There's an interesting question in this post, namely when should you as a founder expect to get paid after an investment and how much?
If you get money from the three Fs (friends, family, fools) as much as possible would go in to the development of the business. In this case probably your salary would be low if not non-existent.
But for larger investments soon you reach a point where it's OK for you to take out even a decent salary and start living of the invested money.
What's your opinion on where the thresholds are for different levels of salaries?
For example, watching the BBC show Dragons Den, the investors always assume the founders will not use the invested money to pay themselves. These are investments in the $100K-$1M area.
This depends on how much money you already have lying around and what you decide in conjunction with your investors - but in general, you should have these discussions with your investors in advance, before you take their money.
One tiny data point - my co-founder and I were personally strapped for cash when we raised seed. We paid ourselves $70K which for me was about half of my market rate at the time. After a Series A, we paid ourselves $100K, which our investors still said was 'below market'. After a Series B, I was no longer CEO, but I got paid market.
In general, don't be a martyr. You're raising money to pay salaries, and that should include yours.
This is probably the wrong place to ask this, but why do founders often give up the position of CEO after the startup is established and up and running?
Traditionally the conventional wisdom, as told by people who I'll note had a stake in this type of outcome, was that the founders by definition didn't have what it takes to grow the company.
Sometimes this certainly true. Maybe even most of the time. But then there's the question, can the founders learn what they need to learn about growing the company more easily than Mr. New CEO learn what's essential to its success that he doesn't understand and probably has no background, no intuitive feeling about.
The CEO in theory has the character necessary to do the big(er) company things and this is no small matter, a lot of people just don't have that (management and leadership are HARD). Whereas the character of the founders in this role is generally untested or often in the process of being tested and found wanting.
I've seen both sides, there's no hard and fast rule here.
In my case we merged with a competitor, and I believed the competitors' CEO was better at key aspects of his job (fundraising, providing motivating leadership) than I was.
Investments in that $100-$1M range are clearly not going to sustain any sort of major "founders pay themselves" use. Unless you need to bring a founder who's e.g. running out of personal resources up to ramen consumption level you're going to be using it for other things.
Here I'm strongly suspecting we're talking an 8 to 9 figure investment, else they wouldn't be able to sustain the "seasoned CEO" in the lifestyle he's grown accustomed to.
Comments
There's an interesting question in this post, namely when should you as a founder expect to get paid after an investment and how much?
If you get money from the three Fs (friends, family, fools) as much as possible would go in to the development of the business. In this case probably your salary would be low if not non-existent.
But for larger investments soon you reach a point where it's OK for you to take out even a decent salary and start living of the invested money.
What's your opinion on where the thresholds are for different levels of salaries?
For example, watching the BBC show Dragons Den, the investors always assume the founders will not use the invested money to pay themselves. These are investments in the $100K-$1M area.
This depends on how much money you already have lying around and what you decide in conjunction with your investors - but in general, you should have these discussions with your investors in advance, before you take their money.
One tiny data point - my co-founder and I were personally strapped for cash when we raised seed. We paid ourselves $70K which for me was about half of my market rate at the time. After a Series A, we paid ourselves $100K, which our investors still said was 'below market'. After a Series B, I was no longer CEO, but I got paid market.
In general, don't be a martyr. You're raising money to pay salaries, and that should include yours.
This is probably the wrong place to ask this, but why do founders often give up the position of CEO after the startup is established and up and running?
Traditionally the conventional wisdom, as told by people who I'll note had a stake in this type of outcome, was that the founders by definition didn't have what it takes to grow the company.
Sometimes this certainly true. Maybe even most of the time. But then there's the question, can the founders learn what they need to learn about growing the company more easily than Mr. New CEO learn what's essential to its success that he doesn't understand and probably has no background, no intuitive feeling about.
The CEO in theory has the character necessary to do the big(er) company things and this is no small matter, a lot of people just don't have that (management and leadership are HARD). Whereas the character of the founders in this role is generally untested or often in the process of being tested and found wanting.
I've seen both sides, there's no hard and fast rule here.
Heh - there's many, many reasons.
In my case we merged with a competitor, and I believed the competitors' CEO was better at key aspects of his job (fundraising, providing motivating leadership) than I was.
Investments in that $100-$1M range are clearly not going to sustain any sort of major "founders pay themselves" use. Unless you need to bring a founder who's e.g. running out of personal resources up to ramen consumption level you're going to be using it for other things.
Here I'm strongly suspecting we're talking an 8 to 9 figure investment, else they wouldn't be able to sustain the "seasoned CEO" in the lifestyle he's grown accustomed to.