I surveyed 500 startup founders about their salaries

I think what people often blissfully miss about founder comp is that the business literally supports the founder's entire life. Everything is a business expense. Pay yourself 50k as a little bonus and run almost everything through the business, because if you don't survive, neither does the business. You think founders are paying out of pocket for their fancy SF and NYC apartments at 50k per year living humbly? Think again. IDK, I always thought this part of the narrative was rather misleading.

EDIT: I'm not a tax person, obviously people aren't being illegal and dishonest. It's just smart to write off everything possible in a founder's life as a business expense. Maybe housing or this or that doesn't qualify where you live? Great that's what the minimal salary is for. Everything else goes on the company card.

2nd EDIT: I don't really understand why everyone is so cagey whenever this topic comes up. This isn't news. The IRS isn't reading this saying "gosh darn they figured out a new loophole". The laws are clearly spelled out, it's up to you to apply them to your situation. Remember, tax evasion is illegal. But minimizing tax liability is 100% okay and literally the name of the game. Otherwise, we wouldn't have tax breaks in the first place.

mousetree• 4 years ago

In what kind of startups is this happening in?!

Edit: in our early days, if one of the co-founders did this, we definitely would've parted ways.

dcow10• 4 years ago

The tax-conscious kind.

whoknew1122• 4 years ago

Every startup I've worked in.

ericghildyal• 4 years ago

Agree completely here! When we were getting everything up and running, we were making decisions about which SaaS platforms were worth our money. Having the company pay for something personally never once crossed my mind.

hn_throwaway_993• 4 years ago

I've also seen cases where pretty well-funded startups (and, honestly, not just startups, I've also seen this with large public companies) have tons of expenses flow through a founder's/upper level exec's personal credit card. The expenses are all legit, but this results in at minimum multi tens of thousands of dollars in credit card bonus points accruing to the exec.

Will let you decide how ethical that is (or not). After all, many/most companies allow their employees to keep points earned for business travel. But it's one thing for an employee to keep bonus points for expenses they themselves incurred, which is very different, I think, than putting tons of corporate-wide business expenses through one person's card.

catsarebetter2• 4 years ago

Yeah I interviewed at a recruiting startup and the founder was writing off his brand new sports BMW and at the time I was like omg that's so cool and now I'm like omg that's so shady

axg11• 4 years ago

How many founders are claiming rent as a business expense? Granted, founders are able to expense a lot of things that employees are not.

si1entstill• 4 years ago

I this true? Wouldn't the IRS have something to say about apartments being classified as a business expense when it is used as housing in addition to "office space?"

dcow10• 4 years ago

Rent may be the only thing the salary goes towards.

JumpCrisscross2• 4 years ago

think founders are paying out of pocket for their fancy SF and NYC apartments at 50k per year

This is tax fraud. More realistic: cell phone bills, car expenses and home internet.

moffkalast• 4 years ago

Founders can have a little tax fraud, as a treat.

dcow10• 4 years ago

It all really depends on your situation and context. Does your company have an office yet? If not it's probably the founder's residence. I've heard of apartments listed as offices in very early days. It's not about committing fraud, it's about working with what you've got. But for sure paying founders a low salary and running everything through the business is a tax-conscious strategy to minimize overall expenses.

hn_throwaway_993• 4 years ago

Not really. There are tons of gray areas:

1. First, it's perfectly legal for an employer to pay for housing, but it may be counted as income to an employee. It depends: https://www.corporatehousing.com/blog/corporate-housing-tax-...

2. The IRS also allows deductions for a home office. The rules about this are pretty strict, but again, there are gray areas here about what counts as an office.

ensignavenger• 4 years ago

It is my understanding that tax law does not prevent a business from providing whatever compensation they want to- but certain compensation is taxable to the recipient as income. So if a business pays $10,000 per month for the founder/ceo/whatever's rent, that is still an expense to the business. But, the recipient has to pay tax on that 10,000 as if it were income. At least on whatever portion of it is not devoted to the business (If the apartment has an office in it that is used exclusively for the business, the cost of the office square footage is deductible).

So as long as the benefit is reported on the founders taxes and taxes are paid, it would not be tax fraud.

paxys2• 4 years ago

That's...not how it works. You can expense cell phone bills and lunches, sure, but VCs aren't paying for your fancy apartment.

