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A Founder Salary Calculator

• jacquesm 9y ago
  Strong disagree on letting the founders personal situation count for the salary to be taken off the table. Having kids or not is a personal decision, if your co-founder has kids and you don't or vv then your salaries should be - all other things being equal too - equal. Paying one founder more than another is a good way to start a founder conflict and those you need like you need a toothache.
  • nawtacawp 9y ago
    The military has this system. A married service member gets paid more than a single service member. The idea is that the single soldier has less requirements for housing. I’m not stating whether I agree or disagree. Just pointing out a similar system already in place.
    • jacquesm 9y ago
      Yes, but the military is not your start-up. Society will also give couples with kids tax breaks, which will already widen the gap in net income between two otherwise equally salaried co-founders, I really see no reason to artificially widen that gap. BTW in almost all situations that I've been in where this would have mattered I was the one with the children.
      • segmondy 9y ago
        Daycare cost for one child where I am is $15000 after tax dollars, not including child cost. Add other necessarily child costs and that number goes up. Grown ups might go on ramen diet to build a business but their children can't afford to.
    • repomies6999 9y ago
      Yeah it makea perfect sense to model your startup after some massive government organisation.
    • tyingq 9y ago
      They get paid a housing allowance, but their base salary isn't higher. The single soldiers live in a dorm that they aren't charged for. Granted, the dorm isn't great, but it's not a straight salary difference.
      • nawtacawp 9y ago
        Receiving a housing allowance sounds like more pay to me. Is there a requirement that states the service member must utilize all of the allowance on housing? Could they chose to live under their allowance? Doesn’t sound like the single service member has the same choice. What if two service members marry each other, do they both get a housing allowance?
        • tyingq 9y ago
          The housing allowance varies, but typically, it's below what the actual costs are. Varies by location. Dorm residents don't pay for the room or food, if they choose to eat at the mess hall. They also usually get free use of washing machines, a common room with TV, etc. Basically, it varies. In some locations the married soldier might be better off. In others they aren't. Either way, the difference isn't striking. You also give up the housing allowance if you live in base housing as a married couple. These units are typically pretty modest. There are, of course, exceptions. Areas where single soldiers get a housing allowance because no barrack exists. And areas where the married allowance is higher than it should be, for various reasons. The point is, though, that it's not a direct comparison to the story. The single founders didn't get a compensating free room and board.
  • Benjamin_Dobell 9y ago
    If your founders have so little respect for each other that they can't acknowledge and gracefully accept the varying circumstances of their peers then the business is likely screwed anyway. If founders are that tightly wound, with respect to each other, then that's a recipe for turmoil ending in disaster.
    • jacquesm 9y ago
      The problem is that such things tend to go underground and they can pop out years later, for instance when you're raising your series 'A' or during an exit. And if and when that happens - besides it being unfair in the intermediate time - it can cause real problems. This is one of my main reasons for advising against founders that are in very different phases of their lives, there is an element in there that you can not easily get rid of that might cause issues in the longer term.
  • trisimix 9y ago
    They also say they had given up there salary for the first few years because of a previous exit. I think you should have enough to take care of your kids and the other non family members should make less, but not the price of your kids less.
  • trisimix 9y ago
    By your logic theyshouldnt get tax breaks?
    • jacquesm 9y ago
      Obviously: No. And besides, they already do.
  • jasode 9y ago
    >Paying one founder more than another is a good way to start a founder conflict The book "Startupland"[1] that chronicles Zendesk[2] talked about this exact problem. One of the 3 founders had "family" to take care of and because of that, he wanted a higher salary. The 2 other founders were thinking, "what?!? you're not the only one making sacrifices here!" After some discussion, the 2 other eventually agreed to it but they really resented it and it was a source of bad tension for a long time. Zendesk eventually got to the IPO so the 3 got past that unequal salary episode but the soap opera drama doesn't seem to be something you want for a struggling company. (Side note: I think it's unfair to downvote jacquesm for bringing this up. Even if you disagree with his opinion, it's still worth leaving the text ungreyed to discuss pros & cons.) [1] https://www.amazon.com/Startupland-Risked-Everything-Global-Business/dp/1118980816 https://www.amazon.com/Startupland-Risked-Everything-Global-... [2] coincidentally, Zendesk is one of the companies in Point Nine's portfolio: http://www.pointninecap.com/portfolio/ http://www.pointninecap.com/portfolio/ (However, author Christoph Janz joined Point Nine in 2011 and Zendesk started 2007 so he may be unaware of their early salary drama.)
