January 15th, 2020 | By: Wil Schroter | Tags: Recruiting
There's a weird discussion around Founder compensation, especially when the number is a big fat zero. We read about famous Founders from Google, Facebook, and Tesla taking $1 salaries, while earning millions in stock.
For early-stage Founders, we often can't get paid (so it's not much of choice!) but there's also this presumption that if we're forgoing personal compensation to roll all the profits back into the company, then we must be really committed.
There's no argument out there that Founders shouldn't be paid, so taking compensation to zero is just a silly move.
The only time Founders or execs get the stink eye is when they take inordinate salaries compared to the rest of the staff or relative to the stage of the business.
There should always be a precedent set that yes, we have bills, and yes, we need to get paid. Even if that's a small amount, there at least needs to be some placeholder to show that our contribution has cash merit.
Even if it's a small amount, the fact that it exists is very important.
Even if we do decide to tighten our belts and forgo compensation now, there's this presumption that somewhere down the road our sacrifice will be remembered and rewarded.
No one is going to give a shit that we were poorly paid 4 years ago. It's history, it's forgotten. The only ones looking back on your income are the IRS.
If we think we're paying it forward for future recognition, it's a sucker's bet. Whatever will be the situation in the future (we're profitable, we're failing) the only focus and appreciation will come from that point in time.
New investors? They don't care what we did 4 years ago or 4 months ago. They just care where things are right now. So we may as well deposit that paycheck.
As Founders, we have two income sources: our equity, which we earned by creating this thing, and our salary, which we earn for the time we work like any other employee.
It's up to us whether we value our time as an employee and set the compensation that work involves. If we don't, no one is going to pull us aside and say, "You know what, we'd all be way more comfortable if you made more money."
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? 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.
Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes Bizplan, Clarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.