EDIT: I'm not a tax person

Most non-tech discussions on forums like this one should start and end with this disclaimer. Watching people here regularly talk about topics like law, "money laundering", write-offs and tax shelters is as hilarious and disconnected from reality as a hacking scene from CSI.

dcow10• 4 years ago

Ultimately, VCs are paying for your fancy apartment. They're just paying more the more expensive your personal life is. I wouldn't dismiss the obviously aligned incentives here that encourage minimization of capital expenditure for business entities, especially in the USA.

I'm making no moral or legal judgements, just commenting based on what I've encountered and witnessed. I'm not a founder and never consulted anybody with legal qualifications regarding this matter either in any specific instance. But, in my anecdotal experience, there is a rather broad spectrum of contexts and interpretations on how to do what's best for you and the business in your specific situation. On the flip side, it's not a big conspiracy, in the USA we heavily subsidize the pursuit of new enterprise. And the law reflects that. Smart people and successful businesses minimize their tax liability.

agrippanux• 4 years ago

One thing that can fly under the radar is when a founder uses their personal credit card for things like social media ad spend, and then gets reimbursed by the company. It's a very easy way to rack up tens to hundreds of thousands of dollars on a credit card which equals tons of points for things like travel, electronics purchases, gift cards, etc.

tensor• 4 years ago

Yeah no, this is bullshit and won't pass tax inspection. I founded and exited a company and yes I did live humbly until we actually managed a significant raise. Even then I still took a low salary. I only expensed things that were actually company related.

rdli2• 4 years ago

In the short-term this might work, but if you're trying to build a company that grows, then it doesn't work so well, because other people you hire will ... want the same thing.

If you expense your cell phone bill every month, then it's reasonable for other employees to expect the same, if they're also using it for work.

Better to get the board to sign off on a slightly higher salary to offset these expenses, IMO.

MangoCoffee• 4 years ago

IRS just got their funding to hire more people. I'm pretty sure what used to be "not really look at" will be under microscope.

aerosmile2• 4 years ago

This is how fake news happens. I really wish we all took a bit more time to research things before we publish them, because I guarantee you there will be more people today running around and sharing this exact same fake news about founders living in apartments paid for by their startups.

vecter2• 4 years ago

You think founders are paying out of pocket for their fancy SF and NYC apartments at 50k per year living humbly? Think again. IDK, I always thought this part of the narrative was rather misleading.

In what situation would a founder have a company with meaningful investor backing and not use that money to pay for an office for employees and instead use it to pay for their rent?

The tone and insinuation of your message is that founders pay themselves $50k/year but then splurge excessively using company funds on "fancy SF and NYC apartments" (which, depending on how fancy you mean, could go for $10-2k/month), which would almost certainly qualify as both tax fraud and fraud against the company. Your edit doesn't really do anything to alleviate the messaging, because you basically say (a) founders often commit fraud (b) ok maybe not, but I'm not erasing my earlier statement.

FWIW when I started a company in SF in 2012, my cofounders and I did indeed pay ourselves $50k/year and pretty much 100% of that money after taxes went to rent and living costs (maybe saved $5k/year, I wasn't keeping track that closely). This was after paying ourselves $0 for a while of course. We did not live in fancy apartments or use a penny of company funds to expense rent or any other personal living costs. In fact, even after we raised $35m for our company, we still only paid ourselves $90k for another couple years.

lemax• 4 years ago

Writing off parts of your rent as a founder or business owner is perfectly ok with the IRS. Such a space needs to have "regular and exclusive use" for running your business and be your principle place of business (i.e. you do not maintain an office outside of your home).

In my experience CPAs consider it reasonable to take the square footage of the dedicated office area and divide it by the total square footage of your home and deduct that much from your rent.

https://www.irs.gov/businesses/small-businesses-self-employe...

triceratops• 4 years ago

Relevant Seinfeld: https://www.youtube.com/watch?v=XEL65gywwHQ

dQw4w9WgXcQ• 4 years ago

It seems like the real path to retirement is be that guy who gets a startup funded and promptly write yourself the $1M yearly check

rdli2• 4 years ago

You'd need board approval.

ghiculescu3• 4 years ago

I think this study should ask founders their age. It has a huge impact, probably more than any factor they did ask.

I started my first startup at 20. We were bootstrapped, so we started at $0 salaries, and didn’t pay ourselves more than 1k/month for a few years. We all lived together somewhere cheap to keep rent low.

