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Ask HN: Early founder compensation
When a startup gets its initial round of funding, how do founders compensate themselves for the work they are doing and have already done?
If you've put 6 months of full time work into your startup, can you pay yourself a (moderate) chunk of money for previous work? Can you set yourself a base salary from this point forward?
What kind of rules govern these kinds of decisions, or is this all between the funders and the founder?
- bdfh42 15y agoIt very much depends upon the attitude of (and your agreements with) your earliest (Angel?) investors. However I would expect you should count past work as your investment in the company - that is why you (and your founding team) will have the majority of shares. You might be lucky enough to find investors who can fund a modest salary or two but don't expect anything like "market worth" until you are cash positive.
- japhyr 15y agoDoesn't some of the initial funding go towards hiring a team to more fully implement whatever has been developed so far? I assume you would have to be able to offer reasonable salaries for a small number of positions in order to make this happen. Can someone point me to a good breakdown of what initial funding usually covers?
- byoung2 15y agoHere is an interesting case study I found that shows what happens when the CEO demands too big a salary. http://startuplawyer.com/venture-capital/series-a-startup-ceo-salary http://startuplawyer.com/venture-capital/series-a-startup-ce...
- japhyr 15y agoThank you for the link. It sounds like a founder should be able to negotiate a reasonable living wage, assuming the founder is going to work full-time on the project.
- damoncali 15y agoYou pay yourself whatever you feel is best for you, the business, and your investors. Naturally, there are some disagreements between those parties about what that means. You just have to work it out. In my experience, this usually means founders make jack squat or nothing, whichever is less.