There seems to be a lot of discussion recently around the topic of founder salaries. Mainly, what is the right amount to pay yourself, as a funded company, without appearing too greedy?

I'll say this up front, I don't believe there is a right or wrong answer, there are way too many variables at play to accommodate a standardized rate. However, there do seem to be two opposing forces: young founders and old founders. "Old" meaning anyone who has any sort of financial responsibility in his or her life, irrespective of age.

For the record, I fit into the old category.

Here's my opinion: Nobody should be a startup martyr.

In my last company, a seed-funded startup, I took a salary of $70,000 per year and I struggled just as much as a younger founder taking $30,000 per year. Just like the younger founder, I drove a shitty car with 180,000-plus miles on it. I didn't purchase new clothes. I didn't eat out, go to movies, take exotic vacations, or buy any luxury items. I struggled, just like someone making $30k.

Simply put, the difference between a young and old founder is the burn rate. Some people can survive on less, yet maintain the same lifestyle as someone making more. Does that make one a more committed entrepreneur over the other? Hell, no. My burn was much less in the past. And soon enough, those who need less today will need more tomorrow.

Here are some of the other arguments I hear against taking a higher salary as an older founder:

"Well, older founders should be better off financially and have a nest egg to offset a lower salary."

Wouldn't that be nice. Problem with that theory is that some people have been on-and-off entrepreneurs all of their careers, therefore, they've always had to "make enough to cover the burn". Not everyone over the age of 30 has had a big exit.

"If you're married, you should have two incomes."

True, unless you have kids, in which case, you either pay for daycare or one of you stays home. Depending on your spouse's salary and the number of kids, you may be better off staying home.

"You should wait to have a family until you're in a better position financially"

Life moves fast. Entrepreneurship is an unpredictable path. If you wait until the time is right, it may never come.

"Maybe you're no longer fit to be an entrepreneur"

As any fellow entrepreneur knows, that's just not an option. But fair enough, you do what you have to do to survive. I've had to work for many companies in my career, even though I have felt like I was cheating on myself.

"You should take the least amount you can and put more into new hires"

No argument here. The caveat being, "least" needs to mean that you're not struggling to pay your bills or wondering how to make extra money. Those are distractions that can cripple your effectiveness, which is what you need to keep your new hires employed.

"You should wait to pay yourself a higher salary until later rounds of funding"

I'm not a proponent of getting rich off salary. However, as you raise money, you increasingly lose more control of your company. As you lose control, there is a risk of getting removed. You don't want to be left out on the street without a penny to your name if that happens.

Again, there are two sides to every discussion. This is just the perspective of an "old founder".

Published on: Feb 28, 2015
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