    • wonderous 9y ago
      There is no single right answer, but if the co-founders agreed to something, then held their choice against party making a request - that to me is a much more serious issue than the party that make the request for a higher salary.
      • jasode 9y ago
        >if the co-founders agreed to something, then held their choice against party making a request One can "agree" to something because of business expediency but simultaneously have a human response that it feels unfair. As analogy, I'm sure many programmers have "agreed" to a low $55k salary and took the job but simultaneously felt that the company was unfairly compensating them because they thought they were worth $100k. Unfortunately, agreement doesn't override human feelings. If you were interpreting my blurb from the book that the 2 founders were constantly throwing the unequal salary in the 3rd founder's face, I don't think that's what happened. The book made it seem like it was a more like a silent resentment. Also, the salary argument came up after Zendesk was already established and running. I didn't previously make it clear that this wasn't 3 founders deciding on unequal salaries when Zendesk was just an idea on a napkin. If one agrees at the founding, that should remove triggers for resentment.
  • petercooper 9y ago
    Having kids or not is a personal decision Could extend that thinking to living in the middle of an ultra-expensive locale like SF or London and take that multiplier away too ;-) I do kinda agree, though. If one founder needs more salary, they should pay for it with (slightly) less equity IMHO.
    • curun1r 9y ago
      Why "slightly" less? Even if it can't be sold, equity in early stage startups has an exact dollar amount attached to it. If one founder needs more salary it should be a simple calculation determine how much equity they should give up for that salary.
      • gkop 9y ago
        > equity in early stage startups has an exact dollar amount attached to it No - at least in the US, you avoid pricing your start up until it's necessary, in order to plausibly say the equity is worth as close to $0 as possible, so equity grants result in the smallest possible tax liability. In practice, this means raising early rounds in convertible notes, which don't require the company be priced.
        • curun1r 9y ago
          At that stage, you're not taking a salary, so your point is moot. This is about startups that can afford to pay founders a salary, and those startups have either raised money at a specific value or are profitable enough that you can't claim the equity is worth $0.
      • petercooper 9y ago
        I think there needs to be some quid pro quo, but early stage startups often have such a low valuation that accurately matching the difference in salary could result in an equity disparity that breaks any pretence of being "equal"(ish) partners.
    • wyclif 9y ago
      By all means, do it outside of "high burn" geographies and hipster playgrounds.
  • Geekette 9y ago
    Strong disagree on letting the founders personal situation count for the salary to be taken off the table. Having kids or not is a personal decision Having kids is a factual part of many people's lives, not an arbitrary personal decision that can be erased at startup time. A person with kids simply has higher living expenses. Of course, if you feel that strongly about it, you can choose to only found companies with single people but that needlessly reduces your pool of potential founders who are talented, experienced, disciplined, of great character and compatible personalities. Otherwise, the issue of varied expenses can be balanced via 2 approaches: a) All cofounders take salary equal to the amount required by the one with highest expenses and agree on the resulting consequences (smaller operating budget, higher urgency towards independence via profitability/ funding, etc). b) Equal salary nominally assigned but the founders with less expenses agree to loan the startup the "excess" portion of their salaries. This can be structured and recorded as deferred compensation/loan agreement payable upon achieving X financial milestone, e.g. when revenue hits a certain level or target amount of funding is received.
    • k__ 9y ago
      I didn't choose "to not have kids" so I could pay more for the kids of other people, if I wanted to pay for kids, I would have got some myself. :D
      • mooreds 9y ago
        As I mentioned in other comments I think this would serve as a valid filter. You'll either not work with founders with kids, or only with founders who have enough money they can take the smaller salary. And that may be fine for your startup. But you are limiting your talent pool, and should make sure that is worth the trade-off.
      • jaxn 9y ago
        Then don’t start a company with people who do have kids. That is fully within your control.
        • temac 9y ago
  • mooreds 9y ago
    Would you pay founders differently if they lived in different areas (SF vs Thailand)? I think you can argue either way, but I will tell you as a founder with kids that if the startup can't pay me enough to take care of my family, I won't be part of that startup for long. You can't pay tuition with equity. That said, this may be a valid filter for you. The most important thing is that the discussion about compensation happens aboveboard and that everyone feels the situation is fair.
  • jaxn 9y ago
    There are consequences for putting one founder in a tighter spot than the others. This can play out as one founder having to take off for dr appointments b/c things are stretched so thin their spouse can’t take off or they can’t afford a nanny, etc. It also plays out that the founder in the tighter spot is going to be making decisions geared to a faster influx of minimal cash vs long-term value building. This is the same as VCs letting founders take some money off the table in later rounds b/c “the first million is worth more” and the investors want to swing for the fence. Happiness doesn’t change much over $50k, but that number goes up with kids. BUT, that also means if you are going to take into account family situation, you should also take into account family money, if you have kids and a spouse with a big salary, you may not need more.
