

How much do founders pay themslves? - echan00

how do founders figure out how much to pay themselves?
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nostrademons
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.

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panotpon
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.

