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How to pay yourself as a startup founder | Startup Finance Basics w/ Kruze's Scott Orn | E1860

This Week in Startups

Thu Dec 07 2023



Founder Salary Determination:

  • Founders should consider the trade-offs of starting a company, realizing that they may not make as much as in their previous roles but have significant upside and fulfillment.
  • The average salary for founders at seed-stage companies is around $120,000 to $140,000 annually, with variations based on funding raised and job responsibilities.
  • As companies raise more capital and founders' roles evolve from doers to managers, they can expect increased compensation.
  • It's important for founders to be thoughtful about their personal burn rate before starting a company to ensure financial stability.

Gender Disparity in Founder Salaries:

  • Data indicates that female founders are paid an average of $15,000 less than male counterparts, highlighting existing gender-based disparities in founder compensation.
  • This disparity may stem from historical pipeline issues and women being more conscientious about cutting their salaries to benefit the rest of the team.

Founder Compensation Strategies:

  • Founders are advised to run their proposed salary by the board and get it approved through a board resolution each year to maintain transparency and avoid potential conflicts.
  • In terms of equity allocation and salaries, it's essential for founders not to lower their own salaries while paying personal expenses out of the company's account. Optics and tax regulations play crucial roles here.
  • Founders are often not the highest-paid individuals at their companies; instead, other key employees such as top engineers or salespeople may command higher cash compensations due to added value brought to the company.

Financial Management Best Practices:

  • Implementing rigorous expense control measures such as real-time transaction monitoring through tools like Slack can help prevent abuse of company resources and promote responsible spending habits among employees.