    • krisroadruck 9y ago
      "Happiness doesn’t change much over $50k" Every time I hear this I cringe. I was much happier making $180K than I was making $60K. I could go out more often, purchase more of my wants and needs without worrying about mounting credit card debt. Afford to live in a non-shit-tier apartment, and still have money left over to tuck away a decent emergency savings fund without it taking a decade to reach 6 months living expense backup savings. Who came up with this figure I wonder?
      • roel_v 9y ago
        It's a since discredited number from studies on gallup polls. I think it was the freakonomics blog that had a series of posts outlining the issues with it; since then there were more rigorous studies concluding that the earlier conclusion was not valid.
      • jakobegger 9y ago
        But where do you live? In many cities $50k is more than enough to live in a decent appartment.
  • robhunter 9y ago
    If you're having conflicts with your co-founders about a nominal difference in salary ($10K to $20K), I'd suggest that perhaps it's a sign that you're likely to encounter more frequent conflicts down the road about things that actually matter.
  • sidlls 9y ago
    I'd like to see some of these singletons balance a family and successful technical career at the same time. That takes a lot of work. Investors discount a person because he has a family due to some perception that therefore he or she won't work as hard on the company are either ignorant or unforgivably stupid.
  • austinjp 9y ago
    > Having kids or not is a personal decision It is so, so very simple for a business to account for children among its workforce. Any staff aged under ~45 on your books? Well, guess what? A percentage (look up your regional variation) are going to have kids, soon. A business that refuses to financially support its staff through predicatble life changes is flagrantly abusing those staff. Even unpredictable life changes can be mitigated and supported. A business that cannot afford to support these staff is failing, and again abusing the staff by shifting the blame onto them.
    • austinjp 9y ago
      Downvoters, it would be useful to read your reasoning. People work for remuneration which reasonably exceeds their expenses. A predictable percentage of the population will have children. Children increase drain on financial and time resources. It's reasonable that people with children might look for work that offers reduced/compressed hours, or higher remuneration in order to manage increased financial/time costs. If your org does not offer these options, why not? Is it deliberately witholding employment from ~50% of the population? If your org cannot offer these options, why not? The figures are eminently predictable. Why are they not in the business plan?
• jerguismi 9y ago
  So this kind of defines value = able to raise lots of money. That just doesn't make sense to me. Also the idea that you should be paid more because you have kids is same logic that communists used "to everyone according to their needs". In capitalism people should be paid based on what value they provide. So, to me this calculator looks stupid. What if my startup hasn't raised any money, is still very profitable and employs 20 people?
  • __s 9y ago
    Could argue that raising children potentially provides society future value, making the increase a kind of long term investment
    • aioprisan 9y ago
      For society, maybe. For the startup, no.
      • __s 9y ago
        Agreed. The line of thought probably ends up being an argument to have tax cuts for parents
  • frogpelt 9y ago
    This salary calculator doesn't seem to be focused on producing pay based on value provided. It is a guideline to determine a reasonable amount a founder can get by paying themselves. That's why things like location and family size matter. If it was strictly a value proposition, the founder could pick any number that his investors would be okay with; he's the founder.
• amimetic 9y ago
  Hoping the "100-hour-work-week" bit was a joke.
  • simonswords82 9y ago
    Probably not...getting any business off the ground usually requires a god awful amount of work at the outset. That's the trade off.
• trisimix 9y ago
  I agree with most points but if you are dead set on dedicating yourself to the compahy you work at why did you take a large exit?
• wonderous 9y ago
  It would be interesting to hear YC’s official position on founder salary. Anyone have a link to an official post or comment from YC?
• nopinsight 9y ago
  Does/should a founder’s skills and market-rate salary affect their salary in the startup? For example, if a highly sought-after AI expert founds a startup with a talented but somewhat junior businessperson, their market-rate salaries could be 2-5 times different and a case could be made that the one with higher market-rate salary makes a larger sacrifice/take on more risks and thus should be compensated more?
  • rbcgerard 9y ago
    Yes - or their equity ownership
  • Geekette 9y ago
    No, it shouldn't. If both senior and junior are starting the company at zero and working fulltime/equally pouring sweat equity in and assuming similar living expense profiles, then they should be compensated similarly. If you can't see your cofounder as equal, then partner with someone else. Or if the salary differential is that important to you, then remain on the corporate path.
