
What salary does the founder of your favorite startup get? - mikekulakov
http://thenextweb.com/insider/2014/01/14/salary-founder-favorite-startup-get-probably-high-one/#!sbu1l
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dangero
I've always heard that a founder's salary should be the amount that allows the
founder to focus on the business. The concept of a super low salary seems to
be focused on the 20 something single crowd. I have a family to support, so I
can't take a super small salary and eat Top Ramen. This may be a subtle way
that older founders are discriminated against. The story I've heard from
founders who have families is that they have a savings from a previous
business that they are tapping into to make up the difference, or their spouse
is carrying the majority of the family burden. Neither of these situations are
mine and I'm sure I'm not the only one.

~~~
verteu
> I have a family to support, so I can't take a super small salary and eat Top
> Ramen. This may be a subtle way that older founders are discriminated
> against.

This is not (harmful) discrimination. Ceteris paribus, people with financial
obligations are less fit to found a startup.

~~~
toast76
They're also more motivated to succeed.

I have a wife and two kids (both under 5) and a big mortgage. I pay myself
barely enough for us to get by (the lowest salary that I've ever earned). The
difference is made up in savings and my wife's occasional consulting work. I'm
the lowest paid in the company.

The cost of failure is so much higher, which simply means you're far more
driven to succeed.

~~~
beat
Absolutely. When the fate of your family hangs in the balance, you're not
going to walk away just because it stops being fun.

~~~
obstacle1
I'd argue that this can actually be a huge liability. Sometimes (a lot of the
time, a majority of the time?) a ship's just gonna sink, and being
overinvested in its not sinking can obscure the escape route, so to speak.
Hard to imagine a scenario in which being able to shift gears/directions on
'go' isn't preferable to _needing_ a specific thing to work out.

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sudonim
Here's data for Customer.io for comparison:

* Currently based in NYC

* Raised ~$700k.

* Both of us founders are each @ $80k and have been the same with the exception of a couple of months at minimum wage.

The goal with these salaries, was to be able to not think about money while
working on the company. It kind of worked. 80k in NYC doesn't get you very far
unless you're making huge lifestyle changes and not eating out with friends,
or traveling for fun etc... I moved out of Manhattan to Brooklyn to save a bit
on rent.

I'm planning to raise our salaries later in 2014 (don't tell John, it'll be a
surprise).

For other examples, check out what Joel @ Buffer has shared about their
salaries:

[http://open.bufferapp.com/introducing-open-salaries-at-
buffe...](http://open.bufferapp.com/introducing-open-salaries-at-buffer-
including-our-transparent-formula-and-all-individual-salaries/)

~~~
elwell
> 80k in NYC doesn't get you very far

wow

~~~
hifier
Especially when you consider that after taxes, retirement savings, etc, you're
likely to take home less than 50% of gross. If you're single you can still
have fun on 80k, but it's peanuts if you want to have a family and/or travel.

------
danielharan
“In practice we have found that if you only ask one question, ask that.”

As most CEO salaries are low, the answer has very little information value.
Adding numbers from that chart, ~8k / 11k founders surveyed were making do
with less than 50k/yr.

Looking for the top 10% of businesses by asking a question that only
discriminates against the bottom ~30% is better than nothing. Assuming this
gave no false negatives, it would increase the investor's hit rate by ~43%.

Any lower than 50k and a founder is either independently wealthy, living a
pauper lifestyle (and being stressed out instead of concentrating on their
startup), or using an expense account. So the positives don't all mean the
same thing. If you're independently wealthy because of a previous success,
your odds are already much higher. A person stressed out about money however
is likely to make really poor decisions.

------
Duhck
This correlation is lost on me. Founders are entitled to make a living wage.
In NYC being paid less than $50k would mean a few things: !) You have to live
in squalor. 2) You have money from somewhere else to support the rest of your
needs. 3) You use the business to pay for your expenses

I would like to see the size of the business as it relates to compensation. A
single founder with no employees and no office space can make $50k/yr salary
and live comfortably if their rent and expenses are on the business. Otherwise
I am dumbfounded by how this works...

~~~
lnanek2
It's not that tough in NYC if you go with lots of roommates, or are willing to
take the bus from cheap NJ living each morning. Even after I stopped taking so
much equity instead of cash and moved into the city proper, I still managed a
basement apartment in Chelsea for only $1,500/month. Something like Washington
heights at the top of the island would probably be half that.

------
petercooper
I suspect many founders of profitable non VC funded startups have small
salaries and instead "pay" themselves through dividends as it can have tax
advantages which might color the value of such graphs. That said, I believe
such companies aren't always considered "startups" around these parts for some
reason but that can be hazy when it comes to other people's surveys.

