Not at all, let me tell you ;)
And if you care about the business, you won't take a $300k salary either.
If my startup makes it to a series A stage, am I rich personally?
11–16 of 16 posts
Re: If my startup makes it to a series A stage, am I rich personally?
#12Earlier quoted context omitted.
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?
No. They will not do that. No good VC would not force you to take a high salary if you would rather the money went into the business. They'd probably even like that. A founder should be setting the vision and culture of the company. Compensation is one piece of that culture. You set a precedent by taking a big salary and you set a message by taking a small one (i.e. Jet Blue - CEO, COO, CFO each have a base salary of $200,000 / turned down bonuses during bad years).
Re: If my startup makes it to a series A stage, am I rich personally?
#13Earlier quoted context omitted.
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?
No. They will not do that. No good VC would not force you to take a high salary if you would rather the money went into the business. They'd probably even like that. A founder should be setting the vision and culture of the company. Compensation is one piece of that culture. You set a precedent by taking a big salary and you set a message by taking a small one (i.e. Jet Blue - CEO, COO, CFO each have a base salary of…
It's not a question of forcing. It's the norm. All other things being equal, why should someone take a lower salary?
And there are other factors. If your compensation becomes a benchmark for the rest of the team, now your company is in real trouble. You can't expect to hire key team members at less than the norm. It just won't happen. VCs know that.
Also, a VC's main job is to put out as much of their committed capital as possible into good deals. Allocating a large part of a preferred equity tranche to fund the maintenance and creation of a solid team is the right thing to do.
And comparing with large companies is not apples to apples. That's a different world; here's an extreme example of that world: http://valleywag.com/tech/greed/the-grotesque-1-salary-251104.php
Re: If my startup makes it to a series A stage, am I rich personally?
#14Earlier 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…
As I said, rich is subjective. My last job paid just shy of your quoted salary and I would not consider that to be rich. Very well off, yes, but not rich. Rich, to me, is what you have behind you in your savings and investments, not what you have to look forward to in salary and the like.
I agree with everything else that you said though.
Re: If my startup makes it to a series A stage, am I rich personally?
#15On paper you're close to rich, in the sense that your stock in the company is worth a lot. But it's illiquid, and most of it may not legally be yours yet because of vesting. On the other hand, after a series A round you'll be able to pay yourself a decent salary-- maybe 1/2 or 2/3 of market rate, which will probably be a great improvement.
In a startup you generally want to make your salary as low as possible. You're not going to get rich from salary but from the company scoring, so why take money out of it?
Re: If my startup makes it to a series A stage, am I rich personally?
#16Closing a VC round is meant to HELP your company take off, not settle. There's a very good reason why it's often referred to as "runway."
The number one motivating factor for startups and the reason why they're able to operate more efficiently than larger competitors boils down to one thing: desperation. Having limited resources makes you desperate and hungry. Besides, living in a cramped apartment and eating ramen is a good reminder of what you get when you don't win (and having a roof over your head ain't too bad).
Paying yourselves $300K when you guys probably don't have revenue is a great way to mislead your investors, create politics amongst employees, and, most of all, make you complacent.
Now, (mis)using investors' money to live the life isn't unheard of. I once interned at a company that basically lost hundreds of millions of dollars every year and addressed this by systematic studio closures and layoffs. The company's misfortunes resulted from poor oversight by the management team and had almost nothing to do with those being laid off (they all went on the be headhunted by competing firms). Following suit, every year, product-producing employees were let go while executives maintained their $400K salaries. The management team basically did whatever they could to keep the company alive while they drew as much salary as possible. Interestingly enough, this behavior actually began when they got funded in the late 1980s.