How much should founders pay themselves?
Rolling up to your loss-making company in a Lambo is a jerk move.
Nobody wants to work hard for someone who they feel isn’t in the trenches with them.
I’ve spoken to a lot of founders who say things like “as CEO I should be earning the most” or “my market rate as a developer is X, so I should be earning X as a founder”.
I think these founders are not only wasting their runway, but are also missing a vital lever to recruit top leaders.
Senior leaders are the most critical hires you make in a startup. Together, they form the team that runs the company with you.
The best leaders have lots of experience, lots of options and are usually way out of your league.
Convincing them to join your company is arguably the most difficult and important job you have as a founder.
Salaries are considered table stakes to recruit leaders at this level - what they’re really looking for is equity upside. Specifically, they want to join a company where the value of their equity will go up massively over time.
So what does having a low salary have to do with any of this?
Taking a low salary signals that you’re all in on your startup. Making promises is easy, but demonstrating that you have skin in the game is far more convincing.
Even at later stages, this signal can be very powerful. Elon Musk, for instance, does not earn a salary from either SpaceX or Tesla. That all-in approach allows him to hire brilliant leaders like Gwynne Shotwell.
So here’s what I believe: Early-stage founders should earn the smallest salary that would make them not stress about money.
The exact amount varies depending on your life situation. If you have three kids, then you should obviously pay yourself more than a 23-year-old with no dependents.
Living lean and staying a little uncomfortable helps in other ways too: It keeps you hungry and prevents lifestyle creep.
Whether you agree with my reasoning or not - I suspect many early-stage founders won’t have a choice but to take this approach in the current climate.
Raising capital is a lot harder now, and it looks like we’re back to founders getting their hands dirty and doing whatever it takes to win.