Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Ask HN: How much do founders pay themselves?

news.ycombinator.com

Post reply on HN
Print view View original

61–70 of 81 posts

Re: Ask HN: How much do founders pay themselves?

#61

Post by hairball »

Generalization: Entrepreneurs, as a group, come out worse than VC's, as a group, on these types of negotiations. The CEO/Founder is taking a much larger risk, and is much more committed (deeply invested), than the VC's that fund them because the VC's spread their risk across multiple companies. It's a shame that an argument as thin as "taking less salary shows commitment" when the investors are not similarly committed (their salaries remain fat as ever, regardless of their performance). People can get more money, but they can't get more time. And the CEO/Founder generally devotes 3 to 7 years of previous time. The equity upside is not a valid justification for below market wages because investors get that without sacrificing theirs. There needs to be some symmetry in the commitment between CEO's and investors.

$180K/yr for a first-round company ratcheting up with each subsequent round. If you're not raising enough to afford that, then you're not raising enough. Consider delaying the round to create more value if VC's are taking too big a piece of the pie.

Re: Ask HN: How much do founders pay themselves?

#62

Post by pjy04 »

jasonmcalacanis wrote: post #32

In general VCs and investors are looking for folks who want to take the minimum salary necessary to live off of, while pumping every dime into the product. Of course most VCs are making $250-$1M in salary per year. That doesn't count their carry... that's just their base salary. here is what VCs generally do: 1. Pre-launch/Pre-revenue, 20-something founders: $50-100k 2. 30 something with two kids in private school: $…

I think #1 is going to experience the most amount of scrutiny. I'll be more conservative if the pre-launch/pre-revenue amount is under 1m. It'll probably be closer to 40-60k

Re: Ask HN: How much do founders pay themselves?

#63

Post by portman »

_delirium wrote: post #45
portman wrote: post #33

A lot of people seem to be saying "market". But for us, it was based entirely on need. After talking to our families, each of us came up with the minimum salary required to maintain our current lifestyle. The idea is that a founder should not be saving any money, but they also shouldn't be forced to move into a smaller home or stop eating out. What's interesting is that this produced 3 very different salaries, even t…

Interesting--- salary based on need, while contributions presumably are based on strengths of each founder. I've heard that compensation strategy somewhere else... ;-) ( http://en.wikipedia.org/wiki/From_each_according_to_his_abil... )

Wait until you hear the awesome propaganda music we play every morning.

Re: Ask HN: How much do founders pay themselves?

#64

Post by portman »

redorb wrote: post #51
_delirium wrote: post #45

Earlier quoted context omitted.

Interesting--- salary based on need, while contributions presumably are based on strengths of each founder. I've heard that compensation strategy somewhere else... ;-) ( http://en.wikipedia.org/wiki/From_each_according_to_his_abil... )

I bet the above company does plan on some time in the future; having more "normal" and "market based" salaries; otherwise they could have worked anywhere for below market wages. They have to have a plan for making more money down the road that won't depend on their needs; but value.

Of course. If revenues begin to cover our own salaries, then we'll increase to market rates. But until then, we're all committed to making our seed round last as long as humanly possible.

Re: Ask HN: How much do founders pay themselves?

#65

Post by techsupporter »

portman wrote: post #33

A lot of people seem to be saying "market". But for us, it was based entirely on need. After talking to our families, each of us came up with the minimum salary required to maintain our current lifestyle. The idea is that a founder should not be saving any money, but they also shouldn't be forced to move into a smaller home or stop eating out. What's interesting is that this produced 3 very different salaries, even t…

Genuine question: Why shouldn't a founder be putting aside savings? Does savings include any accumulation of money, or just liquid cash and allows for retirement planning? I understand that the founder is being paid with venture capital, but what is supposed to happen if, even against the founder's every desires, the business goes bust, the founder is no longer able to work for some reason, or a myriad of unintentional-yet-plausible reasons why the founder might no longer be drawing that salary?

Granted, this comes from the perspective of a person whose entire life's income can be documented on a series of W2 forms, so I beg your indulgence of my ignorance.

Re: Ask HN: How much do founders pay themselves?

