4 ms·

A lot of people seem to be saying "market". But for us, it was based entirely on need. After talking to our families, each of us came up with the minimum salar

by portman 16y ago

A lot of people seem to be saying "market". But for us, it was based entirely on need. After talking to our families, each of us came up with the minimum salary required to maintain our current lifestyle. The idea is that a founder should not be saving any money, but they also shouldn't be forced to move into a smaller home or stop eating out. What's interesting is that this produced 3 very different salaries, even though our "market" rates are roughly equal. Our VCs were completely supportive of those numbers and did not push back at all.

_delirium 16y ago
Interesting--- salary based on need, while contributions presumably are based on strengths of each founder. I've heard that compensation strategy somewhere else... ;-) (http://en.wikipedia.org/wiki/From_each_according_to_his_ability,_to_each_according_to_his_need http://en.wikipedia.org/wiki/From_each_according_to_his_abil...)
- redorb 16y ago
  I bet the above company does plan on some time in the future; having more "normal" and "market based" salaries; otherwise they could have worked anywhere for below market wages. They have to have a plan for making more money down the road that won't depend on their needs; but value.
  - portman 16y ago
    Of course. If revenues begin to cover our own salaries, then we'll increase to market rates. But until then, we're all committed to making our seed round last as long as humanly possible.
- StavrosK 16y ago
  And when the person who can contribute the least has the biggest financial needs, fun things happen.
- portman 16y ago
  Wait until you hear the awesome propaganda music we play every morning.
- plorkyeran 16y ago
  Communism does often work well in small, close-knit groups, and I would certainly hope that the founders of a startup living on VC money would fall into that category.
  - _delirium 16y ago
    Yeah, I didn't mean it as a criticism, just was surprised/amused to see it in a VC-backed company. My impression is that a more Randian spirit is somewhat more common, which views anything altruistic as being screwed. I don't have any survey data, but my guess is that a more common arrangement is based on some sort of swap, e.g. the young/no-dependents co-founder who can afford to take a lower salary might negotiate to work for 50% of the other co-founders' salaries, but gets something in return, e.g. an extra equity share--- as opposed to just taking a lower salary for the good of the company. I don't actually have any problem with the principle the slogan represents, though. IMO the main problems with it are implementation, since there's no way to base a whole country's economy around it without an authoritarian government enforcing who gets what. That's obviously not an issue with voluntary arrangements in smaller groups.
techsupporter 16y ago
Genuine question: Why shouldn't a founder be putting aside savings? Does savings include any accumulation of money, or just liquid cash and allows for retirement planning? I understand that the founder is being paid with venture capital, but what is supposed to happen if, even against the founder's every desires, the business goes bust, the founder is no longer able to work for some reason, or a myriad of unintentional-yet-plausible reasons why the founder might no longer be drawing that salary? Granted, this comes from the perspective of a person whose entire life's income can be documented on a series of W2 forms, so I beg your indulgence of my ignorance.
- portman 16y ago
  That's a great question. The financial goal of a startup is (often) to generate a lifetime of wealth in 3-4 years of intense work. After 3-4 years, a startup will either succeed or fold. Because the timeframe is bounded, it's possible for a founder to forgo any personal savings without irreparably damaging their personal finances. For example, speaking for myself, at my last job I was saving about $60,000 per year. Not contributing that money to my savings over the next 3-4 years isn't a huge deal. If my startup fails, I've only lost 3 or 4 years of savings. However, it IS a huge deal for our STARTUP to save $60,000 per year. That's a full-time junior employee. If not spending that money increases the likelihood of a successful exit, then it's a prudent financial strategy for me. The effect is multiplied if the other cofounders forgo their savings as well. Note that this is only my second VC-backed startup. Others with more startup experience may very well have different advice or reasoning.
  - whyleyc 16y ago
    "The financial goal of a startup is (often) to generate a lifetime of wealth in 3-4 years of intense work" That's just one class of startup. I'm sure the founders of Balsamiq and 37Signals which represent two of the better known "Business as a lifestyle" startups would beg to differ with you.

by portman 16y ago

_delirium 16y ago

Interesting--- salary based on need, while contributions presumably are based on strengths of each founder. I've heard that compensation strategy somewhere else... ;-) (http://en.wikipedia.org/wiki/From_each_according_to_his_ability,_to_each_according_to_his_need http://en.wikipedia.org/wiki/From_each_according_to_his_abil...)

redorb 16y ago
I bet the above company does plan on some time in the future; having more "normal" and "market based" salaries; otherwise they could have worked anywhere for below market wages. They have to have a plan for making more money down the road that won't depend on their needs; but value.
- portman 16y ago
  Of course. If revenues begin to cover our own salaries, then we'll increase to market rates. But until then, we're all committed to making our seed round last as long as humanly possible.
StavrosK 16y ago
And when the person who can contribute the least has the biggest financial needs, fun things happen.
portman 16y ago
Wait until you hear the awesome propaganda music we play every morning.
plorkyeran 16y ago
Communism does often work well in small, close-knit groups, and I would certainly hope that the founders of a startup living on VC money would fall into that category.
- _delirium 16y ago
  Yeah, I didn't mean it as a criticism, just was surprised/amused to see it in a VC-backed company. My impression is that a more Randian spirit is somewhat more common, which views anything altruistic as being screwed. I don't have any survey data, but my guess is that a more common arrangement is based on some sort of swap, e.g. the young/no-dependents co-founder who can afford to take a lower salary might negotiate to work for 50% of the other co-founders' salaries, but gets something in return, e.g. an extra equity share--- as opposed to just taking a lower salary for the good of the company. I don't actually have any problem with the principle the slogan represents, though. IMO the main problems with it are implementation, since there's no way to base a whole country's economy around it without an authoritarian government enforcing who gets what. That's obviously not an issue with voluntary arrangements in smaller groups.

techsupporter 16y ago

Genuine question: Why shouldn't a founder be putting aside savings? Does savings include any accumulation of money, or just liquid cash and allows for retirement planning? I understand that the founder is being paid with venture capital, but what is supposed to happen if, even against the founder's every desires, the business goes bust, the founder is no longer able to work for some reason, or a myriad of unintentional-yet-plausible reasons why the founder might no longer be drawing that salary? Granted, this comes from the perspective of a person whose entire life's income can be documented on a series of W2 forms, so I beg your indulgence of my ignorance.

portman 16y ago
That's a great question. The financial goal of a startup is (often) to generate a lifetime of wealth in 3-4 years of intense work. After 3-4 years, a startup will either succeed or fold. Because the timeframe is bounded, it's possible for a founder to forgo any personal savings without irreparably damaging their personal finances. For example, speaking for myself, at my last job I was saving about $60,000 per year. Not contributing that money to my savings over the next 3-4 years isn't a huge deal. If my startup fails, I've only lost 3 or 4 years of savings. However, it IS a huge deal for our STARTUP to save $60,000 per year. That's a full-time junior employee. If not spending that money increases the likelihood of a successful exit, then it's a prudent financial strategy for me. The effect is multiplied if the other cofounders forgo their savings as well. Note that this is only my second VC-backed startup. Others with more startup experience may very well have different advice or reasoning.
- whyleyc 16y ago
  "The financial goal of a startup is (often) to generate a lifetime of wealth in 3-4 years of intense work" That's just one class of startup. I'm sure the founders of Balsamiq and 37Signals which represent two of the better known "Business as a lifestyle" startups would beg to differ with you.