The Value of Actually Getting Paid

All startup hype aside, actually getting paid kinda matters.

The short line of highly visible, massive startup successes is vastly overwhelmed by the long, long, long line of Founders (and their staff) who racked up all kinds of debt with nothing to show for it. That's the part of the story no one likes to talk about — actually getting paid.

Building a startup is synonymous with deferred compensation and equity fortunes, but it masks a very real truth which is very few of those paper fortunes every become liquid. As Founders, while we benefit from amassing those paper fortunes, we need to be entirely focused on the real paper — getting paid with cash money.

Watching Monopoly Money Millionaires

It's so easy to get caught up in the value of "Monopoly Money," which is what I call the fake value we create that we hope one day becomes real money. That value gets exploded when we start creating conceptual valuations of our company and of course, doing the personal wealth math that comes with those valuations ("I now have 10% of a billion-dollar valuation!")

Externally we look at other Founders and startups amassing these "Monopoly Fortunes" and we wonder why we can't create that kind of wealth. What we lose, of course, is the sense that like Monopoly money, we can't spend any of that wealth in the real world — at least not yet.

The problem is that we start making real-world decisions based on this money. We hire people with it, we exchange it for investment, and sometimes, if we are feeling really bullish — we personally borrow against it (see: WeWork). All of this spending quickly masks the fact that this isn't real money, and in fact, we aren't getting paid.

Deferral Doesn't Pay Bills

Which brings us back to the point. While all the valuation talk and Monopoly money is fun, getting paid with deferred comp doesn't actually pay our own bills. In fact, it often masks how poorly we are getting compensated in real dollars, which over time, becomes a serious issue.

Talk to any Founder who has run the investor fundraising gauntlet over enough years, and they will tell you the same thing — they just want to get paid, with real money, that they buy real things with. Once that novelty of "But we'll make millions later..." wears off, and it always does, we all wind up back in the same place — we want the money now.

That's not us being greedy or unappreciative. It's us needing to pay real bills. It's us getting to a point where borrowing against the future isn't an option anymore, either because we've already maxed out our credit cards or we can't afford the payments—or both.

$1 Paid is worth $100 Deferred

The Founders who are truly winning at this game are actually getting paid — with real money. The value of real money is worth 100x deferred money, not because it will make us richer but because we can actually use it. Many of us can go a short period of time by paying for things with hopes and dreams, but 100% of us eventually have to pay for things with real money.

Over a long enough period of time, we also start to lose out by waiting on deferral because we start to calculate the hard cost of having otherwise gotten paid. Yes, when those big tickets come in—and they do sometimes come in—it makes the "short-sighted view" of only taking cash seem silly.

But it's not one or the other — we should weigh both. We should put a massive premium on getting paid real money, and a smaller premium on "future value." If optimize too heavily for one or the other, we risk coming up seriously short in the end.

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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.

My Startup is Worth Millions, Why am I Broke? (podcast) It's not uncommon for Founders to have all of their net worth tied up in their company without a real dollar to show for it. Our startup might be worth millions on paper, but is there a way to turn it into real money?

How Do I Get More Equity Back? Giving equity away is easy. Getting it back is super hard. So while we can get some stock back into our coffers, we have to focus more on how quickly we give it away than how we get it back.