#66

Post by plorkyeran »

_delirium wrote: post #45
portman wrote: post #33

A lot of people seem to be saying "market". But for us, it was based entirely on need. After talking to our families, each of us came up with the minimum salary required to maintain our current lifestyle. The idea is that a founder should not be saving any money, but they also shouldn't be forced to move into a smaller home or stop eating out. What's interesting is that this produced 3 very different salaries, even t…

Interesting--- salary based on need, while contributions presumably are based on strengths of each founder. I've heard that compensation strategy somewhere else... ;-) ( http://en.wikipedia.org/wiki/From_each_according_to_his_abil... )

Communism does often work well in small, close-knit groups, and I would certainly hope that the founders of a startup living on VC money would fall into that category.

Re: Ask HN: How much do founders pay themselves?

#67

Post by whatusername »

synnik wrote: post #25
thinkcomp wrote: post #10

I pay myself $33K gross annually. I'm the lowest-paid salary employee in the company.

You should never be the lowest paid. Executives are paid not for the actual tasks they do, but for the fact that all responsibility and accountability is on their shoulders.

We can assume that she/he is being compensated through stock/equity. So they are being paid - just not with a salary.

Re: Ask HN: How much do founders pay themselves?

#68

Post by portman »

techsupporter wrote: post #65
portman wrote: post #33

A lot of people seem to be saying "market". But for us, it was based entirely on need. After talking to our families, each of us came up with the minimum salary required to maintain our current lifestyle. The idea is that a founder should not be saving any money, but they also shouldn't be forced to move into a smaller home or stop eating out. What's interesting is that this produced 3 very different salaries, even t…

Genuine question: Why shouldn't a founder be putting aside savings? Does savings include any accumulation of money, or just liquid cash and allows for retirement planning? I understand that the founder is being paid with venture capital, but what is supposed to happen if, even against the founder's every desires, the business goes bust, the founder is no longer able to work for some reason, or a myriad of unintention…

That's a great question.

The financial goal of a startup is (often) to generate a lifetime of wealth in 3-4 years of intense work. After 3-4 years, a startup will either succeed or fold. Because the timeframe is bounded, it's possible for a founder to forgo any personal savings without irreparably damaging their personal finances.

For example, speaking for myself, at my last job I was saving about $60,000 per year. Not contributing that money to my savings over the next 3-4 years isn't a huge deal. If my startup fails, I've only lost 3 or 4 years of savings.

However, it IS a huge deal for our STARTUP to save $60,000 per year. That's a full-time junior employee. If not spending that money increases the likelihood of a successful exit, then it's a prudent financial strategy for me. The effect is multiplied if the other cofounders forgo their savings as well.

Note that this is only my second VC-backed startup. Others with more startup experience may very well have different advice or reasoning.

Re: Ask HN: How much do founders pay themselves?

#69

Post by _delirium »

plorkyeran wrote: post #66
_delirium wrote: post #45

Earlier quoted context omitted.

Interesting--- salary based on need, while contributions presumably are based on strengths of each founder. I've heard that compensation strategy somewhere else... ;-) ( http://en.wikipedia.org/wiki/From_each_according_to_his_abil... )

Communism does often work well in small, close-knit groups, and I would certainly hope that the founders of a startup living on VC money would fall into that category.

Yeah, I didn't mean it as a criticism, just was surprised/amused to see it in a VC-backed company. My impression is that a more Randian spirit is somewhat more common, which views anything altruistic as being screwed. I don't have any survey data, but my guess is that a more common arrangement is based on some sort of swap, e.g. the young/no-dependents co-founder who can afford to take a lower salary might negotiate to work for 50% of the other co-founders' salaries, but gets something in return, e.g. an extra equity share--- as opposed to just taking a lower salary for the good of the company.

I don't actually have any problem with the principle the slogan represents, though. IMO the main problems with it are implementation, since there's no way to base a whole country's economy around it without an authoritarian government enforcing who gets what. That's obviously not an issue with voluntary arrangements in smaller groups.

Re: Ask HN: How much do founders pay themselves?

#70

Post by _b8r0 »

In the UK there are two main sources of income for company directors and shareholders: Pay As You Earn (PAYE) and Dividends.

You have different tax thresholds so most self-owned directors I know tend to take an amount that leaves a minimum in terms of tax liabilities combined with a healthy fund for tax deductable expenses and so on. The company itself also pays tax, so in some cases it may be preferable to go PAYE as it moves the director's renumeration from profit to operating cost.

Most of the directors I know take between £41k (although I think the combined income/dividend efficient limits are higher this year) and around £60k, and spend anywhere from another 10 to 50k through the company.

Directors I know who are brought in to run companies they don't own tend to get paid over £100k with a bonus.

Post reply on HN