

Ask HN: Salary stipulations attached to seed deals? - chatmasta

This is something I have been wondering about. Say you are an unmonetized company and you take a $1mm seed round. Your company may be unmonetized, but if you are working full time, you need to pay yourself to live. Generally speaking, who decides the amount of your salary?<p>Is this a stipulation that goes into term sheets? Is it based on labor market value? e.g. if you&#x27;re a software engineer, you pay yourself max $100k?<p>Just wondering how this works.
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patio11
In a seed round, you presumably don't have your investors on the board, so the
answer is ultimately you set your salary. I might have an information right as
an investor to certain financial docs which would let me figure out the number
for founders I invested in, and I'm positive they'd just tell me if I asked
nicely, but I don't recall any formalization in the docs about it. (Sample
size: 2.)

Common practice is to pay oneself substantially below market, with higher
salaries for entrepreneurs with higher personal expenses, which usually
translates to "married plus kids plus house equals a lot more money." I'm
unsure common practice is either fair, wise, or optimal, but not strongly
committed to that that. (I do think strong pushback on any reasonable founder
salary is a disqualifyier for investors that I'd take money from or advise
taking it from.)

This answer is modestly more complicated after you have a board, presumably
after series A.

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chatmasta
So basically investors want to know that you are not taking investment because
"doing a startup" pays better than your market-rate job. It's a motivation
filter.

Below market salaries motivate founders to generate profit. Since investors
know they have legally little control over the founders, any motivation
increases investment value.

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staunch
The board of directors decides.

