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Seems unwise to have a CEO co-founder be the highest salaried employee at a startup. That person's equity position is probably at least an order of magnitude h

Seems unwise to have a CEO co-founder be the highest salaried employee at a startup. That person's equity position is probably at least an order of magnitude higher than the other employees. As an investor or employee, I'd find this alarming. http://techcrunch.com/2008/09/08/peter-thiel-best-predictor-of-startup-success-is-low-ceo-pay/ http://techcrunch.com/2008/09/08/peter-thiel-best-predictor-... Call me old fashioned, but I think co-founders should be paid living expenses + 25%, even in a series-A funded startup.

beachstartup 13y ago
$100-150k for chief officers at a startup is a completely reasonable salary. similar salaries at established, larger companies run into the 250-500k range.
runako 13y ago
>> co-founders should be paid living expenses + 25%, even in a series-A funded startup It's risky to comment without knowing the specifics of Joel's situation. But it seems that his $158k salary isn't outside those bounds if he lives in e.g. San Francisco or NYC. Hard to know someone's living expenses without drilling way into their personal financials, and again this is not unreasonably high. Thiel, from the link you posted: >> What’s the average salary for CEOs from funded startups? Thiel was hesitant to answer, but eventually said “$100-125k.” That was in 2008. Adjust for rent inflation, and that should square the numbers for you.
- kapilkale 13y ago
  Sure, that's a generalization. There are tons of exceptions where my generalization doesn't apply. But that isn't the core of my argument- its a postscript. The math the company has laid out says that CEOs should be paid more than any employee in a company, even if they are founders and have a controlling equity stake. I'm simply saying that if I were an investor or employee, I would find that concerning.
- zmitri 13y ago
  I worked in finance and made less than that in salary. It's enough for a luxurious existence in NYC provided you don't have children. I'm not sure whether or not they have children, but that's a lot.
  - humanrebar 13y ago
    $150k is middle class in NYC. If you work in Manhattan, it's a small place with a short commute or a normal-size place (by national standards) with a long commute. If you don't work in Manhattan or can work from home most of the time, you can have a pretty luxurious lifestyle, yes. Also, being single with no one to support isn't the average case. I'd argue we should assume that each working person supports one other person. That lines up with American demographics much better.
    - cm2012 13y ago
      This is so laughable. The median salary in NYC is $50,000 per household. This includes tons of people who work in Manhattan (I've met more people who work in Manhattan and live in other boroughs than otherwise - the daily commute numbers back that up.) As another poster mentioned, even just Manhattanites make $70,000 a year for the household. I personally know many people living in Manhattan making far less. $150k is most definitely upper middle class. I grew up in Queens my whole life and until I started working professionally, never met someone who made more than $150,000 a year.
      - humanrebar 13y ago
        Sure, upper middle class. What's wrong with a CEO making upper middle class wages? The point is it's respectable wages for a professional, but hardly as high-on-the-hog as $150k in Kansas City.
        stephencanon 13y ago
        In the context of discussing a company that lets employees work remotely, it is precisely as high-on-the-hog as $150k in KC. Remote employees in NYC choose to live there, because they think it’s a good tradeoff. If employees A and B both make $150k in Kansas City, but A cooks all his meals and B goes out to eat all the time, that doesn’t make A high-on-the-hog and B middle class; it just means that they value different things. Ditto for remote workers who choose to live in NYC.
- BadassFractal 13y ago
  In SF, close to 50% in taxes, cost of living in SOMA, assuming you want to live right by your office (what is it, 3k for a studio?) and those 160k will not get you very far.
  - simoncion 13y ago