    • deleted 9y ago
      [deleted]
    • nopinsight 9y ago
      What if the junior partner is the best person available with history of good working relationships with the senior cofounder? Not considering him/her because of salary differential might be suboptimal for the startup. At the same time, the senior cofounder could have a much larger need for salary because of mortgage and family to take care of, so receiving too little salary would cause hardship and adversely affect the startup, while the junior person has less financial obligations.
  • bwilliams18 9y ago
    And that should be reflected in the equity split, not in comp.
  • Spooky23 9y ago
• onion2k 9y ago
  A founder's salary should strike a balance between maximising their ability to work on their startup and minimising the startup's burn rate. Distractions like spending time finding somewhere cheaper to live, trying to decide whether you can afford something, or having arguments about money with a spouse reduce the likelihood of the startup succeeding so the founder needs enough for those problems to just go away. That means paying yourself enough for them not to be an issue any more. Equally though, paying yourself so much that the startup's capital will only last 6 months is stupid if you're a year from getting to market. You have to be sensible. What you could earn elsewhere, what you earn compared to your co-founders, etc are just unnecessary distractions. The startup and the future value you're building are the only things that matter at this early stage.
  • bkovacev 9y ago
    Exactly this. I get chills reading that some founders were eating ramen for a year. Imagine how much extra work could have a fed brain complete. Some may say I am not understanding the startup life, however without founder's health and sanity startups rarely succeed, because just like you said they're distracted with things they should not be worrying about like living frugally. On the other hand I would never jeopardize my health, family and property for a startup. Maybe that will cost me 10 million in startup funds from a "get rich die trying" mentality loving VC, but at the end of the day, too many startups have failed because they scaled too soon and because someone made a decision when they lacked glucose. I'd much rather have my physical and mental health and future success, than a short term money to spend and an uncertain life ahead. Now, I am not saying that I would not work extra, but there has to be a balance otherwise you'll burn out.
    • cyberpunk0 9y ago
      If you don't want to jeopardize your health don't join the rat race to begin with. Or be rich and do little work like most founders
      • Jakawao 9y ago
        >be rich and do little work like most founders I trust you had an experience that lead you to think this way, but you clearly don't know "most founders."
• grandalf 9y ago
  Isn't the founder salary something that only the founder and those who bought a board seat should care about? If I'm an investor and the founder wants a 40% premium over what the algorithm recommends, I may or may not agree, but surely the founder's judgment on that one issue is not an outlier from other good or bad judgement he or she may have. I'd actually be more worried about minor graft like the founder hiring a family member to provide catering or the founder taking bonuses when most employees are not paid bonuses.
  • DonHopkins 9y ago
    At a flat rate of $10,000/year per pop, the Duggars and their Quiverfull movement would love this Founder Salary Calculator. Should you get more or less financial reward if you pay child support to outsource your kids (KAAS) instead of raising them yourself, so you have more time to dedicate to the start-up?
• k33n 9y ago
  It's amazing how little VC's value early stage founders. It's an accepted fact that hiring a competent CEO is going to cost you well into 6 figures and up. Because their experiences and track records are rare. If we all know having a good CEO is well worth that kind of money, then why don't we apply the same logic when allocating capital for paying the founder(s)? It's a hard job, fraught with literal peril. Founders often face personal financial ruin if the venture fails. Founders are literally pulling on a yarn to iterate on and articulate very broad visions. They are faced with critical decisions that will affect many people's lives every day under incredibly stressful conditions. If there's $1,000,000+ in the bank, it's a disgrace to pay a founder what amounts to Jr. level rates anywhere else.
  • CalChris 9y ago
    Founders and CEOs are not the same thing just as startups and established corporations are not the same thing.
  • brianwawok 9y ago
    Startup A pays founders 50k and has budget for 4 developers. Startup B pays founders 200k and has budget for 2 developers. All else equal, B should win right? It is running leaner that gives you more effort to throw at the problem. Until the point your pay is so low you have to stress about money. Founder pay that is lowest to avoid stress seems optimal.
    • alfiedotwtf 9y ago
      "What one programmer can do in one month, two programmers can do in two months"
      • brianwawok 9y ago
        Yes this is why Google, Apple, and Facebook all have 1 programmer.
• rbcgerard 9y ago
  I’d think the starting point would be a market rate salary - to the extent that a founder is willing to take a lower than market rate salary their equity should be increased taking that into consideration at each stage (or just issuing equity to that person that’s the difference between actual and market each year).
  • edanm 9y ago
    Supposedly that's what equity plus vesting achieves, which is pretty much the default.
