11 ms·

How much do founders pay themselves? A European data set

210 points by vinnyglennon 5y ago

kavalg 5y ago
From the data it looks like they get more or less an average market salary for e.g. architect, team lead, project manager position. What really surprised me was the equity that they keep until series A (below 20%). I expected something at least around 35% for a successful startup that even makes it to series A.
- PragmaticPulp 5y ago
  > What really surprised me was the equity that they keep until series A (below 20%). I expected something at least around 35% for a successful startup that even makes it to series A. Keep in mind that it’s common to have at least one cofounder. Some times more. Start with 3 cofounders and an equal split and already nobody can have more than 33% of the company. The term “Series A” has also become kind of diluted away by a growing list of earlier rounds: Angel, pre-seed, seed, etc. It’s getting kind of funny to see how much fundraising a company can do before “Series A” these days. Equity is a tough topic to think about because everyone expects to have a lot, but numerically a startup with multiple cofounders and multiple investment rounds and an employee option pool and equity for early hires will end up with a lot of entries on the cap table. It becomes difficult for any one person to have >20% equity very quickly in most cases. At startups I often had to explain this to early but post-investment hires who expected 10% or more equity for themselves on top of market rate salaries. Unfortunately the equity gets spread across a lot of different parties.
  - ilrwbwrkhv 5y ago
    It's crazy that Elon Musk still has 17 percent of Tesla and founders are giving away more than that just by series A. Is it because they are not creating anything truly unique with great market pull?
    - whatshisface 5y ago
      It is because they aren't self-funding in the way that an ex-Paypal billionaire can. Elon Musk started Tesla with enough money to be a VC himself, but put it in to his own companies. Normal SWEs can follow this example by saving up and being willing to work for a big discount if it's their own company they're working on. That's not going to let you start a car company but for a website it might be enough.
      - SmellTheGlove 5y ago
        > Elon Musk started Tesla with enough money to be a VC himself, but put it in to his own companies. Didn't he _not_ start Tesla, though? I thought he bought his way in, and negotiated cofounder status?
    - duped 5y ago
      I'm not an expert in this, but most startups that have tried to recruit me in series A/B have such small ambitions (or more quantitatively, TAM) that I can understand why investors want higher stakes. If your TAM and desired market capture implies revenue of less than like $500 million the company is never going to IPO, just for example. Side note, as a potential employee (and a different kind of investor) that's the determining factor in whether or not the equity vs paycut gamble makes sense.
      - neilc 5y ago
        > If your TAM and desired market capture implies revenue of less than like $500 million the company is never going to IPO, just for example. The vast majority of tech companies that IPO have revenues of (much) less than $500M.
    - KptMarchewa 5y ago
      Musk bought his shares at series A.
- sam0x17 5y ago
  From what I've seen anything over 5% is usually ridiculous. At least for startups on a track to a billion $ valuation, most startups of this caliber (or that see themselves as being of this caliber, key point) will be in situations where each cofounder has 1-2% at most and the rest is kept aside for later rounds, employees, eventually going public, etc. Your mileage may vary, but that is what I've seen.
a_c 5y ago
Several thoughts - would love to see distribution rather average, as average is easily skewed by outliers - salary Vs exit (bust, acquisition or public) - salary Vs employee. I was listening an episode of How I Built This by Guy Raz. The founder of Goodreads is paying himself about the same level as highest salary employee. I find it a good reference
onion2k 5y ago
As can be expected, founder salaries increase as their company goes on to raise more funding. Raising takes you out of building the business and turns you into someone who spends all their time talking to investors instead, usually at precisely the time your business needs you to do founder things. By hitching your pay to when you land another round you're incentivizing raising rather than growing the business, and that's probably a bad thing.
- robbiemitchell 5y ago
  As you grow, a founder's job is to hire people who can build and lead the company with you. Waiting for a fundraise to increase a below-market salary in an unprofitable business is a responsible thing to do.
onebot 5y ago
Having done this 5x times now. My advice is the same I got from one of my first VCs @FirstRound... Pay yourself as much as you need to not be distracted by anything that would slow you down. It is different for different founders and for whatever stage they are at in life. But if you are a founder with a family, that is gonna be different from a founder fresh out of college. Obviously you want to spend as little as possible, but not to the detriment of you lacking focus and dedication because you can't pay your rent.
- jxm262 5y ago
  never heard this before, but that makes perfect sense. thanks for sharing
- Rd6n6 5y ago
  I would say that setting aside a tiny bit on top of “pay your rent” for savings is necessary. It doesn’t have to be a ton but you shouldn’t be in trouble if the company doesn’t work out. Startups can take years to play out and you need a safety cushion afterwards, some basic level of financial security
- culi 5y ago
  > Pay yourself as much as you need to not be distracted by anything that would slow you down I'd say this goes equally for your employees, no? Pay them enough to take money off the table
  - onebot 5y ago
    In this competitive market, you are likely paying them market plus equity for top talent. EU is less competitive, but you should be paying market or below market if you are augmenting with extra equity.
- andrew_ 5y ago