    > In SF, close to 50% in taxes When I moved to SF from Alabama, I lost ~1->5% more of my paycheck to taxes. Note that Alabama is a dirt cheap place to live, and that I get so much more from that tax money in SF. Yes, the taxes here are bad if you compare them to Washington or some other low-tax haven... but they're really not that bad here. Also, yes, rent is insane in the city. More apartments must be built!
deleted 13y ago
[deleted]
oijaf888 13y ago
What if the company is profitable? Should CEO co-founders still be paid the bare minimum to live? (living expenses + 25% works out to living expenses after taxes) If they are burning investor money and will require 2-3 more rounds to become profitable, then it would be a pretty big negative.
csmajorfive 13y ago
I came here to say this. A founding CEO should never have the highest salary in the company. Value your own equity more!
joelgascoigne 13y ago
Joel here. This is a really interesting point, I've thought about it a lot. From the linked article: "In Startupland, everybody should be working towards the same goal: that big juicy exit. That’s the only payday any CEO should be worried about (even though more than half of them will never get it)." I can't agree with that, and this is a key reason I spoke with others in the team and we decided that my salary as well as other c-level salaries should be quite high at this point. We're not planning an exit anytime soon. Until a day ago, my salary was $118,000. In the first year, my salary was zero and in the second year it ranged from $55,000 to $75,000. We're at a point with Buffer where there's a massive opportunity, and I'm going into my 4th year now. At $2.3M ARR and being cashflow positive (revenues cover the salaries) we're in growth mode and this isn't investor money we're using to fund these salary levels. I completely agree that in the early years this would be a big red flag. I think the further you go, the more that notion reverses. I've heard that it can be a red flag if the CEO is not paid enough. Would love to hear any other thoughts here, it definitely was a tough decision to make and I'm glad that by putting this out there we get all this valuable feedback.
- kapilkale 13y ago
  Hi Joel- thanks for being open to the feedback. Like you said, you are in growth mode. To me, growth mode means reinvesting as much of the profits as possible back into the company. Paying yourself a large salary during this time is the same as taking money off the table. There are some good reasons to take money off the table, like paying back personal debt or supporting family members. But paying yourself more because you're the CEO doesn't seem like a good one, because your equity position is so significant. If you don't have a good reason to take money off the table, it signals to employees and investors that "Joel thinks the money is better spent going into his personal bank account vs. making the company's equity grow in value." That sort of logic doesn't work in a startup that is targeting high growth, where employees are hoping to receive some sort of payoff from their equity. Moreover, it casts doubt on your judgment in capital allocation, which is one of the most important responsibilities of a founder / CEO. * Obviously, all of this logic falls apart if you're not working on a startup. Low growth businesses that have achieved much of their potential are a totally different story. But you aren't starting a restaurant. Even Uber, at its $4B valuation, is giving compensation packages that are weighted towards options vs. salary. * http://www.amazon.com/The-Outsiders-Unconventional-Radically-Blueprint/dp/1422162672 http://www.amazon.com/The-Outsiders-Unconventional-Radically...
jackgavigan 13y ago
I would agree that founders of a startup should be taking a relatively low salary. However, Buffer is no longer a startup (using Steve Blank's definition: http://steveblank.com/2010/01/25/whats-a-startup-first-principles/ http://steveblank.com/2010/01/25/whats-a-startup-first-princ...). It's generating significant revenue and is break-even from a cash-flow perspective. Investors don't necessarily want founders to pay themselves the absolute minimum because they want the founders to be happy and focused on building the company, instead of being distracted by money worries.