• nautilus12 9y ago
  Why is it when I read this it feels like the VC essentially "hazing" the founder saying that "you will get your payout later so suck it up." Thats not true for every company because not every company has the goal of doubling every year and then getting sold to Google. They don't all have to follow the Silicon Valley model. The irony of this is that the VC has the operating funds to wait till later to get their payout, its like they are making the founder suffer with them. Simultaneously they are taking as much equity as possible essentially minimizing the founder's payout. The difference is that this is probably not the VC's first venture so they have plenty of cash to rest upon whereas a first time founder is literally scraping by, possibly with a family, mortgage, etc.
  • nautilus12 9y ago
    Really the more I think about it, this more sounds like one VC's attempt to weed out people thinking about starting a company by scaring them. There is nothing set in stone that says founders should get paid a certain amount. Every company has different cash flows and situations.
    • lmilcin 9y ago
      You don't need external funding to start a company. Then you can pay yourself whatever you want it's your company. If you want external funding then you stop being sole owner and you need agreement with othe owners on what is the worth of your services to the company. Your stake has nothing to do with it.
    • CalChris 9y ago
      weed out people thinking about starting a company by scaring them Yeah. You sure won't be hanging out at the cool cafes with your new superfriends delegating menial tasks to your hirelings. You'll be working your personal ass off while risking someone else's money.
    • chrija 9y ago
      I'm not sure if you've read my post. If you read it, you'll see that I wrote: << The numbers in the model reflect what I think is market and fair based on the data points that we have and some industry benchmarks that we were able to get. However, our data set is quite limited and the numbers produced by the calculator should by no means be taken as the ultimate truth. If you disagree with my assumptions or have seen different numbers in the market I’d love to hear from you! >> No need to assume bad intentions.
• sheeshkebab 9y ago
  I’d qualify these with - a non technical founder in a product company. A technical founder of a consulting company would be making above market rate from day one, or you are doing it wrong.
• dahart 9y ago
  > I saw a study according to which founder salaries are much lower. According to this data source, 75% of Silicon Valley based founders pay themselves less than $75,000, with 66% paying themselves less than $50,000. Based on these numbers, even for companies that have raised more than $10M the average salary is only $81,700. This looked odd to me, and maybe the difference is due to the fact that the study is three years old. I ignored this data source for now, but again, suggestions and input are very much appreciated. I totally appreciate a VC saying it's okay to take a decent salary, but this point seems strange to me. Why on earth ignore the data?? I doubt three years makes any difference at all. I would speculate this is more likely a philosophical difference between the US and Germany. A founder's entire existence is spent trying to figure out how to get a company to survive its first few years. Companies that raised $10M are dying all the time. $10M really isn't that much, it buys a startup with 30-50 people maybe a year of runway. In a company that size, one or two more engineers can make a real difference, and if four founders forego $50k/year they can then hire one or two more people using the difference. They basically spend every second trying to figure out how to stretch every dollar they have, it's not surprising to me that many live their early startup years exploring just how little money they can actually live on.
  • chrija 9y ago
    The reason why I ignored the data is that it was in stark contrast to several other data sources that I've seen. But it's a good point, I need to look into this again. I will also contact the research team of that study and ask how they collected the data.
    • dahart 9y ago
      Ah, that is interesting. I'd love to see something on the multiple data you've seen! I tried to look but didn't see whether this data is for only VC funded startups, or for a wider set that includes others, do you know. If there are other data sources on SV startup salaries that disagree, then I have to take back my US vs Germany comment. Perhaps the discrepancy is that this data was all opt-in, which could bias the sample? Anyway, thanks for following up!
• Overtonwindow 9y ago
  I've been through a few startups and I always paid myself as little as possible. That is to say, I paid myself the minimum I needed to cover my own personal fixed costs. For me it was important to leave as much money as possible for others and growing the company. When the startup is successful, then I'll take a higher salary.
  • chrija 9y ago
    Same here. I think this is the right attitude. By the way, this even goes for micro VCs, we didn't (couldn't) pay ourselves a salary in the first year or so.