  I was recently offered a founding role. The cofounder is 14 years younger than I. I have a family of 5, she is single and living on a very light income. Her advisers were telling her founders should pay themselves an amount that was approximately 1/3 of my current take-home. The divide in stage of life and accumulated responsibility was just too great to overcome and we parted ways.
Traster 5y ago
Nice little subtle marketing from Graphy there. In the first paragraph he's just a random CEO giving a quote, then you click through to the survey and turns out it's by SeedCamp powered by Graphy. Oh and then it turns out that Graphy is one of the companies that SeedCamp seeded. Putting that aside, I think big chunks of this article are trying to draw conclusions from tiny datasets that might not stand up. For example, the chart showing "Average Number of Employees By Annual Salary" is very clearly just a line connecting the individual data points, that should be a scatter plot with a trend line most likely, and what it shows is that most of the companies consist of only the founding team. Or the bar chart of number of founders vs CEO salary - I think they've sliced that data into so many buckets (4 buckets, 3 groups, N=200) that probably the variance between the groups is just noise.
- batterylow 5y ago
  First I'm hearing of Graphy... it's just my lucky after launching https://PlotPanel.com https://PlotPanel.com yesterday! My salary throughout was £0!
  - mwint 5y ago
    Your marketing page is beautiful, kudos.
    - batterylow 5y ago
      That's made my day, thank you!
  - Shindi 5y ago
    I know that sinking feeling you're feeling after discovering a successful competitor but you can totally crush Graphy. Just make sure to differentiate. Even if not, you could eat a large piece of the pie.
    - batterylow 5y ago
      Thank you! I'll be taking a step back to figure out how to move forward... Marketing isn't my strength and I'm solo, but hopefully I can get the word out!
PragmaticPulp 5y ago
On the investment side, seeing early founders pay themselves similarly to their employees or slightly less was usually a good sign that the founder was truly in it for the long term. You don’t really want founders scraping by on ramen noodles and becoming financially desperate. Seeing founders pay themselves exorbitantly was not a great sign, though. If someone is truly building a company into something they believe to be very valuable, the salary shouldn’t matter very much beyond helping them not worry about bills while they grow the company. That’s all kind of obvious and well known. What I didn’t know was how the unscrupulous founders also know this very well and instead come up with creative ways to pay themselves outside of salary numbers. One founder liked to pay himself $100,000 consulting fees after fundraises to “reimburse” his work done before the raise at what he believed to be “below market rate”. It’s the kind of thing that won’t show up on cursory due diligence, but will poison later rounds when investors dig into finances and realize the CEO or other cofounders have been quietly extracting extra money for themselves. In one case it damaged a startup I was fond of enough that it cost the CEO potentially millions in equity in a later acquisition that failed.
- ed25519FUUU 5y ago
  > On the investment side, seeing early founders pay themselves similarly to their employees or slightly less was usually a good sign that the founder was truly in it for the long term. I don’t know. Just seems like accounting to me. They take a small salary but own 80% of the company you’re helping build for the same salary but 0.03% ownership.
  - PragmaticPulp 5y ago
    Outside of cofounders and founding employees (who, by definition, joined before the company was funded and worth more), the total employee option pool might be around 5% of the company in an early startup. Note that it will grow in later rounds, but dilution will reduce the share of early employees in those rounds. If you hire 100 employees and split that 5% equally then you get 0.05% per employee. What else would you propose? If you tried to give everyone something like 0.5% then the first 100 employees would have to own 50% of the company. Doesn’t really work. The earliest employees who join when company size is less than 10 people or so, as well as key early hires like valuable VPs will end up with higher equity, but once a company reaches a point of paying market rate compensation then a 0.05% equity stake isn't really unfair.
karim79 5y ago
In my case, I got a clued-up response from my lawyers, as to what I should pay myself from my in-profit startup, that is accepted by the German government and fair to the shareholders of my/our company. That was helpful. I think it is fair to be fair and on the right side of morality, ethics, and the law.
- duckmysick 5y ago
  Can you expand on this? It would be cool to hear the details, especially from a non-US country.
  - karim79 5y ago
    I can try. In Germany, as a soul proprietor, one can pay himself as much as is available in terms of revenue, minus taxes and costs of doing business. As a private shared company, which is my case, it's a bit different. The compensation of the CEO (myself) needs to be fair to the shareholders and the founders and somehow scientifically balanced (also in terms of what is perceived to be the "correct" compensation for such a role or endeavour, which includes having to answer to everything, government, customers, employees, all the things basically come together from case history and you get a number which is the "seal" for the role. It's interesting, to say the least. I happen to think it actually works.
    - auggierose 5y ago
      That's why there are so many great startups from Germany.
      - ricardobeat 5y ago
        N26, GetYourGuide, Gorillas, Flink, Grover, Blinkist, Lillium, Zalando, HelloFresh, Delivery Hero, Home24, Trivago, SoundCloud… yeah that’s clearly not working!
        auggierose 5y ago
wongarsu 5y ago
How does the average founder in a four-founder startup hold 31.79% of equity after the pre-seed round? (from the "Impact of the number of co-founders on equity" graph). Am I reading that wrong, or is their sample too small or heavily skewed?
