Startup founder salary: how much to pay
Welcome back to our Workplace newsletter. Today, a new report shows what founders really pay themselves, and experts explain how founders can avoid common mistakes when deciding their salaries. Moreover, Elon Musk’s reign on Twitter is “already a bloodbath”.
— Allison Levitsky, journalist (E-mail | Twitter)
“How much do I have to pay myself?” is one of the many tricky questions that arise when building and scaling a business. A new report from accounting provider Pilot shows how 500 startup founders answer this question.
Know that 46% of founders earn less than six figures. This range was more common among seeded founders, 69% of whom said they paid less than $100,000, compared to 42% of founders who had raised venture capital.
Don’t be a martyr. Three percent of VC-backed founders and 18% of seeded founders said they pay themselves a salary of $0. But founders need to pay themselves a living wage that covers their expenses, whether they’re single and living with roommates or paying a mortgage and supporting a family.
- “It can be kind of a flex: how little can you take?” said Joe Du Bey, co-founder and CEO of Eden, a maker of people success software.
- This mentality can hurt founders who don’t have as much of a safety net, who have families to support, or who are paying off student loans, Du Bey said, noting that it “wasn’t on the menu for me to take zero” from the start because he had just finished his MBA and had student debt.
- Aaron Harris, startup fundraising adviser and former Y Combinator partner, said he’s seen some founders go into debt by not paying themselves, despite raising millions in funds. “Nobody forced them to do this,” Harris said. “They just felt like ‘I heard I had to starve to win,’ or something like that.”
- Paying too little can create mental stress or distraction, said Susan Alban, operating partner and chief human resources officer at startup venture capital firm Renegade Partners. “If so, that’s a very big red flag,” Alban said.
Get help from your board. “Having a board makes this path easier,” Du Bey said. “If we didn’t have a board, I’d probably feel weird about it, honestly.”
- Paying yourself can feel like “you’re taking money from your investors and putting it in your own pocket,” but boards can weigh in on salaries that make sense for founders and other executives , said Du Bey.
Remember that salary is only one component of founders’ long-term wealth. Only 2% of VC-backed founders and 6% of seeded founders said they pay $300,000 or more.
- Non-founding employees and executives often earn higher salaries than the founder, although there is an argument that compensation packages for other executives lean toward equity rather than cash.
- “Ideally, you want your C-suite to have very heavily equity-based compensation, so their reward is directly tied to company performance,” said Matt Birnbaum, talent partner at Pear VC.
- At the same time, underpaid leaders can hurt your ability to recruit talented leaders, which can mean “you’re going to end up wasting [investors’] money in a different way, not on salary, but on a below-average result,” Du Bey said.
- And don’t hesitate to consider selling some of your stocks during a funding round, Harris said. “If you ever talked to a financial advisor and said 99% of my wealth is tied to one thing, they would tell you to diversify,” Harris said.
“The Bird is Freed”
Elon Musk’s reign on Twitter is “already a bloodbath”, reports Chief Protocol correspondent Issie Lapowsky. Musk completed his $44 billion acquisition of Twitter on Thursday night and promptly fired CEO Parag Agrawal, chief financial officer Ned Segal, senior politician Vijaya Gadde and general counsel Sean Edgett.
Musk would have already named himself interim CEO and tweeted On Friday it would wait to form a “content moderation council with widely diverse views” before reinstating any banned accounts. It’s unclear how he’ll run the company without several of its most senior executives (although here’s an idea).
A MESSAGE FROM BAMBOOHR
No two recessions are the same. In fact, eight in ten workers said they had looked for a new job before the upcoming market shift. Find out what HR can do to ensure meaningful retention today and in the near future.
Watch out for reactions ❤️?
What is considered misconduct at work when you don’t have a workplace? A new report of sexual harassment and DEI training provider Traliant surveyed 2,000 U.S. workers and found that 27.4% of their leaders had no established workplace misconduct policy regarding hybrid working and remotely.
- 57% of respondents said they would consider a colleague asking them out via email, video, or chat to be misconduct.
- “Naughty” GIFs and emoticons – such as a kiss, a heart or a hug – would be considered a misconduct by more than 55% of employees, Traliant found.
- One in five respondents said they would not feel comfortable complaining about misconduct at work, with nearly 60% expressing doubts it would be kept confidential.
Some news from the staff
Does anyone else have a bad case of whiplash from great resignation? It’s hard to know which tech companies are growing, shrinking, floating or sinking. We are here to help you.
⬇️ Unions say Standard General LP failed to alert the FCC to planned layoffs related to the private equity firm’s $5.4 billion acquisition of TV broadcaster Tegna, Bloomberg reported.
⬇️ Elon Musk planned to start layoffs on Twitter over the weekend, according to the New York Times, citing unnamed sources.
⬇️ The valuation of the African genomics startup 54gene has been slashed by two-thirds, to around $50 million, following the departure of its CEO and the layoff of 55% of its employees, TechCrunch reported.
A MESSAGE FROM BAMBOOHR
In conversations about pay equity and pay transparency, the stakes are high and the accountability is stressful for HR. Learn how to discuss these topics confidently and competently with everyone, from executives and managers to entry-level employees, in three important steps.
around the internet
A roundup of workplace news from the furthest corners of the internet.
Anti-Semitism is on the rise. Here’s how leaders can respond. (Chief)
What the venture capital downturn means for young investors careers? (information)
How to create a company culture when your team is remote. (Forbes)
Thoughts, questions, advice? Send them to [email protected].