How much do founders pay themslves?

https://news.ycombinator.com/item?id=1138644

by echan00 • 16 years ago

2 2 16 years ago

news.ycombinator.com

how do founders figure out how much to pay themselves?

Usually as little as they can and still live on.

The way a financier thinks about it, a stock is worth the discounted value of all future earnings. The less it pays its founders, the more it earns in profits. Normally this is a bad trade for employees, because they own a tiny portion of the company and their share of those earnings will never hope to equal the money they're giving up in salaries. But founders usually own a big chunk of the company - any money it saves goes straight to its bottom line, and any improvements to the bottom line go straight to their net worth. As a founder, you usually make far more from increases in the stock price than you can from salary.

The way a founder the thinks about it, your runway is cash in the bank over total expenses. How long do you have before your dream dies? If you can pay yourself half as much, it'll last twice as long, and maybe get off the ground in the process. Note that this calculation often changes if you take venture capital, because then founder salaries are a comparatively smaller portion of the burn rate.

The way a prospective employee thinks about it - if you as a founder take a low salary, it's a signal that you're in this for the long haul and are looking for more than your own personal gain. I am far more likely to work hard for a person that is trying to change the world than I am for a person that is trying to get rich. Conversely, if you're just trying to bleed the company dry, why should I not try to bleed the company dry too? Taking a low salary sets a cultural expectation that can be very important to the start-up's long-term success.

panotpon• 16 years ago

This is a general question that requires breadth of answers. Most will differ base on the stage of your start-up. Some will be geographical. My case: I started off didn't pay myself at all. Hired a guy. Fired him. Assume his responsibilities and his pay. Investors are okay with it.

How much do founders pay themslves?

Related Stories