- PragmaticPulp 5y ago
  > How does the average founder in a four-founder startup hold 31.79% of equity after the pre-seed round? How does the average founder in a 4-founder startup hold more than 1/4 of the equity at all? Something is wrong with this stat.
  - Wilduck 5y ago
    I noticed this too. I think the charitable way to read this is: "The average survey respondant who is part of a 4-founder startup" and that the survey was biased towards responses from founders with larger equity stakes in their companies.
motohagiography 5y ago
Worth noting that there isn't a time dimension on the X axis other than funding round interval, as when you average that comp over the 3-5 years it takes to get from seed to A, and then from A to eventual dilution and exit, the average compensation is significantly lower than the high watermark number for salary/comp package.
nicksalt 5y ago
You should pay yourself replacement value. What would you need to pay to replace the closest version to you at the stage of the company u are at.
- 6510 5y ago
  Or what you would earn elsewhere.
mtgx 5y ago
consp 5y ago
Depending on the type of company, in some countries in the EU there is a required minimum depending on company age for the Founders. This might skew the lower bound a bit (if they included those).
mountainofdeath 5y ago
It's for this reason I consider being an investor a much stronger position than a founder and orders of magnitude better than an early employee. As an investor, you have information that only you are founders are privy to. You can continue drawing a salary in whatever your day job is. At the end of the day, your loss is limited to the money you put in and the relatively low time investment. A founder gives up all of their time and near term compensation for a lottery ticket. For people already on a good trajectory, anything but a stellar exit is probably a net loss. For early employees, it almost always is a loss.
- TameAntelope 5y ago
  Well yeah, it's hardly revelatory that having money puts you in a better position than not having money. The scale of privilege is obviously going to favor people who can invest in risk rather than rely on risk.
Cenk 5y ago
Here are the actual survey results: https://seedcamp.com/start-up-founder-compensation-survey/ https://seedcamp.com/start-up-founder-compensation-survey/
MayeulC 5y ago
Graphs do not load for me, even with adblock disabled. Firefox.
CedarMills 5y ago
I made the mistake of paying myself too much after fundraising round and then too little in order to extend runway. Nothing is more stressful when you have less than three months of runway left and you have absolutely no saving and have a family and mortgage. For my next startup, I will try to bootstrap as much as I can first, and then pay myself a livable salary so that I'm not distracted by looking for others sources of income / radically downgrading my lifestyle.
holoduke 5y ago
In my last +10m startup I received a management fee of 6000 euro's a month. It was considered by all investors as a normal salary. Yet it was the lowest in the company. And of course the tax authority asked us questions about it. Afraid that I would lower my salary to a minimum and receive high dividends. I am located in the Netherlands.
- milansm 5y ago
  Is lowering the salary and receive high dividends illegal in Holland?
  - ricardobeat 5y ago
    (Disclaimer: not a founder or tax expert here) There are a bunch of rules, all aiming at making sure as a company director you can’t qualify for any government benefits, and income is taxed in box 1 (income from employment) which has the highest rate. First is a minimum of €45k, then you can’t be paid less than your highest paid employee, for an LLC you need to pay yourself at least 75% of profits. There’s probably more to stop creative accounting and ensure the first chunk of money is always taxed as personal income.
rixrax 5y ago
Assuming it is financially viable and healthy, founders should be paid around the same as some of the more expensive hires in the company. If the company is hiring talent that asks for e.g. 300k total comp, but founders are left behind at say 100k, it gets increasingly distasteful to hire people that probably should be hired because not everyone of these 300k total comp hot shots end up working out for the company (and need to be eventually let go). Down the line, this in my experience leads to poor hiring decisions where founders get increasingly frustrated of the discrepancy between their pay and that of hired talent and start opting for people whose ask is closer to what the founders are being paid (when they infact should really go for the best available talent that the company could afford). In early(er) stage startups the situation is of course different, but once there is revenue and maybe larger capital injections from VCs, it is my experience that compensation committees or who ever is deciding founders salaries, should make sure founders are not left too far behind compared to what new hires are being paid.
burtonator 5y ago
At what point in time in a company's history is it a good idea for the founder to just pay themselves market rate?
- clpm4j 5y ago
  Series C or later is what I've typically seen, and I'm not talking market rate for "Big Co CEO", i.e. I doubt any VC would be comfortable with a portfolio company CEO taking home over $600k/yr regardless of stage.
Galanwe 5y ago
Very sad to see such a worthless analysis on an otherwise interesting dataset. I think it would be worth investing on learning a bit of statistics or discussing with a data scientist before publishing that kind of article. Honestly throwing averages after averages all day long brings 0 value and understanding on the dataset. Smells like a random software engineer or marketing eng with no consideration for basic data science was tasked to study this with excel. Showcasing concentration metrics (means) all day long is useless, I want to understand at the very least how the distribution is shaped (is it normal?), what's the std, hell I'd like a PCA on all the fields (years of exp, sector of activity, number of employees, successful funding rounds,...).
black_13 5y ago