~~~
jakejake
Yes this article is somewhat misleading in my opinion. I would imagine that a
lot of CEOs only pay themselves a fraction of their income through typical
payroll. Steve Jobs famously paid himself $1 salary. Although in his case he
apparently didn't take other forms of compensation since apparently he didn't
need the income. But many other CEOs are known to take low salaries and then
get millions in bonuses or stocks.

~~~
basseq
_Although in his case he apparently didn 't take other forms of compensation
since apparently he didn't need the income._

He received millions in stock options (e.g., a December 2001 grant of 7.5
million options to Jobs that subsequently ended in a backdating scandal) and
an Apple-sponsored private plane beyond his salary.

~~~
jakejake
Ah, so much for Wikipedia! Well I guess that goes to prove my point even
further than CEOs can appear to be making no salary but are actually receiving
tons of money.

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logfromblammo
This talk of "salary" is misleading. Everyone must know by now that the
smartest guys in the room get compensated by other means, if only because if
you say the "s" word, the IRS hears it.

If your founder is only making $75k as salary in Silicon Valley, and he looks
like he still eats and showers regularly, he's getting compensated in some
other way as well. Who knows where it is coming from, but you're definitely
not eligible for it as a mere salaried worker bee.

------
dmtroyer
Right. Keyword here being 'salary'. Most business owners pay themselves only
enough of a reasonable salary to keep from getting audited and compensate
themselves through other, technically non-salary, means, for tax purposes.

~~~
VLM
This is hardly a tech startup only phenomenon. Especially in cash businesses.
Salary = enough to keep the IRS off your back and not a penny more.

The company owns every tool, every book, every piece of furniture, cars, some
clothes, every meal is a business meeting...

------
karangoeluw
Before you jump to conclusions from this graph [1] about India, keep in mind
that for most families, making $50k a year is a glory. You can live
luxuriously, drive "high-end" car(s), but a moderately-large house in a couple
years etc. You get the idea. I always hate it when they compare economies in $
for everyone.

[http://cdn2.tnwcdn.com/wp-
content/blogs.dir/1/files/2014/01/...](http://cdn2.tnwcdn.com/wp-
content/blogs.dir/1/files/2014/01/India.jpg)

~~~
kokey
I don't think living in India makes consumer electronics, cars, worldwide
travel, world class education, clean neighborhoods, reliable electricity, good
plumbing, or anything like that cheaper. I've moved between developed and
developing countries, and I have found that first world goods and services are
more expensive in developing countries, the only thing that is cheaper is
labour. In other words if you want people to cook and clean for you, serve you
food, mend your clothes and fix your car, it will be cheaper. The cost of
living only feels cheaper in developing countries if you consider the
population of that country to be your peers and you generally do the same
things for food, entertainment and running a household as them.

------
shaggy
Somewhere along the line, this concept of a founder/CEO taking a tiny salary
got worked into the way start-ups work. Should a founder be paying themselves
a huge salary and living it up based on that? No. Should they be able to pay
themselves a livable wage that doesn't mean they are spending their nest egg
or making drastic cuts in how they live? Yes.

This article is lacking in one key area, which makes the argument valid or
not. How much money these startups are making. With out that data, this is
just another self fulfilling prophecy that the VCs and their followers can
point to and say, see?

I'd be lumped into the older founder class and having a family to support I
could not take a giant pay cut if I started a business. I save and manage my
money carefully but I would pay myself the same salary I make now so that I
could at least have the same level of money comfort I have now. Doing anything
differently is simply stupid and a VC that is angry about it isn't someone you
should do business with. It's a way they keep their power when at the end of
the day the people with the idea that makes all the money should have the
power. You want 10 or 20% of my company? Great, I'm going to pay myself what
I'm worth. The minute people stop letting themselves be bullied by VCs is
exactly when this kind of stupidity stops happening.

------
tonydiv
What I wonder about is whether founders are paying rent. If you're making $60k
in SF, but your rent is considered a company expense, you're in pretty good
shape.

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patrickg
Very interesting! It's a pity they don't break down on the 0-50k part, as it
is the biggest piece of pie in the charts.

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callmeed
Hmmm, I'm in the "Mature" product phase and $0 funding level. My salary is
quite a bit higher than the averages in those 2 charts. Maybe I'm an anomaly.

Like dangero said, it's probably focused on 20-somethings. I've got a wife and
4 kids (no mortgage).

------
zachallia
This may be more interesting if it were split into startups that make money vs
startups that don't / have funding or don't have funding.

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mindcrime
Well... my favorite startup is Fogbeam Labs, and I get a salary of a whopping
$0.00 / year. :-(

~~~
dinkumthinkum
I guess according to Thiel, your startup should be infinitely successful?

~~~
mindcrime
w00t! Who knew it was so easy to be amazingly successful!?!! Yeehaaawww!! I'd
just like to thank all the people who helped me make it to this momentous
occasion - my mom, my dad, my 3rd grade science teacher, ...