Now I have a family and stuff… it would be very hard to go back to living like that. So the range of salary options practically available to me is totally different, regardless of where (in the US) I live, how much I raise, etc.

gillianobrien4• 4 years ago

Great suggestion! I think we'll ask this question in the next iteration :)

jsonne• 4 years ago

Yeah actually beyond age I would also break out "Do you have children" explicitly as that changes that calculus a lot.

theptip• 4 years ago

Strongly agree that this is a valuable data point. I’d suggest another way of getting at the same thing would be to ask about previous salary; this correlates with age but only somewhat.

Did the $1M salary founders get paid $1M at Google previously? I’d expect there is a quite strong correlation here since it’s much easier to justify to your board/equity in that case.

And just because you’re 50, that doesn’t mean you made it past Senior. Similarly, you could get to Staff+ before 30 if you are exceptional.

kleiba• 4 years ago

Salaries by Geography - it's a shame that this is US-centric, I would be very curious about the median/average salaries of European founders.

gillianobrien4• 4 years ago

Yes - I'm optimistic that in the next iteration we can get even more data points, so that we can do some of these additional country breakouts!

lifeisstillgood• 4 years ago

I would love to see a longitudinal study on this - is this similar to 10/20 years ago? Has the VC world really changed? Can it get better?

tobyjsullivan2• 4 years ago

There's an interesting blip at the end of the chart "Bootstrapped vs. VC-Backed Salaries Breakdown".

     Salary Range   Bootstrapped   VC-Backed  
    -------------- ----------- -------------- 
     200k-249k      3%          6%            
     250k-299k      1%          3%            
     300k+          6%          2%

Overall, I see a pattern that could be explained by slightly different perspectives. A VC-backed founder likely sees themselves working for someone else - "My work will benefit the investors, so I will get paid for that work." Whereas the bootstrapper is very obviously working for themself - "I'll take what I've earned or need and no more".

That's also where you get into that bump at the end. If my bootstrapped company is earning 10M/yr, you bet I'm taking 1M+ salary guilt-free.

edit: accidentally swapped the headers on first post

paxys2• 4 years ago

Simpler explanation – salaries of VC-backed founders have to be approved by the board, which consists of these same VCs. Bootstrapped founders can pay themselves whatever they want.

Swizec4• 4 years ago

If my bootstrapped company is earning 10M/yr, you bet I'm taking 1M+ salary guilt-free.

Wouldn’t you prefer to take minimum salary and the rest as dividends? Seems like that would be the more tax advantaged approach and fully within your ability to do as majority owner.

pclmulqdq3• 4 years ago

Once your company is earning $10M/year, you should probably be using debt instruments instead, and paying yourself enough salary to cover the interest. That gives you a real tax rate on your cash earnings under 10% (and capped at the LTCG rate) if you can get a decent valuation.

tobyjsullivan2• 4 years ago

Good point. I guess I assumed it wasn't incorporated which would be silly (though probably not uncommon for solo founder)

catsarebetter2• 4 years ago

Yeah, in Company of One they say Peldi from Balsamiq takes 1 mil per year

CommanderHux• 4 years ago

Am I missing something or does there seem to be data mismatch?

Breakdown of Salaries by Geography -> NYC Area -> Highest Salary 300K

Breakdown of Salaries by Funding Level* -> $5M-$9.9M -> Highest Salary 400K for NYC

pageandrew• 4 years ago

Do founders set their own salaries? Do they need to be approved by a board/VCs? Do investors have heuristics to help decide if a given founder's salary is appropriate, and not exploitative to boost a founder's lifestyle before a business is truly viable?

IshKebab• 4 years ago

Yeah they have to be approved by the board.

bogota• 4 years ago

Nice, someone with a company size of 26 to 50 got 50M of funding and is paying themselves out 1M a year working remote.

That is the life. I want to know what industry that is in.

aerosmile2• 4 years ago

There are other sources of this exact same info, and this source is far more on the lean side then anything I’ve ever seen. It’s not something I can share because the subscription is not mine, but I am sure others can back me up on this.

j0hnyl2• 4 years ago

Looks like nearly half of the founders surveyed are running companies with 5 or less employees. I wonder if this skews the average way down for the whole sample set. For example, if you look at the salaries reported by founders of companies with teams >25 the average salary is much higher.

noobermin• 4 years ago

As a non-start-up person who'd really not likely ever do it but looks at graphs all day as a job, it does seem like the long tail makes sense, although it's hard to tell if 500 (plus a survey) is a representative sample. It seems like the usual thing for power distributions, you'll have a long tail with flying high salaries which is what most people think of when they think of founders (the architype of a walking hype and reality-disortion field emitting white man wearing a poloshirt), but you'll have a nice chunk near the bottom of the distribution which is "everyone else" who likely won't make a big exit. Don't the vast majority of start-ups fail? That description is the quintessential description of "success" for any variable with a power-law distribution.

gen220• 4 years ago

Super cool survey! And interesting results.