210 points by vinnyglennon 5y ago

From the data it looks like they get more or less an average market salary for e.g. architect, team lead, project manager position. What really surprised me was the equity that they keep until series A (below 20%). I expected something at least around 35% for a successful startup that even makes it to series A.

PragmaticPulp 5y ago
> What really surprised me was the equity that they keep until series A (below 20%). I expected something at least around 35% for a successful startup that even makes it to series A. Keep in mind that it’s common to have at least one cofounder. Some times more. Start with 3 cofounders and an equal split and already nobody can have more than 33% of the company. The term “Series A” has also become kind of diluted away by a growing list of earlier rounds: Angel, pre-seed, seed, etc. It’s getting kind of funny to see how much fundraising a company can do before “Series A” these days. Equity is a tough topic to think about because everyone expects to have a lot, but numerically a startup with multiple cofounders and multiple investment rounds and an employee option pool and equity for early hires will end up with a lot of entries on the cap table. It becomes difficult for any one person to have >20% equity very quickly in most cases. At startups I often had to explain this to early but post-investment hires who expected 10% or more equity for themselves on top of market rate salaries. Unfortunately the equity gets spread across a lot of different parties.
- ilrwbwrkhv 5y ago
  It's crazy that Elon Musk still has 17 percent of Tesla and founders are giving away more than that just by series A. Is it because they are not creating anything truly unique with great market pull?
  - whatshisface 5y ago
    It is because they aren't self-funding in the way that an ex-Paypal billionaire can. Elon Musk started Tesla with enough money to be a VC himself, but put it in to his own companies. Normal SWEs can follow this example by saving up and being willing to work for a big discount if it's their own company they're working on. That's not going to let you start a car company but for a website it might be enough.
    - SmellTheGlove 5y ago
      > Elon Musk started Tesla with enough money to be a VC himself, but put it in to his own companies. Didn't he _not_ start Tesla, though? I thought he bought his way in, and negotiated cofounder status?
  - duped 5y ago
    I'm not an expert in this, but most startups that have tried to recruit me in series A/B have such small ambitions (or more quantitatively, TAM) that I can understand why investors want higher stakes. If your TAM and desired market capture implies revenue of less than like $500 million the company is never going to IPO, just for example. Side note, as a potential employee (and a different kind of investor) that's the determining factor in whether or not the equity vs paycut gamble makes sense.
    - neilc 5y ago
      > If your TAM and desired market capture implies revenue of less than like $500 million the company is never going to IPO, just for example. The vast majority of tech companies that IPO have revenues of (much) less than $500M.
  - KptMarchewa 5y ago
    Musk bought his shares at series A.
sam0x17 5y ago
From what I've seen anything over 5% is usually ridiculous. At least for startups on a track to a billion $ valuation, most startups of this caliber (or that see themselves as being of this caliber, key point) will be in situations where each cofounder has 1-2% at most and the rest is kept aside for later rounds, employees, eventually going public, etc. Your mileage may vary, but that is what I've seen.