  • DaniFong 9y ago
    Notes to a 20 year old me, from a 30 year old me who survived the last decade with my determination intact. I am a lonely survivor! Be careful with giving your buffers (capital buffers, energy buffers, credibility buffers) away. This is critical leverage that you need in many situations and almost all VCs refuse to give you any credit for whatever you have already given of yourself. Sweat equity has minimal redeemable value outside of a success, in the eyes of sharks. It is a dangerous game to play, especially with sharks. I always recommend founders aim to contribute to the mission more personally than any other executive, and get paid at the maximum salary within the organization. Then, you should aim at fairness inside the organization, which is a very hard bar to reach, but is the correct response. What the market pays is immaterial, it's about what you value and how much you want to invest in your employees lives. Generosity is one thing, but some people waste the money. Try not to give them large budgets. If a single mom is doing an amazing job on a tiny salary for her many kids, consider giving her more budgetary responsibility -- and training her by regular conversations. Etc. A big mistake is giving "top talent" the money they were used to in big companies and racing teams. The assumption is always that with billionaires behind us and tech and talent this good, we could find the money. But, in our case, after our largest corporate sponsor was killed tragically in a plane crash, and the price of oil dropped 3x (and has stayed low...), it was very hard to raise money for clean tech. Very few companies were funded, and almost none were funded by new investors -- mainly existing investors supported the companies that they had already invested in. In many places the "top talent" could not adapt, and just went to places like Google X, where they have much more money but have much less independence and creative freedom than as a startup. Then, over time, almost all companies failed (though not us...) But the truly dedicated people are still working on solving the problems. The people who are still trying found they could develop new capabilities. Those who've fought through the lean times are now a new elite, with value and respect beyond any pedigree from outside, within the group of those who've struggled through this Silicon Valley Forge. To get in with us, people start with a baseline level of high respect and then strive to prove our faith in them correct through their actions, and strive to show the whole company what they can do. It is a wonderful thing to earn recognition of their capabilities through clever, elegant, and hard work, creativity, and play, but even better to work with a collection of people with unusual abilities harmoniously. Being part of an outstanding team, so long as you are paid enough to live well (which is dependent on needs, particularly with family, education, and health on the mind), is worth far more than the money that we could possibly pay at this point. If we are successful the work may be worth billions and might just make the future way better. We obviously cannot pay billions now. But we have a shot at making a difference. For those who believe it is possible, that can be enough, if you take care of their needs. Many of the people who've worked for us say that it was the most exciting and productive and creative learning environment of their lives. There's something in that that cannot be put into a value in terms of dollars. You have to work with people who value that, or it will not sustain itself as a creative working environment. It's not about what you get out of work, it's about what you put into it, and how it grows. The big problem with the modern world is that nobody plans for success. Everybody assumes that once they get to the next step, and solve their current money problem, then they can relax and things will be better. Everyone dismisses the possibility of success, and says "these are good problems to have." Actually, problems are problems, and the more successful you are, the more problems you have. Make the success worth fighting for, and plan on it, and win. That should be enough, for the right kind of person. The challenge of making that win come true, and having you and your team really believe in yourselves and your shared vision despite the odds being so far against you, that's really the trick. Rarely does anyone pull it off. And then, rarely does a vision survive its first successes. Protect these fragile hopes and dreams. Plant them in the most fertile soil of your soul, and nurture them with your care and your love and your actions. The soul breathes choices. Remember, you hope for so much more than the world is giving anyone right now. So don't settle for the trappings of success. Make the world we live in your art, weave positive visions together from a zillion hearts, minds and souls, help friend realize their visions in our shared world, and then awaken to a universe alive beyond any one mind's wildest imaginations.
• doublerebel 9y ago
  I have to say, I usually love Janz's writing, but I think this model is too simplistic and does not provide enough evidence. As a technical founder with a successful track record, I could be working with any number of businesspeople or all sorts of opportunities, and I'm good at math. Why should I forgo a market rate salary to take a 1 in 100 chance at a lottery ticket, where my likelihood of success is largely determined by the people who also choose my salary? Major conflict of interest. The math does not add up. I would think my team should be motivated to pay enough to keep each other from leaving for attractive opportunities in this lucrative market. It's one thing to voluntarily give up salary to help the company. It's another to force it by means of a questionably sustainable business model. Evidence: try to hire yourself a technical co-founder from their job at FaceGoogAmaSoft (or pay equivalent) and find out that money talks.
  • doublerebel 9y ago
    I should clarify I'm playing Devil's Advocate. I do try to bootstrap my startups part-time, no salary until we have enough cash to pay decent full-time salary to founders. Good reasons to forgo salary: - startup already has revenue and/or a clear path to profitability that would be affected by the salary decision - because you probably need as much cash as possible for the first technical hire(s). This is a good problem and usually indicates growth - because you legitimately don't need or want it (e.g. cash from successful exit or good pre-fulltime planned savings)
    • CalChris 9y ago
      Why should I forgo a market rate salary to take a 1 in 100 chance at a lottery ticket, where my likelihood of success is largely determined by the people who also choose my salary? Because as a founder you have a great idea that you think will be worth those odds. If you truly think it is a lottery ticket then your idea isn't that good and you should look for another idea. You can always make more money working for BiggleCorp. The benefits are always better at NanoSoft. So the deciding question for you is not what flavor of ramen you'll eat but whether your idea is so insanely great that you're willing to suffer. Moreover, your skillset is already factored into both your stock and the relative ease vs difficulty of your raise.
