Dear SaaStr: How do VCs Really Feel About Founder Salaries? I Was Told That a General Rule of Thumb is 75% of Market
The 75% Rule once you are VC Funded for more than a few million dollars is a good one. But if you raise less than that — 75% may well be too high. You need the cash to last 24 months.
And of course, stage and timing does matter. Once you are profitable and at scale, I don’t think any VC expects founders to take anything less than market salaries 🙂
There are lots of good ideas for all different situations:
- 75% of market for founders’ salaries.
- $10k a year, if it’s very early and you have no cash!
- $10k a month, a good place once you have some cash but not that much.
- Market once you are well funded, not until then.
- Etc. etc.
There are lots of good answers. And also — lots of different situations.
In my first start-up, we raised $9.2m in the seed round. So it really didn’t matter that much in that scenario. The second time, I funded the prototype myself ($0 salary) and then we raised a $2.6m seed and I took a small salary (no need to be $0 anymore, but anything large would decrease the runway). So different situations = different answers, up to a point.
One thing I have learned, though:
If the founders are the highest compensated people in the start-up, especially pre-Scale (e.g., pre $10m ARR) … IMHE, something is wrong.
If the founders are really going for it, there’s always one great engineer, a Stretch VP, even a sales rep, a marketing lead, someone, the first great hire that wasn’t quite a founder but still is great … that makes more than the founders. Always.
If the founders take the highest salaries though …
Then … usually … I’m out.
Other than that, as long as it’s appropriate, and doesn’t harm the runway of the company, most anything fair seems right to me.
First 9 months: 0k
After YC money: 30k
After Seed: 92k
After $1M ARR: 120k
After Series A: 145k
After Series B: 182k
After we adjusted company to to 75%ile: 238k
After we hit 10M ARR: market rate https://t.co/Oti15syEaJ— Jacob Eiting (@jeiting) September 29, 2023
- SEO Powered Content & PR Distribution. Get Amplified Today.
- PlatoData.Network Vertical Generative Ai. Empower Yourself. Access Here.
- PlatoAiStream. Web3 Intelligence. Knowledge Amplified. Access Here.
- PlatoESG. Carbon, CleanTech, Energy, Environment, Solar, Waste Management. Access Here.
- PlatoHealth. Biotech and Clinical Trials Intelligence. Access Here.
- Source: https://www.saastr.com/how-do-venture-capital-firms-really-feel-about-founder-salaries-i-was-told-that-a-general-rule-of-thumb-is-75-of-fair-market-value-i-am-considering-taking-on-a-well-established-rather-expensive-co/
- :is
- :not
- $UP
- 10m
- 24
- 29
- 9
- a
- About
- Adjusted
- All
- also
- always
- and
- answers
- any
- anymore
- anything
- appropriate
- ARE
- AS
- At
- b
- BE
- but
- Cash
- company
- compensated
- course
- decrease
- different
- do
- does
- Doesn’t
- dollars
- Dont
- e
- Early
- engineer
- especially
- etc
- Even
- expects
- fair
- feel
- few
- First
- For
- founder
- founders
- funded
- General
- going
- good
- great
- harm
- Have
- High
- highest
- hire
- Hit
- How
- HTTPS
- i
- ideas
- if
- in
- IT
- jpg
- large
- Last
- lead
- learned
- less
- Long
- lots
- MAKES
- Market
- Marketing
- Matter
- May..
- me
- million
- million dollars
- money
- Month
- months
- more
- most
- much
- my
- myself
- Need
- no
- of
- once
- ONE
- out
- People
- Place
- plato
- Plato Data Intelligence
- PlatoData
- Point
- pre
- profitable
- prototype
- quite
- raise
- raised
- Rate
- really
- right
- round
- Rule
- runway
- salaries
- salary
- sales
- Scale
- scenario
- Second
- seed
- Seed Round
- seems
- Series
- Series A
- Series B
- situations
- small
- So
- some
- Someone
- something
- Stage
- Start-up
- Still
- Take
- than
- that
- The
- then
- thing
- think
- though?
- time
- timing
- to
- told
- too
- took
- true
- until
- usually
- VC
- VCs
- very
- vp
- was
- we
- WELL
- would
- Wrong
- year
- you
- zephyrnet