a_c 5y ago

Several thoughts - would love to see distribution rather average, as average is easily skewed by outliers - salary Vs exit (bust, acquisition or public) - salary Vs employee. I was listening an episode of How I Built This by Guy Raz. The founder of Goodreads is paying himself about the same level as highest salary employee. I find it a good reference

onion2k 5y ago

As can be expected, founder salaries increase as their company goes on to raise more funding. Raising takes you out of building the business and turns you into someone who spends all their time talking to investors instead, usually at precisely the time your business needs you to do founder things. By hitching your pay to when you land another round you're incentivizing raising rather than growing the business, and that's probably a bad thing.

robbiemitchell 5y ago
As you grow, a founder's job is to hire people who can build and lead the company with you. Waiting for a fundraise to increase a below-market salary in an unprofitable business is a responsible thing to do.

onebot 5y ago

Having done this 5x times now. My advice is the same I got from one of my first VCs @FirstRound... Pay yourself as much as you need to not be distracted by anything that would slow you down. It is different for different founders and for whatever stage they are at in life. But if you are a founder with a family, that is gonna be different from a founder fresh out of college. Obviously you want to spend as little as possible, but not to the detriment of you lacking focus and dedication because you can't pay your rent.

jxm262 5y ago
never heard this before, but that makes perfect sense. thanks for sharing
Rd6n6 5y ago
I would say that setting aside a tiny bit on top of “pay your rent” for savings is necessary. It doesn’t have to be a ton but you shouldn’t be in trouble if the company doesn’t work out. Startups can take years to play out and you need a safety cushion afterwards, some basic level of financial security
culi 5y ago
> Pay yourself as much as you need to not be distracted by anything that would slow you down I'd say this goes equally for your employees, no? Pay them enough to take money off the table
- onebot 5y ago
  In this competitive market, you are likely paying them market plus equity for top talent. EU is less competitive, but you should be paying market or below market if you are augmenting with extra equity.
andrew_ 5y ago
I was recently offered a founding role. The cofounder is 14 years younger than I. I have a family of 5, she is single and living on a very light income. Her advisers were telling her founders should pay themselves an amount that was approximately 1/3 of my current take-home. The divide in stage of life and accumulated responsibility was just too great to overcome and we parted ways.

Traster 5y ago

Nice little subtle marketing from Graphy there. In the first paragraph he's just a random CEO giving a quote, then you click through to the survey and turns out it's by SeedCamp powered by Graphy. Oh and then it turns out that Graphy is one of the companies that SeedCamp seeded. Putting that aside, I think big chunks of this article are trying to draw conclusions from tiny datasets that might not stand up. For example, the chart showing "Average Number of Employees By Annual Salary" is very clearly just a line connecting the individual data points, that should be a scatter plot with a trend line most likely, and what it shows is that most of the companies consist of only the founding team. Or the bar chart of number of founders vs CEO salary - I think they've sliced that data into so many buckets (4 buckets, 3 groups, N=200) that probably the variance between the groups is just noise.

batterylow 5y ago
First I'm hearing of Graphy... it's just my lucky after launching https://PlotPanel.com https://PlotPanel.com yesterday! My salary throughout was £0!
- mwint 5y ago
  Your marketing page is beautiful, kudos.
  - batterylow 5y ago
    That's made my day, thank you!
- Shindi 5y ago
  I know that sinking feeling you're feeling after discovering a successful competitor but you can totally crush Graphy. Just make sure to differentiate. Even if not, you could eat a large piece of the pie.
  - batterylow 5y ago
    Thank you! I'll be taking a step back to figure out how to move forward... Marketing isn't my strength and I'm solo, but hopefully I can get the word out!

