How Much Should Founders Be Paid?
1. Salary sustains life, and equity creates long-term motivation
The starting point for an appropriate salary is personal living conditions and the company’s current situation.
- A founder’s main compensation is the long-term value created as the company grows.
- Rather than the salary you could receive from another company, look at whether your current compensation is enough to keep you focused on the business.
- You also need room to cover living expenses and family needs, and to prepare for emergencies.
- The roughly $2,000 per month in savings suggested in the original is a reference example for U.S. founders, and not a standard that applies to everyone.
2. Neither excessive sacrifice nor excessive compensation lasts long
A balance is needed that protects both the founder’s personal stability and the company’s operating capital.
- If salary is set too low, personal debt and family conflict can affect business judgment.
- The pressure of daily life can make you want to leave the company early or sell before it has grown enough.
- Excessive salary shortens the time the company can survive.
- The founder’s compensation level also affects hiring of senior talent and the team’s salary expectations.
3. When changing compensation, check the basis for the change
Salary and equity cash-out can be reviewed according to the situation.
- If living conditions have changed significantly, such as childbirth or emergency expenses, that is a reason to reconsider salary.
- Compensation structure can also be reviewed when equity has been overly diluted or the business has actually grown substantially.
- If the company valuation and investor demand are sufficient, secondary sales are also an option.
- This is a way to continue the business while securing personal financial room by selling some of the equity you hold.
- It is difficult to justify an increase solely because fundraising succeeded or because other founders are getting paid more.
4. Compensation discussions are a place to openly share real situations
Clearly explaining the reasons for a compensation change builds trust.
- Discuss changes in living conditions, the amount needed, and the impact on the company directly with the compensation committee.
- Avoid quietly inserting the change into board materials or voting directly on your own compensation item.
- At the center of the conversation should be the conditions that allow the founder to work stably and remain focused on the company’s long-term growth.
