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> How does that work, then? I mean, if I'm managing tens of millions of dollars in someone else's money, I'm going to want some compensation for that. When som
by freyr 13y ago
> How does that work, then? I mean, if I'm managing tens of millions of dollars in someone else's money, I'm going to want some compensation for that.
When somebody invests in your fledgling company, it's typically not a congratulations for getting out of the starting gate. It's money that allows you to grow your business. You could have payroll, marketing, servers, office space, legal fees, etc. and depending on the business, you can burn through millions extremely quickly.
Not to say you can't pay yourself a decent salary, but you're probably not living high on the hog. If you're stashing the money in your personal bank account (and I'm sure some have), that's likely to make people very unhappy.
And, yes, a startup founder might work more than a personal financial advisor. But he also stands to gain much more for his work, if all goes well, down the line.
- greghinch 13y ago$17.75 million invested is probably beyond the stage of "fledgling". Perhaps "middling"? I will agree that founders' large salaries should come from profit, not investment. Also, you have to imagine that the valuation of the company is somewhere in the neighborhood of 3-4x the amount invested, if not more depending on how recently the last round was. And as a founder it seems reasonable to assume around 10-15% equity remaining after a couple rounds, also assuming a couple other founders with similar stakes. That pegs his shares' value anywhere from $5-10 million. It may just be on paper, but you still count it in "net worth", a term readers of the Financial Post are probably most interested in. And definitely warrants, if the product is successful in its own right to any degree, feeling a bit of "breathing room".