------
lettergram
I would just like to mention that salaries are not very comparable across
countries or even cities. The cost of living in silicon valley (San Francisco
area) is twice as much as living in Chicago and several orders of magnitude
greater than living in India.

------
fleitz
Could it be that a founder who is making decent coin and in control of their
life doesn't need to make $1B to be happy?

Also, isn't the founder generally the primary equity holder? If so how can
equity holders and the founders interests be misaligned?

------
johnpmayer
I wonder if there are similar statistics for NYC? I'd guess pretty similar to
London.

------
iterable
Salary should be low enough for the founder to feel like he needs to hustle,
but not so low that he is desperate. His mental energy should be focussed on
the business, not on whether he will have enough money to pay rent and eat
this week.

------
ojbyrne
There seems to be a logic error here: "The CEO’s salary sets a cap for
everyone else." and then the rest of the article talks about "founders." CEOs
and founders are not identical sets.

------
szirka
Generally, a start up founder should be more interested in growing the
company's (his) equity as opposed to taking a paycheck. The paycheck should be
for living expenses, IMHO.

~~~
usaar333
Agreed, but what is fair for living expenses?

Per the article:

> In Silicon Valley, 75% of founders pay themselves less than $75,000 per year
> and 66% pay themselves less than $50,000 per year, according to the data.

These numbers are lower than what I would consider reasonable for a founder
[1]. You certainly can live in the Bay Area on these salaries, but it means
spending more time thinking about how and where, possibly having a longer
commute, and possibly dealing with poor roommates. All which waste time, time
which would be better spent on the start-up.

[1] For an SF-based single founder, I'd consider $80k reasonable. Higher if
(s)he has college debt to pay off.

------
winterchil
I think there's a glitch with their pie charts. They have no founders for any
region making a salary in the 125k-175k bucket. Possible, but unlikely.

------
bjoernlasseh
Thx for posting mikekulakov.

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michaelochurch
_The lower the CEO salary, the more likely it is to succeed._

Sure, but this an obvious "correlation is not causation" situation and the
reason for this is unpleasant.

If you're from a middle-class background, you have to take full salary because
that's the only money you have to live on. If you're from an upper-class
background, taking full salary hurts your relationship with investors, and
will possibly hurt your bargaining position in future negotiations.

People from middle-class backgrounds cannot afford to pay themselves under
$50,000 per year in San Francisco. As for the upper class, if they have trust
funds, they can and probably will accept low salaries, just as there are
publishing interns all over New York, making what would be poverty wages, and
who live on their trust funds.

People from upper-class backgrounds are more likely to have the connections
that will make their startups succeed.

 _That_ is the reason for the correlation. It's just another incidence of
(unintended?) VC classism.

~~~
ivanplenty
This post will be downvoted to hell, but I have been wanting to say this for a
while and can't find a way to contact you. (My email is my HN handle at gmail)

You may or may not be right about this or the rest of VC-istan. But I LOVE the
fervor and color of your posts. I love hearing a contrarian view. And I would
love to buy you a cup of coffee or beer to say thanks for making my time of HN
so much more interesting.

 _Edit: Thanks for the reply, and I 'm relieved to hear others share my
sentiment. I have seen you refer to rankban elsewhere, but this was the first
time I understood what you meant.

Also, yesterday I published research about Everpix shutting down and I got two
groups of feedback:

1) From startup founders generally positive comments or clarifying questions.
All were constructive conversations.

2) From VC-connected people generally defensive FUD and ad hominems.

It was very interesting to watch, and you are certainly not alone._

~~~
michaelochurch
_This post will be downvoted to hell, but I have been wanting to say this for
a while and can 't find a way to contact you._

Actually, it's at +9 [ETA: changed during writing of reply] right now. [+12 as
of 11.56 PST]

The reason my posts tend to end up at the bottom is _not_ (in general)
downvoting or low karma scores. Of course, I've had some posts get downvoted,
and a smaller number that deserved it. (Who hasn't?)

The ranking system was revamped around summer 2013 to include personal
penalties that seem to have hit a large number of the top-100 posters
(including respected ones, and less controversial ones than me). It's called
"rankban". I also experience "slowban", which is 20x worse latency when logged
in than in incognito mode.

Rankban is supposed to make us go away, I presume, but it actually had the
opposite effect on me. I post more on HN post-rankban. It suggests that my
anti-VCistan writing is in danger (as perceived by PG) of actually being
effective. I'd probably be restricting myself to technical articles only (I
don't care that much about VCs) were it not for rankban.

~~~
scarmig
I wonder if upvoting rankbanned people itself incurs a penalty...

~~~
elwell
The Arc macros have taken a life of their own. PG's not directly to blame.