beachstartup 13y ago

$100-150k for chief officers at a startup is a completely reasonable salary. similar salaries at established, larger companies run into the 250-500k range.

runako 13y ago

>> co-founders should be paid living expenses + 25%, even in a series-A funded startup It's risky to comment without knowing the specifics of Joel's situation. But it seems that his $158k salary isn't outside those bounds if he lives in e.g. San Francisco or NYC. Hard to know someone's living expenses without drilling way into their personal financials, and again this is not unreasonably high. Thiel, from the link you posted: >> What’s the average salary for CEOs from funded startups? Thiel was hesitant to answer, but eventually said “$100-125k.” That was in 2008. Adjust for rent inflation, and that should square the numbers for you.

kapilkale 13y ago
Sure, that's a generalization. There are tons of exceptions where my generalization doesn't apply. But that isn't the core of my argument- its a postscript. The math the company has laid out says that CEOs should be paid more than any employee in a company, even if they are founders and have a controlling equity stake. I'm simply saying that if I were an investor or employee, I would find that concerning.
zmitri 13y ago
I worked in finance and made less than that in salary. It's enough for a luxurious existence in NYC provided you don't have children. I'm not sure whether or not they have children, but that's a lot.
- humanrebar 13y ago
  $150k is middle class in NYC. If you work in Manhattan, it's a small place with a short commute or a normal-size place (by national standards) with a long commute. If you don't work in Manhattan or can work from home most of the time, you can have a pretty luxurious lifestyle, yes. Also, being single with no one to support isn't the average case. I'd argue we should assume that each working person supports one other person. That lines up with American demographics much better.
  - cm2012 13y ago
    This is so laughable. The median salary in NYC is $50,000 per household. This includes tons of people who work in Manhattan (I've met more people who work in Manhattan and live in other boroughs than otherwise - the daily commute numbers back that up.) As another poster mentioned, even just Manhattanites make $70,000 a year for the household. I personally know many people living in Manhattan making far less. $150k is most definitely upper middle class. I grew up in Queens my whole life and until I started working professionally, never met someone who made more than $150,000 a year.
    - humanrebar 13y ago
      Sure, upper middle class. What's wrong with a CEO making upper middle class wages? The point is it's respectable wages for a professional, but hardly as high-on-the-hog as $150k in Kansas City.
      - stephencanon 13y ago
        In the context of discussing a company that lets employees work remotely, it is precisely as high-on-the-hog as $150k in KC. Remote employees in NYC choose to live there, because they think it’s a good tradeoff. If employees A and B both make $150k in Kansas City, but A cooks all his meals and B goes out to eat all the time, that doesn’t make A high-on-the-hog and B middle class; it just means that they value different things. Ditto for remote workers who choose to live in NYC.
BadassFractal 13y ago
In SF, close to 50% in taxes, cost of living in SOMA, assuming you want to live right by your office (what is it, 3k for a studio?) and those 160k will not get you very far.
- simoncion 13y ago
  > In SF, close to 50% in taxes When I moved to SF from Alabama, I lost ~1->5% more of my paycheck to taxes. Note that Alabama is a dirt cheap place to live, and that I get so much more from that tax money in SF. Yes, the taxes here are bad if you compare them to Washington or some other low-tax haven... but they're really not that bad here. Also, yes, rent is insane in the city. More apartments must be built!

deleted 13y ago

[deleted]

oijaf888 13y ago

What if the company is profitable? Should CEO co-founders still be paid the bare minimum to live? (living expenses + 25% works out to living expenses after taxes) If they are burning investor money and will require 2-3 more rounds to become profitable, then it would be a pretty big negative.

csmajorfive 13y ago

I came here to say this. A founding CEO should never have the highest salary in the company. Value your own equity more!

joelgascoigne 13y ago

Joel here. This is a really interesting point, I've thought about it a lot. From the linked article: "In Startupland, everybody should be working towards the same goal: that big juicy exit. That’s the only payday any CEO should be worried about (even though more than half of them will never get it)." I can't agree with that, and this is a key reason I spoke with others in the team and we decided that my salary as well as other c-level salaries should be quite high at this point. We're not planning an exit anytime soon. Until a day ago, my salary was $118,000. In the first year, my salary was zero and in the second year it ranged from $55,000 to $75,000. We're at a point with Buffer where there's a massive opportunity, and I'm going into my 4th year now. At $2.3M ARR and being cashflow positive (revenues cover the salaries) we're in growth mode and this isn't investor money we're using to fund these salary levels. I completely agree that in the early years this would be a big red flag. I think the further you go, the more that notion reverses. I've heard that it can be a red flag if the CEO is not paid enough. Would love to hear any other thoughts here, it definitely was a tough decision to make and I'm glad that by putting this out there we get all this valuable feedback.

kapilkale 13y ago
Hi Joel- thanks for being open to the feedback. Like you said, you are in growth mode. To me, growth mode means reinvesting as much of the profits as possible back into the company. Paying yourself a large salary during this time is the same as taking money off the table. There are some good reasons to take money off the table, like paying back personal debt or supporting family members. But paying yourself more because you're the CEO doesn't seem like a good one, because your equity position is so significant. If you don't have a good reason to take money off the table, it signals to employees and investors that "Joel thinks the money is better spent going into his personal bank account vs. making the company's equity grow in value." That sort of logic doesn't work in a startup that is targeting high growth, where employees are hoping to receive some sort of payoff from their equity. Moreover, it casts doubt on your judgment in capital allocation, which is one of the most important responsibilities of a founder / CEO. * Obviously, all of this logic falls apart if you're not working on a startup. Low growth businesses that have achieved much of their potential are a totally different story. But you aren't starting a restaurant. Even Uber, at its $4B valuation, is giving compensation packages that are weighted towards options vs. salary. * http://www.amazon.com/The-Outsiders-Unconventional-Radically-Blueprint/dp/1422162672 http://www.amazon.com/The-Outsiders-Unconventional-Radically...

jackgavigan 13y ago

I would agree that founders of a startup should be taking a relatively low salary. However, Buffer is no longer a startup (using Steve Blank's definition: http://steveblank.com/2010/01/25/whats-a-startup-first-principles/ http://steveblank.com/2010/01/25/whats-a-startup-first-princ...). It's generating significant revenue and is break-even from a cash-flow perspective. Investors don't necessarily want founders to pay themselves the absolute minimum because they want the founders to be happy and focused on building the company, instead of being distracted by money worries.