• louprado 9y ago
  A bit off topic but lets say you and your co-founder follow the canonical YC advice. You form a Deleware C-Corp, register your California foreign entity and grant yourselves ISOs with a 4 year vesting period and a 1-year cliff. But then your company starts to do very well and in 6-months you both agree you won't need to raise VC and want to start paying yourselves more than the ~$100k mentioned in this article. What would be the best way to draw money from the company ? Increasing you payroll check seems unwise from a tax standpoint. Dividends might be a good way but you don't yet own a single share so you can't be paid through a dividend. You could pay yourselves bonus checks, but isn't that taxed at same rate as payroll ? Side request, can anyone recommend a CPA in the East Bay (SF). Thanks.
  • brianwawok 9y ago
    You need to be careful with the dividend route. The IRS seems to frown on someone in a career that normally makes 6 figures drawing a 50k salary and 200k in dividends a year. I would ask an accountant. But this is exactly the downside of early C corp.
    • deleted 9y ago
      [deleted]
  • jacques_chester 9y ago
    In Australia I was able to take money out of my Pty Ltd as director's fees. But the ATO views subcontracting very differently from the IRS. Really: talk to a lawyer or accountant. The IRS are not going to accept "but I read it on Hacker News" as an acceptable defence to getting something wrong. Plus professionals have insurance to cover their mistakes -- commenters here do not.
  • pcl 9y ago
    You can always convert the C corp to an S corp.
• DonHopkins 9y ago
  How much does prior experience and shipping successful products count? Is it really better for your salary to pump out a few kids instead of shipping a few successful products? Do the kids have to be successful or will any kids do? ;) https://lh3.googleusercontent.com/-gpJ2FfhmWMc/TYb7Un7m-gI/AAAAAAAAACU/bD0C0FNpL-g/s1600/forgot.jpg https://lh3.googleusercontent.com/-gpJ2FfhmWMc/TYb7Un7m-gI/A...
• abalone 9y ago
  > If you raise a small angel or friends & family round, you’ll probably want to spend it on other things than founder salaries. This part in particular doesn’t make sense, or at least assumes founders have savings and assets. But what if you don’t because you’re young or you’ve already bootstrapped your way through all of it and gone into debt too? It makes sense to pay subsistence salaries at the angel stage.
• usaar333 9y ago
  Overall, a sensible calculator. One surprise for me is how low the kids addition is. $18k (pre-tax) is hardly enough to cover the cost of a kid in SF. Even ignoring costs of additional housing, daycare costs are going to be over $25k/year. Looking at the numbers: * $90k single founder in SF - pretty easy to do (live with roommates); probably slightly excessive ($80k should be just fine for most folks) * $108k founder with kids in SF - difficult. I'd put $120k as being a reasonable minimum with one (pre-k) kid.
  • chrija 9y ago
    I agree, I don't expect the kid additions to fully cover the costs. Trying to cover these costs fully is probably unrealistic, as it would lead to a very large salary spread between, say, a founder with 3 kids and one with 0. The good news is that once you have kids you won't have time for parties or expensive hobbies anyway ... and the joy of having kids makes up for the financial disadvantage several times over. :-))
• ricardobeat 9y ago
  Considering the cost of living in these cities, what this tells me when 66%+ of founders in SV pay themselves less than 50k/year is that the majority of them are already well-off, and have savings to spare for things like.. paying rent and eating food. It is completely unrealistic to expect the average college dropout to live comfortably on the same salary. Do these numbers match reality?
  • kevinnk 9y ago
    I live in Palo Alto making about $55k and live fairly comfortably; my actual living expenses are probably closer to $25k. It would be hard to have a family, but I get by just fine having roommates.
    • ricardobeat 9y ago
      Zillow tells me average house price in Palo Alto is $2.6m, average rent $5k. Do you own/share a house? I'm in Europe, so basing myself on public stats.
      • kevinnk 9y ago
        I rent in a house and split 4 ways. My share of the rent is a little over 1k.
        • ricardobeat 9y ago
          Thanks for answering! So the data is not far off. I should add "or is single and has no children" to my comment. Nothing bad about that, on the contrary, it does mean older founders with family or other obligations will need to bring/sacrifice their own nest egg.
