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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 retireme

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.

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.