PragmaticPulp 5y ago

On the investment side, seeing early founders pay themselves similarly to their employees or slightly less was usually a good sign that the founder was truly in it for the long term. You don’t really want founders scraping by on ramen noodles and becoming financially desperate. Seeing founders pay themselves exorbitantly was not a great sign, though. If someone is truly building a company into something they believe to be very valuable, the salary shouldn’t matter very much beyond helping them not worry about bills while they grow the company. That’s all kind of obvious and well known. What I didn’t know was how the unscrupulous founders also know this very well and instead come up with creative ways to pay themselves outside of salary numbers. One founder liked to pay himself $100,000 consulting fees after fundraises to “reimburse” his work done before the raise at what he believed to be “below market rate”. It’s the kind of thing that won’t show up on cursory due diligence, but will poison later rounds when investors dig into finances and realize the CEO or other cofounders have been quietly extracting extra money for themselves. In one case it damaged a startup I was fond of enough that it cost the CEO potentially millions in equity in a later acquisition that failed.

ed25519FUUU 5y ago
> On the investment side, seeing early founders pay themselves similarly to their employees or slightly less was usually a good sign that the founder was truly in it for the long term. I don’t know. Just seems like accounting to me. They take a small salary but own 80% of the company you’re helping build for the same salary but 0.03% ownership.
- PragmaticPulp 5y ago
  Outside of cofounders and founding employees (who, by definition, joined before the company was funded and worth more), the total employee option pool might be around 5% of the company in an early startup. Note that it will grow in later rounds, but dilution will reduce the share of early employees in those rounds. If you hire 100 employees and split that 5% equally then you get 0.05% per employee. What else would you propose? If you tried to give everyone something like 0.5% then the first 100 employees would have to own 50% of the company. Doesn’t really work. The earliest employees who join when company size is less than 10 people or so, as well as key early hires like valuable VPs will end up with higher equity, but once a company reaches a point of paying market rate compensation then a 0.05% equity stake isn't really unfair.

karim79 5y ago

In my case, I got a clued-up response from my lawyers, as to what I should pay myself from my in-profit startup, that is accepted by the German government and fair to the shareholders of my/our company. That was helpful. I think it is fair to be fair and on the right side of morality, ethics, and the law.

duckmysick 5y ago
Can you expand on this? It would be cool to hear the details, especially from a non-US country.
- karim79 5y ago
  I can try. In Germany, as a soul proprietor, one can pay himself as much as is available in terms of revenue, minus taxes and costs of doing business. As a private shared company, which is my case, it's a bit different. The compensation of the CEO (myself) needs to be fair to the shareholders and the founders and somehow scientifically balanced (also in terms of what is perceived to be the "correct" compensation for such a role or endeavour, which includes having to answer to everything, government, customers, employees, all the things basically come together from case history and you get a number which is the "seal" for the role. It's interesting, to say the least. I happen to think it actually works.
  - auggierose 5y ago
    That's why there are so many great startups from Germany.
    - ricardobeat 5y ago
      N26, GetYourGuide, Gorillas, Flink, Grover, Blinkist, Lillium, Zalando, HelloFresh, Delivery Hero, Home24, Trivago, SoundCloud… yeah that’s clearly not working!
      - auggierose 5y ago

wongarsu 5y ago

How does the average founder in a four-founder startup hold 31.79% of equity after the pre-seed round? (from the "Impact of the number of co-founders on equity" graph). Am I reading that wrong, or is their sample too small or heavily skewed?

PragmaticPulp 5y ago
> How does the average founder in a four-founder startup hold 31.79% of equity after the pre-seed round? How does the average founder in a 4-founder startup hold more than 1/4 of the equity at all? Something is wrong with this stat.
- Wilduck 5y ago
  I noticed this too. I think the charitable way to read this is: "The average survey respondant who is part of a 4-founder startup" and that the survey was biased towards responses from founders with larger equity stakes in their companies.

motohagiography 5y ago

Worth noting that there isn't a time dimension on the X axis other than funding round interval, as when you average that comp over the 3-5 years it takes to get from seed to A, and then from A to eventual dilution and exit, the average compensation is significantly lower than the high watermark number for salary/comp package.

nicksalt 5y ago

You should pay yourself replacement value. What would you need to pay to replace the closest version to you at the stage of the company u are at.