          • kevinnk 9y ago
            I think a total household income of ~150-200k is right around the cutoff for 4 people to live in Palo Alto together. You can split that up however you want though. In my case, that's 4 people earning ~50k rooming together. In the case of a family, one person earning 120k and the other doing a startup earning 50k (plus 2 non working kids) works too. You're right that someone trying to support a family on a single income at 50k would have a tough time, but I think the range of people who can make it work is a lot broader than you're making it seem.
• seattle_spring 9y ago
  Do the employees get an extra $15k / child?
• WhitneyLand 9y ago
  in response to feedback being requested The post: It's great, adds a lot of value. The calculator: Terrible idea. Might even add negative value or be counterproductive. The post is appreciated for multiple reasons. Insights from investors are not overflowing the Internet. It’s a relatively small group, so it’s often very helpful when someone chooses to share their thinking. It also has value because it’s not just pulling back the curtain, or sharing facts, rather, it offers critical analysis of how to approach the question. Even if some of the analysis is wrong, it’s still valuable, in that it inspires further analysis and facilitates understanding of the mechanics. However the calculator is a reductionist solution to a problem, that can be highly inconsistent from one situation to another. Paraphrasing: Please input the number of kids you have? Sounds like something a government office would come up with. How about a calculator to pick startups to fund? Well, some people do try to automate betting on companies for various needs, however they often have limited success, and it usually involves very complex modeling systems, rather than a google spreadsheet. The net of it is, using a spreadsheet might be helpful to track and manipulate data inputs, but not to generate an actionable result to drive a nuanced decision. I'm wary even of using it as a starting point, given the risk of building additional reasoning on a flawed foundation. It would be a great tool to have. The problem is there are just too many subtleties to capture (known and unknown), and even then they would apply differently across the startup world's highly variable situations and contexts. In some ways the question is typical of many other questions startups encounter: It's at least partially and possibly highly subjective, the number of potentially relevant factors makes it impractical to spend lots of time of each factor, and the available data points are imperfect and/or incomplete. As AI slowly but steadily chips away at the list of things humans can do better, questions with these attributes might be the some of the very last to fall. And when they do, it will not be office productivity software that slays them.
• ninjakeyboard 9y ago
  Ya in the last company I founded I would go without paychecks to let my co-founder pay himself when we were running out of money/struggling to collect payment. It's a lot more about the needs of the people to be able to get through the initial phases than it is about 'equality and fairness'
• danieltillett 9y ago
  Ultimately everything comes down to BATNA [0], but a good place to start is what you would be doing if you weren’t running a startup and how much you would earn (after tax) if you worked as hard for someone else as an employee. This is your BATNA. An investor (in theory) could pay you a high salary as an employee to work on the business and keep all the equity. An investment is in someways equivalent to a very high interest non-recourse loan. Given this you want to take the absolutely minimum in investment you can and an extra paid in salary to founders will cause you to take more investment than you need. Personal circumstance should never play a role in what someone is paid, only their BATNA. When it comes to startups there are three forms of compensation; salary, conditions, equity. The split between these can vary, but the total should be fixed by the individual's BATNA, not how much many kids they have or student debt. Slightly off topic your compensation in any job should never be based on how much value you bring to the company, but what your BATNA is. It is up to your boss to decide if your BATNA means they want to pay you as much. 0. https://en.wikipedia.org/wiki/Best_alternative_to_a_negotiated_agreement https://en.wikipedia.org/wiki/Best_alternative_to_a_negotiat...
• tibbon 9y ago
  I frequently see advocating paying founders with kids more, but (partially because a company can't legally ask about having kids during an interview) almost never factor in those type of expenses for other employees. Unsure what I think about this.
• ilaksh 9y ago
  Seems like it should factor in the expected size of the company. If it can work with 2 solid engineers and 2 other people then $2 million goes a lot farther than if it is 10 people. So why not pay closer to market in that case.
• bksenior 9y ago
  This martyr narrative is tired. The truth is that most companies once they get to series A fold for much more binary reasons that are almost never saving a few $1000 a month on the founders salaries. Additionally there are easy ways to turn your salary into a draw that ebbs and flows in times of cash flow crunches if thats a concern. Ultimately a founder should just pay themselves what they want. The companies rise happens on the backs of the their judgement so I dont know why we are using some irrelevant framework for this particular decision. Like everything from raising money to hiring, create a narrative and then use it to optimize your target outcome. It's also important to note the founder isnt entitled to struggle as a species. In fact you can build an incredible company and ask to maintain a quality of life. If you can afford it pay yourself market or more and you think it will make you happier or more effective, do it! In the end tolerance for pain isn't the skill that defines a great founder its the progress. Pay yourself whatever the hell you want as long as you keep doing good work.