Does anyone know if it shares how the answers were solicited?

Every survey of this size has substantial sampling bias (which doesn't invalidate the result, just helps us to more rationally interpret it).

---

[edit] there's some color at the bottom, though I'm still curious to know more.

The 2022 Founder Salary Survey was conducted over a five-week period starting in May 2022, during which we reached out to founders through our extended networks and elsewhere online.
We received a total of 516 responses.
Over 60% of our responses were from either remote Founders or Founders in the San Francisco Bay Area.

Leaning on a network is a good way to scale up quickly, although it's probably the principle limiting factor on the scope of conclusions, drawn from this report.

"How much do Founders, who are 0-1 degrees of separation from a company that uses Pilot, pay themselves?" is still a pretty interesting thing to read.

vecter2• 4 years ago

In what world does it make sense for a founder to pay themselves $1m/year in salary? One situation I could imagine is if they have a money-printing machine and outright own the business, then that would make sense. It's hard to imagine any other scenarios where that would be reasonable.

abeppu• 4 years ago

I think maybe this data needed to be cleaned a bit more before being analyzed. For example, in the "Breakdown of Salaries by Funding Level", in the 0 - 99.9k bracket, the "average" salary is 115k and the highest is 360k. I must be missing something basic; is the salary value computed from a monthly value, and the company will either raise more or close down within a period less than a year (having paid out less than the stated salary figure)? If so, it seems a bit disingenuous.

dang• 4 years ago

This is not a valid Show HN. Please read the rules: https://news.ycombinator.com/showhn.html.

We've taken Show HN out of the title now.

gillianobrien4• 4 years ago

Ah, sorry about that! Thanks - noted for next time

libpcap• 4 years ago

Would be good to show the median.

corysama• 4 years ago

The "Deep Dives by Geography" section has histograms.

pc86• 4 years ago

Highest salary in the $1M-2.9M funding bucket is $750k. Surely that company must be pretty profitable, I can't imagine allocating that high a percentage of your funding to the CEO salary if you're not? It's also in the 6-10 FTE bucket.

didgetmaster• 4 years ago

As a startup founder myself, I wish I had the luxury of paying myself a modest salary, but until the revenues support it that is how it goes. Even if I had a bunch of VC money, I would definitely feel guilty about paying myself a ton of money. I would still have a huge chunk of founder's stock, so I would pay myself well below market rates.

If I were an outside investor in my startup, I would demand this. If a founder was living high off my dime I would be very worried that they would cut and run the moment the gravy train dried up. Startups run better when all the players have significant 'skin in the game'.

bailster• 4 years ago

Would love to see difference between “already comfortable” founders vs the rest. Comfortable ones more likely to minimize personal taxes and roll the dice on equity.

Also, any breakout for startup subtypes? (SAAS, fintech, web3, health tech, AI/ML etc.)

huangc10• 4 years ago

I was at a YC startup in the mid 2010s for around 4 years. The most funding we got was a series B round but nothing more after.

Near the end, I had a happy hour or dinner with one of the co-founders. He told me that if he had to choose again (giving up his engineering job vs. starting up the company), he doesn't know if he would choose the start-up route again.

Just some food for thought. It's great playing the CEO or the founder and betting on yourself but at the end of the day, the financial trade-offs could be life changing (especially given the salary/stock options provided by top tech companies).

lfranchi• 4 years ago

Hi HN! I'm Leo, Pilot's Head of Engineering, and we're hiring across the board for engineers, product designers, product managers, and more.

If you want to come work for a growing startup that's selling a service that every business needs (a good thing in a macroeconomic downturn!), with a wonderful, diverse team that cares about their users and each other -- I'd love to chat. Feel free to reach out :)

(Hiring in SF and US-remote. Full jobs page here: https://pilot.com/jobs, or feel free to email me at firstname @pilot.com. Our stack is fully typed Python 3.10 on the backend, Vue/TS on the frontend, and AWS)

I surveyed 500 startup founders about their salaries

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