panels here in Orange County during open-mike sessions.
What should be clearly understood is that you are actually financing a part of that compensation via your significant equity dilution that would result from the new vesting schedule put in place by the VC! You typically can't escape this new vesting if you want VC money...which is why PG's question about how much cash will you take to just walk away from it has real substance behind it.
Re: If my startup makes it to a series A stage, am I rich personally?
#10Earlier quoted context omitted.
Rich is a subjective thing, but in a short answer: no. You are not rich. The money comes with strings and it will almost certainly say what you can and cannot do with it. It is not your money, it is the companies money. The company which you no longer have full control over. As well, when and if a liquidity event occurs, conditions on the series A financing may have the VC's taking several times their listed percenta…
I beg to differ. In the Bay Area, VCs expect and want the founder/CEO to make approximately $150K to $175K per year after the VC round (i.e. Seies A). I have confirmed this by asking VC panels here in Orange County during open-mike sessions. What should be clearly understood is that you are actually financing a part of that compensation via your significant equity dilution that would result from the new vesting sched…
Ok:
This seems useful, but I don't fully understand it. Are you saying that the VCs will force you to take a high salary, so that they can take a bigger chunk of your company?