Sitemaps
How We Secretly Lose Control of Our Startups
Should Kids Follow in Our Founder Footsteps?
The Evolution of Entry Level Workers
Assume Everyone Will Leave in Year One
Stop Listening to Investors
Was Mortgaging My Life Worth it?
What's My Startup Worth in an Acquisition?
When Our Ambition is Our Enemy
Are Startups in a "Silent Recession"?
The 5 Types of Startup Funding
What Is Startup Funding?
Do Founders Deserve Their Profit?
Michelle Glauser on Diversity and Inclusion
The Utter STUPIDITY of "Risking it All"
Committees Are Where Progress Goes to Die
More Money (Really Means) More Problems
Why Most Founders Don't Get Rich
Investors will be Obsolete
Why is a Founder so Hard to Replace?
We Can't Grow by Saying "No"
Do People Really Want Me to Succeed?
Is the Problem the Player or the Coach?
Will Investors Bail Me Out?
The Value of Actually Getting Paid
Why do Founders Suck at Asking for Help?
Wait a Minute before Giving Away Equity
You Only Think You Work Hard
SMALL is the New Big — Embracing Efficiency in the Age of AI
The 9 Best Growth Agencies for Startups
This is BOOTSTRAPPED — 3 Strategies to Build Your Startup Without Funding
Never Share Your Net Worth
A Steady Hand in the Middle of the Storm
Risk it All vs Steady Paycheck
How About a Startup that Just Makes Money?
How to Recruit a Rockstar Advisor
Why Having Zero Experience is a Huge Asset
My Competitor Got Funded — Am I Screwed?
The Hidden Treasure of Failed Startups
If It Makes Money, It Makes Sense
Why do VCs Keep Giving Failed Founders Money?
$10K Per Month isn't Just Revenue — It's Life Support
The Ridiculous Spectrum of Investor Feedback
Startup CEOs Aren't Really CEOs
Series A, B, C, D, and E Funding: How It Works
Best Pitch Decks Ever: The Most Successful Fundraising Pitches You Need to Know
When to Raise Funds
Why Aren't Investors Responding to Me?
Should I Regret Not Raising Capital?
Unemployment Cases — Why I LOOOOOVE To Win Them So Much.
How Much to Pay Yourself
Heat-Seeking Missile: WePay’s Journey to Product-Market Fit — Interview with Rich Aberman, Co-Founder of Wepay
The R&D technique for startups: Rip off & Duplicate
Why Some Startups Win.
Chapter #1: First Steps To Validate Your Business Idea
Product Users, Not Ideas, Will Determine Your Startup’s Fate
Drop Your Free Tier
Your Advisors Are Probably Wrong
Growth Isn't Always Good
How to Shut Down Gracefully
How Does My Startup Get Acquired?
Can Entrepreneurship Be Taught?
How to Pick the Wrong Co-Founder
Staying Small While Going Big
Investors are NOT on Our Side of the Table
Who am I Really Competing Against?
Why Can't Founders Replace Themselves?
Actually, We Have Plenty of Time
Quitting vs Letting Go
How Startups Actually Get Bought
What if I'm Building the Wrong Product?
Are Founders Driven by Fear or Greed?
Why I'm Either Working or Feeling Guilty
Startup Financial Assumptions
Why Every Kid Should be a Startup Founder
We Only Have to be Right Once
If a Startup Sinks, Founders Go Down With it
Founder Success: We Need a Strict Definition of Personal Success
Is Quiet Quitting a Problem at Startup Companies?
Founder Exits are Hard Work and Good Fortune, Not "Good Luck"
Finalizing Startup Projections
All Founders are Beloved In Good Times
Our Startup Culture of Entitlement
The Bullshit Case for Raising Capital
How do We Manage Our Founder Flaws?
What If my plan for retirement is "never retire"?
Startup Failure is just One Chapter in Founder Life
6 Similarities between Startup Founders and Pro Athletes
All Founders Make Bad Decisions — and That's OK
Startup Board Negotiations: How do I tell the board I need a new deal?
Founder Sacrifice — At What Point Have I Gone Too Far?
Youth Entrepreneurship: Can Middle Schoolers be Founders?
Living the Founder Legend Isn't so Fun
Why Do VC Funded Startups Love "Fake Growth?"
How Should I Share My Wealth with Family?
How Many Deaths Can a Startup Survive?
This is Probably Your Last Success
Why Do We Still Have Full-Time Employees?
The Case Against Full Transparency
Should I Feel Guilty for Failing?
Always Take Money off the Table

How Can I Creatively Pay My First Employees?

Wil Schroter

How Can I Creatively Pay My First Employees?

Somehow the startup world has convinced people to work for "free" on a regular basis, with the theoretical benefit of some big payout on equity later.

The truth is, those bets rarely work and once the pixie dust of the new startup wears off, what's left is a bunch of frustrated employees who can't pay their bills.

Although we have little to no money to pay today, we should always try to incorporate some level of cash compensation, even if it's incredibly small, to help offset the cost of life that our team is going to inevitably face.

When our team is more focused on going broke than contributing, we're not really doing anyone a favor!

Use a Compensation "Ramp Up"

Compensation doesn't have to be "all or nothing."

Just because someone makes $60,000 per year doesn't mean we have to be able to pay that all right now. Instead, we can use a "ramp up" that scales over the next year.

Someone that needs $5K per month may be able to start at $2K per month this quarter, $3K per month next quarter, and so on as our commitment scales with the business.

We can make up for the delta with equity grants or a higher base salary at the end of the ramp-up period.

Convert Equity to Cash Later

Similar to deferred cash compensation, we can also provide the option of offering equity now, with the option to convert some of that equity to cash in the not-too-distant future.

That could be as simple as saying "This project is worth $10K, so we'll pay you $20K in equity. At a later date, we can have the option to convert that back to cash at $12K (to cover some additional risk)."

This allows people to take our equity as a bit of security against a future cash payment which could convert within a year versus waiting 7+ years for an exit event.

It's Not "If" We Pay, It's "How" We Pay

It's very rare that a startup can pay a full salary like a regular company, so what we as Founders need to think about is finding ways that scale pay with our own growth expectations.

Not everyone will be interested in that program, and that's fine. But generally what we'll find is that there are many different ways to recruit the talent we need if we're willing to be flexible with how we get there.

In Case You Missed It

How Much to Pay Yourself. As a Founder, how do you determine how much to pay yourself? How much is too much or too little? We’re breaking down the long-debated issue of Founder compensation to help you find the right balance.

Why Should I Avoid Paying People With Equity? Paying people with equity is synonymous with startups. But the problem is that equity isn't like cash — it's far more valuable, yet we tend to spend it like it's free.

Why Good Employees Leave High-Paying Jobs. When the average salary for a Google software engineer is $111,149, you can’t really argue that the tech giants underpay their employees. So why do good employees leave high-paying jobs so quickly, and what can companies do to combat it?

Find this article helpful?

This is just a small sample! Register to unlock our in-depth courses, hundreds of video courses, and a library of playbooks and articles to grow your startup fast. Let us Let us show you!

Submission confirms agreement to our Terms of Service and Privacy Policy.

Already a member? Login

Michael Hubbard

This is a great article, thank you! I do however wish that there was next level detail linked to for each or some of the sections. For example, in the "Convert Equity to Cash Later" scenario, what are the best instruments to implement this in a cost effective way? Is this only recommended for startups at a particular stage (ie. funded up to seed or A, etc.)?

Reply5 years ago

1 Replies

Register to join the discussion.

Already a member? Login

Create Free Account