6510 5y ago
Or what you would earn elsewhere.

mtgx 5y ago

consp 5y ago

Depending on the type of company, in some countries in the EU there is a required minimum depending on company age for the Founders. This might skew the lower bound a bit (if they included those).

mountainofdeath 5y ago

It's for this reason I consider being an investor a much stronger position than a founder and orders of magnitude better than an early employee. As an investor, you have information that only you are founders are privy to. You can continue drawing a salary in whatever your day job is. At the end of the day, your loss is limited to the money you put in and the relatively low time investment. A founder gives up all of their time and near term compensation for a lottery ticket. For people already on a good trajectory, anything but a stellar exit is probably a net loss. For early employees, it almost always is a loss.

TameAntelope 5y ago
Well yeah, it's hardly revelatory that having money puts you in a better position than not having money. The scale of privilege is obviously going to favor people who can invest in risk rather than rely on risk.

Cenk 5y ago

Here are the actual survey results: https://seedcamp.com/start-up-founder-compensation-survey/ https://seedcamp.com/start-up-founder-compensation-survey/

MayeulC 5y ago

Graphs do not load for me, even with adblock disabled. Firefox.

CedarMills 5y ago

I made the mistake of paying myself too much after fundraising round and then too little in order to extend runway. Nothing is more stressful when you have less than three months of runway left and you have absolutely no saving and have a family and mortgage. For my next startup, I will try to bootstrap as much as I can first, and then pay myself a livable salary so that I'm not distracted by looking for others sources of income / radically downgrading my lifestyle.

holoduke 5y ago

In my last +10m startup I received a management fee of 6000 euro's a month. It was considered by all investors as a normal salary. Yet it was the lowest in the company. And of course the tax authority asked us questions about it. Afraid that I would lower my salary to a minimum and receive high dividends. I am located in the Netherlands.

milansm 5y ago
Is lowering the salary and receive high dividends illegal in Holland?
- ricardobeat 5y ago
  (Disclaimer: not a founder or tax expert here) There are a bunch of rules, all aiming at making sure as a company director you can’t qualify for any government benefits, and income is taxed in box 1 (income from employment) which has the highest rate. First is a minimum of €45k, then you can’t be paid less than your highest paid employee, for an LLC you need to pay yourself at least 75% of profits. There’s probably more to stop creative accounting and ensure the first chunk of money is always taxed as personal income.

rixrax 5y ago

Assuming it is financially viable and healthy, founders should be paid around the same as some of the more expensive hires in the company. If the company is hiring talent that asks for e.g. 300k total comp, but founders are left behind at say 100k, it gets increasingly distasteful to hire people that probably should be hired because not everyone of these 300k total comp hot shots end up working out for the company (and need to be eventually let go). Down the line, this in my experience leads to poor hiring decisions where founders get increasingly frustrated of the discrepancy between their pay and that of hired talent and start opting for people whose ask is closer to what the founders are being paid (when they infact should really go for the best available talent that the company could afford). In early(er) stage startups the situation is of course different, but once there is revenue and maybe larger capital injections from VCs, it is my experience that compensation committees or who ever is deciding founders salaries, should make sure founders are not left too far behind compared to what new hires are being paid.

burtonator 5y ago

At what point in time in a company's history is it a good idea for the founder to just pay themselves market rate?

clpm4j 5y ago
Series C or later is what I've typically seen, and I'm not talking market rate for "Big Co CEO", i.e. I doubt any VC would be comfortable with a portfolio company CEO taking home over $600k/yr regardless of stage.

Galanwe 5y ago

Very sad to see such a worthless analysis on an otherwise interesting dataset. I think it would be worth investing on learning a bit of statistics or discussing with a data scientist before publishing that kind of article. Honestly throwing averages after averages all day long brings 0 value and understanding on the dataset. Smells like a random software engineer or marketing eng with no consideration for basic data science was tasked to study this with excel. Showcasing concentration metrics (means) all day long is useless, I want to understand at the very least how the distribution is shaped (is it normal?), what's the std, hell I'd like a PCA on all the fields (years of exp, sector of activity, number of employees, successful funding rounds,...).

black_13 5y ago